def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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Preliminary Proxy Statement
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Confidential, for
Use of the
Commission Only (as
permitted by Rule
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Definitive Proxy Statement
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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Mackinac Financial Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
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130 South Cedar Street
Manistique, Michigan 49854
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 26, 2010
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Mackinac Financial Corporation
(the Corporation), a Michigan corporation, will be held on Wednesday, May 26, 2010, at 11:00 a.m.
EDT, at The Community House, 380 S. Bates Street, Birmingham, Michigan 48009, for the following
purposes:
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To elect two (2) Directors, each to hold office for a three-year term; |
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To approve, in a non-binding, advisory vote, the Corporations compensation of
executives, as disclosed in the accompanying proxy statement; |
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To ratify the appointment of Plante & Moran, PLLC as independent auditors for the year
ending December 31, 2010, and; |
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To transact such other business as may properly come before the annual meeting or any
adjournment thereof, all in accordance with the accompanying proxy statement. |
The Board of Directors of the Corporation recommends a vote for proposal 1 and 2 above and for the
ratification of proposal 3.
The Board of Directors has fixed April 20, 2010, as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting or any adjournment of the meeting.
We call your attention to the proxy statement accompanying this notice for a more complete
statement regarding the matters to be acted upon at the annual meeting. Please read it carefully.
If you have questions or comments, please direct them to Mackinac Financial Corporation, 130 South
Cedar Street, Manistique, Michigan 49854, Attention: Paul D. Tobias. Please also contact Paul D.
Tobias if you would like directions to the annual meeting.
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By order of the Board of Directors
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/s/ Paul D. Tobias
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Paul D. Tobias |
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Chairman and Chief Executive Officer |
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER
MEETING TO BE HELD ON MAY 26, 2010: The Proxy Statement, Form 10-K for the year ended December 31, 2009 and
the 2009 Annual Report to Shareholders are available at www.bankmbank.com.
Your vote is important. Even if you plan to attend the meeting, please date and sign the enclosed
proxy form, indicate your choice with respect to the matters to be voted upon, and return it
promptly in the enclosed envelope. Note that if the stock is held in more than one name, all
parties must sign the proxy form.
Dated: April 27, 2010
TABLE OF CONTENTS
130 South Cedar Street
Manistique, Michigan 49854
April 27, 2010
PROXY STATEMENT
This proxy statement and the enclosed proxy are furnished in connection with the solicitation of
proxies by the Board of Directors of Mackinac Financial Corporation (the Corporation), a Michigan
corporation, to be voted at the Annual Meeting of Shareholders of the Corporation to be held on
Wednesday, May 26, 2010, at 11:00 a.m. EDT, at The Community House, 380 S. Bates Street,
Birmingham, Michigan 48009, for the purposes set forth in the accompanying notice and in this proxy
statement.
This proxy statement is being mailed on or about April 27, 2010, to all holders of record of common
stock of the Corporation as of the record date. The Board of Directors of the Corporation has fixed
the close of business on April 20, 2010, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting and any adjournment of the meeting. As of the
record date, there were 3,419,736 shares of common stock outstanding. Each outstanding share will
entitle the holder to one vote on each matter presented for vote at the meeting.
If a proxy in the enclosed form is properly executed and returned to the Corporation, the shares
represented by the proxy will be voted on each matter that properly arises at the meeting and any
adjournment of the meeting. If a shareholder specifies a choice as to a particular matter, the
proxy will be voted as specified. If no choice is specified, the shares represented by the proxy
will be voted for the election of all of the nominees named in the proxy statement, for approval of the compensation of our executives, ratification of the independent
auditors, and in accordance with the judgment of the persons named as proxies with respect to any
other matter which may come before the meeting. Due to a recent regulatory rule change, brokers no
longer have discretion to cast votes in the election of directors with respect to any shares held
in street name for which they have not received voting directions from the beneficial owners.
Therefore, if you hold your shares in street name, you must vote your proxy if you wish your shares
to be voted in the election of directors. A proxy may be revoked before exercise by notifying the
Chief Executive Officer of the Corporation in writing or in open meeting, by submitting a proxy of
a later date or attending the meeting and voting in person. All shareholders are encouraged to date
and sign the enclosed proxy, indicate your choice with respect to the matters to be voted upon, and
return it to the Corporation.
Quorum, Required Vote, and Related Matters
Quorum. A quorum is present if a majority of the votes entitled to be cast on a proposal are
represented at the annual meeting in person or by proxy. For purposes of determining a quorum,
shareholders who are present in person or are represented by proxy, but who abstain from voting,
are considered present and count toward the determination of the quorum. Shares reported as broker
non-votes are also considered to be shares present for purposes of determining whether a quorum is
present.
Street Name Accounts. If you hold shares in street name with a broker, bank, or other
custodian, you will receive voting instructions from the holder of record of your shares. In some
cases, a broker may be able to vote your shares even if you provide no instructions. But on other
matters (such as the election of directors) your broker may vote the shares held for you only if
you provide voting instruction. Shares for which a broker does not have the authority to vote are
recorded as a broker non-vote and are not counted in the vote by shareholders. If you hold your
shares in street name, it is critical that you cast your vote if you want it to count in the
election of our directors. In the past, if you held your shares in street name and you did not
indicate how you wanted your shares voted in the election of directors, your bank or broker was
allowed to vote those shares on your behalf in the election of directors as they felt appropriate.
Recent changes in regulation take away the ability of your bank or broker to vote your uninstructed
shares in the election of directors on a discretionary basis. Accordingly, if you hold your
shares in street name and you do not instruct your bank or broker how to vote in the election of
directors, no votes will be cast on your behalf. Your
bank or broker will, however, continue to have discretion to vote any uninstructed shares on the ratification of the appointment of our
independent auditors.
Proposal No. 1 Election of Directors. Directors are elected by a plurality of the votes
cast by the shares entitled to vote. For this purpose, a plurality means that the individuals
receiving the largest number of votes are elected as directors. You may vote in favor of the
nominees specified on the accompanying form of proxy or may withhold your vote as to one or more of
such nominees. Shares withheld or not otherwise voted in the election of directors (because of abstention, broker
non-vote, or otherwise) will have no effect on the election of directors.
Proposal No. 2 Approval of Non-Binding Resolution Executive Compensation. The approval of
the non-binding resolution endorsing our executive compensation practices will be approved if more
shares are voted for the proposal than are voted against the proposal. Shares not voted (because
of abstention, broker non-vote, or otherwise) will have no effect on the approval of the
resolution.
Proposal No. 3 Ratification of Independent Auditors. The appointment of Plante & Moran,
PLLC as independent auditors will be ratified if more shares are voted for the ratification than
are voted against the ratification. Shares not voted (because of abstention, broker non-vote, or
otherwise) will have no effect on the ratification.
Votes cast at the meeting and submitted by proxy are counted by the inspectors of the meeting, who
are appointed by the Corporation. A plurality of the votes cast at the meeting is required to elect
the nominees as Directors of the Corporation. The two nominees who receive the largest number of
affirmative votes cast at the meeting will be elected as Directors. Shares not voted at the
meeting, whether by abstention, broker nonvote, or otherwise, will not be treated as votes cast at
the meeting and will have no effect on the outcome of the voting for the election of Directors.
The proposal for election of directors is no longer considered a discretionary item, so you must
provide voting instructions to your brokerage firm. The affirmative vote of a majority of the
votes cast at the meeting by the holders of shares entitled to vote on the proposal is required to
approve, in a non-binding advisory vote, the Corporations executive compensation disclosed in this
proxy statement. The executive compensation proposal is not a discretionary item, so you must
provide instructions to your brokerage firm. Abstentions and broker nonvotes will not be counted
as votes cast and therefore will not affect the determination as to whether the Corporations
executive compensation policies and procedures are approved. Because this shareholder vote is
advisory, it will not be binding upon the Board of Directors, overrule any decision made by the
Board of Directors, or create or imply any additional fiduciary duty by the Board of Directors.
