def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a - 101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 |
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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TABLE OF CONTENTS
130 South Cedar Street
Manistique, Michigan 49854
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 28, 2008
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 28, 2008, 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 four (4) Directors, each to hold office for a three-year term. |
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To transact such other business as may properly come before the annual meeting, all in
accordance with the accompanying proxy statement. |
The Board of Directors has fixed April 22, 2008, 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.
By order of the Board of Directors
/s/ Paul D. Tobias
Paul D. Tobias
Chairman and Chief Executive Officer
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: May 2, 2008
130 South Cedar Street
Manistique, Michigan 49854
May 2, 2008
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 28, 2008, 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 May 2, 2008, 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 22, 2008, 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 at the meeting and any adjournment of the meeting. If a
shareholder specifies a choice, 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 and in accordance with the judgment of the persons named as proxies with
respect to any other matter which may come before the meeting. 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.
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 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. An abstention will have no effect on the
voting for Directors.
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
ten (10). 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. Four persons have been nominated for election to the Board, each to
serve a three-year term expiring at the 2011 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 members of the class of
Directors of the Corporation whose terms expire at the 2008 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.
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.
Nominees Standing for Election as Directors
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Director of |
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Corporation |
For Terms Expiring in 2011 |
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Principal Occupation |
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Dennis B. Bittner
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59 |
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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.)
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2001 |
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Joseph D. Garea
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53 |
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Investment Advisor, Managing Partner Hancock
Securities. (Provides investment portfolio
management services to banks, thrift
institutions, insurance companies, nonprofit
organizations and other institutional
clients.)
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2007 |
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Kelly W. George
(see below for prior occupations)
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40 |
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President and Chief Executive Officer of
mBank and President of Mackinac Financial
Corporation
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2006 |
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L. Brooks Patterson
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69 |
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County Executive, Oakland County, Michigan
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2006 |
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Continuing Directors
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Director of |
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Corporation |
Directors Whose Terms Expire in 2009 |
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Principal Occupation |
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Walter J. Aspatore, (currently designated as
Lead Director)
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65 |
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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.)
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2004 |
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Robert H. Orley
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52 |
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Real Estate Developer, Vice President and
Secretary of Real Estate Investment Group,
Inc.
(Real estate investment, development and
management.)
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2004 |
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Randolph C. Paschke
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58 |
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From August 2002 to present- Chair,
Department of Accounting in the School of
Business Administration at Wayne State
University.
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2004 |
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Director of |
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Corporation |
Directors Whose Terms Expire in 2010 |
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Principal Occupation |
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Robert E. Mahaney
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49 |
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Sole Proprietor, Veridea Group, LLC.
(A commercial and residential real estate
development company.)
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2008 |
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Eliot R. Stark
(See below for prior occupations)
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55 |
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Vice Chairman of the Corporation from
November 2006 to present, Executive Vice
President and Chief Financial Officer of the
Corporation and the Bank from December 2004
to October 2006.
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2004 |
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Paul D. Tobias
(See below for prior occupations)
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57 |
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Chairman and Chief Executive Officer of the
Corporation and Chairman of the Bank from
December 2004 to present.
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2004 |
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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 (Nasdaq). 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, Mr. George, President and Chief Executive Officer of the Bank and President of the
Corporation, and Mr. Stark, Vice Chairman of the Corporation. Messrs. Tobias, George, and Stark
are not independent because of their services as Executive Officers of the Corporation.
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 the Proxy
under the heading Executive Compensation.
Paul D. Tobias Age 57 Chairman of the Board and Chief Executive Officer. Mr. Tobias was
appointed to his present position with the Corporation and as Chairman of the Bank on December 16,
2004. Mr. Tobias was appointed Chief Executive Officer of the Bank in July 2005. From January of
2000 to December 2004, he 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), not affiliated with Mackinac Financial Corporation or mBank.
Mr. Tobias continues as a shareholder of Mackinac Holdings, Inc. and as a member of Mackinac
Partners, LLC, but is not active in either entity and does not receive compensation from either
entity.
