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
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Filed by a Party other than the Registrant
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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 §240.14a-12
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MERCANTILE BANCORP, INC
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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 date of its
filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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Mercantile Bancorp, Inc.
200 North 33rd Street
Quincy, IL 62301
May [4], 2010
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of Mercantile Bancorp,
Inc., to be held at Mercantile Bank, located at 200 North 33rd Street, Quincy, Illinois, on Monday,
May 24, 2010, commencing at 2 p.m., local time. The business to be conducted at this meeting is
described in the accompanying notice of annual meeting and proxy statement and includes the
following items:
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Election of the nine directors of our Company, each to hold office
until the 2011 annual meeting of the stockholders;
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2.
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Approval of an amendment to the Companys Certificate of Incorporation
to increase the number of authorized shares of common stock;
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3.
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Ratification of the selection of the accounting firm of BKD, LLP as the
independent auditors of our Company for the year ending December 31, 2010; and
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4.
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Transaction of such other business as properly may come before the
meeting and any adjournment, postponement or continuation of the meeting.
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In addition, there will be an opportunity to meet with members of senior management and review
the business and operations of our Company. Your Board of Directors joins with me in urging you to
attend the meeting and recommends you vote FOR items 1, 2 and 3. Whether or not you plan to
attend the meeting, however, please sign, date and return the enclosed proxy card promptly. A
prepaid return envelope is provided for this purpose. You may also vote via the internet or
telephone, which methods are explained in more detail in the proxy statement. You may revoke your
proxy in the manner described in the proxy statement at any time before it is exercised, and it
will not be used if you attend the meeting and prefer to vote in person.
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Sincerely yours,
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Ted T. Awerkamp
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President and Chief Executive Officer
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TABLE OF CONTENTS
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Section
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Mercantile Bancorp, Inc.
200 North 33rd Street
Quincy, Illinois 62301
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 24, 2010
NOTICE IS HEREBY GIVEN that the annual meeting of the stockholders of Mercantile Bancorp,
Inc., a Delaware corporation, will be held at Mercantile Bank, located at 200 North 33rd Street,
Quincy, Illinois, on Monday, May 24, 2010, commencing at 2 p.m., local time, and thereafter as it
may from time to time be adjourned, for the following purposes:
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1.
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To elect the nine directors of our Company, each to hold office until the 2011
annual meeting of the stockholders and until their respective successors are duly
elected and qualified or until their respective earlier resignation or removal;
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2.
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To approve an amendment to the Companys Certificate of Incorporation to
increase the number of authorized shares of common stock;
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3.
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To ratify the selection of the accounting firm of BKD, LLP as the independent
auditors of our Company for the year ending December 31, 2010; and
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4.
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To transact such other business as properly may come before the meeting and any
adjournment, postponement or continuation of the meeting.
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Our Board of Directors has fixed the close of business on April 12, 2010 as the record date
for determination of the stockholders entitled to notice of, and to vote at, the annual meeting.
All stockholders are cordially invited to attend the meeting. Whether or not you intend to be
present at the meeting, our Board of Directors solicits you to sign, date and return the enclosed
proxy card promptly. A prepaid return envelope is provided for this purpose. You may also vote
via the internet or telephone, which methods are explained in more detail in the proxy statement.
You may revoke your proxy in the manner described in the proxy statement before it is exercised,
and it will not be used if you attend the meeting and prefer to vote in person. Your vote is
important, and all stockholders are urged to be present in person or by proxy.
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By Order of the Board of Directors
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Ted T. Awerkamp
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President and Chief Executive Officer
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May [4], 2010
Quincy, Illinois
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED,
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY IN THE
MANNER DESCRIBED IN THE PROXY STATEMENT PRIOR TO THE MEETING.
1
Mercantile Bancorp, Inc.
200 North 33rd Street
Quincy, Illinois 62301
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 2010
INTRODUCTION
The Board of Directors of Mercantile Bancorp, Inc. (the Company) solicits your proxy for use
at the annual meeting of stockholders to be held on Monday, May 24, 2010, and at any adjournment or
adjournments thereof. The annual meeting will commence at 2 p.m., local time, and will be held at
Mercantile Bank, located at 200 North 33rd Street, Quincy, Illinois.
Our Company is a multi-bank holding company based in Quincy, Illinois. Through our
majority-owned subsidiaries, now consisting of one bank each in Illinois, Kansas and Florida, the
Company conducts full-service commercial and consumer banking business, engages in mortgage
banking, trust services and asset management, and provides other financial services and products.
Those banking organizations are Mercantile Bank in Illinois; Mid-America Bancorp, Inc., sole
shareholder of Heartland Bank, in Kansas; and Royal Palm Bancorp, Inc., sole shareholder of Royal
Palm Bank of Florida. The Company also operates Mercantile Bank branch offices in Indiana and
Missouri and a Heartland Bank branch office in Missouri. In addition, the Company has minority
investments (less than 50% of the total voting power) in eight banking organizations in Missouri,
Georgia, Florida, Colorado, California and Tennessee. More information is available on the
Companys website at
www.mercbanx.com
. The information on the Companys website is not
incorporated by reference and is not a part of this proxy statement.
Our principal executive offices are located at 200 North 33rd Street, Quincy, Illinois, 62301.
This proxy statement and the enclosed form of proxy were first mailed to stockholders on or about
May [4], 2010.
INFORMATION ABOUT THE MEETING AND VOTING
Purposes of the Meeting
The purposes of the annual meeting are:
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to elect the nine directors of our Company, each to hold office until the 2011
annual meeting of the stockholders of our Company and until their respective successors
are duly elected and qualified or until their respective earlier resignation or
removal;
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to approve an amendment to the Companys Certificate of Incorporation to increase
the number of authorized shares of common stock;
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to ratify the selection of the accounting firm of BKD, LLP as the independent
auditors of our Company for the year ending December 31, 2010; and
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to transact such other business as may properly come before the annual meeting and
any adjournment, postponement or continuation of the meeting.
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Stockholders Entitled to Vote at the Meeting
Stockholders of record of our common stock as of the close of business on April 12, 2010 are
entitled to notice of, and to vote at, the annual meeting or any adjournment or adjournments
thereof. As of this record date, 8,703,330 shares of our Companys common stock, $0.4167 par value
per share, were issued and outstanding. Each issued and outstanding share of common stock as of
the record date is entitled to one vote on each matter properly to come before the annual meeting
and can be voted only if the record owner is present in person at the meeting or represented by
proxy. The Company has no other authorized series of common stock. In February 2009, the
Companys stockholders approved the creation of one or more classes of preferred stock from time to
time with features that the Board of Directors determines are appropriate; however, no classes of
preferred stock have been established and no shares of preferred stock have been issued as of the
date of this proxy statement.
Voting by Proxy by Mail
This proxy statement is being sent to you by our Board of Directors for the purpose of
requesting that you allow your shares of common stock to be represented at the annual meeting by
the persons named in the enclosed proxy card. We urge you to complete, date and sign the enclosed
form of proxy and return it promptly in the enclosed postage prepaid envelope so that it is
received by the Companys Secretary no later than 10 a.m. on Friday, May 21, 2010. If you properly
complete and sign your proxy card and send it to us so that it is received in time to vote, the
shares represented by your proxy will be voted as you have directed. If you sign the proxy card
but do not make specific voting instructions, your shares will be voted as follows:
FOR the election of the Boards nominees for director named in this proxy statement;
FOR the amendment to the Certificate of Incorporation to increase the number of authorized
shares of common stock; and
FOR ratification of the selection of the accounting firm of BKD, LLP as our Companys
independent auditors for the year ending December 31, 2010.
If any other matter is properly brought before the annual meeting, your shares will be voted
in accordance with the discretion and judgment of the appointed proxies. A stockholder who has
delivered a proxy by mail may revoke it before it is exercised at the annual meeting by (a) filing
written notice of revocation with the Secretary of our Company, (b) executing and delivering to the
Secretary of our Company a proxy card bearing a later date, (c) appearing at the annual meeting and
voting in person after notifying the Secretary in advance of your intent to vote in person, or (d)
following the telephonic or internet revocation/re-voting procedures described in the section below
entitled Voting by Proxy by Telephone or Internet, all by the deadlines specified below.
If you intend to revoke your proxy by filing a written notice of revocation or executing and
delivering a proxy card bearing a later date, such notice or later-dated proxy must be received by
the Secretary no later than 10 a.m. on Friday, May 21, 2010, in order to be valid. If you intend
to appear at the annual meeting and vote in person instead of by a proxy that has already been
delivered to the Company, then you must notify the Secretary no later than 10 a.m. on Friday, May
21, 2010, of your intention to attend in person and that your proxy is thus revoked. Revocations
or re-voting by later-dated proxies via the internet or telephone must be made by 11:59 p.m.
(central time), Saturday, May 22, 2010, in order to be effective. Any revocations or later-dated
proxies received after these deadlines will be disregarded.
Many stockholders hold their shares through a stockbroker, bank, or other nominee rather than
directly in their own name. If you hold your shares in one of these ways, you are considered a
beneficial owner, not a record owner. The instructions above apply to record owners, not
beneficial owners. For beneficial owners, your broker or nominee should send you voting
instructions for you to use in directing the broker or nominee on how to vote your shares. Your
broker or nominee may allow you to deliver your voting instructions to them via the telephone or
the internet. The Company also permits voting via the telephone or internet for record owners, as
described in more detail below.
3
Voting by Proxy by the Telephone or Internet
This year we are again asking our stockholders to help save the Company money by voting their
proxies via the internet or telephone, rather than by return mail.
If you are a beneficial owner, but not a record owner, you will receive instructions from your
broker, bank or other nominee that you must follow in order to have your shares voted. Most
nominees that are institutions make internet or telephone voting options available to the
beneficial owners for whom they hold shares, so please see the voting instructions from those
institutions for specific information about how to vote via the internet or telephone.
If your shares are registered directly in your name with our transfer agent, Illinois Stock
Transfer Company, you are considered the stockholder of record with respect to those shares, and
these proxy materials are being sent directly to you. As the stockholder of record, you have the
right to vote by proxy. We encourage our registered stockholders to vote:
By internet
http://www.illinoisstocktransfer.com
and click on the heading Internet Voting;
or
By touch-tone telephone (800) 555-8140.
Please have your proxy card in hand when you access the website or call the toll-free number.
You will be prompted to enter your Voter Control Number, which is located on
the front of the proxy card. Then you can follow the directions provided.
If you elect to vote via the internet or telephone, only votes cast no later than 11:59 p.m.
(central time) on Saturday, May 22, 2010, will be accepted. If you vote via the internet or
telephone and wish to revoke your proxy or re-vote your shares by later-dated proxy, you can do so
by internet or telephone using the website or telephone number listed above or by following one of
the other procedures for revocation or re-voting set forth above under Voting by Proxy by Mail,
provided that you meet the requirements and deadlines listed.
Electronic Delivery of Proxy Materials Important Notice Regarding the Availability of Proxy
Materials for the Stockholder Meeting to be held on May 24, 2010
This proxy statement, proxy card and our 2009 Annual Report to Stockholders are available in
advance of the annual meeting by selecting the Materials, Voting & Delivery option in the
Investor Relations section of our Companys website at
www.mercbanx.com
. You may also
elect through the Investor Relations section to receive email notification when these documents
become available on our website in future years. If you elect to receive the email notification,
you will receive an email message next year containing the internet address to access the
documents. You do not have to re-elect internet access each year. Your choice will remain in
effect until you indicate otherwise. To view, cancel or change your enrollment profile, please
re-visit the Materials, Voting & Delivery option in the Investor Relations section of our
website at
www.mercbanx.com
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If you are a stockholder of record, you will receive automatically a complete set of printed
annual meeting materials regardless of whether you have also elected to view the materials on our
website. Electronic-only delivery of materials is not currently available for stockholders of
record. If, however, you hold your shares through a bank, stockbroker, or other nominee, please
refer to the information provided by that nominee for instructions on how to elect to access future
proxy statements and annual reports over the internet exclusively. Doing so will save the Company
printing and mailing expenses. Such an option may or may not be available to beneficial owners,
depending upon the procedures followed by the bank, stockbroker or other nominee.
Attending the Meeting and Voting in Person
As a stockholder, you may attend the annual meeting regardless of whether you have elected to
vote your shares by proxy. If your shares are held in the name of your broker, bank or other
nominee (commonly referred to as being held in street name), proof of your beneficial ownership
may be required before you will be admitted to the
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meeting. Examples of proof of ownership are a recent brokerage statement or a letter from the
bank, broker or other nominee that holds the shares.
If you attend the annual meeting and wish to vote in person (and have not already voted by
proxy unless the proxy has been validly revoked), we will give you a ballot when you arrive. If
you want to vote shares of common stock that are held in street name in person at the meeting,
you will have to obtain a written proxy authorizing you to vote the shares from the broker, bank or
other nominee who holds your shares and present this proxy at the meeting.
Quorum Requirement
A quorum of stockholders is necessary to hold a valid meeting. The presence in person or by
proxy of stockholders holding a majority of the total outstanding shares of our Companys common
stock will constitute a quorum at the annual meeting. Shares of common stock represented by a
proxy that directs that the shares be voted to abstain or to withhold a vote on matters or that
otherwise may not be voted on matters will nevertheless be counted in determining whether a quorum
is present. Shares of common stock as to which there is a broker non-vote on one or more matters
will be counted as present or represented at the meeting for purposes of determining a quorum, even
though such shares may not and will not be voted on those matters. Broker non-votes are proxies
submitted by brokers that do not indicate a vote for some or all of the proposals because the
broker has not received instructions as to how to vote on those proposals and does not have
discretionary voting authority with respect to such proposals. If a quorum should not be present,
the annual meeting may be adjourned from time to time until a quorum is obtained.
Required Vote to Approve Each Proposal
Election of Directors
. Directors are elected by a plurality of the votes cast, in person or
by proxy, by stockholders entitled to vote at the annual meeting for that purpose. A plurality
means receiving a higher number of votes than any other candidate. In other words, the nine
nominees receiving the most FOR votes will be elected director. Stockholders can withhold
authority to vote for one or more nominees for director. Votes withheld from a particular nominee
may under particular circumstances have an effect on the election of directors or result in the
defeat of one or more of the Boards nominees if there are more nominees for Board seats than there
are seats to be filled at the election, which is not the case for the 2010 annual meeting. Each
outstanding share of common stock is entitled to one vote on each director position to be filled at
the meeting. Stockholders do not have cumulative voting rights in the election of directors,
meaning they cannot aggregate their votes on all seats to be filled and vote them on a lesser
number of nominees or a single nominee.
Amendment to Certificate of Incorporation.
The affirmative vote of holders of a majority of
the outstanding shares of common stock is required for the approval of the amendment to the
Certificate of Incorporation. Any stockholder represented in person or by proxy at the meeting and
entitled to vote on the subject matter may elect to abstain from voting on this proposal. If so,
because the amendment requires the approval of holders of a majority of all outstanding shares,
such abstention will have the same effect as a vote cast against the amendment. For the same
reason, stockholders not attending the meeting, in person or by proxy, will also have the same
effect as if they had voted against the amendment.
Ratification of Auditors
. The affirmative vote of a majority of the votes cast is required
for the ratification of the selection of BKD, LLP as our independent auditors for the year ending
December 31, 2010. Any stockholder represented in person or by proxy at the meeting and entitled
to vote on the subject matter may elect to abstain from voting on this proposal. If so, such
abstention will not be counted as a vote cast on the item and, therefore, will have no effect on
the vote for this proposal. Similarly, a decision by a stockholder not to attend the meeting or be
represented by proxy will have no effect on the vote for this proposal.
Other Matters
. The affirmative vote of a majority of the votes cast on any other matter is
required for the approval of any such other matter as properly may come before the annual meeting
or any adjournment thereof,
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unless the Companys certificate of incorporation or bylaws or applicable law requires otherwise.
Provided there is a quorum of stockholders present in person or by proxy, stockholders not
attending the meeting, by proxy or in person, or stockholders who are present in person or by proxy
but who elect to abstain from the vote will have no effect on the vote for this proposal.
Effect of Broker Non-Votes
. As previously stated, broker non-votes are proxies submitted by
brokers that are not voted for some or all of the proposals because the broker has not received
instructions as to how to vote on those proposals and does not have discretionary voting authority
with respect to such proposals. Brokers are subject to New York Stock Exchange (NYSE) rules. The
NYSE rules direct that, if you are the beneficial owner of shares held in street name by a
broker, the broker, as the record holder of the shares, is required to vote those shares in
accordance with your instruction. If you do not give instructions to the broker, the broker will
be entitled to vote the shares with respect to discretionary items but will not be permitted to
vote the shares with respect to non-discretionary items (those shares are treated as broker
non-votes). Broker non-votes are deemed to be shares entitled to vote on such matters and,
therefore, count for purposes of determining a quorum. With respect to any proposals requiring the
affirmative vote of a majority of the votes cast, in person or by proxy at the meeting (such as
Item 3 in this proxy statement) or a plurality of the votes cast in person or by proxy (such as
Item 1 in this proxy statement), broker non-votes will have no effect upon the outcome of the vote.
With respect to any proposals requiring the affirmative vote of a designated percentage of all
outstanding shares entitled to vote or of a quorum (such as Item 2 in this proxy statement), broker
non-votes would be the equivalent of a vote AGAINST such proposals.
Under recent changes to the NYSE rules, the election of directors is no longer considered a
discretionary item. This means that brokers who have not been furnished voting instructions from
their clients will not be authorized to vote in their discretion on the election of directors. We
urge you to provide voting instructions to your broker so that your votes may be counted.
Solicitation of Proxies
Our Board of Directors is making this solicitation of proxies for the annual meeting. The
Company will bear all costs of such solicitation, including the cost of preparing and mailing this
proxy statement and the enclosed form of proxy. After the initial mailing of this proxy statement,
proxies may be solicited by mail, telephone, email, facsimile transmission or personally by
directors, officers, employees or agents of the Company or its subsidiaries. Brokerage houses,
banks and other custodians, nominees and fiduciaries will be requested to forward soliciting
materials to beneficial owners of shares held of record by them, and the Company will pay their
reasonable out-of-pocket expenses. The Company has engaged the Illinois Stock Transfer Company to
act as its transfer agent, and the Company will thus bear any costs related to the transfer agents
services.
