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
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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)
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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 25, 2011
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 25, 2011, at 11:00 a.m.
EDT, at The Townsend Hotel, 100 Townsend Street, Birmingham, Michigan 48009, for the following
purposes:
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To elect four (4) 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, 2011, 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 19, 2011, 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.
By order of the Board of Directors
/s/ Paul D. Tobias
Paul D. Tobias
Chairman and Chief Executive Officer
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER
MEETING TO BE HELD ON MAY 25, 2011: The Proxy Statement, Form 10-K for the year ended December 31, 2010 and the
2010 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 25, 2011
130 South Cedar Street
Manistique, Michigan 49854
April 25, 2011
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 25, 2011, at 11:00 a.m. EDT, at The Townsend Hotel, 100 Townsend 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 25, 2011, 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 19, 2011, 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, for 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, as well as with respect to the
approval of the compensation of our executives. 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 and approval of executive compensation) 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 and approval of executive
compensation. 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 or approval of executive compensation, 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 on 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 four 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 non-vote, 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.
2
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. Four persons have been
nominated for election to the Board, each to serve a three-year term expiring at the 2014 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. Bittner, Garea, George and Patterson, the nominees named
below. Messrs. Bittner, Garea, George and Patterson 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 2011 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. Bittner, Garea, George and
Patterson, the four 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
Corporation 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 25, 2011.
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, 2011. 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 Board believes that providing the Corporations shareholders with an opportunity to
ratify the independent auditor is appropriate given 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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Nominees Standing for Election |
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Director of |
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Corporation |
Whose Terms Expire in 2014 |
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Dennis B. Bittner
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62 |
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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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56 |
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Investment Advisor, Managing Partner Hancock Securities
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2007 |
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(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
service 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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Kelly W. George
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43 |
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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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71 |
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County Executive, Oakland County, Michigan. Mr.
Pattersons qualifications to serve 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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2006 |
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Director of |
Continuing Directors |
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Corporation |
Whose Terms Expire in 2012 |
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Walter J. Aspatore
(currently designated as
Lead Director)
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68 |
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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
publicly held companies.
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2004 |
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Robert H. Orley
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55 |
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Real Estate Developer, Vice President and Secretary of
REI Group, Inc. (Real estate and corporate
development and management.) Mr. Orleys
qualifications as director include a background in
real estate management and corporate developments,
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 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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2001 |
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Paul D. Tobias
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60 |
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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 included his extensive experience as a
banking and financial services executive, along with
his intimate knowledge of the Corporation as Chief
Executive Officer.
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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 to maintain the current majority of Directors which 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.
5
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.
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 60 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.
Kelly W. George Age 43 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 61 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
2010.
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 2010.
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 five meetings in 2010.
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
7
review and approve the annual base
salary level, annual incentive opportunity level, the long-term incentive opportunity level,
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 2010, the Compensation Committee reviewed earnings information relative to the historical
compensation of executive management and comparative information prepared both internally and from
external providers. 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 Corporations 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 Corporations 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 nine meetings during 2010. 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 2010. 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 2010 annual meeting of shareholders and all other Directors
attended the 2010 annual meeting of shareholders. The Corporation expects all nominees and
Directors to attend the 2011 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
8
the business conduct and code of ethics policy) are changed, waivers from the business
conduct and code of ethics policy are granted, 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 Corporation to
make that determination based on the position and direction of the Corporation 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 Corporations shareholders at this time. This structure
ensures a greater role for the independent Directors in the oversight of the Corporation 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 Corporations day-to-day operations.
Boards Role in Risk Oversight
The Corporation faces a variety of risks, including credit risk, liquidity risk, and operational
risk. The Board has implemented a risk management system that is intended to (1) timely identify
the material risks that the Corporation 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
Corporations risk profile, and (4) integrate risk management into Corporation 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, 2010.
2010 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 2010, 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.
Each of Messrs. Aspatore, Bittner, Orley, Paschke and Patterson were granted option awards prior to
2010 for 10,000 shares, 2,000 shares of which are currently vested. No option awards were granted
in 2010. The employee directors (which included Messrs. Tobias and George in 2010) did not receive
compensation for their service on the Board of Directors. For 2011, 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 Capital Purchase Program (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) a 10-year 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.