However, the Compensation Committee will take into account the outcome of the vote when considering
future executive compensation arrangements.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Bylaws of the Corporation provide for a Board of Directors consisting of a minimum of five (5)
and a maximum of sixteen (16) members. The Board of Directors has fixed the number of Directors at
nine (9). The Articles of Incorporation of the Corporation and the Bylaws also provide for the
division of the Board of Directors into three (3) classes of nearly equal size with staggered
three-year terms of office; however, due to the previously announced resignation of Mr. Eliot
Stark, the Board currently has classes comprised of two, three and four directors, respectively.
See Information about Directors and NomineesDirector Information below. Two persons have been
nominated for election to the Board, each to serve a three-year term expiring at the 2013 annual
meeting of shareholders.
Unless otherwise directed by a shareholders proxy, the persons named as proxy holders in the
accompanying proxy will vote for Messrs. Mahaney and Tobias, the nominees named below. Messrs.
Mahaney and Tobias are currently Directors of the Corporation, and its subsidiary, mBank (the
Bank), and are the members of the class of Directors of the Corporation whose terms expire at the
2010 annual meeting. In the event that any of the nominees become unavailable, which is not
anticipated, the Board of Directors at its discretion, may reduce the number of Directors or
designate substitute nominees, in which event the enclosed proxy will be voted for such substitute
nominees. Proxies cannot be voted for a greater number of persons than the number of nominees
named.
The Board of Directors recommends a vote FOR the election of Messrs. Mahaney and Tobias, the two
persons nominated by the Board.
PROPOSAL 2: ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
In connection with the adoption of American Recovery and Reinvestment Act of 2009 (ARRA)
(described in the Executive Compensation summary below), the Corporation is required to permit a
separate shareholder vote to approve the compensation of its executives. Accordingly, the Company
is providing its shareholders with the opportunity to endorse or not endorse the Corporations
executive compensation programs by voting on the adoption of the following shareholder resolution:
RESOLVED, that the shareholders approve the compensation of executive officers as described
in the Executive Compensation section of the Mackinac Financial Corporation proxy statement
for the annual meeting of shareholders to be held on May 26, 2010.
As provided in ARRA, the vote by the shareholders is not binding on the Corporations Board and may
not be construed as overruling a decision by the Board regarding executive compensation, nor does
the vote by shareholders create or imply any additional fiduciary duty on the part of the
Corporations Board. The advisory vote above also does not restrict or limit the ability of
shareholders to make proposals for inclusion in the Corporations proxy materials in accordance
with SEC rules. The Corporations Board will take the outcome of this advisory vote into
consideration when considering future executive compensation arrangements.
The Corporations Board of Directors believes that the compensation procedures and policies are not
excessive and are aligned with the long-term interests of the Corporations shareholders.
Accordingly, the Corporations Board recommends a vote FOR the non-binding advisory vote on
executive compensation.
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
At the annual meeting, shareholders will be asked to ratify the appointment of the firm of Plante &
Moran, PLLC as independent auditor to audit our books, records, and accounts for the fiscal year
ending December 31, 2010. Although action by the shareholders in this matter is not required and
is not binding should the Board believe it is appropriate to retain another firm as independent
auditor, the role played by the independent auditor in maintaining the integrity of our financial
controls and reporting. The firm has served as our auditor since 2002.
Representatives of Plante & Moran will be present at the annual meeting and will have an
opportunity to make a statement or respond to appropriate questions.
The Board recommends a vote FOR the ratification of the appointment of Plante & Moran, PLLC. In
the event the shareholders do not ratify the appointment, the appointment will be reconsidered by
the Audit Committee and the Board.
3
Information about Directors and Nominees
Director Information
The following information has been furnished to the Corporation by the respective Directors. Each
of them has been engaged in the occupations stated below during the periods indicated, or if no
period is indicated, for more than five years.
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Director of |
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Corporation |
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Nominees Standing for Election |
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For Terms Expiring in 2013 |
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Robert E. Mahaney
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Sole Proprietor, Veridea Group, LLC (A commercial and
residential real estate development company.) Mr.
Mahaneys qualifications to serve on the Board include his
many successful business ventures and previous financial
services experience, coupled with his academic background,
professional designations, and community involvement.
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2008 |
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Paul D. Tobias
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Chairman and Chief Executive Officer of the Corporation and
Chairman of the Bank from December 2004 to present. Mr.
Tobias qualifications as a director include his extensive
experience as a banking and financial services executive,
along with his intimate knowledge of the Company as
President and Chief Executive Officer.
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Continuing Directors |
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Whose Terms Expire in 2012 |
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Walter J. Aspatore
(currently designated as
Lead Director)
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Investment Banking, Chairman Amherst Partners (Assists
public and private companies in the purchase or sale of
businesses. Also provides other advice and consulting
services related to business valuations,
operational/profitability improvement, and financing
alternatives.) Mr. Aspatores qualifications to serve on
the Board encompass a broad financial background which
spans across several decades as CEO and board member in a
wide variety of national and international publically held
companies.
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Robert H. Orley
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Real Estate Developer, Vice President and Secretary of REI
Investment Group, Inc. (Real estate and corporate
development and management.) Mr. Orleys qualifications
as director include a background in real estate management
and corporate development, along with his academic
background.
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2004 |
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Randolph C. Paschke
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From August 2002 to present Chair, Department of
Accounting and Interim Chair of The Department of Finance
in the School of Business Administration at Wayne State
University. Mr. Paschkes qualifications as a Director
include his many years as a partner in an international
accounting firm, along with his esteemed service as chair
of the accounting department at Wayne State University.
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2004 |
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Whose Terms Expire in 2011 |
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Dennis B. Bittner
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Owner and President, Bittner Engineering, Inc. (A
professional services company providing planning,
development and consultation related services on civil,
environmental and architectural engineering projects.)
Mr. Bittners qualifications as a Director include the
management/ownership of an engineering company, his many
years of business related consultation to a broad array of
public and private companies along with his prior career
experience as an engineer with State and Federal Agencies.
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2001 |
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Joseph D. Garea
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Investment Advisor, Managing Partner Hancock Securities
(Provides investment portfolio management services to
banks, thrift institutions and other institutional
clients.) Mr. Gareas qualifications as a Director
include his historical employment within the financial
services industry, his current service as a member of the
BOD of three banks, with a variety of committee
responsibilities including the chairmanship of Audit and
Compensation, along with his other current advisory
services to numerous public and private financial service
organizations.
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2007 |
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Kelly W. George
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President and Chief Executive Officer of the Bank and
President of the Corporation. Mr. Georges qualifications
to serve as a Director include his employment within the
financial services industry for over fifteen years with
initial employment as a regulator for the Federal Reserve
system, along with extensive lending experience, prior to
joining this Corporation.
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2006 |
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L. Brooks Patterson
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County Executive, Oakland County, Michigan. Mr.
Pattersons qualifications as a Director include his many
years of service as the County Executive of Oakland County
and his academic background, along with a distinguished
career as a prosecuting attorney.
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The Corporation believes that its Board as a whole should encompass a range of talent, skill,
diversity, and expertise enabling it to provide sound guidance with respect to the Corporations
operations and interests. In addition to considering a candidates background and accomplishments,
candidates are reviewed in the context of the current majority of Directors qualify as
independent under the rules of the Nasdaq Stock Market, LLC (Nasdaq).