A list of stockholders entitled to vote at the annual meeting will be available for
examination at least ten days prior to the date of the annual meeting during normal business hours
at the principal place of business of the Company located at 200 North 33rd Street, Quincy,
Illinois. The list also will be available at the annual meeting.
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors
The first item to be submitted to a vote at the annual meeting is the election of nine
directors of the Company, each to serve for a term of one year to expire at the 2011 annual meeting
of stockholders. Our Board of Directors currently consists of nine members, as follows: Ted T.
Awerkamp, Julie A. Brink, Michael J. Foster, Alexander J. House, Lee R. Keith, William G. Keller,
Jr., Dennis M. Prock, John R. Spake and James W. Tracy.
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Upon the recommendation of the Nominating/Corporate Governance Committee, the Companys Board
of Directors has nominated all of the current directors for reelection to the Board at the 2010
annual meeting.
Unless authority to vote for the nominees or a particular nominee is withheld, all shares
represented by properly executed proxies in the form enclosed will be voted for the election of
these nine nominees as directors. In the event that one or more of the nominees should become
unavailable for election prior to the meeting, the shares represented by properly executed proxies
in the enclosed form will be voted for the election of such substitute nominee or nominees as may
be designated by the Board of Directors, unless the authority to vote for all nominees or for the
particular nominee who has ceased to be a candidate has been withheld. Each of the nominees has
consented to being named in this proxy statement and to serve as a director if elected, and the
Board of Directors has no reason to believe that any nominee will be unavailable for election.
The Board of Directors recommends unanimously that you vote FOR the election of Ted T.
Awerkamp, Julie A. Brink, Michael J. Foster, Alexander J. House, Lee R. Keith, William G. Keller
Jr., Dennis M. Prock, John R. Spake and James W. Tracy as directors.
Information on Directors and Nominees
The following table sets forth certain information with respect to each current director of
the Company who has been re-nominated for election as a director at the annual meeting.
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Position
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Company
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Name
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Age
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With our Company
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Director Since
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Ted T. Awerkamp
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52
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President and CEO, Director
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1994
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Julie A. Brink
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42
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Director
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2009
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Michael J. Foster
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62
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Chairman of the Board
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2003
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Alexander J. House
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52
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Director
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2009
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Lee R. Keith
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56
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Director
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2009
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William G. Keller, Jr.
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61
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Director
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1983
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Dennis M. Prock
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55
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Director
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2006
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John R. Spake
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58
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Director
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2009
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James W. Tracy
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55
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Director
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2007
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The business experience during at least the last five years of each current director and
nominee, and other information about the persons experience, qualifications, attributes and/or
skills that the Companys Nominating/Corporate Governance Committee considered important in its
process for determining its nominees for director, are as follows:
Ted T. Awerkamp
was named President and Chief Executive Officer of the Company as of March 1,
2007. Prior to that date, he served as Vice President and Secretary of the Company (since 1994)
and as President and CEO of Mercantile Bank (since 2005). He served as Executive Vice President
and Chief Operating Officer of Mercantile Bank from 1993 to 2005. Prior to 1993, he served as Vice
President of Mercantile Bank and as President, Chief Executive Officer and a director of the former
Security State Bank of Hamilton (later merged with Marine Bank & Trust). Prior to joining
Mercantile Bank in 1984, he worked for two years as a bank examiner for the Commissioner
7
of Bank and Trust Companies of the State of Illinois. Mr. Awerkamp has also been active in
numerous civic, charitable and industry organizations in the Quincy area. Mr. Awerkamp has been a
member of the Board of Directors of the Company and Mercantile Bank since 1994 and is the Chairman
of the Board of Mercantile Bank. Mr. Awerkamp is also a director of the following subsidiaries of
the Company: Royal Palm Bancorp, Inc. and its subsidiary Royal Palm Bank of Florida, both of which
he is Chairman; Mid-America Bancorp, Inc., of which he is Chairman, and its subsidiary Heartland
Bank; and Mercantile Investments, Inc.
Julie A. Brink
is Vice President (since 2009) and Secretary of R.L. Brink Corp. (since 1980),
which is engaged in heavy construction and concrete and asphalt production, and Vice President
(since 2009) and Secretary of Thompson, Inc. (since 1985), an interstate trucking company. She has
been employed in various capacities by R.L. Brink Corp. since 1990. Both businesses are
headquartered in Quincy, Illinois. She is also Vice President of Leeser TX, Inc. (since 1988), an
interstate trucking company located in Palmyra, Missouri. Ms. Brink has been involved in many
civic and charitable organizations in the Quincy area and has served as a director of the Company
and Mercantile Bank since 2009.
Michael J. Foster
is a retired agribusiness executive, having worked for 33 years in the
international livestock feed and supplement business. He was President of ADM Alliance Nutrition,
Inc. (ADM Alliance), a subsidiary of Archer-Daniels-Midland Company, from 1998 through 2004. ADM
Alliance is headquartered in Quincy, Illinois, and manufactures and sells livestock feeds
nationally and internationally. In that capacity, Mr. Foster was responsible for approximately
2,000 employees and $800 million in sales volume. From 1992 through 1999, he served as a member of
the Advisory Board of Directors for Mercantile Bank of St. Louis, a bank unrelated to the Company.
Mr. Foster is currently engaged in several civic and charitable organizations, including serving as
chairman of a nonprofit integrated health care delivery system headquartered in Quincy. He has
served as a director of the Company and of Mercantile Bank since 2003.
Alexander J. House
is founder and President of Mid-America Carbonates, LLC (since 2006), which
has corporate offices in Quincy and operations in southern Illinois. The company is engaged in the
milling and marketing of calcium carbonate, a high purity limestone, for industrial applications.
Prior to 2006, Mr. House was President of Quincy Carbonates, Inc., a firm also engaged in the
mining, milling and marketing of calcium carbonate. Mr. House has also been engaged in farming
operations in the Quincy area for many years. He has served as a director of the Company and
Mercantile Bank since 2009.
Lee R. Keith
is President and Chief Lending Officer of Premier Bank (since 2009) in St.
Peters, Missouri and has over 33 years of experience in the banking industry. From 2008 through
2009, he was President of Mid-MO Bank in Springfield, Missouri. He served as President of Progress
Bank/First State Community Bank in Sullivan, Missouri, from 2006 through 2008, and as President of
Gold Bank in St. Joseph, Missouri, from 2000 through 2006. Prior to 2000, he worked in various
other executive and operational positions in the banking industry. The Companys Board of
Directors appointed Mr. Keith as a director of the Company and Mercantile Bank in August 2009.
William G. Keller, Jr.
, is a partner with the law firm of Schmiedeskamp, Robertson, Neu &
Mitchell LLP, located in Quincy, Illinois, which acts as outside counsel to the Company and its
subsidiaries. He has 35 years of experience practicing law, including the representation of
individuals and entities in the areas of estate planning, banking, corporate law and finance. Mr.
Keller has been and currently is involved in many civic and charitable organizations in the Quincy
area and has been a director of the Company since its inception in 1983 and Mercantile Bank since
1982. Mr. Keller also serves as a director of the Companys subsidiary Mid-America Bancorp, Inc.
and the Companys indirect subsidiary Mercantile Investments,
Inc.
Dennis M. Prock
is chairman of the board and founder of For Your Convenience, one of the
largest distributors of convenience store equipment in the country, which since 1986 has
manufactured millwork, walk-in coolers and graphics for major convenience store chains across
America. Mr. Prock has been chairman of For Your Convenience since 1986 and served as its
President from 1986 to 2004. From 1995 through 2002, he also served as President of Huck Store
Fixture Co. in Quincy, Illinois. Mr. Prock is involved in numerous business enterprises in
8
Missouri and Illinois. Mr. Prock has been a director of the Company and Mercantile Bank since
2006 and serves as a director of the Companys subsidiary Royal Palm Bancorp, Inc. (and its
subsidiary Royal Palm Bank of Florida).
John R. Spake
has been President and Chief Executive Officer of Comstock-Castle Stove Company
for more than 10 years. The company manufactures and services commercial cooking equipment,
selling in the U.S. and internationally. Mr. Spake is active in community and trade organizations,
having served as a member of the Board of Directors of both the Quincy Area Chamber of Commerce and
the North American Association of Food Equipment Manufacturers for the past six years. He has been
a director of the Company and Mercantile Bank since 2009.
James W. Tracy
is Senior Vice President and General Counsel of Dot Foods, Inc., headquartered
in Mt. Sterling, Illinois, a redistributor of food products from manufacturers to distributors
throughout the United States. He has been employed with Dot Foods, Inc. since 1980 and, prior to
taking his current position in 2002, he was Senior Vice President of Operations. He has served on
the Board of Directors of Dot Foods, Inc. for 25 years. In addition, Mr. Tracy has served on the
board of directors of numerous industry-specific and civic organizations, including Loyola Family
Business Center, Mt. Sterling Chamber of Commerce, Mt. Sterling Community Center, West Central Mass
Transit Board, Brown County Economic Development Board, and the International Foodservice
Distributors Association. He was a director of the Companys former subsidiary Brown County State
Bank from 2000 through early 2010, and has been a director of the Company and Mercantile Bank since
2007.
There is no arrangement or understanding between any director or nominee and the Company or
any other person pursuant to which such director was selected as a director as of the date of this
proxy statement other than with respect to Mr. Keith. The Company is party to a Fourth Amended and
Restated Loan Agreement, dated as of April 30, 2009, as amended (the Great River Loan Agreement)
with Great River Bancshares, Inc. (Great River) pursuant to which Great River has extended
various loans and lines of credit to the Company. In addition, under the Great River Loan
Agreement, R. Dean Phillips, the sole shareholder of Great River, is entitled to nominate a person
to the Companys Board of Directors. In the event that Mr. Phillips or any person nominated by him
is not elected to the Board of Directors at the Companys annual meeting, the Great River Loan
Agreement provides that Great River may request the Companys Board of Directors to take all action
necessary to appoint Mr. Phillips or his designee as a director of the Company, including
increasing the size of the Board of Directors or obtaining the resignation of another director of
the Company. Pursuant to this provision, in 2009 James Senty was nominated by Mr. Phillips and
elected as a director by the shareholders at the 2009 annual meeting. Mr. Senty resigned as a
director in June 2009. Following Mr. Sentys resignation, pursuant to the Great River Loan
Agreement Great River designated Mr. Keith as a director to serve on the Companys Board of
Directors, and Mr. Keith was appointed as a director of the Company effective as of August 25,
2009. See the sections entitled Certain Relationships and Transactions and Director
Independence beginning on pages 42 and 11, respectively.
ITEM 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK
On April [27], 2010, our Board of Directors approved an amendment to Article Fourth of our
Certificate of Incorporation to increase the number of authorized shares of common stock of the
Company from 14 million to 30 million (the Amendment). The Boards approval is subject to the
approval of the Amendment by the holders of a majority of the outstanding shares of our common
stock. A copy of the Amendment increasing authorized common stock is attached to this proxy
statement as
Appendix A
.
9
Increase in Authorized Common Stock
The Board of Directors recommends that the stockholders approve the Amendment because it
considers the Amendment to be in the best long-term and short-term interests of the Company and its
stockholders. The proposed increase in the number of authorized shares of common stock will ensure
that a sufficient number of shares will be available, if needed, for issuance in connection with
any possible future transactions approved by the Board of Directors, including, among others,
equity offerings, stock splits, stock dividends, acquisitions, and other corporate purposes. The
Board of Directors believes that the availability of the additional shares for these purposes
without delay will be beneficial to the Company by providing it with the flexibility to consider
and respond to future business opportunities and needs as they arise.
The Board believes the Amendment is particularly important in todays economically trying
times. Economic developments over the past approximately two years have adversely affected the
capital markets and the availability of capital. The Company is taking a proactive approach, which
is encouraged by its bank regulators, by developing and executing a plan to raise additional equity
in order to protect its capital and liquidity positions. Such a plan could include one or more
equity offerings. The Amendment will provide the Company with increased flexibility to meet the
Companys and our subsidiary banks various capital requirements and to respond to circumstances
that could adversely affect our capital positions in the future, by increasing the number of shares
of common stock available for issuance. It is possible that shares of common stock may be issued
at a time and under circumstances that may increase or decrease our earnings per share and increase
or decrease the book value per share of our shares of common stock currently outstanding.
We are exploring strategic alternatives to strengthen the Companys capital position and
enhance long-term stockholder value, but we do not currently have any agreements, arrangements,
commitments or understandings with respect to the issuance of any additional shares of our common
stock that would be authorized upon approval of the Amendment. If the Amendment is not approved,
our flexibility to pursue potential future transactions involving our stock will be limited.
Under our Certificate of Incorporation, we currently have authority to issue 14 million shares
of common stock, par value $0.4167 per share, of which 8,703,330 shares were issued and outstanding
as of April 12, 2010, and the authority to issue 100,000 shares of preferred stock having a par
value of $0.01, of which no shares were issued and outstanding as of April 12, 2010. Approximately
5,296,670 shares of common stock were available for issuance on such date.
Condition to the Effectiveness of the Amendment
If the Amendment is approved by the stockholders, then the Amendment will take effect only
when the Company files the Amendment with the Secretary of State of Delaware. The proposed form of
Amendment is attached to this proxy statement as Appendix A.
Vote Required
If a quorum exists, Item 2 will be approved if holders of at least a majority of the
outstanding shares of the Companys common stock are voted, in person or by proxy, in favor of the
Amendment.
The Board of Directors recommends that stockholders vote FOR the adoption of the amendment
to the Certificate of Incorporation to increase the number of authorized shares of our common stock
from 14 million to 30 million.
10
ITEM 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The third item to be submitted to a vote at the meeting is the ratification of the selection
of our independent auditors. The Audit Committee of our Board of Directors has selected the
independent certified public accounting firm of BKD, LLP as our Companys independent auditors to
audit the books, records and accounts of our Company for the year ending December 31, 2010.
Stockholders will be asked to ratify this decision.
BKD, LLP has served as our Companys independent auditors since 2001. A representative of
BKD, LLP is expected to be present at the annual meeting. Such representative will have an
opportunity to make a statement if he or she desires to do so and will be available to respond to
appropriate questions.
Submission of the selection of the independent auditors to the stockholders for ratification
is not required by the Companys certificate of incorporation, bylaws or applicable law.
Nevertheless, the Board of Directors believes it is appropriate to give stockholders the
opportunity to ratify the decision of the Audit Committee. Neither the Audit Committee nor the
Board will be bound by the stockholders vote at the meeting but may take the stockholders vote
into account in future determinations regarding the retention of an independent auditor. Also,
submission of the matter to the stockholders this year will not limit the authority of the Audit
Committee to appoint another independent certified public accounting firm to serve as independent
auditors if the present auditors resign or their engagement otherwise is terminated.
Additional information relating to the independent auditor and the work of the Audit Committee
is set forth below under the heading Audit Committee Report and Independent Auditor Information.
The Board of Directors recommends unanimously that you vote FOR ratification of the
selection of BKD, LLP.
CORPORATE GOVERNANCE
The business and affairs of the Company are managed under the direction of the Board of
Directors. Members of the Board are kept informed of the Companys business through discussions
with the Companys executive officers and other key employees, by reviewing materials provided to
them and by participating in meetings of the Board and its committees.
The Board of Directors believes that the purpose of corporate governance is to ensure that we
protect stockholder value through appropriate policies and procedures governing management
functions of the Company. The Board has adopted corporate governance practices, which the Board and
senior management believe promote this purpose. The Board and, in particular, its
Nominating/Corporate Governance Committee periodically review these governance practices, both in
light of prevailing good corporate governance practices generally and for purposes of ensuring
compliance with the rules and listing standards of NYSE Amex, the stock exchange on which the
Companys common stock is listed for trading, and the regulations of the Securities and Exchange
Commission.
Director Independence
The Board has determined that a majority of the current directors and all current members of
the Nominating/Corporate Governance, Compensation, and Audit Committees are independent for
purposes of Section 802 of the NYSE Amex Company Guide. Specifically, the Board has determined
that the following current directors and director nominees are independent: Julie A. Brink,
Michael J. Foster, Alexander J. House, Dennis M. Prock, John R. Spake and James W. Tracy. In
addition, with respect to other persons who served as directors during any part of 2009 but who are
not now directors, the Board had determined previously that the following were independent at the
time of their service to the Company in 2009: Frank H. Musholt, James A. Senty and Walter D.
Stevenson III. The Board based these determinations primarily on its review of the responses of
these individuals to
11
questions regarding their personal history, their business and professional relationships with
the Company as well as those of their families and their business affiliates, and other
relationships they may have with management.
In making determinations of independence, the Board uses the definition of independent
provided in Section 803 of the NYSE Amex Company Guide, including the objective measures of
director independence established in that section. In applying this NYSE Amex definition of
independence, the Board considers a wide range of subjective factors, including the following:
personal relationships between the director and Company management, business relationships between
the Company and the director (including the latters immediate family members and controlled
business interests) that do not exceed the dollar thresholds automatically resulting in loss of
independence under the NYSE Amex guidelines but that nevertheless may be significant to one or both
parties, and other relationships between the director and the Company or its management that may
affect independent judgment. Chief among these other relationships are customer relationships that
a director may have with the Company.
Generally, the Board does not believe that the mere existence of a traditional customer
relationship between a director (including the directors immediate family and controlled business
interests) and the Company, where, for example, the director is a borrower, depositor or trust
customer of the Company, will jeopardize the independence of the director, except in cases where
the dollar amount of the relationship or account in question is extraordinarily large or where the
particular relationship or account is experiencing significant difficulties.
In reviewing the independence of the current directors, the Board determined that none of
these individuals, directly or through their families or controlled companies, had an
extraordinarily large or troubled customer relationship of any kind with the Company or its banks
although several maintain deposit accounts of various types with us and/or have personal or
corporate loans from us of a non-troubled nature. Moreover, none of the individuals deemed
independent had any non-customer business relationships with us at all, directly or indirectly
through their families or controlled businesses. Finally, none of the individuals deemed
independent had personal ties to Company management that were considered by the Board to be so
material as to compromise his independence.
The directors and nominees who were determined not to be independent under applicable NYSE
Amex guidelines were Ted T. Awerkamp, because he is a current executive officer of the Company;
William G. Keller, Jr., because of the extent of his law firms representation of the Company; and
Lee R. Keith, because he was appointed as a director at the request of Great River Bancshares,
Inc., the Companys primary lender (Great River), which is owned by R. Dean Phillips (the
Companys largest stockholder) pursuant to the Companys contractual obligation to include a
representative selected by Mr. Phillips on the Companys Board. With respect to other persons who
served as directors of the Company during any part of 2009 but who are not now directors, the Board
had determined previously that Dan S. Dugan, former President and CEO of the Company and a
consultant to the Company through February 28, 2010, was not independent as a result of those
relationships.