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. The Corporation intends to
carefully review any Treasury and SEC regulations as 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
Compensation Philosophy, Objectives and Policies
The Corporations compensation policies are intended to attract and retain top quality management
with a balance of short-term and long-term consideration. The overall compensation includes
incentives to individuals commensurate with the overall performance of the Corporation and
individual contribution to that success. The Compensation Committee has the overall responsibility
for the review and approval of compensation policies and programs to ascertain that they are in
accordance with the overall philosophy and objectives of the Corporation which is to offer
employees the following:
(1) |
|
Base salary and annual benefits that will be determined based upon a variety of factors
including a salary and benefits peer analysis, other competitive factors, individual talent,
education and professional expertise, and overall job performance. |
|
(2) |
|
Annual bonus that may be paid for the accomplishment of some or all of the objectives of the
current year business plan and would be subject to claw back provisions for a period of
three years if a determination is made that the awards were made based upon materially
inaccurate financial or performance criteria. Bonuses awarded to the five most highly
compensated executive officers of the Corporation for 2010 totaled $58,200. |
|
(3) |
|
Historically, key members of management and Directors of the Corporation were awarded stock
option grants under the terms of stock option plans, which have since expired. These options
were granted with exercise prices set at the then current market value of the underlying
stock, which has since declined in value due primarily to the overall decline in the relevant
market values of community bank stocks and somewhat due to the lack of liquidity in the
Corporations stock. It is unlikely that given the current vesting requirements of these
option grants that they will become fully vested or prove to be of value before expiration.
The Corporation is considering a new long-term equity incentive plan which would encourage the
retention of key members of management and reward them in accordance with the related increase
in shareholder value. Any long-term incentive rewards may also be subject to claw back
provisions if they were made based upon materially inaccurate financial statements or any
other materially inaccurate performance metric criteria. This portion of the compensation
policy is not currently in place but the Corporation intends on formulating a program for
future consideration. |
Administration Process
Overview: In reviewing overall executive compensation for 2010, the Compensation Committee
considered various factors including the financial performance of the Corporation as a whole both
for the short term relative to the economy and its peers and as it relates to the overall
achievements to the attributes of the Corporation that enhance franchise value such as core deposit
growth, customer relationships, employee morale and individual growth and contribution to corporate
objectives.
Role of Executives
Mr. Tobias, as Chief Executive Officer of the Corporation, annually reviews the performance of each
executive officer (excluding himself) with respect to the overall performance of the Corporation,
the executive officers contribution to the performance and presents such evaluation to the
Compensation Committee. Mr. George, the Chief Executive Officer of the Bank, actively participates
in this process with Mr. Tobias with respect to all executive officers other than himself. The
Compensation Committee considers Mr. Tobias recommendations and uses its own discretion in making
final compensation decisions with respect to the executives.
Peer Group and Benchmarking
In 2010, the Committee used a number of different peer comparisons in order to evaluate executive
compensation. The Committee also utilized the Michigan Bankers Association 2010 Bank Compensation
and Benefits survey in order to determine certain pay ranges and compensation paid within the
Michigan market area. Based upon these peer reviews and salary survey, the Committee adjusted
compensation and/or worked with management of the Corporation to revise employee benefit programs
and employee payments relative to these programs.
Other Benefits and Perquisites
Executive officers are eligible for all of the benefits made available to the full-time employees
of the Corporation (401k plan, health insurance, group term life insurance and disability
insurance) on the same basis as other full-time employees and are subject to the same paid time off
and other employee policies.
The Corporation does offer certain of its executive officers additional benefits and perquisites
which it believes are appropriate as a part of the overall compensation package. The additional
perquisites include a partial reimbursement for health insurance under a Health Savings Plan that
is intended to supplement the high deductible health care insurance program, if elected, by
executives. The
12
Corporation also pays for additional long-term disability coverage under the terms of certain
executive employment agreements, which is discussed further under the proxy caption entitled
Employee Agreements.
Future Compensation Planning
The Corporation is considering instituting a long-term equity incentive plan, which, if
implemented, would be subject to shareholder approval.
2010 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 2010.