Kelly W. George Age 40 President of the Corporation and President and Chief Executive Officer
of the Bank. Prior to his appointment as President of the Corporation in November of 2006, he
served as President of the Bank from August 2005 and prior to that as Executive Vice President and
Chief Lending Officer from August 2003. Prior to joining the Bank, Mr. George was Senior Vice
President/Chief Lending Officer for The Commercial and Savings Bank in Millersburg, Ohio, from 2001
to August of 2003.
Eliot R. Stark Age 55 Vice Chairman. Mr. Stark was appointed to his current position with
the Corporation in November 2006. Prior to his current position with the Corporation he served as
Executive Vice President and Chief Financial Officer of the Corporation and the Bank from December
2004 to October 2006. From January of 2001 to the present, he has served as the Managing Director
of Mackinac Partners, LLC (A financial and operational advisory company serving global and middle
market companies), not affiliated with Mackinac Financial Corporation or mBank.
Ernie R. Krueger Age 58 Executive Vice President and Chief Financial Officer. Prior to his
current position he served as Senior Vice President and Controller of the Corporation and the Bank
from October 2003 to October 2006.
3
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 Audit Committee has responsibility for:
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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 this Charter was
filed as Appendix A with the 2007 proxy.
The current members of the Audit Committee are Messrs. Paschke (chairman), Bittner and Patterson,
all of whom are independent, as independence for audit committee members is defined in Nasdaqs
listing standards. The Board has determined that Mr. Paschke is an audit committee financial
expert as that term is defined by the Securities and Exchange Commission. The Audit Committee
held eight meetings in 2007. Messrs. Bittner, Paschke and Patterson all attended the majority of
these meetings.
Nominating Committee
The Nominating Committee is responsible for:
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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, who were members of this committee for all of 2007. All members are independent under
the Nasdaq Stock Market rules defining independence. The Nominating Committee held one meeting in
2007. Messrs. Aspatore, Garea and Patterson were in attendance.
The Board of Directors has adopted a Charter for the Nominating Committee. A copy of this Charter
was filed, as Appendix B, with the 2007 proxy. 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. 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 potential
nominee in substantially the same manner.
The Nominating Committee will consider candidates nominated by shareholders in accordance with the
procedures set forth in the Corporations Bylaws and Articles of Incorporation. 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, together with the written consent of such person to serve as a
Director, must be received by the Secretary of the Corporation not less
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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, 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 Securities Exchange Act of 1934, as amended [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.
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 independent under the Nasdaq
Stock Market rules defining independence. These members were assigned to this committee in October
2007. Members of the Compensation Committee prior to October were Messrs. Orley (chairman),
Aspatore, Bittner, Garea, and Paschke. Two meetings of this Committee were held in 2007 with all
current members in attendance. This Committees primary functions are to recommend annually to the
Board the salary of the Executive Officers, review with management the annual projected salary
ranges and recommend those for Board approval, and review the written personnel policy and the
employee benefit package annually. The primary responsibilities of the Compensation Committee are
to ensure that the compensation available to the Board of Directors and officers of the
Corporation:
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Enables the Corporation to attract and retain high quality leadership; |
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Provides competitive compensation opportunities; |
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Supports the Corporations overall business strategy; and |
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Maximizes shareholder value. |
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
The Board of Directors held a total of eight meetings during 2007. 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 2007. There are no family relationships between or among any of the Directors, nominees,
or Executive Officers of the Corporation.
Communication with Directors and Attendance at Annual Meetings
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, MI 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 2007 Annual Meeting of Shareholders
and all other Directors except Messrs. Aspatore and Orley attended the 2007 Annual Meeting of
Shareholders. The Corporation expects all nominees and Directors to attend the 2008 Annual
Meeting.
5
Remuneration of Directors
The table below summarizes the compensation paid by the Corporation to non-employee directors for
the fiscal year ended December 31, 2007.