The Corporations Board has considered the independence of the nominees for election at the annual
meeting, and the continuing Directors under the rules of The Nasdaq Stock Market LLC. The Board
has determined that all of the nominees and continuing Directors are independent under Nasdaq rules
except Mr. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of the
Bank, and Mr. George, President of the Corporation and President and Chief Executive Officer of the
Bank. Messrs. Tobias and George are not independent because of their services as Executive
Officers of the Corporation and the Bank.
As previously announced, Mr. Eliot Stark resigned from the Corporations Board of Directors in June
2008. At that time, the Board determined not to fill the vacancy and instead reduced the size of
the Board from ten to nine directors. As a result of the reduction, the Board currently has three
staggered classes of directors comprised of two, three and four directors, respectively.
5
Executive Officers
The Executive Officers of the Corporation serve at the pleasure of the Board of Directors. Set
forth below are the current Executive Officers of the Corporation and a brief explanation of their
principal employment during at least the last five years. Additional information concerning
employment agreements of Executive Officers of the Corporation is included elsewhere in this proxy
statement under the heading Executive Compensation.
Paul D. Tobias Age 59 Chairman of the Board and Chief Executive Officer of the Corporation
and Chairman of the Board of the Bank. Mr. Tobias was appointed to his present positions with the
Corporation and the Bank on December 16, 2004. Mr. Tobias also served as Chief Executive Officer
of the Bank from July 2005 until November 2006. From January 2000 to December 2004, Mr. Tobias
served as Chairman and Chief Executive Officer of Mackinac Holdings, Inc. and Managing Member of
Mackinac Partners, LLC (a financial and operational advisory company serving global and middle
market companies), neither of which are affiliated with the Corporation or the Bank. Mr. Tobias is
not currently a shareholder of Mackinac Holdings, Inc. nor is he a member of Mackinac Partners,
LLC, and is not active in either entity nor does he receive compensation from either entity.
Kelly W. George Age 42 President of the Corporation and President and Chief Executive Officer
of the Bank. Mr. George was appointed as President of the Corporation and as Chief Executive
Officer of the Bank in November 2006. Prior to that, Mr. George served as President of the Bank
from August 2005 and, prior to that, as Executive Vice President and Chief Lending Officer of the
Bank from August 2003.
Ernie R. Krueger Age 60 Executive Vice President and Chief Financial Officer of the
Corporation and the Bank. Mr. Krueger was appointed to his current positions in October 2006.
Prior to that, he served as Senior Vice President and Controller of the Corporation and the Bank
from October 2003 to October 2006.
Board of Directors Meetings and Committees
Audit Committee
The Audit Committee is a separately-designated standing Committee of the Board of Directors
established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as
amended (the Exchange Act). The Audit Committee has responsibility for, among other things:
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Appointing or replacing the Corporations independent auditors; |
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Overseeing the work of the independent auditors (including resolution of any
disagreements between management and the auditors regarding financial reporting); |
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Reviewing the independent auditors performance, qualifications and independence; |
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Approving all auditing and permitted non-auditing services to be performed by the
independent auditors with limited exceptions; |
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Reviewing the Corporations financial statements, internal audit function and system
of internal controls; |
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Overseeing compliance by the Corporation with legal and regulatory requirements and
with the Corporations Code of Business Conduct and Ethics; and |
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Producing the report required by federal securities regulations for inclusion in the
Corporations Proxy Statement. |
The Board of Directors has adopted a charter for the Audit Committee, a copy of which is available
on the Corporations website at www.bankmbank.com.
The current members of the Audit Committee are Messrs. Paschke (chairman), Bittner and Patterson,
all of whom are considered independent, as independence for audit committee members is defined in
applicable SEC and Nasdaq rules. The Board has determined that Mr. Paschke is an audit committee
financial expert as that term is defined by the SEC. The Audit Committee held eight meetings in
2009.
6
Nominating Committee
The Nominating Committee is responsible for, among other things:
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Identifying new candidates who are qualified to serve as Directors of the
Corporation; |
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Recommending to the Board of Directors the candidates for election to the Board and
for appointment to the Boards Committees; and |
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Considering any nominations for Director submitted by shareholders. |
The current members of the Nominating Committee are Messrs. Aspatore (chairman), Garea and
Patterson. All members are considered independent under the applicable Nasdaq rules. The
Nominating Committee had no meetings in 2009.
The Board of Directors has adopted a charter for the Nominating Committee, a copy of which is
available on the Corporations website at www.bankmbank.com. In the past, the committee has
identified potential nominees through recommendations made by executive officers and non-management
directors and has evaluated them based on their resumes and through references and personal
interviews. The Corporation has not paid any third party fee to assist in the process of
identifying or evaluating director nominees. No shareholder, other than an officer or director,
has ever submitted a suggestion for a nominee, but if the committee were to receive such a
suggestion, it expects it would evaluate that nominee in substantially the same manner.
The Corporation does not have a formal policy with regard to the consideration of diversity in
identifying Director nominees, but the Nominating Committee strives to nominate Directors with a
variety of complementary skills so that, as a group, the Board will possess the appropriate talent,
skills, and expertise to oversee the Corporations businesses.
The Nominating Committee will consider candidates nominated by shareholders in accordance with the
procedures set forth in the Corporations Bylaws and Articles of Incorporation and in the
Nominating Committees charter. Under the Corporations Bylaws and Articles of Incorporation,
nominations other than those made by the Board of Directors or the Nominating Committee must be
made pursuant to timely notice in proper written form to the Secretary of the Corporation. To be
timely, a shareholders request to nominate a person for election to the Board at the annual
meeting of shareholders, together with the written consent of such person to serve as a Director,
must be received by the Secretary of the Corporation not less than 60 nor more than 90 days prior
to the first anniversary date of the annual meeting of shareholders in the immediately preceding
year. To be in proper written form, the notice must contain certain information concerning the
nominee and the shareholder submitting the nomination.
With respect to each person proposed to be nominated as a director, the Nominating Committee must
be provided with the following information: (i) the name, address (business and residence), date of
birth, principal occupation or employment of such person (present and for the past five (5) years);
(ii) the number of shares of the Corporation such person beneficially owns (as such term is defined
by Section 13(d) of the Exchange Act); and (iii) any other information relating to such person that
would be required to be disclosed in a definitive proxy statement to shareholders prepared in
connection with an election of Directors pursuant to Section 14(a) of the Exchange Act. The
Nominating Committee may require any proposed nominee to furnish additional information as may be
reasonably required to determine the qualifications of such person to serve as a Director of the
Corporation. No person is eligible for election as a Director of the Corporation unless nominated
in accordance with the procedures set forth in the Bylaws and Articles of Incorporation.
In addition, as described in Executive CompensationParticipation in the TARP Capital Purchase
Program below, the Corporation issued and sold 11,000 shares of Series A Preferred Shares to the
Treasury. Under the terms of the CPP agreements, if dividends are not paid on the Series A
Preferred Shares in full for six dividend periods, whether or not consecutive, the holders of the
Series A Preferred Shares will have the right to elect two directors to the Corporations Board of
Directors. Any such nominations would not be subject to the above restrictions regarding
nominations made by the Board, the Nominating Committee or the shareholders.
Compensation Committee
The current Compensation Committee of the Board of Directors is comprised of Messrs. Garea
(chairman), Aspatore, Bittner, Paschke and Patterson, each of whom is considered independent under
the Nasdaq rules defining independence. The Compensation Committee held four meetings in 2009.