Executive Sessions of Independent Directors
The Companys Corporate Governance policies require the Board to provide for regular executive
sessions including only independent directors. At least once a year, the Board holds an executive
session including only independent directors. In 2009, all of the independent directors attended
the executive session. In addition, the Boards three principal committees, Nominating/Corporate
Governance, Compensation and Audit, consist of only independent directors, and the chairmanship of
these committees rotates among those directors. Therefore, each meeting of these committees
permits the independent directors to address Company business in executive session to the extent
desired, and each independent director has a significant role in setting committee agendas and
conducting committee meetings.
12
Information Concerning the Board and Committees of the Board
Board Meetings; Attendance Record
In 2009 our Board of Directors held 12 regular meetings and seven special meetings. Each
director attended at least 90% of the regular and special meetings of the Board during the year and
at least 85% of the meetings of committees of the Board on which he served (in each case for the
period during which he served). Our directors discharge their responsibilities throughout the
year, not only at Board and committee meetings, but through personal meetings and other
communications with members of management and others regarding matters of interest and concern to
our Company.
Our directors are expected to attend our annual meeting of stockholders absent a compelling
reason, such as a family or medical emergency, but we do not otherwise have a policy regarding such
attendance. All directors were present at the annual meeting of the stockholders held in May 2009.
The Board of Directors typically holds its annual organizational meeting immediately following the
annual meeting of stockholders, which facilitates the directors ability to attend the annual
meeting of stockholders.
Board Committees
Our Board of Directors has established three standing committees: an Audit Committee, a
Compensation Committee and a Nominating/Corporate Governance Committee. There currently are no
other standing executive or other committees of our Board, or committees performing similar
functions. However, the Board established two ad hoc committees in 2009 the Special Committee
(which has been charged with overseeing the creation and implementation of the Companys capital
plan and related transactions) and the Expense Reduction Committee (which is charged with
identifying and recommending operational efficiencies through cost containment). The Board has
determined that the current members of all three standing committees are independent under the
guidelines set forth in Section 803 of the NYSE Amex Company Guide. The members and duties of each
of these committees are described briefly below. A more complete description of each standing
committees functions is provided in its charter which is available on our internet website in the
Corporate Governance section under Investor
Relations at
www.mercbanx.com
.
Audit Committee
. The Audit Committee consists of Messrs. Foster (Chairman), House and Prock
and Ms. Brink. The Audit Committee acts on behalf of the Board in reviewing the financial
statements of the Company and in approving and overseeing the relationship between the Company and
its independent auditor. In addition to monitoring the scope and results of audit and non-audit
services rendered by our independent auditor, the Audit Committee reviews the adequacy of internal
controls, internal auditing and the results of examinations made by supervisory authorities. The
Audit Committee also performs other duties, including oversight of our whistle-blowing policy and
review and approval of certain related party transactions. The Board of Directors has determined
that each member of the Audit Committee, in addition to qualifying as independent under Section
802 of the NYSE Amex Company Guide, also qualifies as independent under the more stringent
requirements set forth in Section 10A(m)(3) of the Securities Exchange Act of 1934 (the 1934 Act)
and Section 803 of the NYSE Amex Company Guide, both of which are applicable to audit committee
members. Each member also has been deemed to qualify as an audit committee financial expert
within the meaning of the rules and regulations of the Securities and Exchange Commission. The
Audit Committee met four times during 2009.
Compensation Committee
. The members of the Compensation Committee are Messrs. Prock
(Chairman), Foster and Tracy and Ms. Brink. The Compensation Committee has the responsibility to
make certain determinations regarding executive compensation, and to review and make
recommendations to the Board of Directors generally regarding our executive compensation program,
as well as the compensation of our directors. Among other tasks, the Committee sets annual
performance targets under our Incentive Compensation Plan and oversees plan payments if targets are
met. For more information on the executive compensation program, see the section entitled
Compensation Discussion and Analysis beginning on page 21. The Compensation Committee met four
times during 2009.
Nominating/Corporate Governance Committee
. The Nominating/Corporate Governance Committee
consists of Messrs. Tracy (Chairman), House and Prock and Ms. Brink. The committee is responsible
for the director nomination process, including evaluating and recommending director nominees and
appointments to Board committees, and overseeing the identification and evaluation of candidates
for nomination. The
13
Nominating/Corporate Governance Committee also is charged with developing and recommending a
set of corporate governance principles applicable to the Company, and identifying other corporate
governance issues for the Board. The committee held seven meetings during 2009.
Any stockholder desiring a paper copy of the charter for any of these committees may obtain
one by making a written request to the Corporate Secretary at the following address: Mercantile
Bancorp, Inc., 200 North 33rd Street, Quincy, Illinois 62301, Attention: Corporate Secretary.
Board Leadership Structure
The Chairman of the Companys Board of Directors has been an independent director since the
annual meeting in May 2009, when former Company President and CEO Dan S. Dugan retired from the
position as Chairman of the Board after having served in that role since the formation of the
Company as a bank holding company for Mercantile Bank in 1983. Today, Michael J. Foster serves as
Chairman. The Board believes that separating the role of President and CEO from the role of
Chairman offers the Company a greater diversity of viewpoints in Company leadership and enhances
the accountability of executive management to the Board and the Companys shareholders. In
addition, the chairmen of the Boards three standing committees (Compensation, Nominating/Corporate
Governance, and Audit Committees) and the ad-hoc Special Committee are all independent directors.
Boards Role in Risk Oversight
The Board of Directors has primary responsibility for the oversight of risk management and,
either as a whole or through its committees, regularly discusses with management the Companys
major risk exposures, their potential impact on the Company, and the steps the Company (through
management) takes to monitor and the controls implemented to mitigate the exposures. In
particular, the Audit Committee reviews financial risk exposures through monitoring the
independence and performance of the Companys auditors and the quality and integrity of the
Companys financial reporting process and systems of internal controls. Both the Companys
external auditors and internal audit staff report directly to the Audit Committee.
The Nominating/Corporate Governance Committee focuses on the management of risks associated
with Board organization, membership and structure, through the nomination process and independence
assessment, and the organizational and governance structure of the Company, through periodic review
of Board practices and policies concerning corporate governance and the performance of the Board.
The Compensation Committee assists the Board in fulfilling its oversight responsibilities with
respect to the management of risks arising from our compensation policies and programs, through
review of compensation to executive officers, directors and employees in general and through
oversight of all compensatory plans.
The charter of each of these committees is available on our internet website in the Corporate
Governance section under Investor Relations at
www.merbanx.com
.
In addition to the foregoing risk management practices initiated by the Company, the Company
and its banking subsidiaries are regulated by various federal and state banking agencies, which
periodically examine the organizations. The results of these examinations are presented to the
full Board. Management (primarily through the internal audit staff) and the Board (principally
through the Audit Committee) track the issues identified in the examinations and monitor ongoing
regulatory compliance.
Compensation Committee Interlocks and Insider Participation
At December 31, 2009, members of the Compensation Committee were Directors Prock, Brink,
Foster and Tracy. The Compensation Committee reviews and makes recommendations to the Board of
Directors regarding executive compensation. No member of the Compensation Committee in 2009 was,
or had ever been, an officer or employee of the Company or any of its subsidiaries, or had any
substantial business dealings with the Company. In addition, no compensation committee
interlocks existed during fiscal year 2009, that is, no member of our Compensation Committee or
the Board was an executive officer of another company on whose compensation committee or board any
of our executive officers served.
14
Stockholder Communications with Directors
Our policy is to forward to our directors any stockholder correspondence we receive that is
addressed to them. Stockholders who wish to communicate with our Board or individual directors may
do so by sending their comments in writing addressed to the Board or to the individual director or
directors at our headquarters at 200 North 33rd Street, Quincy, Illinois 62301. Stockholders
wishing to submit candidates for nomination or election as directors of our Company or wishing to
submit other proposals for consideration by our stockholders at the annual meeting should review
the information set forth below under the headings Nomination of Directors; Stockholder Access to
Process and Stockholder Proposals for the Annual Meeting.
Code of Ethics Applicable to Directors, Officers and Employees
We have adopted a Code of Ethics for directors, officers and employees including our principal
executive officer, principal financial officer, principal accounting officer, controller and
persons performing similar functions. A copy of this Code of Ethics was filed with the Securities
and Exchange Commission (SEC) as an exhibit to the Companys Annual Report on Form 10-K for the
fiscal year ending December 31, 2004 and is available on our internet website in the Corporate
Governance section under Investor Relations at
www.mercbanx.com
. Any substantive amendments to
this Code, or any waivers from the Code granted for any director or senior officer, including our
principal executive officer, principal financial officer, principal accounting officer, controller
and persons performing similar functions, will be disclosed in a report on Form 8-K filed with the
SEC.
Nomination of Directors; Stockholder Access to Process
Nomination Process
On an annual basis, the Nominating/Corporate Governance Committee of the Board makes
recommendations to the full Board on individuals it believes should be nominated for director,
including, if appropriate, re-nomination of incumbent directors, accompanied by key factors
underlying its recommendations. If it so chooses, the Committee may include with its
recommendations a report on other candidates considered by it but not recommended for nomination,
including candidates the Committee believes should be given serious consideration for nomination in
future time periods as well as candidates considered by the Committee that were deemed unsuitable
for nomination. The Committee will include in its report any suggestions received from
stockholders on nominees and its reaction to such suggestions. The full Board reviews and
discusses the Committees recommendations and report, and then determines the slate of nominees to
be submitted by the Board for stockholder approval at the ensuing annual meeting.
To the extent vacancies in the Board arise between annual stockholders meetings or the Board
determines to expand the number of directors between annual meetings, the Committee will be
expected to prepare an ad hoc review and recommendation of suitable candidates for appointment to
the vacant or newly created directorships, utilizing a process similar to that undertaken by it in
connection with elections of directors at annual meetings. Thereafter, the full Board will review
the Committees recommendations and make the final determination on appointment of appropriate
persons to the new directorships on an interim basis.
Identification of Candidates
On an ongoing basis, the Nominating/Corporate Governance Committee identifies and reviews
possible candidates for director and, if appropriate, conducts inquiries into the backgrounds and
qualifications of candidates. The Committee may identify candidates as a result of suggestions
received by it from Committee members, other directors, or Company officers or search firms
retained by the Committee. In addition, the Committee considers any suggestions on director
candidates that may be received from stockholders from time to time, subject to the Companys
procedures for stockholder submission of candidates as described below.
Director Qualifications
The Committee and the full Board believe that the Board should be comprised of directors with
varied, complementary backgrounds, and that directors should, at a minimum, have knowledge and
experience that may be
15
useful to our Company. Directors should also possess the highest personal
and professional ethics and should be willing and able to devote the required amount of time to our
business. In accordance with its charter, the Nominating/Corporate Governance Committee has
identified the following additional attributes as desirable for its directors: knowledge of the
banking industry; financial expertise; experience in the management or leadership of a substantial
private business enterprise or educational, religious or not-for-profit organization; engagement in
the communities served by the Company; and such other professional and personal experience that the
Committee determines may be helpful on the Board. The Committee also considers a candidates
relationships with customers and potential customers and, for those candidates who are also
customers, the nature, dollar amount and history of the candidates customer relationship with the
Company. While the Company has no written policy regarding the consideration of the specific issue
of diversity in identifying director nominees, the Committee and full Board consider the issue of
diversity in the context of identifying potential candidates who would provide varied,
complementary backgrounds in terms of their professional and business experience, education, skill
and other attributes. In identifying director candidates, the Committee makes every effort to
ensure that the Board and its committees will include the required number of independent directors,
as that term is defined by NYSE Amex and the SEC. In determining whether an incumbent director
should be retained and stand for re-election, the Committee considers the quality of the directors
past service to the Company, including the directors attendance record at meetings. The Company
has no mandatory retirement age for directors.
Stockholder Submission of Candidates to Committee for its Consideration and Possible Nomination
Any stockholder wishing to submit the names of one or more individuals for consideration in
future years by the Nominating/Corporate Governance Committee and the full Board as nominees for
director of the Company must follow the Companys procedures for stockholder submission of
candidates, as formulated by the Committee and approved by the Board. A copy of these
procedures can be found on our internet website in the Corporate Governance section under
Investor Relations at
www.mercbanx.com
. In summary, stockholder submissions of candidates
must be in writing and sent by mail or courier to the Nominating/Corporate Governance Committee
at the Companys offices at 200 North 33rd Street, Quincy, Illinois 62301. The submission
should include the candidates name, mailing address, business experience and other relevant
background information, shareholding in the Company (if any), and other information relevant to
the persons appropriateness to serve as a director of the Company. Additional information may
be required by law or requested by the Nominating/Corporate Governance Committee after the
submission. The committees consideration of a candidate submitted by a stockholder may not
involve significant review or discussion in cases where the committee deems such not to be
appropriate in light of the circumstances. In some instances, the committee may defer serious
consideration of a stockholder-submitted candidate until a later date deemed more suitable.
Stockholders submitting candidates for consideration by the Nominating/Corporate Governance
Committee as nominees will be advised by the Company when their submissions have been received
and when the candidates are likely to receive consideration by the committee. The
Nominating/Corporate Governance Committee, after consideration of any candidates submitted by
the stockholders, will advise any such candidates whether the committee will nominate such
candidate. There is no assurance that the Committee will act within any specified time period
in response to stockholder suggestions or that candidates or their proponents will be entitled
to make a presentation to the Committee or receive any formal Company or Committee decision.
Stockholders are referred to the complete explanation of the applicable procedures set forth on
the Companys website mentioned above.
Direct Nomination of Candidates by Stockholders at Annual Meeting
In addition to submitting names of potential candidates for director to our
Nominating/Corporate Governance Committee for possible consideration by the Committee and our Board
in their annual selection of director nominees, stockholders may desire to act directly to place a
candidates name in nomination for election as director at an annual meeting. Any stockholder
wishing to do so, however, must comply with our bylaw provision governing direct nominations by
stockholders. Under our bylaw, any stockholder who wishes to place a name directly in nomination
for election as director at an annual meeting must, among other things, give advance notice to our
Corporate Secretary at our principal executive offices not less than 120 days prior to the
anniversary of the previous years annual meeting of stockholders nor more than 180 days prior to
such anniversary date (unless the
calendar day of the current years annual meeting is more than 30 days before or after the calendar
day of the previous years annual meeting, in which case the Board of Directors will establish a
different and more suitable deadline for notices). The notice deadline for the 2010 annual meeting
was January 19, 2010. For a direct
16
stockholder nomination to be considered at the 2011 annual
meeting, notice must be received not later than January 24, 2011, and not earlier than November 25,
2010. In the event that the date of the upcoming annual meeting is changed by more than 30 days
from the prior years annual meeting, the Board of Directors will establish a different and
suitable deadline date for notices. To obtain a copy of the relevant bylaw, please contact the
Corporate Secretary. The bylaw provision is also available on our internet website in the
Corporate Governance section under Investor Relations at
www.mercbanx.com
. The Company
is not obligated to include in its proxy materials information regarding candidates expected to be
nominated by stockholders.
Stockholder Proposals for the Annual Meeting
Stockholder Submission of Proposals to be Included in the Companys Proxy Statement
If a stockholder wishes to have a particular proposal considered by the Board for inclusion in
the Companys proxy statement for an annual meeting, the stockholder must satisfy the requirements
established by the SEC in its proxy rules for such proposals. SEC Rule 14a-8 requires that any
stockholder wishing to submit such a proposal must submit it in writing to the Company at least 120
days before the anniversary date of the proxy statement mailing date for the prior years annual
meeting, unless the upcoming annual meeting is to be held on a calendar day that is more than 30
days before or after the calendar day of the prior years annual meeting (in which case, the Board
will separately establish the deadline date for such submissions). The deadline for stockholder
proposals for the 2010 annual meeting has passed. Stockholders who wish to submit proposals for
inclusion in the Companys proxy statement for next years annual meeting (in 2011) must deliver
such proposals to our Corporate Secretary on or before December 20, 2010. The written notice must
clearly identify the proposal, contain a brief supporting statement and all required information
about the proposing stockholder, and otherwise meet the SECs rule. Please note the Company has
the right to exclude proposals that do not satisfy the requirements of applicable law.
Proposals should be addressed to: Mercantile Bancorp, Inc., 200 North 33rd Street, Quincy,
Illinois 62301, Attention: Corporate Secretary.
Direct Submission of Proposals by Stockholders for the Annual Meeting
Stockholders who meet certain requirements set forth in our bylaws may be in a position to
submit a personal proposal directly to an annual meeting of stockholders for consideration by the
stockholders, even if the stockholder does not wish to submit such proposal to the Board of
Directors for inclusion in the Companys proxy statement. Of course, any stockholder directly
submitting a proposal at an annual meeting is unlikely to be in a position to secure the
stockholder vote required for approval of such proposal, unless the submitting stockholder
separately solicits from the Companys stockholders proxies in favor of such proposal, which may be
an expensive process and is regulated by the SECs rules. Under our bylaws, any stockholder may
submit such a proposal for presentation at an annual meeting by delivering a written notice to the
Corporate Secretary that complies with the requirements in our bylaws regarding such proposals,
including the deadline for delivering such notice, the contents of the notice and the subject
matter of the proposal. For such a stockholder proposal to qualify for presentation at next years
annual meeting (in 2011), the Company must receive the proposal no later than December 20, 2010.
The deadline has already passed for direct submission of stockholder proposals for this years
annual meeting.
To obtain a copy of the relevant section of the bylaws, please contact the Corporate
Secretary. The provision is also available on our internet website in the Corporate Governance
section under Investor Relations at
www.mercbanx.com
.
Proposals should be addressed to: Mercantile Bancorp, Inc., 200 North 33rd Street, Quincy,
Illinois 62301, Attention: Corporate Secretary.
17
AUDIT COMMITTEE REPORT AND INDEPENDENT AUDITOR INFORMATION
Audit Committee Report
The Audit Committee of the Board of Directors submits the following annual report. The
Committee currently consists of four directors, each of whom is independent as defined in the NYSE
Amex listing standards and the rules and regulations of the SEC defining independence of audit
committee members, and each of whom has been determined by the Board of Directors to be an audit
committee financial expert within the meaning of the SECs rules and regulations.