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other |
|
|
|
|
|
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Compensation |
|
|
Total |
|
Name and Principal Position |
|
Year |
|
|
($) (1) |
|
|
($) |
|
|
($) (2) |
|
|
($) |
|
Paul D. Tobias |
|
|
2010 |
|
|
|
240,000 |
|
|
|
0 |
|
|
|
22,048 |
|
|
|
262,048 |
|
Chairman and Chief Executive Officer of the |
|
|
2009 |
|
|
|
240,000 |
|
|
|
0 |
|
|
|
28,570 |
|
|
|
268,570 |
|
Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chairman of the Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly W. George |
|
|
2010 |
|
|
|
246,846 |
|
|
|
20,000 |
|
|
|
31,100 |
|
|
|
297,946 |
|
President of the Corporation |
|
|
2009 |
|
|
|
209,000 |
|
|
|
0 |
|
|
|
25,353 |
|
|
|
234,353 |
|
President and Chief Executive Officer of the Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ernie R. Krueger |
|
|
2010 |
|
|
|
183,462 |
|
|
|
15,000 |
|
|
|
23,841 |
|
|
|
222,303 |
|
Executive Vice President and |
|
|
2009 |
|
|
|
165,000 |
|
|
|
15,000 |
|
|
|
12,877 |
|
|
|
192,877 |
|
Chief Financial Officer of the Corporation and
the Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
2010 Salaries for Mr. George and Mr. Krueger reflect the salary increase which occurred
on January 28, 2010. The salary increase for Mr. George was from $209,000 to $250,000 and
Mr. Kruegers salary was increased from $165,000 to $185,000. |
|
(2) |
|
Amounts in this column include the value of the following perquisites paid to each
individual in 2010 and 2009. Perquisites are valued at actual amounts paid to each
provider of such perquisites. Perquisites included in All Other Compensation column for
2010 include: 401(k) employer match contributions for Mr. George $7,350 and Mr.
Krueger $6,031; health and disability insurance premiums for Mr. Tobias $20,500, Mr.
George $23,390, and Mr. Krueger $15,434; life insurance premiums for Mr. Tobias -
$1,548, Mr. George $360, and Mr. Krueger $2,376.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 $2,468. |
13
2010 Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information for each of the Executive Officers named in the Summary
Compensation Table with respect to each option to purchase common shares that had not been
exercised and remained outstanding at December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
|
Number of Securities |
|
|
Number of Securities |
|
|
|
|
|
|
|
|
|
|
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
|
|
Unexercised Options |
|
|
Unexercised Options |
|
|
Option Exercise |
|
|
Option |
|
|
Option |
|
|
|
(#) |
|
|
(#) |
|
|
Price |
|
|
Grant |
|
|
Expiration |
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
($) |
|
|
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 Mr. Tobias were able to 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%) were
able to 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. The remaining options may still vest if, within the
ten-year life of the option, certain events occur, including but not limited to the death
of the executive or a change in control of the Corporation. |
|
(2) |
|
Options granted to Messrs. George and Krueger were able to 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 increases 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. The remaining options may still vest if, within the ten-year life of the option,
certain events occur, including but not limited to the death of the executive or a change
in control of the Corporation. |
Employment and Consulting Agreements
The Corporation has employment agreements with Executive Officers as described below. Mr. Tobias
does not currently have an employment agreement with the Corporation. The prior employment
agreement for Mr. Tobias expired on June 30, 2010.
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 |
|
|
|
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. 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 above in Executive CompensationParticipation in the TARP Capital Purchase Program
and Proposal 2: Non-Binding Advisory Vote on Executive Compensation, 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. 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. 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 scope 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 2010 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, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Audit fees (1) |
|
$ |
89,500 |
|
|
$ |
89,500 |
|
Audit-related fees (2) |
|
|
22,500 |
|
|
|
22,500 |
|
Tax fees (3) |
|
|
13,000 |
|
|
|
13,000 |
|
All other fees (4) |
|
|
13,803 |
|
|
|
11,450 |
|
|
|
|
|
|
|
|
Total fees |
|
$ |
138,803 |
|
|
$ |
136,450 |
|
|
|
|
|
|
|
|
|
|
|
(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 2010, 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 19, 2011, 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
Partners III LP
441 Vine Street, Suite 507
Cincinnati, OH 45202 |
|
340,000 Common Shares |
|
|
9.94 |
% |
Gerlach & Co.