The Compensation Committees primary functions are to: review and recommend to the Board all
persons to be elected as Chairman, Chief Executive Officer, President, Chief Financial Officer and
other executive positions; review all material performance criteria used in evaluating Executive
Officers of the Corporation, including their compensation; and review and approve the annual base
salary level, annual incentive opportunity level, the long-term incentive opportunity level,
7
employment and other agreements, and other benefits of the Executive Officers. The primary
responsibilities of the Compensation Committee are to ensure that the compensation available to the
Board of Directors and officers of the Corporation:
|
|
|
Enables the Corporation to attract and retain high quality leadership; |
|
|
|
|
Provides competitive compensation opportunities; |
|
|
|
|
Supports the Corporations overall business strategy; and |
|
|
|
|
Maximizes shareholder value. |
In 2009, the Compensation Committee reviewed earnings information relative to the historical
compensation of executive management and comparative information prepared both internally and from
external advisors. The committee also engaged a compensation consultation firm to prepare
benchmarking information for all Key executive management positions. The totality of the
information reviewed by the Compensation Committee was considered when establishing current
executive salary levels, and similar analysis will be considered when reviewing and establishing
future salaries and long term incentives.
The Companys compensation policies and practices were evaluated to ensure that they do not foster
risk taking above the level or risk associated with the Corporations business model. For this
purpose, the committee considered the Corporations growth and return performance, volatility and
leverage, and the time horizon of the Corporations investments; and compared them to the
performance metrics, leverage, and time horizon of the Companys compensation policies and
practices. We also evaluated managements compensation in light of other specific risk parameters
such as credit, liquidity and interest rate risk. Based on this assessment, the Corporation
concluded that it has a balanced pay and performance program that does not promote excessive risk
taking.
The Compensation Committee charter is available on the Corporations website at www.bankmbank.com.
The Committee reviews management recommendations for contracts and compensation levels of all
senior executive officers. The Committee considers these recommendations in reference to relative
compensation levels of like-size financial institutions.
Attendance of Directors; Family Relationships
The Board of Directors held a total of eight meetings during 2009. No Director attended less than
75% of the aggregate number of meetings of the Board of Directors and the Committees on which he
served in 2009. There are no family relationships between or among any of the Directors, nominees,
or Executive Officers of the Corporation.
Communication with Directors; Attendance at Annual Meetings; Code of Ethics
The Corporations Board provides a process for shareholders to send communications to the Board or
any of the Directors. Shareholders may send written communications to the Board or any one or more
of the individual Directors by mail, c/o Corporate Secretary, Mackinac Financial Corporation, 130
South Cedar Street, Manistique, Michigan 49854. All communications will be compiled by the
Corporations Corporate Secretary and submitted to the Board or the individual Directors on a
regular basis unless such communications are considered, in the reasonable judgment of the
Corporate Secretary, to be improper for submission to the intended recipient(s). Examples of
shareholder communications that would be considered improper for submission include, without
limitation, customer complaints, solicitations, communications that do not relate directly or
indirectly to the Corporations business, or communications that relate to improper or irrelevant
topics.
It is the Corporations policy that all of the Directors and nominees for election as Directors at
the annual meeting attend the annual meeting except in cases of extraordinary circumstances. All
of the nominees for election at the 2009 annual meeting of shareholders and all other Directors
attended the 2009 annual meeting of shareholders. The Corporation expects all nominees and
Directors to attend the 2010 annual meeting.
The Corporation has a business conduct and code of ethics policy for all employees, officers and
directors of the Corporation and its subsidiaries. Among other things, the business conduct and
code of ethics policy includes provisions regarding ethical conduct, compliance with law, conflicts
of interest, insider trading and certain investment and other opportunities, competition and fair
dealing, discrimination and harassment, record keeping of personal transactions, accounting
matters, confidentiality, and reporting of violations. The Corporation has posted copies of its
business conduct and code of ethics policy on its corporate website, at www.bankmbank.com, under
the link Corporate Governance. If further matters are documented, or if those documents
(including the business conduct and code of ethics policy) are changed, waivers from the business
conduct and code of ethics policy are granted,
8
or new procedures are adopted, those new documents, changes and/or waivers will be disclosed on the
corporate website at the internet address above, in a press release or on a Current Report on Form
8-K.
Board Leadership Structure
The Board does not have a policy regarding the separation of the roles of Chief Executive Officer
and Chairman of the Board as the Board believes it is in the best interests of the Company to make
that determination based on the position and direction of the Company and the membership of the
Board. The Board has determined that having an independent director serve as Lead Director is in
the best interest of the Companys shareholders at this time. This structure ensures a greater
role for the independent Directors in the oversight of the Company and active participation of the
independent Directors in setting agendas and establishing Board priorities and procedures.
Further, this structure permits the Chief Executive Officer to focus on the management of the
Companys day-to-day.
Boards Role in Risk Oversight
Companies face a variety of risks, including credit risk, liquidity risk, and operational risk.
The Board believes an effective risk management system will (1) timely identify the material risks
that the Company faces, (2) communicate necessary information with respect to material risks to
senior executives and, as appropriate, to the Board or relevant Board Committee, (3) implement
appropriate and responsive risk management strategies consistent with Companys risk profile, and
(4) integrate risk management into Company decision-making.
9
Remuneration of Directors
The table below summarizes the compensation paid by the Corporation to non-employee directors for
the fiscal year ended December 31, 2009.
2009 Director Compensation Table
|
|
|
|
|
|
|
Total Fees Earned |
|
|
or |
|
|
Paid in Cash |
Name |
|
($) |
Walter J. Aspatore |
|
|
28,000 |
|
Dennis B. Bittner |
|
|
25,000 |
|
Joseph D. Garea |
|
|
28,000 |
|
Robert E. Mahaney |
|
|
25,000 |
|
Robert H. Orley |
|
|
25,000 |
|
Randolph C. Paschke |
|
|
28,000 |
|
L. Brooks Patterson |
|
|
25,000 |
|
In 2009, the non-employee members of the Board of Directors received remuneration in the form of
$25,000 and in addition, directors who chaired board committees were paid an additional $3,000. No
option awards were granted in 2009. The employee directors (which included Messrs. Tobias and
George in 2009) did not receive compensation for their service on the Board of Directors. For
2010, non-employee directors will be paid an annual fee of $25,000. In addition to the annual fee,
those directors who chair board committees will be paid an additional $3,000.
10
EXECUTIVE COMPENSATION
Participation in the TARP Capital Purchase Program
As previously announced, on April 24, 2009, the Corporation entered into and closed a Letter
Agreement, including the Securities Purchase AgreementStandard Terms (collectively, the
Securities Purchase Agreement), related to the CPP. Pursuant to the Securities Purchase
Agreement, the Corporation issued and sold to the Treasury (i) 11,000 shares of the Corporations
Series A Preferred Shares, and (ii) the Warrant to purchase 379,310 shares of the Corporations
Common Shares, at an exercise price of $4.35 per share (subject to certain anti-dilution and other
adjustments), for an aggregate purchase price of $11,000,000 in cash. The Warrant has a ten-year
term.
As a result of the CPP transaction, the Corporation is required to take certain actions, for so
long as the Treasury holds any securities acquired from the Corporation pursuant to the CPP
(excluding any period in which the Treasury holds only the Warrant to purchase Common Shares of the
Corporation) (the CPP Period), to ensure that its executive compensation and benefit plans with
respect to Senior Executive Officers (as defined in the relevant agreements) comply with Section
111(b) of Emergency Economic Stabilization Act of 2008 (EESA), as implemented by any guidance or
regulations issued under Section 111(b) of EESA, and not adopt any benefit plans with respect to,
or which cover, the Corporations Senior Executive Officers that do not comply with EESA, as
amended by the American Recovery and Reinvestment Act of 2009 (the ARRA), which was passed by
Congress and signed by the President on February 17, 2009. The applicable executive compensation
standards generally remain in effect during the CPP Period and apply to the Corporations Senior
Executive Officers (which for purposes of the ARRA and the CPP agreements, includes the
Corporations Chief Executive Officer, its Chief Financial Officer, and the next three most
highly-compensated executive officers, even though the Corporations senior executive officers
consist of a smaller group of executives for purposes of the other compensation disclosures in this
proxy statement).