2007 Director Compensation Table
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Fees Earned or |
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Paid in Cash |
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Option Awards |
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Total |
Name |
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($) |
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($) (2) (3) |
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($) |
Walter J. Aspatore |
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21,050 |
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8,996 |
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30,046 |
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Dennis B. Bittner |
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25,800 |
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8,996 |
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34,796 |
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Joseph D. Garea |
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21,400 |
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21,400 |
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Robert E. Mahaney(1) |
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Robert H. Orley |
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21,300 |
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8,996 |
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30,296 |
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Randolph C. Paschke |
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25,400 |
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8,996 |
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34,396 |
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L. Brooks Patterson |
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21,600 |
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5,060 |
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26,660 |
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Appointed as Director in
2008 |
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The amounts shown in this column constitute options granted under the 2000 Director and
Officer Option Plan. The amounts equal the financial statement compensation cost for
Stock Awards as reported in our consolidated statement of income for fiscal year 2007 and
are valued based on the aggregate grant date fair value of the award determined pursuant
to FAS 123R. See Note 17 to the Consolidated Financial Statements included in our Annual
Report on Form 10-K for the year ended December 31, 2007 for a discussion of the relevant
assumptions used in calculating grant date fair value pursuant to FAS 123R. |
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The options granted to Directors have a 20% vesting on issuance with the remainder vesting
over a two year term conditional upon the market value appreciation of the underlying
common stock of the Corporation. Options outstanding at December 31, 2007 totaled 10,000
shares for Messrs. Aspatore, Bittner, Orley, Paschke and Patterson, 50,000 shares in total
for all directors |
The members of the Board of Directors currently receive remuneration in the form of monthly
attendance fees, committee fees and an annual retainer. For 2007, the external, non-employee
Directors of the Corporation and the Bank received an annual retainer of $15,000, a fee of $750 for
each meeting that was held by the Board of Directors of the Corporation and a $200 per meeting fee
for each committee meeting of the Board that they participated in. No option awards were granted
in 2007. Attendance is a requirement in order for the Directors to be paid the monthly fee. There
is no anticipated change for Director remuneration in 2008.
6
EXECUTIVE COMPENSATION
2007 Summary Compensation Table
The following table summarizes compensation for the past two fiscal years awarded to, earned by or
paid to, our principal executive officer and our two other most highly compensated Executive
Officers for 2007.
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Salary |
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Bonus |
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Option Awards |
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All Other |
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Total |
Name and Principal Position |
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Year |
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($) |
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($) |
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($) (1) |
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($) (2) |
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($) |
Paul D. Tobias |
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2007 |
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233,887 |
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20,000 |
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43,074 |
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296,961 |
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Chairman and Chief Executive Officer of the Corporation |
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2006 |
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225,000 |
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15,000 |
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109,204 |
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41,926 |
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391,130 |
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Chairman of the Bank |
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Kelly W. George |
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2007 |
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209,000 |
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20,000 |
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21,790 |
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25,072 |
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|
|
275,862 |
|
President of the Corporation |
|
|
2006 |
|
|
|
181,058 |
|
|
|
15,000 |
|
|
|
21,790 |
|
|
|
29,085 |
|
|
|
246,933 |
|
President and Chief Executive Officer of the Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliot R. Stark |
|
|
2007 |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
47,689 |
|
|
|
247,689 |
|
Vice Chairman of the Corporation |
|
|
2006 |
|
|
|
200,000 |
|
|
|
|
|
|
|
78,003 |
|
|
|
42,449 |
|
|
|
320,452 |
|
|
|
|
(1) |
|
The amounts shown in this column constitute options granted under the 2000 Directors and
Officer Option Plan. The amounts equal the financial
statement compensation cost for Stock Awards as reported in our consolidated statement of income for fiscal
years 2007 and 2006 and are valued based on
the aggregate grant date fair value of the award determined pursuant to FAS 123R. See Note 17 to the
Consolidated Financial Statements included in our
Annual Report on Form 10-K for the year ended December 31, 2007 for a discussion of the
relevant assumptions used in calculating grant date fair
value pursuant to FAS 123R. For further information on these awards, see the Grants of
Plan-Based Awards table beginning on page 8 of this
Proxy Statement. |
|
(2) |
|
Amounts in this column include the value of the following perquisites paid to the Executives in 2007 and
2006. Perquisites are valued at actual amounts paid
to each provider of such perquisites. Perquisites included in other compensation for 2007 include 401(k)
employer match contributions for Mr. Tobias ($6,750),
Mr. George ($6,434) and Mr. Stark ($6,000); health and disability insurance premiums for Mr. Tobias
($28,405), Mr. George ($18,218) and Mr. Stark ($25,213);
life insurance premiums for Mr. Tobias ($1,806), Mr. George ($420), and Mr. Stark ($1,806); and auto
allowance for Mr. Tobias ($6,113) and Mr. Stark ($14,670).