The Committee assists the Board of Directors in fulfilling its oversight role relating to the
Companys financial statements and the financial reporting process, including the system of
disclosure controls and internal controls and procedures. Its duties include approving the
engagement of the independent auditor annually, reviewing the independent auditors qualifications,
independence and performance, and monitoring the internal audit function. The Board of Directors
has adopted and annually reviews the Committees charter, which sets forth these and the
Committees other duties in detail. The charter is available on the Companys internet website in
the Corporate Governance section under Investor Relations at
www.mercbanx.com
.
The Committee has reviewed and discussed, both with management and with BKD, LLP, the
Companys independent registered public accounting firm, the Companys audited consolidated
financial statements for December 31, 2009. Management has the responsibility for the preparation
of the Companys consolidated financial statements and for assessing the effectiveness of internal
control over financial reporting. The independent registered public accounting firm has the
responsibility for the audit of the consolidated financial statements. The independent registered public accounting firm reports directly to the Committee,
which meets with them on a regular basis and in separate executive sessions when appropriate.
The Committee has discussed with BKD, LLP the matters required to be discussed by Statement on
Auditing Standards No. 61, Communication with Audit Committees (as amended by Statement on
Auditing Standards No. 90, Audit Committee Communications).
The Committee approved the engagement of BKD, LLP as its independent registered public
accounting firm for 2009 and 2010, as well as the scope of their engagement for each year. In this
context, the Committee has received from BKD, LLP the written disclosures and the letter required
by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees,
relating to auditor independence, and has discussed with BKD, LLP the firms independence. The
Committee has also considered whether the provision by BKD, LLP of non-audit services to the
Company is compatible with BKD, LLPs independence and concluded such services are compatible.
Based upon the Committees review and discussions noted above, the Committee recommended to
the Board of Directors that the audited consolidated financial statements be included in the Annual
Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange
Commission.
Committee Members
:
Michael J. Foster, Chairman
Julie A. Brink
Alexander J. House
Dennis M. Prock
18
Principal Accounting Fees and Services
The following table presents fees billed for professional audit services rendered by BKD, LLP
for the audit of our Companys annual financial statements for 2008 and 2009, and fees billed for
other services rendered by BKD, LLP during such years.
|
|
|
|
|
|
|
|
|
Type of Fee
|
|
2008
|
|
|
2009
|
|
Audit Fees (1)
|
|
$
|
275,800
|
|
|
$
|
191,850
|
|
Audit-Related Fees (2)
|
|
|
40,000
|
|
|
|
53,850
|
|
Tax Fees (3)
|
|
|
45,700
|
|
|
|
46,300
|
|
All Other Fees
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
361,500
|
|
|
$
|
292,000
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Audit Fees, including out-of-pocket costs, are for the audit of the Companys
financial statements for the years ended December 31, 2008 and 2009. Also included are
the fees related to the preparation of reports filed by the Company with the SEC under
section 13(a) of the 1934 Act (e.g., annual reports on Form 10-K, quarterly reports on
Form 10-Q).
|
|
(2)
|
|
Audit-Related Fees include the aggregate fees and out-of-pocket costs paid by
us to BKD, LLP during 2008 and 2009 for assurance and related services that are
reasonably related to the performance of the audit or review of the Companys financial
statements and not included in Audit Fees, including a separate profit-sharing plan
audit.
|
|
(3)
|
|
Tax Fees include the aggregate fees paid by us to BKD, LLP during 2008and 2009
for professional services rendered for tax compliance, tax advice and tax planning.
|
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
Pursuant to its charter, the Audit Committee is responsible for reviewing and approving, in
advance, the engagement of our independent auditor and any permissible non-audit engagement or
relationship between our Company and its independent auditors. In addition to approving our
engagement of BKD, LLP to conduct the audit of our Company in each of the last three years, the
Audit Committee has approved each permissible non-audit engagement or relationship between our
Company and BKD, LLP entered into since January 1, 2009. The percentage of audit-related fees, tax
fees and all other fees that were approved by the Audit Committee for fiscal year 2009 equaled 100%
of the total fees incurred. We have been advised by BKD, LLP that substantially all of the work
done in conjunction with its audit of our financial statements for the most recently completed
fiscal year was performed by permanent full-time employees and partners of BKD, LLP.
19
COMPENSATION OF DIRECTORS
The following table sets forth for the year ended December 31, 2009 the compensation paid to
each director of the Company who served during that year other than directors who were executive
officers whose compensation is included in the Summary Compensation Table for executive officers on
page 29.
Compensation of Non-Management Directors
|
|
|
|
|
|
|
|
|
Fees Earned or Paid
|
|
All Other
|
|
|
Name
|
|
in Cash ($)
|
|
Compensation ($)
|
|
Total ($)
|
Julie A. Brink
|
|
26,000
|
|
0
|
|
26,000
|
Dan S. Dugan(1)
|
|
0
|
|
63,300(2)
|
|
63,300
|
Michael J. Foster
|
|
39,000
|
|
0
|
|
39,000
|
Alexander J. House
|
|
26,000
|
|
0
|
|
26,000
|
William G. Keller, Jr.
|
|
0
|
|
0
|
|
0
|
Lee R. Keith
|
|
16,250
|
|
0
|
|
16,250
|
Frank H. Musholt(1)
|
|
14,808
|
|
0
|
|
14,808
|
Dennis M. Prock
|
|
48,000
|
|
0
|
|
48,000
|
James A. Senty(3)
|
|
6,500
|
|
0
|
|
6,500
|
John R. Spake
|
|
26,000
|
|
0
|
|
26,000
|
Walter D. Stevenson III(1)
|
|
14,808
|
|
0
|
|
14,808
|
James W. Tracy
|
|
48,300
|
|
0
|
|
48,300
|
|
|
|
(1)
|
|
This directors term expired at the 2009 annual meeting of
stockholders, and the director did not stand for reelection as a director. However,
in the case of Mr. Dugan, he continued after the annual meeting as a consultant and
advisory director.
|
|
(2)
|
|
Amount consists of consulting fees paid to Mr. Dugan pursuant to his consulting
agreement with the Company, which agreement expired by its terms on February 28,
2010.
|
|
(3)
|
|
Mr. Senty was a director of the Company and Mercantile Bank from May through
June 2009.
|
All of the directors of the Company in 2009 also served as directors of the Companys
principal subsidiary bank, Mercantile Bank. Certain directors also served as directors of other
direct or indirect subsidiaries of the Company. Mr. Prock served as a director of Royal Palm
Bancorp, Inc. (and its subsidiary Royal Palm Bank of Florida); Mr. Tracy served as a director of
Brown County State Bank (Brown County) which the Company sold in February 2010; Mr. Dugan served
as a director of Mid-America Bancorp, Inc. (and its subsidiary Heartland Bank), HNB Financial
Services, Inc. (and its subsidiary HNB National Bank) which the Company sold in December 2009, and
Royal Palm Bancorp, Inc. (and its subsidiary Royal Palm Bank of Florida); and Mr. Keller served as
a director of Mid-America Bancorp, Inc. and the Companys indirect subsidiary Mercantile
Investments, Inc. No other director of the Company in 2009, other than Mr. Awerkamp, served as a
director of any other subsidiary of the Company in 2009.
20
Directors fees for service on the Board of Directors of the Company or any subsidiary of the
Company are reviewed and, if appropriate, adjusted annually by the board of the respective entity.
Directors fees are established as an annual amount, which is then paid in cash to the director in
twelve (12) equal installments, except for Royal Palm Bancorp, Inc. and Royal Palm Bank of Florida,
which pay directors for attendance at each meeting. In 2009, the annual fee amount for Company
directors was $17,304, and the annual fee amount for Mercantile Bank directors was $21,696. In
2009, Royal Palm Bancorp, Inc. and Royal Palm Bank of Florida paid Mr. Prock $9,000 in directors
fees, and Brown County paid Mr. Tracy $9,300 in directors fees. No additional fees are paid to
directors for their service on committees of any board. It has been the Companys policy that no
directors fees have been paid to directors who are also executive officers or employees of the
Company or to other non-independent directors, including Mr. Keller whose law firm provides legal
services to the Company and its subsidiaries. The Company has paid Mr. Keith directors fees as an
exception to this policy because he has had no direct or indirect compensatory relationship with
the Company. Upon the recommendation of the Compensation Committee beginning after the annual
meeting in May 2010, the directors fees will be reduced by 15% as a cost-savings measure and will
be paid to directors who are not executives or other employees of the Company or any of its
subsidiaries. All other directors will be paid the reduced fees, which will be $14,708 for the
Company and $18,442 for Mercantile Bank.
In 2009, no director, other than Messrs. Awerkamp, Dugan and Keller, received any compensation
from the Company or its subsidiaries other than directors fees for services rendered on the boards
of directors of such entities.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Officers
Executive officers of our Company are appointed by the Board of Directors and serve at the
discretion of the Board. The following are the current executive officers of our Company.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
Ted T. Awerkamp
|
|
|
52
|
|
|
President and Chief Executive Officer
|
Michael P. McGrath
|
|
|
55
|
|
|
Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
|
Daniel J. Cook
|
|
|
54
|
|
|
Executive Vice President and Chief Investment
Officer
|
There is no arrangement or understanding between any executive officer and any other person
pursuant to which such executive officer was selected as an officer, except for the employment and
other arrangements described in this proxy statement.
Compensation Discussion and Analysis
General
. In this Compensation Discussion and Analysis (the Analysis), references to
Committee are to the Compensation Committee of our Companys Board of Directors, which has
general responsibility for the establishment, direction and administration of all aspects of our
executive compensation program. As discussed above under the heading Corporate
GovernanceInformation Concerning the Board and Committees of the Board, the Committee currently
is composed of four independent directors, none of whom is an officer or employee of our Company or
any subsidiary bank. We use the term Executives to refer to the executive officers of the
Company listed above.
This Analysis has been prepared by management of the Company. The Company is responsible for
this Analysis and for the disclosure controls relating to executive compensation. The Analysis is
not a report or disclosure of the Committee. However, the Committee has reviewed and discussed the
Analysis with management and has submitted a Report hereon which immediately follows this Analysis.
21
Overall Compensation Policy
. Our Companys executive compensation policy is premised upon two
basic goals: (1) to attract and retain qualified individuals who provide the skills and leadership
necessary to enable our Company and its subsidiary banks to achieve earnings growth, capital growth
and compliance, return on investment and other performance objectives, and (2) to create incentives
for those individuals to achieve Company and individual performance objectives through the use of
performance-based compensation measures. The Company also has a goal of creating a mutuality of
interest between executive officers and stockholders through compensation structures that correlate
a material portion of executive compensation with stockholder returns. Our incentive plan provides
a clear and effective method for motivating our Executives to achieve financial results that will
enhance the share value over time, to the benefit of the stockholders.
Overview of Executive Compensation Components
In 2009, our compensation program for the Executives consisted of several compensation
components, which are identified in the following paragraphs and discussed individually in more
detail below. In determining the structure and levels of each element of executive compensation,
the compensation package is considered in total, rather than any one element in isolation. As more
fully described in the ensuing sections of this Analysis, the ultimate determination of each
element of executive compensation is a subjective process in which many factors are considered,
including our Companys and/or subsidiary banks performance and the individual Executives
specific responsibilities, historical and anticipated personal contribution to our business, and
length of service with our Company or subsidiary banks.
The following are the material elements of the compensation program for our Executives:
|
|
|
A base salary;
|
|
|
|
|
Annual incentive compensation;
|
|
|
|
|
Retirement benefits; and
|
|
|
|
|
Change-in-control protections.
|
Each of these elements is described in more detail under Components of Compensation, below.
We also provide various health and welfare benefits to the Executives on the same basis as apply to
all salaried employees, as well as modest perquisites and personal benefits to assist the
Executives in performing their functions. The perquisites and benefits are discussed in the
Summary Compensation Table on page 29 and footnotes to the table.
Use of Consultants; Market Data
In recent years, we have used compensation consultants occasionally to assist management, the
Committee and the Board in refining and updating our compensation program and plans, not only for
the Executives, but for all employees. Some of these consultants have been asked to review and
make recommendations on only selected aspects of compensation; others were instructed to review and
comment upon our executive compensation program as a whole.
In December 2007, the Compensation Committee engaged Frederic W. Cook & Co., Inc. of Chicago,
Illinois (Cook & Co.), to provide a comprehensive review of the compensation practices and
programs for all employees of the Company and compensation levels for the Companys senior
management, including the Executives. The consultants duties also included an internal review of
the Companys compensation practices and programs for effectiveness and alignment with the
Companys business strategy, as well as external benchmarking against practices in relevant
markets.
In performing its review, which occurred in the first quarter of 2008, Cook & Co. selected,
and compared the Company with, 18 similarly situated bank holding companies. The comparison
companies were publicly traded, classified as regional banks, thrifts or mortgage finance
institutions, and headquartered in the Midwest (sixteen companies) or Florida (two companies). The
median of assets among the companies was $1.5 billion. Our Company was determined at the time to
be in the middle of the group in terms of size and performance although the Companys
22
total shareholder returns over the several years immediately preceding the review were above
the 75
th
percentile of the group.
The consultants findings and recommendations are discussed throughout this Analysis. Among
the consultants recommendations was the adoption and implementation of an equity incentive plan to
provide equity-based, long-term incentives to our key employees including the Executives. The
Company presented an equity incentive plan to stockholders for consideration in May 2008, but it
was not approved.
At the Committees request, Cook & Co. provided supplemental advice to the Committee through
July 2008 regarding issues raised during its review earlier in the year. Although the Company has
not engaged a compensation consultant since the 2008 review by Cook & Co., we expect to continue to
utilize the services of compensation consultants when appropriate from time to time in the future.
Also in 2009, as in prior periods, we conducted our own internal review of executive
compensation practices at a peer group of 27 similarly sized bank holding companies located in the
Midwest, with particular focus on total dollar amounts of compensation and the mix of compensation
paid by our peers to various levels of executives. In preparing this internal review, we used
executive compensation information obtained from SNL Financial, a national information specialist
for the financial services sector. On the basis of our internal review, we concluded that total
compensation received by our Executives as a group in preceding years was largely in line with the
average for our peer group, and that our mix of compensation was similar to our peer group, except
for the absence of equity-based, long-term incentive compensation, which is a common feature of
compensation packages among publicly traded financial institutions. In February 2010, to address
the down-sizing of the Company as a result of the sale or exchange of three of its subsidiary
banks, the Committee revisited the make-up of the peer group and concluded a more accurate group
would be one comprised of 10 Midwest bank holding companies of similar asset size and
organizational structure. The new peer group will be used for comparisons beginning in 2010, again
utilizing the executive compensation information obtained from SNL Financial.
Mix of Pay
We believe that the combination of base salary and annual incentive compensation utilized by
us in recent periods provides a suitable and effective program for compensating and incentivizing
our Executives, to the benefit of our Company and our stockholders. The Committee and the Board
believe that designating a portion of executive compensation to be at risk (the annual incentive
compensation piece) advances the interests of our stockholders. We must perform satisfactorily as
an organization, exceeding clear and objective financial benchmarks, in order for annual incentive
compensation to be paid to any Executive, and then individual performance and the Executives
personal contribution to our Companys and/or subsidiary banks success is factored in to determine
precisely how much annual incentive compensation each Executive receives.
Components of Compensation
Base Salary.
Base salary compensates for sustained performance in the executive function. It
is a standard compensatory element. The base salary for each Executive is reviewed at each
year-end in comparison to the previous years salary. In determining whether to adjust base salary
levels, recommendations and subjective assessments of individual performance by members of
management other than the individual officer in question are taken into account. In addition, the
performance of our Company and the subsidiary banks is considered. Based primarily upon a
subjective analysis of our Companys financial performance during the period since the last salary
increase, the Company concluded not to increase base salaries for the Executives in 2010. In this
regard, the analysis of performance included a review of our Companys earnings and return on
equity for the prior year. The factors impacting base salary levels are not independently assigned
specific weights. Rather, all of these factors are reviewed, and specific base pay recommendations
are made that reflect an analysis of the aggregate impact of these factors. Principal factors
underlying the Committees salary determinations at year-end 2009 were the Companys overall
performance in 2009, the general economic conditions, and the difficulties facing financial
institutions in particular. The base salaries currently receivable by our Executives are $325,000
for Mr. Awerkamp, $185,000 for Mr. Cook and $185,000 for Mr. McGrath. For all of the foregoing
reasons, we believe that base pay levels for the Executives are within a range that is appropriate
and sufficient.
23
Annual Incentive Compensation.
Our basic annual incentive compensation component at present
is our Incentive Compensation Plan. This is an annual incentive plan, involving establishment on
an annual basis of financial targets for the Company which, if met, may result in cash payments to
Executives and other key employees. Until 2007, the incentive plan was not a comprehensive uniform
plan for all senior management; rather the Committee, with input from management, established the
financial targets at the beginning of each year as a series of separate targets for the different
executives, and then provided a cash payout at year-end for each executive if his target level of
performance had been exceeded. The amount of the payment usually was based on some other objective
standard, such as a percentage of the executives base salary. The plan, as applied until 2007,
was divided into a series of separate arrangements and had operated with only a minimum of
flexibility and discretion; selected financial measures, benchmark targets and the calculation of
year-end cash payouts were largely objective. The plan was never submitted to a stockholder vote
because deductibility of plan payments under Section 162(m) of the Internal Revenue Code was not
(and still is not) an issue given the conservative levels of compensation we have traditionally
paid our executives.
In early 2007, after weighing the recommendation of its compensation consultants, the
Committee, with the approval of the Board of Directors, determined to amend the Incentive
Compensation Plan, both by formalizing the plan and by expanding the range of financial targets
that the Committee would be able to utilize when making annual plan awards to executives. The plan
as amended has both an objective test feature and a discretionary, subjective feature for
determining plan payments in any year. Under the objective feature, there is a two-step formula
for establishing annual awards. The Committee must first make a determination as to which
performance criterion or criteria will be so-called threshold performance triggers for individual
executives or groups of executives (triggers). If the trigger or triggers are not met, then the
executive(s) will receive no year-end payments under the objective feature and the analysis ends
without proceeding to the second step of the formula. If the trigger or triggers are met, then the
executive(s) will receive a year-end payment, the total amount of which may increase depending upon
the outcome at year-end under the second step. Under the second step, the Committee must determine
which additional factors, so-called key performance factors (factors), will apply to awards for
the year to the executive or group of executives and, together with the trigger, affect the
ultimate amount of any payments. In identifying triggers and factors, the Company will compare its
performance against the performance of a peer group of bank holding companies for the ensuing year,
as reported after the conclusion of the year by the Federal Reserve Boards Division of Banking
Supervision and Regulation in its year-end Bank Holding Company Performance Report (the BHC
Report). In addition, the Company may choose to compare the total annual return on its stock
price to the performance of the banks and bank holding companies included in the ABA NASDAQ
Community Bankers Index (ABAQ). The ABAQ is the most broadly representative stock index for the
community bank segment of the banking industry.