The applicable executive compensation standards include: (i) limits on compensation to exclude
incentives to take unnecessary and excessive risks during the CPP Period; (ii) prohibitions on
payment or accrual of bonuses, retention awards and other incentive compensation to our most
highly-compensated employee, other than payments pursuant to written employment agreements entered
into on or before February 11, 2009, or grants of restricted stock that do not fully vest during
the CPP Period and do not have a value which exceeds one-third of that employees total annual
compensation; (iii) prohibitions on any payments to our ten most highly-compensated employees for
departure from the Corporation for any reason (a golden parachute), except for payments for
services performed or benefits accrued; (iv) recovery (clawback) of bonuses, retention awards and
incentive compensation to Senior Executive Officers and the next 20 most highly-compensated
employees if the payment was based on materially inaccurate statements of earnings, revenues, gains
or other criteria; (v) prohibition on compensation plans that encourage manipulation of reported
earnings; (vi) retroactive review of bonuses, retention awards and other compensation previously
paid to Senior Executive Officers and the next 20 most highly-compensated employees if found by the
Treasury to be inconsistent with the purposes of TARP or otherwise contrary to public interest;
(vii) requiring the establishment of a company-wide policy regarding excessive or luxury
expenditures; and (viii) requiring the inclusion in proxy statements for annual shareholder
meetings of a non-binding Say-on-Pay shareholder vote on the compensation of executives. The
Treasury also has authority under the ARRA to impose additional appropriate standards for executive
compensation and corporate governance.
The ARRA executive compensation standards require that the Treasury and the SEC issue a number of
regulations describing how the standards are to be implemented. As of the date of this proxy
statement, neither the Treasury nor the SEC has issued those implementing regulations.
The Corporation intends to carefully review any Treasury and SEC regulations once they are issued.
To the extent that the Treasury and/or the SEC issues regulations describing how the Corporation is
to comply with these standards, the Corporation will work with its Senior Executive Officers and
other affected employees to take such steps as it deems necessary to comply with the standards and
adopt policies and procedures consistent with the foregoing. As previously announced, the
Corporation has entered into amendments to its compensation arrangements with certain key employees
to, among other things: (a) eliminate any parachute payments during the CPP Period and (b) waive
any right of the Corporation to terminate those employees, except terminations for death,
disability or cause.
The Corporation has the right to redeem the Series A Preferred Shares at any time after consulting
with its primary regulator, in which case the executive compensation standards would no longer
apply to the Corporation.
11
2009 Summary Compensation Table
The following table summarizes compensation for the past two fiscal years awarded to, earned by or
paid to, our principal executive officer and our two other most highly compensated Executive
Officers who were serving at the end of 2009.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
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|
|
|
|
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Compensation |
|
|
Total |
|
Name and Principal Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) (1) |
|
|
($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul D. Tobias |
|
|
2009 |
|
|
|
240,000 |
|
|
|
0 |
|
|
|
28,570 |
|
|
|
268,570 |
|
Chairman and Chief Executive Officer of the Corporation |
|
|
2008 |
|
|
|
240,000 |
|
|
|
0 |
|
|
|
36,738 |
|
|
|
276,738 |
|
Chairman of the Bank |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly W. George |
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|
2009 |
|
|
|
209,000 |
|
|
|
0 |
|
|
|
25,353 |
|
|
|
234,353 |
|
President of the Corporation |
|
|
2008 |
|
|
|
209,000 |
|
|
|
25,000 |
|
|
|
24,968 |
|
|
|
258,968 |
|
President and Chief Executive Officer of the Bank |
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|
|
|
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|
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|
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|
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|
|
|
|
|
|
|
|
Ernie R. Krueger |
|
|
2009 |
|
|
|
165,000 |
|
|
|
15,000 |
|
|
|
12,877 |
|
|
|
192,877 |
|
Executive Vice President and |
|
|
2008 |
|
|
|
165,000 |
|
|
|
20,000 |
|
|
|
17,865 |
|
|
|
202,865 |
|
Chief Financial Officer of the Corporation and the Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts in this column include the value of the following perquisites paid to each
individual in 2009 and 2008. Perquisites are valued at actual amounts paid to each
provider of such perquisites. Perquisites included in the All Other Compensation column
for 2009 include: 401(k) employer match contributions for Mr. George $6,639 and Mr.
Krueger $5,208; health and disability insurance premiums for Mr. Tobias $26,962, Mr.
George $18,340, Mr. Krueger $10,409; life insurance premiums for Mr. Tobias
$1,608, Mr. George $374, Mr. Krueger $2,468; Perquisites included in the All Other
Compensation column for 2008 include: 401(k) employer match contributions for Mr. Tobias
$6,900, Mr. George $6,270 and Mr. Krueger $5,550; health and disability insurance
premiums for Mr. Tobias $28,280, Mr. George $18,336 and Mr. Krueger $10,783; life
insurance premiums for Mr. Tobias $1,558, Mr. George $362 and Mr. Krueger $1,532. |
12
2009 Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information for each of the Executive Officers named in the Summary
Compensation Table with respect to each option to purchase common shares that had not been
exercised and remained outstanding at December 31, 2009.
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|
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|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Number of Securities |
|
Number of Securities |
|
|
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
Unexercised Options |
|
Unexercised Options |
|
Option Exercise |
|
Option |
|
Option |
|
|
(#) |
|
(#) |
|
Price |
|
Grant |
|
Expiration |
Name |
|
Exercisable |
|
Unexercisable |
|
($) |
|
Date |
|
Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul D. Tobias (1) |
|
|
70,502 |
|
|
|
79,503 |
|
|
|
9.75 |
|
|
|
12/15/04 |
|
|
|
12/15/14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly W. George (2) |
|
|
4,000 |
|
|
|
16,000 |
|
|
|
12.00 |
|
|
|
06/10/05 |
|
|
|
06/10/15 |
|
|
|
|
3,000 |
|
|
|
12,000 |
|
|
|
10.65 |
|
|
|
12/15/06 |
|
|
|
12/15/16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ernie R. Krueger (2) |
|
|
2,000 |
|
|
|
8,000 |
|
|
|
12.00 |
|
|
|
06/10/05 |
|
|
|
06/10/15 |
|
|
|
|
2,000 |
|
|
|
8,000 |
|
|
|
10.65 |
|
|
|
12/15/06 |
|
|
|
12/15/16 |
|
|
|
|
(1) |
|
Options granted to Messr. Tobias could vest within two years from the December 15, 2004
grant date. The first 47% vested immediately after the market value of the Corporations
common stock attained a price equal to or greater than 115% of the stock option exercise
price, which it did on December 16, 2004. The remaining shares (53%) vest within two years
from the December 15, 2004 grant date if the market value of the Corporations common stock
is equal to or greater than 145% of the stock option exercise price. This market value
condition has not yet been met; therefore, only 47% of the options are currently vested. |
|
(2) |
|
Options granted to Messrs. George and Krueger could vest within four years from the
original grant date. The options vest as follows: 20% vested immediately on the grant
date, and the remaining 80% vest over four years, provided that the market value of the
common stock attains increased market value during the vesting period from 115% of stock
option exercise price in the first year to 145% of stock option exercise price in the
fourth year of vesting. |
Employment and Consulting Agreements
The Corporation has employment agreements with Executive Officers as described below.