Perquisites included in other compensation for 2006 include: 401(k) employer match contributions for Mr.
Tobias ($6,600) and Mr. Stark ($6,440); health
insurance premiums for Mr. Tobias ($19,136), Mr. George ($13,712) and Mr. Stark ($20,511); life insurance
premiums for Mr. Tobias ($1,520), Mr. George ($324)
and Mr. Stark ($828); and auto allowance for Mr. Tobias ($14,670), Mr.
George ($15,049) and Mr. Stark ($14,670). |
7
2007 Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information for each of the Executive Officers named in the Summary
Compensation Table with respect to each option to purchase common shares that had not been
exercised and remained outstanding at December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Number of Securities |
|
Number of Securities |
|
|
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
Unexercised Options |
|
Unexercised Options |
|
Option Exercise |
|
Option |
|
Option |
|
|
(#) |
|
(#) |
|
Price |
|
Issue |
|
Expiration |
Name |
|
Exercisable |
|
Unexercisable |
|
($) |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eliot R. Stark (1) |
|
|
50,359 |
|
|
|
56,788 |
|
|
|
9.75 |
|
|
|
12/15/04 |
|
|
|
12/15/14 |
|
|
|
|
(1) |
|
Options for Mr. Tobias and Mr. Stark vest within two years from the original grant date. The original 47% vested immediately after the
market value of the Corporations common strock attained a price equal to or greater than 115% of the stock option exercise price.
The remaining shares (53%) vest within two years from date of initial grant if the market value of the Corporations common stock is
equal to or greater than 145% of the stock option exercise price. |
|
(2) |
|
Options for Mr. George vest within four years from the original grant date. The initial 20% vested immediately. 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 agreement, dated May 7, 2007, provides for him to be employed
and appointed as our Chairman of the Board and the Chief Executive Officer of the Corporation and
the Chairman of the Board of the Bank. He is to receive an initial annual base salary of $240,000,
subject to annual increases by the Board. He will be eligible to participate in an incentive plan
or plans for annual cash bonuses to be awarded to eligible employees. The agreement had an initial
term which expires June 30, 2010.
In addition to the compensation noted above, the agreement provides for health and other benefits
to be provided to him at least substantially equivalent to other management employees holding
comparable positions.
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, we are to make termination payments in amounts and in a lump sum or
over time depending on the reason the agreement is terminated. The table below summarizes the
termination payments under the agreement.
8
|
|
|
REASON FOR TERMINATION |
|
TERMINATION PAYMENTS |
By death, us for cause, or expiration of employment contract term
|
|
No termination payments required |
|
|
|
By us without cause
|
|
In the first 12 months of contract, a payment of 300% plus highest bonus from January
1, 2005 through effective date of termination |
|
|
|
|
|
In the second 12 months of contract, a payment of 200% plus highest bonus from January
1, 2005 through effective date of termination |
|
|
|
|
|
In the third 12 months of contract, a payment of 100% plus highest bonus from January
1, 2005 through effective date of 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; 299% of aggregate of base salary and
benefits 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 they be
determined to constitute a 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 1 to 3 years, depending on the reason for the termination.
Kelly W. George Mr. Georges agreement, dated December 21, 2006, provides for him to be
employed as our President and Chief Executive Officer of the Bank and President of the Corporation.
He is to receive an initial annual base salary of $209,000, subject to
annual increases by the Board. He will be eligible participate in an incentive plan or plans for
annual cash bonuses to be awarded to eligible employees. The agreement expires January 31, 2010.
In addition to the compensation noted above, the agreement provides for health and other benefits
to be provided to him at least substantially equivalent to other management employees holding
comparable positions.
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, we are to make termination payments in amounts and in a lump sum or
over time depending on the reason the agreement is terminated. The table below summarizes the
termination payments under the agreement.
9
|
|
|
REASON FOR TERMINATION |
|
TERMINATION PAYMENTS |
By death, us for cause, or expiration of
employment contract term
|
|
No termination payments required |
|
|
|
By us without cause
|
|
One year base salary plus highest bonus from
January 1, 2005 through the effective date of 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; 299% of aggregate of base salary and
benefits 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 they be
determined to constitute a 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 1 to 3 years, depending on the reason for the termination.