Peer group ratio averages documented in the BHC Report serve as a frame of reference for
evaluating the financial condition and actual performance of the Company relative to other bank
holding companies with similar characteristics. This information serves as a benchmark against
which the Companys balance sheet structure and earnings can be evaluated. The 2009 BHC Report
compared the performance of the Company to Peer Group Number 3, which consisted of 296 U.S. bank
holding companies with consolidated assets between $1 billion and $3 billion. A peer group
average for a financial ratio is the arithmetic mean of the ratio values calculated for all bank
holding companies in the selected peer group subject to upper and lower exclusion limits. That is,
to reduce the influence of erroneous or atypical data on peer group ratio averages, values falling
above the 95
th
and below the 5
th
percentiles for the peer group are excluded
from the calculation of the peer group average.
As a final step under the objective feature of the plan, the Committee assigns a weight to
each trigger (in the first step) and key factor (in the second step), the total of which must equal
100%. All triggers and factors, and their weighting, are established typically late in the first
quarter or early in the second quarter of each fiscal year. If any factor is not met, the weight
of that factor is added to the weight of each other performance factor that is also not met for the
year and the total percentage is then deducted from the executives objective determinant of plan
payment, i.e., the maximum percentage of his base salary that the executive is entitled to receive
if all triggers and factors are met for the year.
24
The following paragraphs illustrate how the triggers and factors impacted the determination of
awards under the plan in 2009 for each Executive. The trigger for all the Executives was the
Companys achieving a return on average assets equal to or exceeding the lesser of 0.50% or 97% of
the return on average assets reported in the BHC Report (which was a negative 0.25% for 2009). The
trigger was weighted at 25%. Their key performance factors were (a) net interest margin ratio
equal to or exceeding the lesser of 3.25 or 90% of such ratio reported in the BHC Report (which was
3.50 for 2009) (weighted at 25%), (b) the ratio of total non-interest expense to average assets
equal to or less than the greater of 2.65 or 93% of such ratio reported in the BHC Report (which
was 3.17 for 2009) (weighted at 25%), and (c) the ratio of net charge-offs to average loans equal
to or less than the greater of 0.50 or 100% of such ratio reported in the BHC Report (which was
1.32 for 2009) (weighted at 25%).
Because the Company, like many other financial institutions, suffered substantial
deterioration in its asset quality in 2009, the Company failed to achieve positive net income for
the year 2009 and thus failed to satisfy the specified trigger for payouts to Executives under the
plan for 2009. As a consequence, there were no payments of annual incentive compensation to the
Executives under the objective feature of the plan for 2009.
The plan also permits the Committee to make additional, discretionary awards to Executives, to
reflect individual performance or other significant corporate achievements even if no awards are
authorized or granted under the objective feature of the plan. The plan thus gives the Committee a
degree of discretion over plan awards without undercutting the importance of objective performance
targets selected in advance. Due to the extent of difficulties experienced by the Company in 2009,
there were also no awards to Executives under the plans discretionary feature for 2009.
Since the Company committed the Incentive Compensation Plan to a written document in 2007, the
Board has approved and applied amendments to the plan from time to time to reflect recommendations
of compensation consultants and the Committee. In addition, upon the recommendation of the
Committee, the Board amended the plan in February 2010 to reserve to the Companys Board of
Directors the right to reduce, modify, withhold or discontinue awards under the plan to some or all
eligible participants at any time without notice, regardless of whether objective performance
measures are achieved. The Committee and the full Board believe the Company needs maximum
flexibility in making incentive compensation determinations in todays financially challenging
environment.
In February 2010, the Committee recommended and the full Board agreed that, in conjunction
with Company-wide budget reductions for 2010, the Company will suspend the objective test feature
of the Incentive Compensation Plan for the Companys Executives for this year. Therefore, the
Company will not establish the 2010 trigger and factors under the plan and their respective
weighting, and the Executives will not be eligible at the end of this year for 2010 awards under
the objective test feature of the plan.
Retirement Benefits.
Our retirement benefits provide post-retirement security to all eligible
employees, including our Executives. There are two sources of retirement benefits covering one or
more of our current Executives, as follows:
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Our tax-qualified retirement plan, the Mercantile Bancorp, Inc. Profit-Sharing Plan
and Trust (the Profit-Sharing Plan), which covers all eligible employees and is
described briefly in the Narrative following the Summary Compensation Table below;
and
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A salary continuation agreement that the Board of Directors, with the Committees
approval, extended to President and CEO Ted T. Awerkamp in 1994, under which, following
his retirement, Mr. Awerkamp will receive cash payments in addition to those received
by him under the qualified plan; more information is provided about these payments in
the Pension Benefits table below as well as the Narrative following the table.
|
Upon recommendation of Cook & Co. after its first quarter 2008 review, the Board and Committee
considered and approved changes to the retirement benefits. First, the Company amended its
Profit-Sharing Plan to provide a Company match of employee contributions up to three percent of the
employees eligible compensation;
25
however, the Company retains the discretion to make additional Company contributions tied to
profitability year to year. The Companys match contributions vest over a three-year period.
Second, the Company and Mr. Awerkamp amended his salary continuation agreement to reduce the
vesting age to his current age (51) from age 55 for an involuntary termination without cause,
including disability, and for a change-in-control termination (formerly, there would have been no
benefits under these circumstances). If Mr. Awerkamp terminates voluntarily before the age of 55,
the vesting age would remain at age 55. Also, the Company updated the benefits under the salary
continuation agreement to reflect Mr. Awerkamps current pay level. Formerly, the benefits were
based on his pay level in 1994 plus a projection of adjustments since that time, which projection
was no longer consistent with actual pay levels. See the description of Mr. Awerkamps salary
continuation agreement, as amended, under the section below entitled Pension Benefits.
We believe the combination of these retirement benefits, as amended, adequately provides for
the security of our Executives following their cessation of service, such that their efforts can be
directed solely to the success of the Company in their pre-retirement years.
Change-in-Control Protections
. A component of executive compensation is the additional income
security we provide to our management team in the event the Company undergoes a change in control
and the Executives are thereafter dismissed or de facto dismissed by reason of their demotion or
reassignment to remote locations. The employment agreements with all three of our current
Executives contain a change-in-control provision giving them such security. Under this provision,
if during the term of the agreement the Company is the subject of a change in control (as
defined in the agreement) and subsequently the Executive either (i) is terminated by the Company
without cause or (ii) terminates his own employment following a post-change-in-control decrease in
salary, demotion in position or relocation to a remote place of business, the Executive will be
entitled to receive a lump sum cash payment in an amount equal to 250% (for Mr. Awerkamp) or 200%
(for Messrs. McGrath and Cook) of the sum of (x) his current base salary at the time of termination
plus (y) the amount of his payment, if any, under the Incentive Compensation Plan for the most
recently completed fiscal year of the Company.
We believe that providing this protection to our Executives upon a change in control of the
Company is in the stockholders best interest because doing so serves to maintain a stable
executive team during a change-in-control process and incentivizes management to explore, when
appropriate, possible transactions involving a sale or other change in control of the Company, to
the benefit of our stockholders. Under this provision in the employment agreements, the triggering
of a payment requires both a change in control of the Company and the Executives loss of position.
The structure of the provision lessens the likelihood that any payment made thereunder to an
Executive will exceed the ceiling established under Section 280G of the Internal Revenue Code on
the tax deductibility of such payments. Also, the Company is not obligated under the agreements to
make any tax gross-up payments to taxing authorities on behalf of the Executives of amounts they
would otherwise be required to pay individually with respect to payments they may receive following
a change in control and termination of their employment.
For further information on the Executives employment agreements, see the discussion under the
heading, Employment and Other Compensatory Agreements with the Executives Employment Agreements
on page 34.
Mr. Awerkamp may also be entitled to receive payments in the event of a change in control
under his salary continuation agreement. For more information regarding these payments, see the
discussion under the heading Potential Payments to Executives upon Termination or Change in
Control, below.
Regulatory Parameters.
On March 17, 2009, the Company entered into a Memorandum of
Understanding (MOU) with the Federal Reserve Bank of St. Louis (the FRBSL). Under the terms of
the MOU, the Company will pay no salaries, bonuses and other compensation to the Executives without
the prior written approval of the FRBSL. Based on correspondence with the FRBSL, the Company
understands that the current compensatory arrangements with the Executives (and other insiders)
have been properly approved by the FRBSL, but that payment of any other salary amounts, bonuses or
other compensation out of the ordinary course of past business would require prior written approval
by the FRBSL. An MOU is characterized by regulatory authorities as an informal action that is
neither published nor made publicly available by the agencies and is used when circumstances
warrant a milder form of action than a formal supervisory action, such as a cease and desist order.
26
On February 16, 2010, the Company executed a Written Agreement (WA) with the FRB. The terms
of the WA are generally consistent with the MOU. A WA is a formal enforcement action by the FRB,
similar in nature to an MOU, but is legally binding and will be published and made public.
Procedure for Determining Executive Compensation
Committee and Board Roles, Generally.
The Committee oversees and reviews all aspects of the
Companys executive compensation program, including welfare and personal benefits, at least
annually, during its year-end meeting if not before, and often examines specific compensation
issues during the year, if and as appropriate. Its fundamental goal is to ensure that overall
compensation levels and incentive opportunities are competitive and reflect the performance of the
Company and its subsidiary banks as well as performance of the individual executive officer. Types
and amounts of compensation paid to the executives in preceding years have some effect on the
Committees compensation decisions for subsequent years, but are less important than current and
desired future Company performance, retention needs and internal pay equity.
The Board generally monitors the Committees functioning, and makes some decisions on
executive compensation itself, such as approving any compensation agreements with, or plans or
other arrangements involving, the executives. Recommendations received from compensation
consultants are carefully weighed by the Committee and the Board in making their compensation
determinations.
Specific Actions for 2009 and 2010.
The following outlines the executive compensation
decisions made by the Committee and the Board of Directors for 2009 and 2010:
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Annual Incentive Compensation Plan
. Triggers and financial performance
factors for the Executives under the objective feature of the Incentive Compensation
Plan for 2009 (the 2009 awards) were recommended by the Committee at its June 11, 2009
meeting and approved by the Board at its June 16, 2009 meeting. The Committee reviewed
on December 11, 2009 whether the triggers and performance factors for the Executives
under the Incentive Compensation Plan for 2009 would be achieved and, because the
return on average assets trigger would not, no payments were made under the objective
feature for 2009 nor were payments made under the subjective feature. On December 16,
2009, the Committee adopted a recommendation to amend the plan to give the Board the
right to reduce, modify, withhold or discontinue awards under the plan to some or all
eligible participants at any time without notice, regardless of whether objective
performance measures are achieved. In February 2010, the Board approved an amendment
to the plan with those changes and also suspended the objective test feature of the
plan for the Companys Executives for 2010.
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Executive Employment Agreements
. On February 15, 2010, the Committee
decided not to extend the terms of the Executives employment agreements beyond their
current terms, which expire on February 29, 2012 for Mr. Awerkamp and February 28, 2011
for Messrs McGrath and Cook. The Committee reached its conclusion after assessing the
performance of the Company in 2009 and noting the fact there was at least a year
remaining on each of the current terms of the agreements, so no immediate action to
renew them was necessary. This action was ratified by the Board on February 16, 2010.
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Compensation Review
. At the Committees meetings in December 2009 and
February 2010, the members considered various year-end 2009 compensation matters in
addition to those described above, including, but not limited to, base salaries. Among
other decisions, the Committee recommended no increases in salaries for the Executives
and no increases in directors fees for service on the boards of the Company and its
subsidiaries. The Committee also reviewed and considered triggers and factors for 2010
under the Incentive Compensation Plan although no metrics were established. The full
Board ratified the decisions regarding salaries and directors fees at its meeting on
March 23, 2010.
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Role of Executive Officers.
Mr. Awerkamp, as the Companys President and CEO, had substantial
input at year-end 2009 into executive compensation decisions of the Committee and the Board. He
participated in formulating a set of management recommendations presented to the Committee and the
Board at various stages of the
27
determination process. Mr. Awerkamp did not actively negotiate with the Company regarding the
terms and conditions of the agreements entered into between the Company and the Executives, nor did
he participate in discussions at the Committee or Board level regarding his own compensation
arrangements generally.
Important Corporate and Individual Factors Utilized at Year-End 2009 in Determining Executive
Compensation.
In making their subjective determinations each year regarding executive
compensation, the Committee and the Board consider both corporate and individual performance.
Corporate factors utilized at year-end 2009 included all key financial metrics, including earnings
per share, net interest income, return on stockholders equity, return on assets, asset quality,
loan growth, and trends in the foregoing measures, compared in each case to results achieved by the
Companys peer group institutions. Individual factors utilized in making year-end compensation
decisions included the particular Executives initiation and implementation of business strategies,
control and oversight of management and departmental teams, and various personal qualities,
including leadership.
The year 2009 was a difficult year for most financial institutions and the Company, like many
others, suffered from significant deterioration in its asset portfolio, especially in those
geographic areas served by its subsidiaries that experienced the greatest declines in property
values. The Company reported a net loss of $58.5 million or $(6.72) per share for the year ended
December 31, 2009, compared with a net loss of $8.8 million or $(1.01) per share in 2008. The net
losses for both 2009 and 2008 include the income and expense associated with discontinued
operations, namely HNB National Bank, Marine Bank & Trust and Brown County State Bank, all of which
have been sold. From continuing operations, net interest income was $21.2 million in 2009 compared
with $21.8 million the prior year, provision for loan losses decreased from $23.2 million in 2008
to $22.1 million in 2009, total noninterest income was $7.8 million in 2009 compared with $9.2
million the prior year, and total noninterest expense was $71.5 million in 2009 compared with $38.6
million in 2008. In addition, the Company recorded a net loss from discontinued operations of $8.0
million in 2009 compared to net income of $7.3 million in 2008.
The total noninterest expense from continuing operations of $71.5 million in 2009 included
$30.4 million in goodwill impairment loss, primarily related to the Companys acquisition of Royal
Palm Bancshares, Inc. in 2006. Included in the net loss from discontinued operations in 2009 was a
goodwill impairment loss of $14.0 million related to the Companys acquisition of HNB Financial
Services, Inc. in 2007.
Total assets at December 31, 2009 were $1.4 billion compared with $1.8 billion the prior year,
the decrease primarily due to the exchange for debt of HNB National Bank. Loans declined from $1.3
billion a year ago to $776 million as of December 31, 2009, while deposits were $955 million at
year-end 2009 compared with $1.5 billion at year-end 2008. The decreases in total loans and
deposits in 2009 were primarily attributable to the exchange or sale of three banks.
In view of the Companys difficult year and continuing economic pressures forecast for the
financial sector generally, the Committee and Board concluded not to increase 2010 salaries for the
Executives or to pay any bonuses to them under the Incentive Compensation Plan for 2009.
Report of the Compensation Committee
The Compensation Committee of the Company has reviewed and discussed with the Companys
management the Compensation Discussion and Analysis that is required by Securities and Exchange
Commission rules to be included in this proxy statement.
Based on that review and those discussions, the Committee has recommended to the Companys
Board of Directors that the Compensation Discussion and Analysis be included in this proxy
statement.
Dennis M. Prock, Chairman
Julie A. Brink
Michael J. Foster
James W. Tracy
28
Compensation Tables and Narrative Disclosure
The following table sets forth compensation information for our Executives for services
rendered to the Company and its subsidiaries in 2009, 2008 and 2007.
Summary Compensation Table
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Change in
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Pension Value
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and
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Nonqualified
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Non-Equity
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Deferred
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Name and
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Incentive Plan
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Compensation
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All Other
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Principal
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Salary
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Bonus
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Compensation
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Earnings
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Compensation
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Position (1)
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Year
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($)(2)
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($)(3)
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($) (3)
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($)(4)
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($)(5)
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Total ($)
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Ted T. Awerkamp,
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2009
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325,000
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0
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0
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22,469
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34,665
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382,134
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President and CEO
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2008
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325,000
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0
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0
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24,189
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28,205
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377,394
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(effective March
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2007
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310,000
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30,000
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74,400
|
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20,504
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44,352
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479,256
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2007)
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Michael P. McGrath,
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2009
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185,000
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0
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0
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0
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11,783
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196,783
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Executive Vice
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2008
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185,000
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0
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0
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0
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10,265
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195,265
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President, Chief
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2007
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175,000
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15,000
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26,425
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0
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20,086
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236,511
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Financial Officer,
Treasurer and
Secretary
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Daniel J. Cook,
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2009
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185,000
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0
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0
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0
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11,783
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196,783
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Executive Vice
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2008
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185,000
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0
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0
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0
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10,265
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195,265
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President and Chief
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2007
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175,000
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15,000
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26,425
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0
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20,090
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236,515
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Investment Officer
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(1)
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Upon Dan S. Dugans retirement as President and CEO on February 28, 2007,
Mr. Awerkamp was promoted to from Vice President and Secretary of the Company
to President and CEO effective March 1, 2007.
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(2)
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Represents base salary paid to the Executive. Although Mr. Awerkamp served
as a director of the Company and certain of its subsidiaries in each of 2009,
2008 and 2007, he received no additional fees for that service. Includes
amounts deferred by the Executives under the 401(k) feature of the Companys
Profit-Sharing Plan.
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(3)
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All cash compensation received by each Executive for 2009, 2008 and 2007
is included in the Salary column, Bonus column or Non-Equity Incentive Plan
Compensation column of this table. Any payments to the Executive
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under the
discretionary feature of the Companys Incentive Compensation Plan are
contained in the Bonus column. The payments to the Executive under the
objective feature of the plan are found in the Non-Equity Incentive Plan
Compensation column.
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(4)
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Represents amounts accrued in 2009 under the salary continuation agreement
(supplemental retirement payment agreements) for Mr. Awerkamp.