Paul D. Tobias Mr. Tobiass employment agreement, dated May 7, 2007, provides for him to
be employed and appointed as Chairman of the Board and Chief Executive Officer of the Corporation
and Chairman of the Board of the Bank. The agreement provides for an initial annual base salary of
$240,000, which is subject to annual review by the Board. Under the agreement, Mr. Tobias is
eligible to participate in an incentive plan or plans for annual cash bonuses to be awarded to
eligible employees. The agreement has an initial term which expires June 30, 2010.
In addition to the compensation noted above, the agreement entitles Mr. Tobias to participate in
employee benefit plans as from time to time are maintained, sponsored or made available to the
executive employees of the Corporation and the Bank, on the same terms and subject to the same
conditions and limitations generally applicable to other executive officers.
In addition to other benefits provided under the agreement, the Corporation purchased a
supplemental disability insurance policy to provide for supplemental payments to those received
under the Corporations current benefit plan that will bring total payments in the event of
disability to not less than 80% of current base salary.
13
If the agreement is terminated, Mr. Tobias is entitled to receive certain payments and
benefits depending on the reason the agreement is terminated. The table below summarizes the
termination payments under the agreement.
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|
|
REASON FOR TERMINATION |
|
TERMINATION PAYMENTS |
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|
|
By death, by the Corporation for cause
(as defined in the agreement), or
voluntarily by employee
|
|
No termination payments
required; however, employee
receives his salary and benefits
and reimbursements to which he
is entitled through the date of
termination |
|
|
|
By the Corporation without cause
|
|
If the termination is in the
first 12 months of the
agreement, employee receives a
lump payment equal to 300% of
employees then current annual
salary, plus the highest bonus
from January 1, 2005 through the
effective date of the
termination and other benefits
and reimbursements for a period
of one year following
termination |
|
|
|
|
|
If termination is in the second
12 months of the agreement,
employee receives a lump payment
equal to 200% of employees then
current annual salary, plus the
highest bonus from January 1,
2005 through the effective date
of the termination and other
benefits and reimbursements for
a period of one year following
termination |
|
|
|
|
|
If termination is in the third
12 months of the agreement or
thereafter), employee receives a
lump payment equal to 100% of
employees then current annual
salary, plus the highest bonus
from January 1, 2005 through the
effective date of the
termination and other benefits
and reimbursements for a period
of one year following
termination |
|
|
|
Disability
|
|
Benefits related to supplemental
disability plan which would
amount to not less than 80% of
annual salary and benefits |
|
|
|
Following a Change in Control or by
employee for Cause (as defined in the
agreement)
|
|
Lump sum equal to 299% of
aggregate of base salary and
other benefits and
reimbursements for one year
following change of control |
|
|
|
By mutual agreement
|
|
Per the mutual agreement |
The agreement provides for a specified adjustment to the termination payments should the payments
be determined to constitute an excess parachute payment under Section 280G of the Internal Revenue
Code.
The agreement includes confidentiality obligations of Mr. Tobias and provides that he will not
engage in competitive activities while employed by us. If his employment is terminated, the
restriction on his competitive activities will continue after termination in certain instances for
a period of one to three years, depending on the reason for the termination.
Kelly W. George Mr. Georges employment agreement, dated December 21, 2006, provides for
him to be employed as President of the Corporation and President and Chief Executive Officer of the
Bank. The agreement provides for an initial annual base salary of $209,000, which was subject to
annual review by the Board. Under the agreement, Mr. George is eligible participate in an
incentive plan or plans for annual cash bonuses to be awarded to eligible employees. The
agreement was amended on January 28, 2010 to increase the annual salary to $250,000 and extend the
employment term to January 31, 2012.
In addition to the compensation noted above, the agreement entitles Mr. George to participate in
employee benefit plans as from time to time are maintained, sponsored or made available to the
executive employees of the Corporation and the Bank, on the same conditions and limitations
generally applicable to other executive officers.
14
In addition to other benefits provided under the agreement, the Corporation purchased a
supplemental disability insurance policy to provide for supplemental payments to those received
under the Corporations current benefit plan that will bring total payments in the event of
disability to not less than 80% of current base salary.
If the agreement is terminated, Mr. George is entitled to receive certain payments and benefits
depending on the reason the agreement is terminated. The table below summarizes the termination
payments under the agreement.
|
|
|
REASON FOR TERMINATION |
|
TERMINATION PAYMENTS |
|
|
|
By death, by the Corporation for cause (as defined in the
agreement), or voluntarily by employee
|
|
No termination payments required; however, employee
receives his salary and benefits and reimbursements
to which he is entitled through the date of
termination |
|
|
|
By the Corporation without cause (as defined in the agreement)
|
|
A lump payment equal to employees then current
annual base salary, plus the highest bonus from
January 1, 2005 through the effective date of the
termination and other benefits and reimbursements for
a period of one year following termination |
|
|
|
Disability
|
|
Benefits related to supplemental disability plan
which would amount to not less than 80% of annual
salary and benefits |
|
|
|
Following a Change in Control
|
|
Lump sum equal to 299% of aggregate of base salary and
other benefits and reimbursements for one year
following change of control |
|
|
|
By mutual agreement
|
|
Per the mutual agreement |
The agreement provides for a specified adjustment to the termination payments should the payments
be determined to constitute an excess parachute payment under Section 280G of the Internal Revenue
Code.
The agreement includes confidentiality obligations of Mr. George and provides that he will not
engage in competitive activities while employed by us. If his employment is terminated, the
restriction on his competitive activities will continue after termination in certain instances for
a period of one to three years, depending on the reason for the termination.
Ernie R. Krueger Mr. Kruegers agreement, dated January 31, 2007, provides for him to be
employed as Executive Vice President and Chief Financial Officer of the Corporation and the Bank.
The agreement provides for an initial annual base salary of $165,000, which is subject to
annual review by the Board. Under the agreement, Mr. Krueger is eligible to participate in an
incentive plan or plans for annual cash bonuses to be awarded to eligible employees. The agreement
was amended on January 28, 2010 to increase the annual salary to $185,000 and extend the employment
term to January 31, 2012.
In addition to the compensation noted above, the agreement entitles Mr. Krueger to participate in
employee benefit plans as from time to time are maintained, sponsored or made available to the
executive employees of the Corporation and the Bank, on the same conditions and limitations
generally applicable to other executive officers.
In addition to other benefits provided under the agreement, the Corporation purchased a
supplemental disability insurance policy to provide for supplemental payments to those received
under the Corporations current benefit plan that will bring total payments in the event of
disability to not less than 80% of current base salary.
If the agreement is terminated, Mr. Krueger is entitled to receive certain payments and benefits
depending on the reason the agreement is terminated. The table below summarizes the termination
payments under the agreement.
15
|
|
|
REASON FOR TERMINATION |
|
TERMINATION PAYMENTS |
|
|
|
By death, by the Corporation for cause (as defined in the
agreement), or voluntarily by employee
|
|
No termination payments
required; however,
employee receives his
salary and benefits and
reimbursements to which
he is entitled through
the date of termination |
|
|
|
By the Corporation without cause (as defined in the agreement)
|
|
A lump payment equal to
employees then current
annual base salary,
plus the highest bonus
from January 1, 2005
through the effective
date of the termination
and other benefits and
reimbursements for a
period of one year
following termination |
|
|
|
Disability
|
|
Benefits related to
supplemental disability
plan which would
amount to not less than
80% of annual salary
and benefits |
|
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|
Following a Change in Control
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Lump sum equal to 299%
of aggregate of base
salary and other
benefits and
reimbursements for one
year following change
of control |
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By mutual agreement
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Per the mutual agreement |
The agreement provides for a specified adjustment to the termination payments should the payments
be determined to constitute an excess parachute payment under Section 280G of the Internal Revenue
Code.