FBO Banc Fund V LP
208 LaSalle Street, Suite 1680
Chicago, IL 60604 |
|
300,000 Common Shares |
|
|
8.77 |
% |
PRB Advisors, LLC
600 Third Avenue, 17th Floor
New York, NY 10016 |
|
290,496 Common Shares |
|
|
8.49 |
% |
Hillsdale Hourly Pension Plan
2424 John Daly Road
Inkster, MI 48141 |
|
235,911 Common Shares |
|
|
6.90 |
% |
Raymond Garea
31 Claremont Avenue
Maplewood, NJ 07040 |
|
231,157 Common Shares |
|
|
6.76 |
% |
Wellington Management Company LLP
75 State Street
Boston, MA 02109 |
|
212,380 Common Shares |
|
|
6.21 |
% |
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 19, 2011. Except as noted, beneficial ownership is direct and the person
indicated has sole voting and investment power.
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner |
|
Amount and Nature of Beneficial Ownership (1) |
|
|
Percent of Class |
|
Walter J. Aspatore |
|
|
11,953 |
|
|
|
* |
|
Dennis B. Bittner |
|
|
5,341 |
|
|
|
* |
|
Joseph D. Garea |
|
|
50,466 |
|
|
|
1.4 |
% |
Kelly W. George |
|
|
20,348 |
|
|
|
* |
|
Ernie R. Krueger |
|
|
18,166 |
|
|
|
* |
|
Robert E. Mahaney |
|
|
6,631 |
|
|
|
* |
|
Robert H. Orley |
|
|
27,641 |
|
|
|
* |
|
Randolph C. Paschke |
|
|
15,158 |
|
|
|
* |
|
L. Brooks Patterson |
|
|
2,000 |
|
|
|
* |
|
Paul D. Tobias (2) |
|
|
152,586 |
|
|
|
4.4 |
% |
|
|
|
|
|
|
|
All current Directors and
Executive Officers as a
group
(10 persons) |
|
|
310,290 |
|
|
|
8.8 |
% |
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1.0%. Percentages are based on shares outstanding on April 19, 2011. |
|
(1) |
|
Includes the following shares subject to options exercisable within 60 days of April 19,
2011: 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. |
18
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, 2010 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, 2011.
Changes of Accountants
There was no change of the Corporations independent public accountants during 2009 or 2010.
FUTURE SHAREHOLDER PROPOSALS
A proposal submitted by a shareholder for the 2012 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 27, 2011 to be eligible for inclusion in the
Corporations proxy materials for the 2012 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
The Board of Directors is not aware of any matter to be presented for action at the 2011
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 2010 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.
19
THE ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION AND THE CORPORATIONS 2010
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
PLEASE MARK VOTES REVOCABLE PROXY AS IN THIS EXAMPLE With-For All Except 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 Townsend Hotel, 100 Townsend Street, Birmingham,
MI 48009, on May 25, 2011, at 11:00 a.m., EDT and any and all adjournments thereof: MACKINAC
FINANCIAL CORPORATION For hold 1. Election of four (4) Directors (except as marked to the contrary
below): Dennis B. Bittner Joseph D. L. Brooks PattersonGarea Kelly W. George INSTRUCTION: To
withhold authority to vote for any individual nominee, mark For All Except and write that
nominees name in the space provided. 2. A PROPOSAL TO APPROVE, IN A NON-BINDING Fo Again Ab r st
stai ADVISORY n T VOTE CORPORATI COMPENSAT O H , ONS ION F E 3. TO RATIFY THE APPOINTMENT OF
PLANTE & MORAN, PLLC AS INDEPENDENT AUDITORS FOR THE ENDING DECEMBER 31,YEAR 2011. 4. 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. 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 postage-paid envelope which is addressed to our
tabulation service at: Registrar and Transfer Company 10 Commerce Drive Cranford, New Jersey
07016-3572 Detach above card, sign, date and mail in postage paid envelope provided. 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. |