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(5)
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Represents Company contributions under the Profit-Sharing Plan for the
year 2009 of $16,125 for Mr. Awerkamp, $11,783 for Mr. McGrath and $11,783 for
Mr. Cook. Also includes the following perquisites for the year 2009: $8,040
in country club dues and $10,500 in the use of a Company car for Mr. Awerkamp.
Previously, the Company leased a car for Mr. Awerkamp; however, in April 2009
the Company purchased the car for $52,426 and permits Mr. Awerkamp to use it.
The dollar amount attributed to his use of the car is an estimate of the value
of this benefit based on the former lease payment. No other executive received
perquisites in 2009 valued at $10,000 or more.
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Narrative to Summary Compensation Table.
For a further discussion of the details regarding
the salary paid to each Executive, please see the section entitled Base Salary under Components
of Compensation in the Compensation Discussion and Analysis on page 23. All amounts listed in the
Non-Equity Incentive Plan Compensation column were awarded pursuant to the Companys Incentive
Compensation Plan, which is discussed in more detail in the section entitled Annual Incentive
Compensation under Components of Compensation in the Compensation Discussion and Analysis on
page 24.
The amounts listed in the All Other Compensation column as Company contributions under the
Profit-Sharing Plan consist of discretionary payments made by the Board of Directors to the account
of each executive under the Profit-Sharing Plan. This defined-contribution profit-sharing plan
covers substantially all employees. Under the plan, the Board determines the total contribution to
the plan, and then a portion of the total is allocated to each participants account in the same
proportion that the participants compensation, plus the participants excess compensation, bears
to the total compensation plus excess compensation of all participants. Excess compensation is
defined as the portion of a participants compensation that exceeds his or her Social Security
taxable wage base. If after the first step of the allocation process there still remains a portion
of the contribution which has not yet been allocated, then the remainder will be allocated to the
participant in the same proportion that the participants compensation bears to the total
compensation of all participants. Beginning in 2009, the plan provides that the Company will match
the employees contributions to their accounts up to three percent of the employees eligible
compensation, which Company match will vest over a three-year period.
For a further discussion regarding the salary continuation agreements, which are referenced in
the footnote to the Change in Pension Value and Nonqualified Deferred Compensation Earnings
column, see the discussion under the Pension Benefits table on page 32.
Grants of Plan-Based Awards
The following table sets forth the range of payments our Executives could have received under
the objective feature of the Incentive Compensation Plan as established for 2009. However, no
actual payments were made to the Executives for 2009 because the financial performance trigger and
factors established by the Compensation Committee and Board under the plan for 2009 were not
satisfied.
30
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Estimated Future Payouts Under Non-Equity Incentive Plan
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Grant Date
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Awards (2)
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Name
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(1)
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Threshold ($)
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Target ($)
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Maximum ($)
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Ted T. Awerkamp
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56,875
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113,750
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227,500
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Michael P. McGrath
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18,500
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37,000
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74,000
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Daniel J. Cook
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18,500
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37,000
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74,000
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(1)
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See the section entitled Specific Actions for 2009 and 2010 under Procedures for
Determining Executive Compensation in the Compensation Discussion and Analysis for a discussion
of the timing of the Incentive Compensation Plan awards for 2009.
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(2)
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For Messrs. Awerkamp, McGrath and Cook, the threshold, target and maximum payout amounts are
based on the percentage of the Executives base salaries they would have received if the Company
had satisfied the trigger only (25%), the trigger plus one of the other key factors (50%), or the
trigger and all key factors (100%) under the objective feature of the Incentive Compensation Plan
for 2009. The base salaries of Messrs. Awerkamp, McGrath and Cook for 2009 were $325,000,
$185,000 and $185,000, respectively. Listed payouts do not include any additional payments under
the plans discretionary feature. In fact, there were no payments under either the objective or
discretionary features of the plan for 2009.
|
Narrative to Grants of Plan-Based Awards Table.
The table sets forth estimated possible
payments under the objective feature of the Companys Incentive Compensation Plan, its only
non-equity incentive plan. Specifically, the table shows the range of possible payments to
Executives during 2009 depending upon their meeting certain criteria. However, no actual payments
were made to the Executives for 2009 because the financial performance trigger and factors
established by the Compensation Committee and Board under the plan for 2009 were not satisfied.
For a more detailed discussion of the Incentive Compensation Plan in place for 2009 and the awards
thereunder, please see the section entitled Annual Incentive Compensation under Components of
Compensation in the Compensation Discussion and Analysis on
page 24.
Pension Benefits
The table below shows the actuarial present value of accumulated benefits under the individual
salary continuation agreement held by Mr. Awerkamp as of December 31, 2009:
31
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Number of Years
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Present Value of
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Payments During
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Credited Service
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Accumulated Benefit
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Last Fiscal Year
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Name
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Plan Name
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(#)(1)
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($)(2)
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($)
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Ted T. Awerkamp
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Salary Continuation Agreement
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15
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245,123
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0
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(1)
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Represents the number of years that have transpired since the adoption of Mr.
Awerkamps agreement in 1994; however, the benefits payable under the agreement are
determined by reference to the age of Mr. Awerkamp at his retirement date and are not
directly related to his number of years of service to the Company.
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(2)
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For purposes of calculating the present value of the accumulated benefits under Mr.
Awerkamps salary continuation agreement as of December 31, 2009, the Company engaged Clark
Consulting, Inc. (Clark). According to Clark, the dollar amount above was determined in
accordance with standard actuarial assumptions and utilizing methods prescribed by the
Financial Accounting Standards Board. In calculating the dollar amount for Mr. Awerkamp,
the Company assumed monthly payments of $5,741.66 commencing September 1, 2022, the date Mr.
Awerkamp would be able to retire at age 65, the normal retirement age under the agreement,
and continuing for a period of time as determined using the 1994 Group Annuity Reserving
Table. Clark applied a discount rate of 6.0%.
|
Narrative to Pension Benefits Table.
Retirement benefits for executives consist of
participation in the Companys Profit-Sharing Plan, a tax-qualified retirement plan which covers
all eligible employees, and supplemental retirement benefits under salary continuation agreements
awarded to certain executives (currently, Mr. Awerkamp is the only executive with a salary
continuation agreement). The Executives participation in the Profit-Sharing Plan is discussed
above in the narrative to the Summary Compensation Table.
In 1994 the Companys Board of Directors consulted with Bank Compensation Strategies Group
(now Clark Consulting) regarding a supplemental executive retirement program (SERP) for top
management to supplement existing retirement programs and provide incentive to remain with the
Company. The consultants provided the Company with data from Wyatt Data Services and Hay/Huggins
Benefit Report regarding the use of some type of SERP or other nonqualified retirement plan in
organizations in the financial, industrial and service sectors. The Wyatt data had a significant
representation of financial institutions. The data indicated that approximately 50% of the
reporting financial institutions had some form of nonqualified retirement plan for chief executive
officers, top management and senior management. The amount of the SERP benefit for those
reporting organizations was usually a percent of final salary with the average being approximately
53% of final salary for the financial sector.
Consequently in 1994, upon the consultants recommendation, the Company entered into a salary
continuation agreement with Mr. Awerkamp to establish SERP benefits. Under his agreement, Mr.
Awerkamp is entitled to receive, following his retirement, certain amounts in addition to the
payments receivable by him under the Companys qualified retirement plan, the Profit-Sharing Plan.
The amount of the supplemental payment under the agreement depends on when he retires, when his
agreement payments commence, and certain other factors.
As originally contemplated in 1994, the target benefit was 75% of final salary (using the 1994
salary amount and increasing annually at the rate of 5% to age 65) but including projected benefits
the participant would receive from social security and the Profit-Sharing Plan. Using that target,
Mr. Awerkamps SERP benefit was projected at 21% of final salary, although taking into
consideration projected social security and profit-sharing plan benefits, he had a combined benefit
of 75%. In order to provide incentive to him to remain with the Company, the Board elected to
defer vesting of the SERP benefit until age 55 years and provided for a lower benefit if the
participant retired prior to age 65 years.
32
The agreement was amended in April 2004 to clarify that no benefits would be payable if Mr.
Awerkamps employment were terminated for cause, in December 2007 to comply with Section 409A of
the Internal Revenue Code, and again on July 15, 2008 to clarify the calculation of benefits and to
address certain additional termination scenarios described below.
Under his salary continuation agreement, if Mr. Awerkamp retires at normal retirement age,
that is, at age 65, he or his beneficiaries will be entitled to receive thereafter $68,900 per
year, in monthly installments of $5,742, for the greater of (i) his remaining life, or (ii) 180
months (15 years). If Mr. Awerkamp retires at an early retirement age, that is, retires before
age 65 but after age 60, he or his beneficiaries will be entitled to receive supplemental cash
payments over the same period of time, but in amounts that are progressively smaller depending on
how early in that time period he retires, down to a minimum cash amount of $48,632 per year, or
$4,053 per monthly installment, if he elects early retirement at age 60. However, if Mr. Awerkamp
retires early but elects to defer commencement of his supplemental payments until his normal
retirement age of 65, he will be able to receive the higher payments receivable by him upon normal
retirement.
If Mr. Awerkamp voluntarily terminates his employment before age 60 but after age 55, his
employment is terminated prior to age 65 as the result of a disability, or his employment is
terminated involuntarily (regardless of his age) for any reason other than death, disability or
for cause, he will receive supplemental cash payments under his agreement in lesser amounts. He
or his beneficiaries will receive the payments in monthly installments for 15 years (180 months).
If Mr. Awerkamps employment terminates before age 55 under any circumstances other than those
outlined above, he receives nothing under his salary continuation agreement, except in the case of
termination of his employment under certain circumstances following a change in control. The
payments due Mr. Awerkamp following a change in control are discussed below in footnote (d) to the
Post-Termination of Employment Benefits Table.
In the event Mr. Awerkamp is terminated for cause, he receives no payments or benefits under
his salary continuation agreement, regardless of his age. The agreement also provides that, if Mr.
Awerkamp dies while in the service of the Company before payments are due him under the agreement,
the Company will pay his beneficiaries certain survivors benefits for 15 years.
Mr. Awerkamp is receiving no payments under the agreement at this time, so there are no
benefits reportable by him for income tax purposes and no corresponding deductions for the Company.
For a further discussion of these payments, see the section entitled Potential Payments to
Executives Upon Termination or Change in Control on page 35.
Post-Termination of Employment Benefits Table
The table below shows the estimated payouts to each of the named Executives in connection with
termination of their employment under special circumstances, including disability, death,
termination other than for cause, and termination in connection with a change in control. For the
purposes of this table we are assuming that the individual was terminated on December 31, 2009.
Furthermore, for purposes of the benefits determined by reference to the Executives base salaries
and annual incentive compensation, we used the Executives actual base salaries in 2009 and annual
incentive compensation payments for 2009 (which were $0 for all Executives). The timing and other
terms of these payments, the payments receivable by the Executives upon the voluntary termination
of their employment or termination for cause, and the applicability of restrictive covenants after
termination of the Executives employment are discussed below under the sections entitled
Employment and Other Compensatory Agreements with Executives beginning immediately below this
table and Potential Payments To Executives Upon Termination or Change In Control beginning on
page 35.
33
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Termination
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Termination by Company
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After a Change
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Disability
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Death
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Other than for Cause
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in Control
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Name
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(a)($)
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(b)($)
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(c)($)
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(d)($)
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Ted T. Awerkamp
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195,000
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1,033,499
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704,167
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1,035,154
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Michael P. McGrath
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111,000
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0
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215,833
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370,000
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Daniel J. Cook
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111,000
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0
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215,833
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370,000
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(a)
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Represents potential payments to Executives under their employment agreements.
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(b)
|
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Represents total potential value of payments to the beneficiaries of Mr. Awerkamp under
his salary continuation agreement.
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(c)
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Represents potential payments to Executives under their employment agreements, each of
which provides that the Executive would receive his base salary for the remaining term of
his agreement and the annual incentive compensation payment for the last calendar year
preceding the termination that he would have received had he remained employed. At December
31, 2009, the remaining term for Mr. Awerkamp was two years and two months and for Messrs.
McGrath and Cook was one year and two months. The base salaries and annual incentive
compensation payments for 2009 are disclosed in the Summary Compensation Table above.
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(d)
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Represents potential payments to Executives under their employment agreements and, for
Mr. Awerkamp, an additional $222,654 in total potential payments under his salary
continuation agreement. Each employment agreement provides that the Executive would receive
a multiple (2.5 times for Mr. Awerkamp and 2 times for Messrs. McGrath and Cook) of his
current annual base salary plus the incentive compensation payment for the last calendar
year preceding the termination and change in control. The payments under the employment
agreement may be reduced in connection with the application of IRC 280G as discussed below.
The base salaries and annual incentive compensation payments for 2009 are disclosed in the
Summary Compensation Table above. For further information regarding the salary
continuation agreements, see the section entitled Pension Benefits.
|
EMPLOYMENT AND OTHER COMPENSATORY AGREEMENTS WITH EXECUTIVES
We have in place two types of individual compensatory agreements with our Executives: First,
we have employment agreements with each of our Executives (Messrs. Awerkamp, McGrath and Cook),
which we entered into as of January 1, 2008. Second, we have a supplemental retirement benefit
agreement (so-called salary continuation agreement) with Mr. Awerkamp, which we entered into in
1994 and have amended several times since then. The employment agreements are described in the
immediately following section of this proxy statement, Employment Agreements. The salary
continuation agreement with Mr. Awerkamp is described above under the heading Pension Benefits.
Employment Agreements
After a series of discussions with our compensation consultants and a review of peer group
practices, our Board of Directors, upon the recommendation of our Compensation Committee, approved
in early 2007 our entering into employment agreements with each of our Executives, Messrs.
Awerkamp, McGrath and Cook. Those agreements, which became effective March 1, 2007, were amended
and restated in their entirety as of January 1, 2008, to comply with Section 409A of the Internal
Revenue Code, which sets forth certain requirements for arrangements involving deferred
compensation. The agreements were further amended as of July 15, 2008, to change the maximum
percentage of each Executives base salary that the Executive is entitled to receive if all
specified financial performance targets under the Incentive Compensation Plan are met for the year.
34
The employment agreements are intended to further the stability and effectiveness of our
management team, while providing the Executives with substantial incentives to continue to achieve
financial success at the Company level and thereby build shareholder value. For further discussion
of the Companys compensation philosophy and the decision to award employment agreements to the top
Executives, see the Compensation Discussion and Analysis above.
The agreements for the three Executives are similar in structure and effect. As restated on
January 1, 2008, the agreement for Mr. Awerkamp was to continue through February 28, 2010, and the
agreements for Messrs. McGrath and Cook were to continue through February 28, 2009, in each case
renewable by the Board of Directors as of February of each year of the term for an additional year.
In both February 2008 and 2009, upon the recommendation of the Compensation Committee, the Board
of Directors approved the extension of the term of each agreement for an additional year; however,
in February 2010, upon recommendation of the Compensation Committee, the Board declined to approve
extensions of the terms. The Board based its decision on the performance of the Company in 2009
and the fact there was at least a year remaining on each of the current terms of the agreements, so
no immediate action to renew them was necessary. The agreement for Mr. Awerkamp is now for a term
of two years (ending February 29, 2012) and the agreements for Messrs. McGrath and Cook are for
terms of one year (ending February 28, 2011).
Under the agreements, the Executive is guaranteed an annual base salary, as the same may be
adjusted upward (but not downward) from time to time, and certain job-related benefits that are
typically covered by such agreements, including specified life and health insurance coverage. In
addition, Mr. Awerkamp is entitled to the use of a Company automobile and limited perquisites such
as club fees, and Mr. Cook is entitled to receive club fees. Each agreement also provides that the
Executive will be entitled to participate in the objective feature of the Companys Incentive
Compensation Plan, that is, the Executive will be eligible to receive an award under that feature
for each year if the specified financial performance target or targets applicable to the Executive
for that year are met. The agreements also specify the maximum amount of the payment thus
receivable by the particular Executive in any year, as a percentage of such Executives base
salary. Specifically, the maximum payment for Mr. Awerkamp in any year is 70% of his base salary
and the maximum payment for each of Messrs. McGrath and Cook for any year is 40% of his base
salary. Such percentages were selected by the Board and Committee based on their review of
incentive compensation arrangements for executives at similarly situated bank holding companies,
including the mix of compensation components, and after consultation with Frederic W. Cook & Co.,
the Companys compensation consultant. The consultant confirmed the payment terms under the
objective feature, including the percentages, were within a reasonable range for similar plans
among comparison bank holding companies, again taking into consideration the current mix of
compensation components. The base salaries currently receivable by the Executives under the
agreements are $325,000 for Mr. Awerkamp, $185,000 for Mr. McGrath and $185,000 for Mr. Cook. No
changes were made in the base salaries for 2010.
The agreements also call for special payments to be made to the Executives if they are
disabled, if their employment with the Company is terminated without cause, or if their employment
is terminated following a change in control of the Company, as that term is defined in the
agreements. For a further discussion of these special payment provisions, see the discussion below
under the heading, Potential Payments to Executives Upon Termination or Change in Control. The
agreements also contain non-competition covenants that may be triggered upon certain terminations
of the Executives employment and, if so, apply for two years thereafter; however, in the case of
Mr. McGrath and Mr. Cook, the non-competition period would be one year if the Company terminated
his employment without cause. In cases where these covenants apply, the executives are generally
precluded from being employed by or affiliated with any bank or other insured depository
institution, or other entity engaged in commercial, agricultural or consumer lending or the sale of
any services or products provided by the Company, if that institution or entity is located within
fifty (50) miles of the corporate city limits of Quincy, Illinois, or within five (5) miles of the
main or branch facility of any of the subsidiaries of the Company.
35
POTENTIAL PAYMENTS TO EXECUTIVES UPON TERMINATION OR CHANGE IN CONTROL
Employment Agreements for Executives
As discussed in the immediately preceding section of this proxy statement under the heading
Employment Agreements, each of the Companys three Executives has an employment agreement with
the Company, under which, among other things, the Executive is entitled to receive a special cash
payment if his employment with us is terminated under non-standard circumstances, such as following
a change in control of the Company. These agreements became effective on January 1, 2008.
The information required to be set forth in this section of the proxy statement, regarding
special benefits that may be payable to Executives upon termination of their employment under
various circumstances, assumes for purposes of presentation and analysis that the Executives
employment should be deemed to have terminated, hypothetically, as of the last day of the preceding
fiscal year, in this case, as of December 31, 2009.