Eliot R. Stark Mr. Starks agreement, dated August 10, 2004 and effective December 15,
2004, provides for him to be employed and appointed as our Executive Vice President and Chief
Financial Officer of the Corporation and the Bank. Mr. Stark was promoted to Vice Chairman of the
Corporation and the Bank in November 2006. He is to receive an initial annual base salary of
$200,000, subject to annual increases by the Board. He will be eligible to participate in an
incentive plan or plans for annual cash bonuses to be awarded to eligible employees.
The agreement had an initial three-year term which renewed for an additional year on each
anniversary date of the agreement unless we or Mr. Stark elected to not renew at least sixty (60)
days prior to the renewal date. The agreement was not renewed by the Corporation by written
notice on May 1, 2007, and will terminate on December 31, 2009.
In addition to the compensation noted above, the agreement provides for health and other benefits
to be provided to Mr. Stark at least substantially equivalent to other management employees holding
comparable positions. The agreement also requires us to reimburse him for all reasonable
out-of-pocket expenses in connection with his employment, including a car allowance of $750 per
month and a per diem allowance for living expenses while in Manistique, Michigan, of at least $100
per day, not to exceed $1,000 in any calendar month, but subject to upward adjustment upon
demonstration that the reasonable ordinary living expenses exceed the per diem amount. We have
also agreed in the employment agreement to pay the reasonable costs of an office in Oakland County
and a personal secretary and other assistance unless we otherwise provide him with an office and
support staff in that county.
Under the agreement, Mr. Stark was awarded options under the Corporations 2000 Stock Incentive
Plan to purchase 107,147 shares of common stock at an exercise price of $9.75 per share. These
options were awarded in December 2004.
If the agreement is terminated, we are to make termination payments in amounts and in a lump sum or
over time depending on the reason the agreement is terminated. The table below summarizes the
termination payments under the agreement.
10
|
|
|
REASON FOR TERMINATION |
|
TERMINATION PAYMENTS |
By us for cause
|
|
No termination payments required |
|
|
|
By us without cause and not due to
disability, or by the Executive for Good Reason
|
|
Three years; base salary, highest bonus and benefits |
|
|
|
Death
|
|
One year; base salary and benefits |
|
|
|
Disability
|
|
Two years; base salary and benefits, subject to
reduction for long term disability benefits received by
the Executive |
|
|
|
Following a Change in Control, either by Executive
Good Reason or by us other than for cause or disability
|
|
Lump sum; 300% of aggregate of base salary and
highest bonus. Three years for benefits. |
|
|
|
By Executive without Good Reason following a
Change in Control
|
|
Lump sum; 100% of base salary and highest bonus |
|
|
|
By mutual agreement
|
|
Per the mutual agreement |
The agreement provides for a specified adjustment to the termination payments should they be
determined to constitute a parachute payment under Section 280G of the Internal Revenue Code. The
agreement also provides for us to pay interest at an annual rate equal to 120% of the applicable
federal rate and to indemnify Mr. Stark for expenses, including reasonable attorneys and
consultants fees, incurred to collect any unpaid amounts. We are also required to indemnify him
for costs and expenses, on an as incurred basis, as a result of any dispute or controversy,
regardless of the outcome of the dispute or controversy.
The agreement includes confidentiality obligations of Mr. Stark 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 1 to 3 years, depending on the reason for the termination.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Corporations audited financial statements with
management.
The Audit Committee has discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards,
Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee has considered the compatibility of the provision of non-audit services with
maintaining the auditors independence.
The Audit Committee has received the written disclosures and the letter from the independent
accountants required by Independence Standards Board No. 1, (Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees), as adopted by the Public Company Accounting
Oversight Board in Rule 3600T, and has discussed with the independent accountant the independent
accountants independence.
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 2007 for filing with the Securities and Exchange Commission.