The agreement includes confidentiality obligations of Mr. Krueger and provides that he will not
engage in competitive activities while employed by us. If his employment is terminated, the
restriction on his competitive activities will continue after termination in certain instances for
a period of one to three years, depending on the reason for the termination.
As discussed in Executive CompensationParticipation in the TARP Capital Purchase Program above
and Proposal 2: Non-Binding Advisory Vote on Executive Compensation below, as a participant in
the CPP, the Corporation is subject to a number of additional executive compensation standards as
provided by the EESA and the ARRA, and the standards may be changed or expanded by future
regulations. As previously announced: (1) the Corporation has entered into amendments to its
compensation arrangements with certain key employees (including Messrs. Tobias, George and Krueger)
to, among other things: (a) eliminate any parachute payments during the CPP Period and (b) waive
any right of the Corporation to terminate those employees, except terminations for death,
disability or cause and (2) certain employees of the Corporation (including Messrs. Tobias,
George and Krueger) have executed a waiver pursuant to the terms of the Securities Purchase
Agreement.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Corporations audited financial statements with
management.
In discharging its oversight responsibility as to the audit process, the Audit Committee obtained
from the independent auditors a formal written statement describing all relationships between the
auditors and the Corporation that might bear on the auditors independence and information required
by applicable requirements of the Public Company Accounting Oversight Board regarding the
independent accountants communications with the Audit Committee concerning independence and
discussed with the auditors any relationships that may impact their objectivity and independence.
The Audit Committee has also considered whether the provision of any non-audit services by the
auditors is compatible with maintaining the auditors independence. The Audit Committee is
satisfied as to the auditors independence. The Audit Committee also discussed with management and
the independent auditors the quality and adequacy of the Corporations internal controls and the
internal audit functions organization, responsibilities, budget and staffing. The Audit Committee
reviewed the audit plans, audit scopes and identification of audit risks with the independent
auditor.
The Audit Committee discussed and reviewed with the independent auditors all communications
required by the Public Company Accounting Oversight Board, including those described in Statement
on Auditing Standards No. 61, as amended, Communication with Audit Committees and, with and without management present, discussed and reviewed the results
of the independent auditors examination of the financial statements.
16
Based on the review and discussions referred to above, the Audit Committee has recommended to the
Board of Directors that the audited financial statements be included in the Corporations Annual
Report on Form 10-K for 2009 for filing with the SEC.
Audit Committee
Randolph C. Paschke Dennis B. Bittner L. Brooks Patterson
Principal Accountant Fees and Services
The following table summarizes fees for professional services rendered by Plante & Moran, PLLC, the
Corporations independent auditors for the years ended December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
Audit fees (1) |
|
$ |
89,500 |
|
|
$ |
89,500 |
|
Audit-related fees (2) |
|
|
22,500 |
|
|
|
12,750 |
|
Tax fees (3) |
|
|
13,000 |
|
|
|
13,000 |
|
All other fees (4) |
|
|
11,450 |
|
|
|
24,670 |
|
|
|
|
|
|
|
|
Total fees |
|
$ |
136,450 |
|
|
$ |
139,920 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees consist of fees billed for professional services performed by Plante &
Moran, PLLC, for the audit of the Corporations annual financial statements and internal
control over financial reporting included in the Form 10-K, the review of financial
statements included in the Corporations Form 10-Q filings and services that are normally
provided in connection with regulatory filings or engagements. |
|
(2) |
|
Represents fees for review and audit of the Corporations 401(k) plan. |
|
(3) |
|
Represents fees billed for tax services, including tax reviews and planning. |
|
(4) |
|
All other fees represent fees paid for website development. |
The Audit Committee is required to review and pre-approve both audit and non-audit services to be
provided by the independent auditor (other than with respect to de minimis exceptions permitted by
the Sarbanes-Oxley Act of 2002). During 2009, all services provided by Plante & Moran, PLLC were
pre-approved by the Audit Committee. To the extent required by Nasdaq rules or any other applicable
legal or regulatory requirements, approval of non-audit services must be disclosed to investors in
periodic reports required by Section 13(a) of the Exchange Act.
INDEBTEDNESS OF AND TRANSACTIONS WITH MANAGEMENT
Certain of the Directors and officers of the Corporation have had and are expected to have in the
future, transactions with the Bank, or have been Directors or officers of corporations, or members
of partnerships or limited liability companies, which have had and are expected to have in the
future, transactions with the Bank. In the opinion of management, all such previous transactions
(i) were made in the ordinary course of business, (ii) were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the same time for comparable
transactions with other customers, and (iii) did not involve more than normal risk of
collectability or present other unfavorable features. The Corporations Board of Directors has
responsibility for reviewing and approving transactions with related persons. The Corporation, as
a general policy, approves transactions to related parties at essentially the same terms and
conditions that apply to similar transactions it engages in or approves with non-related parties.
17
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of April 20, 2010, no person was known by management to be the beneficial owner of more than 5%
of the outstanding common stock of the Corporation, except as follows:
|
|
|
|
|
|
|
|
|
Name and Address of |
|
Amount and Nature of |
|
Percent of |
Beneficial Owner |
|
Beneficial Ownership |
|
Class |
|
|
|
|
|
|
|
|
|
Financial Stocks Capital |
|
340,000 Common Shares |
|
|
9.94 |
% |
Partners III LP
441 Vine Street, Suite 507
Cincinnati, OH 45202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerlach & Co. |
|
300,000 Common Shares |
|
|
8.77 |
% |
FBO Banc Fund V LP
208 LaSalle Street, Suite 1680
Chicago, IL 60604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Hofmeister |
|
300,000 Common Shares |
|
|
8.77 |
% |
2008 Cypress Street, Suite 100
Paris, KY 40361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRB Advisors, LLC |
|
298,987 Common Shares |
|
|
8.74 |
% |
600 Third Avenue, 17th floor
New York, NY 10016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond Garea |
|
231,157 Common Shares |
|
|
6.76 |
% |
31 Claremont Avenue
Maplewood, NJ 07040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellington Management Company LLP |
|
212,380 Common Shares |
|
|
6.19 |
% |
75 State Street
Boston, MA 02109 |
|
|
|
|
|
|
|
|
18
The information in the following table sets forth the beneficial ownership of the Corporations
common stock by each of the Corporations Directors, each of the Executive Officers listed in the
Summary Compensation Table and by all current Directors and Executive Officers of the Corporation
as a group, as of April 20, 2010. Except as noted, beneficial ownership is direct and the person
indicated has sole voting and investment power.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of |
|
|
Name of Beneficial Owner |
|
Beneficial Ownership (1) |
|
Percent of Class |
Walter J. Aspatore |
|
|
9,800 |
|
|
|
* |
|
Dennis B. Bittner |
|
|
5,341 |
|
|
|
* |
|
Joseph D. Garea |
|
|
48,520 |
|
|
|
1.4 |
% |
Kelly W. George |
|
|
16,089 |
|
|
|
* |
|
Ernie R. Krueger |
|
|
16,254 |
|
|
|
* |
|
Robert E. Mahaney |
|
|
5,937 |
|
|
|
* |
|
Robert H. Orley |
|
|
27,641 |
|
|
|
* |
|
Randolph C. Paschke |
|
|
14,046 |
|
|
|
* |
|
L. Brooks Patterson |
|
|
2,000 |
|
|
|
* |
|
Paul D. Tobias (2) |
|
|
152,586 |
|
|
|
4.4 |
% |
|
|
|
|
|
|
|
|
|
All current Directors and
Executive Officers as a
group
(10 persons) |
|
|
298,214 |
|
|
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1.0%. Percentages are based on shares outstanding on the record date. |
|
(1) |
|
Includes the following shares subject to options exercisable within 60 days of April 20,
2010: Mr. Aspatore 2,000, Mr. Bittner 2,325, Mr. George 7,000, Mr. Krueger
4,000, Mr. Orley 2,000, Mr. Paschke 2,000, Mr. Patterson 2,000, Mr. Tobias
70,502, all current Directors and Executive Officers as a group 91,827. |
|
(2) |
|
Includes 10,256 shares owned by Tobias Capital LLC, which is 35% owned by Mr. Tobias and
his wife. |
The above beneficial ownership information is based on data furnished by the specified persons and
is determined in accordance with Rule 13d-3 under the Exchange Act, as required for purposes of
this proxy statement. It is not necessarily to be construed as an admission of beneficial
ownership for other purposes.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporations officers and
Directors, and persons who own more than 10% of the Corporations common stock to file reports of
ownership and changes in ownership with the Securities and Exchange Commission. Based solely on a
review of filings furnished to and written representation regarding Form 5 filing obligations, the
Corporation is not aware of any failure by any such person to file required reports on a timely
basis.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Independent Auditors
The financial statements of the Corporation for the year ended December 31, 2009 have been examined
by Plante & Moran, PLLC, an independent registered public accounting firm. A representative of
Plante & Moran, PLLC is expected to be at the meeting and will have an opportunity to make a
statement and will be available to answer appropriate questions. Plante & Moran, PLLC has been
appointed by the Audit Committee of the Board of Directors to serve as the independent public
accountants of the Corporation and its subsidiaries for the year ending December 31, 2010.