Voluntary Termination or Early Retirement
Under the employment agreements, an Executive may terminate his employment during the term of
the agreement, upon six months written notice to the Company, but absent some special circumstance,
such as a preceding change in control of the Company, the Executive will not be entitled to any
special payments or benefits under the agreement. The Executive would be required under the
agreement to continue to perform his duties for the six-month period and would be entitled to
continuing compensation during that period, but would not be entitled to any further payments after
the date of termination. However, if the Company fails to renew the term of the Executives
employment agreement for an additional year as of February of any year of the term, then the
Executive may terminate the agreement without cause upon sixty (60) days written notice, in which
case the Executive would only be obligated to perform his duties for such sixty (60)-day period.
Of course, if the Executive terminates his employment voluntarily, the Executive would also be
entitled to receive the vested portion of his account under the Companys Profit-Sharing Plan.
In addition, if the Executive also has a salary continuation agreement with the Company, as
Mr. Awerkamp has, he may be entitled to receive cash payments under that agreement following a
voluntary termination of employment if such termination constitutes early retirement under the
agreement, supplementing his payments under the retirement plan, and he may be able to receive cash
payments under his agreement even if his voluntary termination of employment occurs before the
earliest date of early retirement for him under the retirement plan, if he meets the conditions in
the agreement for such very early retirement payments. In all cases, if the Executive is entitled
to receive cash payments under his salary continuation agreement upon voluntary retirement, the
amount of the payments will depend on how old the Executive is when he voluntarily retires and
whether he elects to receive his payments under the agreement immediately or chooses to wait until
a later date to commence receipt thereof. Because Mr. Awerkamps salary continuation agreement
does not provide for any payments if he voluntarily terminates his employment before he turns 55,
and because he was not yet 55 on December 31, 2009, he would not have been entitled to any cash
payments under his agreement if he had voluntarily terminated his employment at the end of last
year.
Termination for Cause
Under the employment agreements, if the Company terminates an Executive for cause (as defined
in the agreement), he is entitled to receive payment of his base salary only through the end of the
month the termination becomes effective. This limited right to post-termination payment of salary
is driven solely by the demands of payroll processing and is for the convenience of the Company,
not the Executive. Of course, an Executive terminated for cause on December 31, 2009, the last day
of the month, would not have received any benefit from this provision in any case.
Although an Executive terminated for cause may retain the legal right to receive certain
amounts due him upon termination, such an Executive would not receive any enhanced rights or
benefits to retirement payments under the Companys qualified plan. The Executives eligibility to
receive subsequent plan payments under such circumstances would be determined in a manner
consistent for all employees participating in the plan who may be terminated under such
circumstances.
36
Death or Disability
The Executives employment agreements may provide for enhanced payments if the Executive
becomes disabled during the term of his agreement, depending on the dollar amount of the insurance
payments he receives during his disability. Specifically, under the agreements, if the Executives
employment is suspended due to disability and the disability insurance payments made to him
(annualized) are less than 60% of the sum of (i) the Executives annual base salary at the time his
disability commences, plus (ii) the amount of the payment, if any, received by the Executive under
the Incentive Compensation Plan for the year ended immediately prior to the year he becomes
disabled, he is entitled to receive payments equal to the difference for so long as he is eligible
to receive disability income payments. If any Executives employment had been suspended due to
disability on December 31, 2009, it is unlikely that the Executive would have been entitled to
receive any makeup payments under the employment agreement with respect to his base salary, due
to the disability coverage presently held by the Companys Executives. However, the Executive
would have become entitled to receive from the Company under the employment agreement an amount
equal to 60% of his incentive compensation award for the immediately preceding year, which payment
is not included in the Companys disability coverage.
The employment agreements provide that, upon death of an Executive, the Company would be
obligated to pay the Executives compensation through the end of the month during which the
Executive dies. In addition, under the salary continuation agreement with Mr. Awerkamp, if he were
terminated due to death on December 31, 2009, his beneficiaries would be entitled to payments under
the agreement. Specifically, had Mr. Awerkamp died on December 31, 2009 while in service to the
Company, his beneficiaries would have been entitled to receive one hundred eighty (180) equal
monthly installments of $5,742.
No Executive would have been entitled to receive any other special benefits or payments upon
termination of his employment due to death or disability at the end of last year under any other
special agreements or arrangements provided by the Company, other than the payments described above
and other than such benefits and payments that might have been received by him or his heirs or
beneficiaries under the Companys group disability or life insurance plan or the Companys
Profit-Sharing Plan, if applicable, which benefits or payments, if received, would have been
determined in a manner consistent with that applied for all employees of the Company experiencing
termination of employment under similar circumstances.
37
Termination Other than for Cause
Under the employment agreements, if an Executive is terminated without cause during the term
of the agreement, he is entitled to receive an amount equal to his base annual salary for the
remainder of the term of the agreement (but for not less than two years for Mr. Awerkamp and one
year for Messrs. McGrath and Cook), all other benefits due him under the agreement for the
remaining term of the agreement, plus an amount equal to his award under the Incentive Compensation
Plan for the last full calendar year preceding the date of termination of his employment, with no
duty on his part to mitigate the cost thereof to the Company by seeking other employment, provided,
however, the Executive thus terminated has no right to receive an award under the Incentive
Compensation Plan for any years after the year in which his termination occurs. Had any Executive
been terminated without cause on December 31, 2009, the Executive would have received the remaining
payments of his base salary plus all other benefits due him during the term of the agreement (two
years and two months more for Mr. Awerkamp and one year and two months more for Messrs. McGrath and
Cook), plus his annual incentive compensation award for 2009 ($0 for each Executive). The
severance amount would be payable to the Executive in twenty-four equal monthly installments
following termination; provided, however, if the severance amount would exceed the safe harbor
amount under Section 409A of the Internal Revenue Code, such excess portion would be paid in a lump
sum to the Executive. If the termination without cause of the Executive followed a change in
control of the Company, the consequences to him under the employment agreement would be different,
as discussed in the ensuing section, Termination After a Change in Control.
There are no other plans or agreements under which any of the Executives would be entitled to
receive any special benefits or payments upon termination without cause. We have a policy under
which our employees generally are entitled to receive severance benefits in the event of
termination of their employment other than for cause under certain circumstances; however, the
Executives employment agreements provide that the Executives are not eligible to receive severance
benefits under the policy.
The termination for cause of an Executive would not result in his receipt of enhanced
retirement benefits under our Profit-Sharing Plan beyond those normally receivable by him,
determined in a manner consistent with the determination of plan benefits for all employees of the
Company.
Termination after a Change in Control
The employment agreements provide our executives with financial protection and security should
there be a change in control of the Company and thereafter they are either terminated or
effectively forced out. Specifically, if a change in control (as defined in the agreement) occurs
and, within the remaining term of the agreement, the Executive either (i) is terminated by the
Company without cause or (ii) resigns because he has (a) been demoted; (b) had his compensation
reduced; (c) had his principal place of employment transferred away from the City of Quincy,
Illinois; or (d) had his job title, status or responsibility materially reduced, the Executive will
be entitled to receive from the Company a lump sum cash payment equal to 2.5 (for Mr. Awerkamp) or
2.0 (for Messrs. McGrath and Cook) multiplied by the sum of (x) the Executives annual base salary
at the time of the change in control/the termination of his employment, plus (y) the amount of the
payment, if any, received by him under the Incentive Compensation Plan for the fiscal year
immediately preceding the year in which his employment terminates. The Executive would also be
entitled to continue to receive the other benefits due to him under his employment agreement for
two years for Mr. Awerkamp and one year for Messrs. McGrath and Cook, after the date of
termination, other than the right to participate in the Incentive Compensation Plan in the year
following the year of termination. Had the employment of any Executive terminated on December 31,
2009 following a change in control, the Executive would have been entitled to receive a lump sum
cash payment equal to 2.5 (for Mr. Awerkamp) or 2.0 (for Messrs. McGrath and Cook) multiplied by
his annual salary for 2009 (there were no incentive payments for 2009), as well as continuing
benefits such as health insurance for two years for Mr. Awerkamp and one year for Messrs. McGrath
and Cook.
Under Mr. Awerkamps salary continuation agreement, if Mr. Awerkamp is terminated prior to
reaching age 60 for reasons other than death, disability, or for cause, but after a change in
control, and in connection with the change in control Mr. Awerkamps title, duties,
responsibilities, or base salary is significantly lessened or his situs of
38
employment is changed, without his consent, then the Company is required to make certain
payments to Mr. Awerkamp based upon schedules in his agreement.
The payment under Mr. Awerkamps employment agreement arising from his death would be reduced
under certain circumstances related to payments under his salary continuation agreement. His
employment agreement provides that if the present value of payments due Mr. Awerkamp on account of
a change in control under the employment agreement, plus the present value of payments due to him
under his salary continuation agreement relating to a change in control, exceed three times the
base amount determined under Internal Revenue Code Section 280G, then the payment under this
employment agreement will be reduced to an amount that would be equal to three times his base
amount less one dollar. This provision is intended to preserve the tax deductibility to the
Company of payments to Mr. Awerkamp in connection with a change in control, which might otherwise
be nondeductible under IRC Section 280G under these circumstances. The base amount is defined as
the persons annualized includible compensation for the most recent five taxable years ending
before the date on which the change in control occurs.
There are no other agreements or plans under which any of the Executives would be entitled to
receive special payments or benefits upon termination of their employment following a change in
control. Such a termination would not result in any Executive receiving enhanced benefits under
our Profit-Sharing Plan beyond the plan benefits otherwise receivable by him upon retirement or
early retirement, determined in a manner consistent with the determination of benefits under the
plan for all participating employees of the Company.
OWNERSHIP OF COMMON STOCK BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following tables set forth certain information as of April 12, 2010 regarding the
beneficial ownership of the Companys common stock by (i) each person, including groups of persons
acting in concert, known to the Board of Directors to own beneficially 5% or more of such class of
common stock, (ii) each director of the Company, (iii) by each executive officer named in the
Summary Compensation Table under Executive Compensation and (iv) all directors and officers of
the Company as a group. Generally, all the information set forth below with respect to the
stockholdings of the listed beneficial owners was obtained from such owners, directly or indirectly
from reports filed by them with the SEC.
39
Principal Owners
Persons (including groups acting in concert) who beneficially own in excess of five percent
(5%) of the Companys common stock are required to file with the SEC certain reports regarding
ownership and changes in ownership of such stock pursuant to the 1934 Act. The following table
identifies, as of April 12, 2010, all persons (including groups acting in concert) who are known or
presumed by the Board and management to be the beneficial owners of more than five percent (5%) of
our common stock, based among other things on reports filed by such persons with the SEC.
|
|
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Amount and Nature of
|
|
Percent of Shares of
|
|
|
Beneficial
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Common
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Name and Address of Beneficial Owner
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Ownership (1)
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Stock Outstanding
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|
Mercantile Bank
200 North 33rd Street
Quincy, Illinois 62301
|
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517,368
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(2)
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5.9
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%
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|
|
|
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|
R. Dean Phillips and others reporting as a group
524 North 30th Street
R. Dean Phillips
Town & Country Bank
Quincy, Illinois 62301
|
|
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3,350,938
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(3)
|
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38.5
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%
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|
|
|
|
|
|
|
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|
Dennis M. Prock
8010 Estero Boulevard
Fort Myers Beach, Florida 33931
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562,261
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(4)
|
|
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6.5
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%
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(1)
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|
With respect to the beneficial owners who are natural persons, the figures
include shares of common stock held directly by them as well as by spouses or
minor children, in trust and by other means of indirect ownership, provided the
individual effectively exercises sole or shared voting and/or investment power
over the shares.
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(2)
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All shares are held in nominee name for Mercantile Bank by Northern Trust
Company. All such shares are held directly or indirectly by Mercantile Bank
for the benefit of trust, estate and agency clients, except for 177,744 shares
that are held for the benefit of the participants of the Companys
Profit-Sharing Plan. In its administration of the accounts of all such trust,
estate and agency clients (the Accounts) and its administration of the
Profit-Sharing Plan, Mercantile Bank has voting and/or investment power over
all securities held in such Accounts or the Profit-Sharing Plan, including
shares of our stock, in accordance with the powers specified in the governing
instrument of the estate, trust or agency or the Profit-Sharing Plan document.
Mercantile Bank exercises sole voting power with respect to 310,929 shares,
shared voting power with respect to 80,980 shares, sole investment power with
respect to 96,787 shares, and shared investment power with respect to 78,985
shares. Mercantile Bank disclaims beneficial ownership of any shares over which
it has neither voting nor investment power.
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(3)
|
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Number of shares beneficially owned derived from a report on Form 4 filed
by Mr. Phillips with the Securities and Exchange Commission on November 4,
2009, and a Schedule 13D filed on February 13, 2009, as amended by Schedules
13D/A filed on April 22, 2009 and November 25, 2009, by Mr. Phillips and
certain other persons reporting as a group, such other persons being the
trustees of various irrevocable unfunded life insurance trusts established by
Betty Jo Phillips for the benefit of various family members and the trustees of
various revocable trusts of Betty Jo Phillips for her benefit and the benefit
of various family members. The individual trustees of the various trusts on
November 25, 2009, were David E. Miller, Philip M. Burns, James R. Behrens, and
Town and Country Bank of Quincy. The reporting persons reported, collectively,
beneficial ownership of 3,350,938 shares of the Companys common stock. Mr.
Phillips reported sole voting and dispositive power with respect to 1,384,695 shares (15.9% of the Companys outstanding shares). As trustee of certain of
the trusts, Mr. Miller reported shared voting and dispositive
|
40
|
|
|
|
|
power with
respect to 264,858 shares. As trustee of certain of the trusts, Mr. Burns
reported shared voting and dispositive power with respect to 264,863 shares.
As trustee of certain of the trusts, Mr. Behrens reported shared voting and
dispositive power with respect to 264,860 shares. As trustee of certain of the
trusts, Town and Country Bank of Quincy reported shared voting and dispositive
power with respect to 1,171,662 shares (13.5% of the Companys outstanding
shares). Except for stock owned directly by such persons, the reporting
persons expressly disclaimed beneficial ownership of the stock reported on the
Schedule 13D, as amended, and expressly disclaimed that they have formed a
group as contemplated by Section 13(d)(3) of the 1934 Act.
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(4)
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Number of shares beneficially owned derived from a report on Form 4 filed
by Mr. Prock with the Securities and Exchange Commission on March 31, 2009.
Shares held by Mr. Prock through a grantor revocable trust and an individual
retirement account, over both of which he has sole voting and investment power.
Mr. Prock is a director of the Company.
|
Management
The following table sets forth, as of April 12, 2010, the number of shares of common stock
beneficially owned by directors, nominees and executive officers of the Company.
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Amount and
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Percent of Shares
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|
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Nature of
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of Common
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Beneficial
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Stock
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Name of Beneficial Owner
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Ownership (1)
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Outstanding
|
|
Directors, Nominees and Named
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Julie A. Brink
|
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222,145
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(2)
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2.6
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%
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Michael J. Foster
|
|
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9,750
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(3)
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|
|
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*
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Alexander J. House
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0
|
|
|
|
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*
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Lee R. Keith
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0
|
|
|
|
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*
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|
|
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William G. Keller, Jr.
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88,549
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(4)
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|
|
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*
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Dennis M. Prock
|
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562,261
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(5)
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|
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6.5
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%
|
|
|
|
|
|
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John R. Spake
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5,750
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(6)
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|
|
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*
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James W. Tracy
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1,500
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(7)
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|
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*
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Ted T. Awerkamp
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15,000
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(8)
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|
|
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*
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Michael P. McGrath
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2,550
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(9)
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|
|
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*
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Daniel J. Cook
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1,012
|
(10)
|
|
|
|
*
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All Executive Officers and
Directors as a group
(includes 11 individuals)
|
|
|
1,086,261
|
(11)
|
|
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12.5
|
%
|
|
|
|
(1)
|
|
Includes shares of common stock held directly as well as by spouses or minor children, in trust and
other indirect ownership, over which shares the individuals effectively exercise voting and/or investment
power, as described in the corresponding footnotes.
|
|
(2)
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|
Includes 2,400 shares of common stock held personally and 219,745 shares held by R.L. Brink Corp. and
Thompson, Inc. of which Ms. Brink is a Director, Vice President and Secretary, over which she holds
shared voting power but not investment power.
|
|
(3)
|
|
Includes 7,050 shares owned by Mr. Foster through an individual retirement account over which he has
sole voting and investment power and 2,700 shares owned by Mr. Foster with his spouse over which he
shares voting and
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41
|
|
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investment power.
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(4)
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|
Includes 10,620 shares owned by Mr. Keller personally and 77,929 shares held by Mr. Keller as
co-trustee of the Schmiedeskamp, Robertson, Neu & Mitchell LLP Profit-Sharing Plan, over which the
trustees hold voting power but not investment power. The shares in this plan include 15,750 shares for
which Mr. Keller is a beneficiary and thus holds investment power.
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(5)
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|
Shares held by Mr. Prock through a grantor revocable trust and an individual retirement account, over
both of which he has sole voting and investment power. Includes 559,035 shares pledged as collateral
securing loans from Town and Country Bank, Quincy, Illinois.
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|
(6)
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|
Shares held by Mr. Spake through an individual retirement account over which he has sole voting and
investment power.
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(7)
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|
Shares are held by Mr. Tracy jointly with his spouse, with whom he shares voting and investment power.
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(8)
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|
Includes 2,895 shares owned by Mr. Awerkamp through an individual retirement account over which he
has sole voting and investment power and 12,105 shares owned jointly with his spouse over which he shares
voting and investment power.
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(9)
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|
Shares are held by Mr. McGrath through an individual retirement account over which he has sole voting
and investment power.
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(10)
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|
Shares are held by Mr. Cook through an individual retirement account over which he has sole voting
and investment power.