Audit Committee
Randolph C. Paschke Dennis B. Bittner L. Brooks Patterson
11
Principal Accountant Fees and Services
The following table summarizes fees for professional services rendered by Plante & Moran, PLLC, the
principal accountant for the years ended December 31, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Audit fees (1) |
|
$ |
90,500 |
|
|
$ |
106,000 |
|
Audit-related fees (2) |
|
|
10,500 |
|
|
|
8,000 |
|
Tax fees (3) |
|
|
21,000 |
|
|
|
17,140 |
|
All other fees (4) |
|
|
118,710 |
|
|
|
41,659 |
|
|
|
|
|
|
|
|
Total fees |
|
$ |
240,710 |
|
|
$ |
172,799 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees consist of fees billed for professional services performed by Plante & Moran
for the audit of the Companys annual financial statements and internal control over
financial reporting included in Form 10-K, the review of financial statements included in
the Companys 10-Q filings and services that are normally provided in connection with
regulatory filings or engagements. |
|
(2) |
|
Represents fees for review and audit of employee 401(k) employee benefit plan. |
|
(3) |
|
Represents fees billed for tax services, including tax reviews and planning. For 2007,
a majority of the fees in this category represent preparation of 2007 consolidated tax
returns. |
|
(4) |
|
The majority of all other fees, $93,190, 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 permit by the
Sarbanes-Oxley Act of 2002). During 2007, all services provided by Plante Moran, PLLC were
pre-approved by the Audit Committee. To the extent required by the rules of the Nasdaq Stock Market
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 Securities Exchange Act
of 1934.
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 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 collectibility 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.
12
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of April 22, 2008, 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 |
|
|
9.92 |
% |
Partners III LP
441 Vine Street, Suite 507
Cincinnati, OH 45202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerlach & Co. |
|
300,000 Common Shares |
|
|
8.75 |
% |
FBO Banc Fund V LP
208 LaSalle Street, Suite 1680
Chicago, IL 60604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hot Creek Ventures 2, LP |
|
300,000 Common Shares |
|
|
8.75 |
% |
6900 South McCarran Blvd., Suite 3040
Reno, NV 89509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond Garea |
|
231,157 Common Shares |
|
|
6.74 |
% |
31 Claremont Avenue
Maplewood, NJ 07040 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRB Advisors, LLC |
|
221,172 Common Shares |
|
|
6.45 |
% |
New York, New York |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellington Management Company LLP |
|
212,380 Common Shares |
|
|
6.20 |
% |
75 State Street
Boston, MA 02109 |
|
|
|
|
|
|
|
|
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 22, 2008. 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 |
|
|
4,822 |
|
|
|
* |
|
Dennis B. Bittner |
|
|
3,187 |
|
|
|
* |
|
Joseph D. Garea |
|
|
44,008 |
|
|
|
1.22 |
% |
Kelly W. George |
|
|
7,750 |
|
|
|
* |
|
Robert E. Mahaney |
|
|
400 |
|
|
|
* |
|
Robert H. Orley |
|
|
27,641 |
|
|
|
* |
|
Randolph C. Paschke |
|
|
8,257 |
|
|
|
* |
|
L. Brooks Patterson |
|
|
2,000 |
|
|
|
* |
|
Eliot R. Stark |
|
|
76,000 |
(2) |
|
|
2.12 |
% |
Paul D. Tobias |
|
|
124,784 |
(3) |
|
|
3.39 |
% |
|
|
|
|
|
|
|
|
|
All current Directors and
Executive Officers as a
group (11 persons) |
|
|
301,849 |
|
|
|
8.45 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1.0% |
|
(1) |
|
Includes options for Mr. Aspatore (2,000), Mr. Bittner (2,325), Mr. George (7,000), Mr.