Changes of Accountants
There was no change of the Corporations independent public accountants during 2008 or 2009.
19
FUTURE SHAREHOLDER PROPOSALS
A proposal submitted by a shareholder for the 2011 annual meeting of shareholders must be sent to
the Secretary of the Corporation, 130 South Cedar Street, Manistique, Michigan 49854 and must be
received by the Corporation no later than December 29, 2010 to be eligible for inclusion in the
Corporations proxy materials for the 2011 annual meeting of shareholders under Rule 14a-8 under
the Exchange Act. In order to be considered at any meeting, a shareholder proposal submitted
outside of Rule 14a-8 under the Exchange Act, other than a nomination of directors, must (i) comply
with the requirements in the Corporations Bylaws and Articles of Incorporation as to form and
content, and (ii) be received by the Corporation (a) at least 30 days prior to the originally
scheduled date of the meeting, or (b) not later than the close of business on the tenth day
following the date on which notice of the scheduled meeting was first mailed to the shareholders,
if less than 40 days notice of the meeting is given by the Corporation. Shareholder nominations of
directors must comply with the requirements of the Articles of Incorporation and Bylaws summarized
above under Board of Directors Meetings and CommitteesNominating Committee.
OTHER MATTERS
A shareholder who intends to present a proposal to the 2011 annual meeting of shareholders, other
than a nomination of directors and other than pursuant to Rule 14a-8 under the Exchange Act, must
provide the Corporation with notice of such intention by at least March 15, 2011, or the persons
named in the proxy to vote the proxies will have discretionary voting authority at the 2011 annual
meeting with respect to any such proposal without discussion of the matter in the Corporations
proxy statement.
The Board of Directors is not aware of any matter to be presented for action at the 2010 annual
meeting, other than the matters set forth herein. If any other business should properly come before
the meeting, the proxy will be voted regarding the matter in accordance with the best judgment of
the persons authorized in the proxy, and discretionary authority to do so is included in the proxy.
The cost of soliciting proxies will be borne by the Corporation. If requested, the Corporation will
reimburse banks, brokerage houses and other custodians, nominees and certain fiduciaries for their
reasonable expenses incurred in mailing proxy materials to their principals. In addition to
solicitation by mail, officers and other employees of the Corporation and its subsidiaries may
solicit proxies by telephone, facsimile or in person, without compensation other than their regular
compensation.
The Annual Report of the Corporation for 2009 is included with this proxy statement. Copies of the
report will also be available for all shareholders attending the annual meeting and can be obtained
on our website at www.bankmbank.com.
THE ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION AND THE CORPORATIONS 2009
ANNUAL REPORT IS ALSO AVAILABLE AT WWW.BANKMBANK.COM AND WILL BE PROVIDED FREE TO SHAREHOLDERS UPON
WRITTEN REQUEST. TO REQUEST A COPY, WRITE TO SHAREHOLDER RELATIONS DEPARTMENT, MACKINAC FINANCIAL
CORPORATION, 130 SOUTH CEDAR STREET, MANISTIQUE, MICHIGAN 49854.
Shareholders are urged to sign and return the enclosed proxy in the enclosed envelope. A prompt
response will be helpful and appreciated.
20
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PLEASE MARK VOTES AS IN THIS EXAMPLE
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REVOCABLE PROXY MACKINAC FINANCIAL
CORPORATION
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
The undersigned hereby appoints Paul D. Tobias and Kelly W. George, or either of
them, with power of substitution in each, proxies to vote, as designated hereon, all of the undersigneds shares of Common Stock of MACKINAC FINANCIAL CORPORATION, at the
Annual Meeting of Shareholders to be held at The Community House, 380
S. Bates Street, Birmingham, MI 48009, on May 26, 2010, at 11:00 a.m., EDT and
any and all adjournments thereof:
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Please be sure to date and sign
this proxy card in the box below. |
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Date |
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Sign above |
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With- |
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For All |
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For |
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hold |
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Except |
1. Election
of Directors (except as marked to the
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contrary below):
|
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Robert E. Mahaney
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Paul D. Tobias
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INSTRUCTION: To withhold
authority to vote for any individual nominee, mark For
All Except and write that nominees name in the space provided. |
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For |
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Against |
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Abstain |
2. A PROPOSAL TO APPROVE, IN A NONBINDING
ADVISORY VOTE, THE CORPORATIONS COMPENSATION OF EXECUTIVES, AS
DISCLOSED IN THE PROXY STATEMENT FOR THE ANNUAL MEETING.
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For |
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Against |
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Abstain |
1 TO RATIFY THE APPOINTMENT OF PLANTE & MORAN, PLLC AS INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2010.
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2 IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT THEREOF. |
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The Board of Directors
recommends a vote "FOR" the nominees listed above and
"FOR" proposals 2 and 3.
|
Properly executed
proxies will be voted as marked and, if not marked, will be voted "FOR" all proposals.
|
YOUR VOTE IS IMPORTANT. |
Whether or not you plan to attend, you can be sure your shares are represented at the meeting by promptly
returning your completed proxy in the enclosed postagepaid envelope which is addressed to our tabulation service at:
Registrar and Transfer
Company 10 Commerce Drive
Cranford, New Jersey 07016-
3572
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Detach above card, sign, date and mail in postage paid envelope provided.
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MACKINAC FINANCIAL
CORPORATION 130 SOUTH CEDAR
STREET MANISTIQUE, MICHIGAN 49854
Please date, sign exactly as your name appears hereon, and mail promptly in the enclosed envelope which requires no postage if mailed in the United States. When signing as attorney, executor,
administrator, trustee, guardian, etc., give full title as such. If shares are held jointly both owners must sign.
PLEASE ACT PROMPTLY SIGN, DATE & MAIL
YOUR PROXY CARD TODAY
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.