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(11)
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|
Includes 177,744 shares owned by the Companys Profit-Sharing Plan, for which Mercantile Bank serves
as trustee. Through its trust department, Mercantile Bank exercises voting and investment power over the
shares.
|
|
*
|
|
Less than one percent (1%) of the outstanding shares of common stock.
|
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Loans and Other Customer Relationships Between Company and Certain Related Parties
Our executive officers, current directors, director nominees, beneficial owners of five
percent or more of the Companys outstanding shares, and their respective associates and controlled
companies have been, and we anticipate they will continue to be, customers of our subsidiary banks
in the ordinary course of business, which includes obtaining loans, maintaining deposit accounts
and entering into trust and other fiduciary relationships with our subsidiaries. The most
significant type of these traditional customer relationships are loans that our banks, principally
Mercantile Bank, have extended from time to time to these persons and their associates. All of
our insider loans outstanding at any point during 2009 (a) were extended consistent with similar
practices in the banking industry generally, (b) were made in the ordinary course of business and
on substantially the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with the banks other customers, and (c) did not involve more
than the normal risk of collectibility or present other unfavorable features, and, as of December
31, 2009, no such loan was past due more than 90 days, on nonaccrual status, a restructured loan
under FAS 15, or a potential problem loan.
Other Business Relationships with Certain Related Parties
In addition, from time to time the Company and its subsidiaries enter into other business
transactions or business or professional relationships with executive officers, current directors,
director nominees, and beneficial owners of five percent or more of the Companys outstanding
shares (including their respective associates and
42
controlled companies). During 2009, the Company had no such transaction or relationship with
any of the executive officers, current directors, director nominees, or beneficial owners of five
percent or more of the Companys outstanding shares or their respective affiliates where the dollar
amount in question exceeded $120,000, except for (i) the borrowing relationship described below
with Great River Bancshares, Inc. (Great River), which is owned by R. Dean Phillips (Phillips),
a beneficial owner of more than five percent of the Companys outstanding shares, and (ii) the
professional relationship with the Quincy, Illinois law firm of Schmiedeskamp, Robertson, Neu &
Mitchell LLP, of which Director Keller is a senior partner. During 2009, the Company and its
subsidiaries paid aggregate fees of $451,074 to the Schmiedeskamp firm, which has provided legal
services to the Company for several years. This amount includes a $170,000 annual retainer paid to
the firm, which was offset against fees for services rendered during the year.
The Company and Great River have had a lending relationship since December 2008, when Great
River purchased certain loans that U.S. Bank National Association (USB) had made to the Company,
with principal balances of $15,109,000, $5,037,000, and $2,015,000. The terms of the assumed notes
were the same as the terms with USB, including the various covenants.
The $15,109,000 note payable was secured by 100% of the outstanding shares of the Companys
subsidiary banks and certain other assets. Interest was payable quarterly at a fixed annual rate
of 6.09% until amended in November 2009 to a fixed annual rate of 7.5%. Principal was due in three
payments as follows: $375,000 due March 31, 2009, $375,000 due June 30, 2009, and $14,359,000 due
on November 10, 2009. The largest aggregate amount of principal outstanding regarding this note
during 2009 was $15,109,000. Both principal and interest pertaining to this note in the amounts of
$14,359,000 and $107,693, respectively, were paid in full in December 2009 as part of the Exchange
Agreement (discussed below) with Phillips.
The $5,037,000 and $2,015,000 notes payable were secured by 100% of the outstanding shares of
the Companys subsidiary banks and certain other assets. Interest was payable quarterly at fixed
annual rates of 6.13% and 6.27%, respectively, until amended in November 2009 to fixed annual rates
of 7.5%. Principal was due in four payments as follows: $125,000 each due December 31, 2009,
$125,000 each due March 31, 2010, $125,000 each due June 30, 2010, and the remaining principal of
$4,662,000 and $1,640,000, respectively, due August 31, 2010. In November 2009, Great River issued
another note payable in the amount of $11,000,000 to the Company, with a maturity of January 31,
2010 and an annual interest rate of 7.5%. Principal of $1,880,000 and interest of $15,112
pertaining to the $2,015,000 note were also paid down as part of the Exchange Agreement (discussed
below) with Phillips, leaving a principal balance due of $135,000 at December 31, 2009. The
largest aggregate amounts of principal outstanding regarding these notes during 2009 were
$5,037,000 with respect to the $5,037,000 note and $2,015,000 with respect to the $2,015,000 note.
This $135,000 balance, along with both principal and interest pertaining to the $5,037,000 and
$11,000,000 notes in the amounts of $16,172,000 and $76,970, respectively, was paid in full in
February 2010 from the proceeds of the Companys sale of Marine Bank & Trust (Marine Bank) and
Brown County State Bank (Brown County).
The notes payable had various covenants including ratios relating to the Companys capital,
allowance for loan losses, return on assets, non-performing assets and debt service coverage. At
December 31, 2008, the Companys non-performing assets to primary capital ratio of 26% was in
noncompliance with the non-performing assets covenant requiring an 18% maximum. Also at December
31, 2008, the Companys fixed charge coverage ratio of (.72)% ratio was in noncompliance with the
covenant requiring a minimum ratio of 1.10%. The notes payable were due upon demand because of the
debt covenant noncompliance and Great River could have required repayment at its discretion before
maturity. In April 2009, the Company received a waiver from Great River relating to the debt
covenant violations at December 31, 2008.
On November 21, 2009, the Company entered into a Second Waiver and Amendment (the Second
Waiver) to the Fourth Amended and Restated Loan Agreement by and between the Company and Great
River. The Second Waiver waived the Companys breaches of, and amended, certain financial and
other covenants, extended the principal payment and maturity dates on certain of the notes payable,
and provided that all principal and interest related to the notes payable would be repaid from the
proceeds of the sale of Marine Bank and Brown County. As of December 31, 2009, the Company was in
compliance with all debt covenants related to the notes payable with Great
43
River. In February 2010, the sale of Marine Bank and Brown County was consummated, and all
principal and interest due to Great River was paid in full.
Also on November 21, 2009, the Company entered into an Exchange Agreement (the Exchange)
with Phillips (Phillips). The Exchange provided for the sale of HNB National Bank (HNB), one
of the Companys subsidiary banks, to Phillips, in exchange for the repayment of $28 million of the
Great River debt. Phillips owned, through participations from Great River, more than $28 million
of the Great River debt. On December 16, 2009, the Company finalized the Exchange eliminating $28
million of the debt owed to Great River, and transferred control of HNB to Phillips. In connection
with the Exchange, the Company entered into other ancillary agreements with HNB. The exchange of
debt for all issued and outstanding stock of HNB left approximately $16 million in outstanding debt
owed to Phillips and Great River. The Company repaid the remainder of this debt following the
closing of the sale of Marine Bank and Brown County on February 26, 2010.
Great River provided the Company a new line of credit on November 21, 2010, in the principal
amount of $7 million, which has a maturity date of December 31, 2010, and bears interest at 7.5%
per annum. There is no outstanding principal under this line of credit as of the date of this
proxy statement.
Policy and Procedures on Related Party Transactions
The Company has adopted a related person transaction policy applicable to certain transactions
between the Company or its subsidiaries and any executive officer or director of the Company,
including their immediate family members and their controlled companies and business entities.
Under the policy, any such related party transaction, as further defined in Item 404 of Regulation
S-K of the SEC rules, will be evaluated and approved or disapproved by the Companys Audit
Committee or, if it is unable to act, by a majority of the disinterested directors of the Company.
These transactions are also subject to and governed by the Companys Code of Ethics and Standards
of Conduct, which together with the policy are available on the Companys website at
www.mercbanx.com
. The Nominating/Corporate Governance Committee will also be apprised of any
related party transactions and consider that information in determining director independence.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires our Companys directors and executive officers, and
persons who own more than 10% of any class of equity securities of our Company registered pursuant
to Section 12 of the Exchange Act, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership in such securities and other equity
securities of our Company. Securities and Exchange Commission regulations require directors,
executive officers and greater than 10% stockholders to furnish our Company with copies of all
Section 16(a) reports they file.
Based solely on our review of these reports, or written statements from these persons that
they were not required to file any reports in 2009, we believe that all of our directors, executive
officers and greater than 10% stockholders complied with all Section 16(a) reporting requirements
in 2009 and timely filed all reports.
OTHER BUSINESS AT THE MEETING
The Board of Directors is not aware of, and does not intend to present, any matter for action
at the annual meeting other than those referred to in this proxy statement. If, however, any other
matter properly comes before the annual meeting or any adjournment, the holders of the proxies
solicited by the Board of Directors will vote on such matters in their discretion in accordance
with their best judgment, unless authority to vote on other matters has been withheld.
44
ANNUAL REPORT
Our Companys Annual Report to Stockholders, containing consolidated financial statements for
the year ended December 31, 2009, is being mailed with this proxy statement to all stockholders
entitled to vote at the annual meeting. Such Annual Report is not to be regarded as proxy
solicitation material.
A COPY OF OUR COMPANYS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2009, AS
FILED WITH THE SEC, EXCLUDING EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER OF
RECORD AS OF APRIL 12, 2010, UPON WRITTEN REQUEST TO CORPORATE SECRETARY, MERCANTILE BANCORP, INC.,
200 NORTH 33RD STREET, QUINCY, ILLINOIS 62301.
Our Company will provide a copy of any exhibit(s)
to the Form 10-K report to any such person upon receipt of a specific written request from such
person for such exhibit(s) together with payment of our reasonable expenses in furnishing such
exhibit(s). You may read and download our Form 10-K, including exhibits, as well as our other SEC
filings, over the internet from several commercial document retrieval services as well as at the
SECs internet website (
www.sec.gov
), which site may be accessed through the Companys internet
website under Investor Relations section at
www.mercbanx.com
.
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (including brokers) to
satisfy the delivery requirements for proxy statements and annual reports with respect to two or
more stockholders sharing the same address by delivering a single proxy statement addressed to
those stockholders. This process, which is commonly referred to as householding, potentially
means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are stockholders of our Company will
be householding our proxy materials. A single proxy statement may be delivered to multiple
stockholders sharing an address unless contrary instructions have been received from one or more of
the affected stockholders. Once you have received notice from your broker that it will be
householding communications to your address, householding will continue until you are notified
otherwise or until you notify your broker or us that you no longer wish to participate in
householding. If, at any time, you no longer wish to participate in householding and would prefer
to receive a separate proxy statement and annual report in the future you may (1) notify your
broker, (2) direct your written request to: Corporate Secretary, Mercantile Bancorp, Inc., 200
North 33rd Street, Quincy, Illinois 62301, or (3) contact the Corporate Secretary at (217)
223-7300. Stockholders who currently receive multiple copies of the proxy statement at their
address and would like to request householding of their communications should contact their broker.
In addition, we will promptly deliver, upon written or oral request to the address or telephone
number above, a separate copy of the annual report and proxy statement to a stockholder at a shared
address to which a single copy of the documents was delivered.
|
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|
|
By Order of the Board of Directors
|
|
|
|
|
|
Ted T. Awerkamp
|
|
|
President and Chief Executive Officer
|
|
|
May [4], 2010
Quincy, Illinois
45
Appendix A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
MERCANTILE BANCORP, INC.
Mercantile Bancorp, Inc., a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, at a meeting duly held, adopted a
resolution proposing and declaring advisable the following amendment to the Certificate of
Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of the Company be amended by
deleting Article Fourth and by substituting in lieu thereof the following new
Article Fourth:
FOURTH
: The total number of shares of stock that the
corporation shall have authority to issue is Thirty Million One
Hundred Thousand (30,100,000), of which Thirty Million (30,000,000) shares shall be Common Stock, with each share of Common Stock having a
par value of Forty-One and 67/100 Cents ($0.4167), and One Hundred
Thousand (100,000) shares shall be Preferred Stock, with each share of
Preferred Stock having a par value of One Cent ($0.01). The Preferred
Stock may be issued from time to time in one or more series with such
distinctive serial designations and (a) may have such voting powers,
full or limited, or may be without voting powers; (b) may be subject
to redemption at such time or times and at such prices; (c) may be
entitled to receive dividends (which may be cumulative or
noncumulative) at such rate or rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or series of stock;
(d) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the corporation; (e) may be made
convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or
classes of stock of the corporation, at such price or prices or at
such rates of exchange, and with such adjustments; and (f) shall have
such other relative, participating, optional or other special rights,
qualifications, limitations, preferences or restrictions thereof, all
as may be stated and expressed in the resolution or resolutions
providing for the issue of such Preferred Stock from time to time
adopted by the Board of Directors pursuant to authority so to do which
is hereby vested in the Board of Directors.
SECOND: That the stockholders of said corporation, at a meeting duly held, adopted said
amendment to the Certificate of Incorporation of said corporation.
THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable
provisions of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That this Certificate of Amendment of the Certificate of Incorporation shall be
effective upon the date of filing with the Secretary of State of the State of Delaware.
46
IN WITNESS WHEREOF, said corporation has caused this certificate to be signed by Ted T.
Awerkamp, President and Chief Executive Officer this _____ day of _____, 2010, by which signature he
acknowledges that this Certificate is the act and deed of said corporation and the facts stated
herein are true.
|
|
|
|
|
|
Mercantile Bancorp, Inc.
|
|
|
By:
|
|
|
|
|
Ted T. Awerkamp
|
|
|
|
President and Chief Executive Officer
|
|
|
47
200 North 33rd Street, P O Box
3455
Quincy, IL 62305-3455
ANNUAL MEETING
MAY 24, 2010
THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS
PROXY VOTING
You can vote in one of three ways:
1) By Internet, 2) By Mail, 3) By Phone.
See the below for instructions.
IF YOU ARE
NOT
VOTING BY INTERNET OR BY
TELEPHONE, COMPLETE BOTH SIDES OF THIS
PROXY, DETACH AND RETURN IN THE
ENCLOSED ENVELOPE TO:
Illinois Stock Transfer Co.
209 West Jackson Boulevard, Suite 903
Chicago, Illinois 60606
If you personally plan to attend the
Annual Meeting of Stockholders please
check the box below. For address
changes/comments please check the box
below.
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I/We do plan to attend the
2010 Annual Meeting.
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Address
changes/
comments
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DETACH PROXY CARD HERE
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(continued on reverse side)
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Your Internet vote is quick, confidential and your vote is immediately submitted. Just follow
these easy steps:
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1.
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Read the accompanying Proxy Statement.
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2.
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Visit our Internet voting site at
www.ilstk.com,
click on the I am a Shareholder, select
the Internet Voting tab, enter your Voter Control Number and
the last four digits of your Tax Identification Number that is associated with the account you
are voting in the designated fields. Your Voter Control
Number is shown above.
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Please note that all votes cast by Internet must be
completed
and
submitted
prior to Saturday, May
22, 2010 at 11:59 p.m. Central Time.
Your Internet vote authorizes the named proxies to vote your shares to the same extent as if you
marked, signed, dated and returned the proxy card.
This is a secured web page site. Your software and/or Internet provider must be
enabled to access this site. Please call your software or Internet provider for further
information if needed.
If You Vote By INTERNET, Please Do Not Return Your Proxy Card By Mail
Your telephone vote is quick, confidential and immediate. Just follow these easy steps:
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1.
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Read the accompanying Proxy Statement.
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2.
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Using a Touch-Tone telephone, call Toll Free 1-800-555-8140 and follow the instructions.
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3.
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When asked for your Voter Control Number, enter the number printed just above
your name on the front of the proxy card below.
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Please note that all votes cast by telephone must be
completed and submitted
prior
to Saturday, May 22, 2010 at 11:59 p.m. Central Time.
Your telephone vote authorizes the named proxies to vote your shares to the same extent as if you
marked, signed, dated and returned the proxy card.
If You Vote By TELEPHONE, Please Do not Return Your Proxy Card By Mail
To vote by mail, complete both sides, sign and date the proxy card below. Detach the card below
and return it in the envelope provided.
TO VOTE BY INTERNET
TO VOTE BY TELEPHONE
TO VOTE BY MAIL
MERCANTILE BANCORP, INC.
ADDRESS CHANGES / COMMENTS
Proxy - Mercantile Bancorp, Inc.
Annual Meeting of Stockholders, May 24, 2010
The stockholder(s) hereby appoint(s) F.R. McFarland and Daniel J. Cook, and each of them, with full
power to act alone and each with the power to appoint his substitute, as the true and lawful
attorneys-in-fact and proxies, and hereby authorizes them to represent and to vote, as designated
below, all of the shares of common stock of Mercantile Bancorp, Inc., that the stockholder(s)
is/are entitled to vote at the Annual Meeting of Stockholders to be held at MERCANTILE BANK, 200
NORTH 33rd STREET, QUINCY, IL on MONDAY, MAY 24, 2010, AT 2:00 P.M., for the purposes noted below,
and any adjournment or postponement thereof, with all the powers the stockholder(s) would possess
if personally present.
The Board of Directors recommends that you vote FOR proposals 1, 2
and 3.
1. To elect a Board of nine (9) directors to serve for the ensuing year.
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Election of Directors
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FOR
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WITHHELD
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FOR
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WITHHELD
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01
Ted T. Awerkamp
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06
William G. Keller, Jr.
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02
Julie A. Brink
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07
Dennis M. Prock
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03
Michael J. Foster
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08
John R. Spake
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04
Alexander J. House
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09
James W. Tracy
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05
Lee R. Keith
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2.
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To amend the Companys Certificate of Incorporation to
increase the number of authorized shares of common stock;
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FOR
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AGAINST
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ABSTAIN
3.
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To consider and act upon ratification of the selection of the
accounting firm of BKD, LLP as the independent auditors of our
Company for the year ending December 31, 2010; and
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FOR
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AGAINST
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ABSTAIN
4.
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To transact such other business as may properly come before
the annual meeting and any adjournment, postponement or
continuation of the meeting.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDERS. IF NO SUCH
DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE
REVERSE SIDE FOR THE BOARD OF DIRECTORS, FOR PROPOSALS 2 AND 3, AND IN THE DISCRETION OF THE
PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF TO THE EXTENT PERMITTED UNDER APPLICABLE LAW.
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SIGNATURE
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DATE
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SIGNATURE
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DATE
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Please sign exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator, attorney,
trustee or guardian, please give full title as such. If the signer is a corporation, please
sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
DETACH PROXY CARD HERE
ATTENTION SHAREHOLDERS
INTERNET VOTING
You can now submit your Proxy via the Internet and have your vote recorded.
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Internet Voting is timelier.
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It saves the Company ever-rising cost of business reply postage.
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You can change your vote by re-voting at any time.
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It is simple and easy to use.
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Instructions for Internet Voting can be found on the reverse side.
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The Internet Voting Website is:
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http://www.ilstk.com -
click on I am a Shareholder and select
Internet Voting
Grafico Azioni Mercantile Bancorp (AMEX:MBR)
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