Orley (2,000), Mr. Paschke (2,000), Mr. Patterson (2,000), Mr. Stark (50,359), Mr. Tobias
(70,502), and for all current Directors and Executive Officers as a group (142,186). |
13
|
|
|
(2) |
|
Includes 25,641 shares owned by Mr. Stark in his IRA account. |
|
(3) |
|
Includes 10,256 shares owned by Tobias Capital LLC, which is 35% owned by Mr. Tobias and
his wife. |
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.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in the cumulative total
shareholder return on the Corporations common stock with that of the cumulative total return on
the NASDAQ Bank Stocks Index and the NASDAQ Market Index for the five-year period ended December
31, 2007. The following information is based on an investment of $100, on December 31, 2002 in the
Corporations common stock, the NASDAQ Bank Stocks Index, and the NASDAQ Market Index, with
dividends reinvested. From August 31, 2001 to December 15, 2004, the Corporations common stock
traded on the NASDAQ SmallCap Market under the symbol NCFC. Effective with the recapitalization
and the 20:1 reverse stock split on December 16, 2004, the Corporations stock began trading on the
NASDAQ Small Cap Market under the symbol MFNC.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG MACKINAC FINANCIAL CORP.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
ASSUMES $100 INVESTED ON DEC. 31, 2002
ASSUMES DIVIDEND PAYMENTS REINVESTED
FISCAL YEARS ENDING DEC. 31, 2007
ASSUMES $100 INVESTED ON DECEMBER 31, 2001
ASSUMES DIVIDEND PAYMENTS REINVESTED
FISCAL YEARS ENDING DECEMBER 31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 |
|
|
2003 |
|
|
2004 |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
Mackinac Financial Corporation |
|
|
|
100.00 |
|
|
|
|
72.31 |
|
|
|
|
37.13 |
|
|
|
|
18.80 |
|
|
|
|
23.76 |
|
|
|
|
18.55 |
|
|
|
NASDAQ Bank Stocks Index |
|
|
|
100.00 |
|
|
|
|
128.13 |
|
|
|
|
141.95 |
|
|
|
|
139.95 |
|
|
|
|
155.89 |
|
|
|
|
120.61 |
|
|
|
NASDAQ Market Index |
|
|
|
100.00 |
|
|
|
|
150.36 |
|
|
|
|
163.00 |
|
|
|
|
166.58 |
|
|
|
|
183.68 |
|
|
|
|
201.91 |
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Source: Morningstar, Inc., Chicago, Illinois.
14
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Independent Auditors
The financial statements of the Corporation for the year ended December 31, 2007 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 as the independent public accountants of
the Corporation and its subsidiaries for the year ending December 31, 2008.
Changes of Accountants
There was no change of the Corporations independent public accountants during 2006 and 2007.
SHAREHOLDER PROPOSALS
A proposal submitted by a shareholder for the 2009 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 January 2, 2009 to be eligible for inclusion in the
Corporations proxy materials for the 2009 Annual Meeting of Shareholders under SEC Rule 14a-8. In
order to be considered at the meeting, a shareholder proposal submitted outside of Rule 14a-8 under
the Securities Exchange Act of 1934, 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 2009 Annual Meeting of Shareholders, other
than a nomination of directors and other than pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, must provide the Corporation with notice of such intention by at least March 18, 2009,
or the persons named in the proxy to vote the proxies will have discretionary voting authority at
the 2009 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 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 2007 is included with this proxy statement. Copies of the
report will also be available for all shareholders attending the annual meeting.
THE ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND EXCHANGE COMMISSION WILL BE PROVIDED FREE TO
SHAREHOLDERS UPON WRITTEN REQUEST. WRITE 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.
15
PLEASE MARK VOTES REVOCABLE PROXY X With- For All AS IN THIS EXAMPLE MACKINAC FINANCIAL
CORPORATION For All hold All Except THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. 1.
Election of Directors (except as marked to the contrary below): The undersigned hereby appoints
Paul D. Tobias and Kelly W. George, or either of Dennis B. Bittner them, with power of
substitution in each, proxies to vote, as designated hereon, all of the Joseph D. Garea
undersigneds shares of Common Stock of MACKINAC FINANCIAL CORPORATION, at the Kelly W. George
Annual Meeting of Shareholders to be held at The Community House, 380 S. Bates Street, Birmingham,
MI 48009, on May 28, 2008, at 11:00 a.m., EDT and any and all L. Brooks Patterson adjournments
thereof: INSTRUCTION: To withhold authority to vote for any individual nominee, mark For All
Except and write that nominees name in the space provided below. 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. The Board of Directors recommends a vote FOR the nominees
listed above. Properly executed proxies will be voted as marked and, if not marked, will be voted
FOR all of the nominees. 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 Please be sure to sign and date Date 10 Commerce Drive this Proxy in the box
below. Cranford, New Jersey 07016-3572 Stockholder sign above Co-holder (if any) sign above ç
Detach above card, sign, date and mail in postage paid envelope provided. ç 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.
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