<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TOWER FINANCIAL CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
TOWER FINANCIAL CORPORATION
116 EAST BERRY STREET
FORT WAYNE, INDIANA 46802
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 18, 2000
TO THE HOLDERS OF SHARES OF COMMON STOCK OF
TOWER FINANCIAL CORPORATION
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Tower
Financial Corporation will be held in the lobby of Tower Bank & Trust Company,
116 East Berry Street, Fort Wayne, Indiana, 46802 on Tuesday, April 18, 2000 at
5:00 p.m., for the purpose of considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. To elect five directors to serve until the
2003 annual meeting of shareholders and until their successors are
elected and have qualified.
2. ELECTION OF OUTSIDE ACCOUNTANTS. To elect PricewaterhouseCoopers
LLP as Tower Financial Corporation's principal independent
auditors for fiscal year 2000; and
3. OTHER BUSINESS. To transact such other business as may properly be
brought before the meeting or any adjournments thereof.
All shareholders of record at the close of business on Tuesday,
February 15, 2000 will be eligible to vote at the meeting.
WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN
THE ACCOMPANYING ADDRESSED, POSTAGE-PAID ENVELOPE AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON. WE WOULD APPRECIATE
RECEIVING YOUR PROXY BY MONDAY, APRIL 10, 2000.
By Order of the Board of Directors,
/s/ Donald F. Schenkel
-------------------------------------
Donald F. Schenkel
Chairman of the Board, President &
Chief Executive Officer
Dated: March 10, 2000
<PAGE> 3
TOWER FINANCIAL CORPORATION
116 EAST BERRY STREET
FORT WAYNE, INDIANA 46802
PROXY STATEMENT
ANNUAL MEETING OF
SHAREHOLDERS
APRIL 18, 2000
GENERAL INFORMATION
This Proxy Statement is being furnished to shareholders of Tower
Financial Corporation (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Corporation, to be voted at the annual
meeting of shareholders of the Corporation (the "Annual Meeting") on Tuesday,
April 18, 2000 at 5:00 p.m. in the lobby of Tower Bank & Trust Company, 116 East
Berry Street, Fort Wayne, Indiana, 46802, and at any and all adjournments
thereof. It is expected that the proxy materials will be mailed to shareholders
on or about March 10, 2000.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its exercise. If a shareholder executes more
than one proxy, the proxy having the latest date will revoke any earlier
proxies. A shareholder attending the Annual Meeting will be given the
opportunity to revoke his or her proxy and vote in person.
Unless revoked, a proxy will be voted at the Annual Meeting in
accordance with the instructions of the shareholder in the proxy, or if no
instructions are given, for the election as directors of all nominees listed
under "Election of Directors" and for the election of the outside accountants.
Election of directors will be determined by the vote of the holders of a
plurality of the shares voting on such election. Election of the outside
accountants will be subject to the vote of holders of a greater number of shares
favoring approval than those opposing it. A proxy may indicate that all or a
portion of the shares represented by such proxy are not being voted with respect
to a specific proposal. This could occur, for example, when a broker is not
permitted to vote shares held in street names on certain proposals in the
absence of instructions from the beneficial owner. Shares that are not voted
with respect to a specific proposal will be considered as not present and
entitled to vote on such proposal, even though such shares will be considered
present for purposes of determining a quorum and voting on other proposals.
Abstentions on a specific proposal will be considered as present but not as
voting in favor of such proposal. As a result, with respect to all of the
proposals, neither broker non-votes nor abstentions on such proposals will
affect the determination of whether such proposals will be approved.
The Board of Directors knows of no matters, other than those described
in the attached Notice of Annual Meeting, which are to be brought before the
meeting. If other matters properly come before the meeting, it is the intention
of the persons named in the enclosed proxy form to vote such proxy in accordance
with their judgment.
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<PAGE> 4
The entire cost of soliciting proxies will be borne by the Company.
Proxies may be solicited by mail, facsimile or telegraph, or by directors,
officers, or regular employees of the Company or its subsidiary, in person or by
telephone. The Company will reimburse brokerage houses and other custodians,
nominees and fiduciaries for their out-of-pocket expenses in forwarding
soliciting materials to the beneficial owners of common stock of the Company.
The Board of Directors, in accordance with the by-laws of the Company,
has fixed the close of business on February 15, 2000 as the record date for
determining shareholders entitled to notice of and to vote at the annual meeting
of shareholders and at any and all adjournments thereof.
At the close of business on such record date, the outstanding number of
voting securities of the Company was 2,530,000 shares of common stock, each of
which is entitled to one vote on all matters, including the election of
directors.
ELECTION OF DIRECTORS
The Company's by-laws provide for a board of directors consisting of 18
members. The Articles of Incorporation and By-Laws of the Company further
provide that the directors shall be divided into three classes, Class I, Class
II and Class III, with each class serving a staggered three-year term and with
the number of directors in each class being as nearly equal as possible.
Currently, the Board of Directors of the Company consists of 17
directors divided into three classes. Two classes contain six directors each,
with the remaining class containing five directors. The term of one class of
directors expires each year. Generally, each director serves until the annual
meeting of shareholders held in the year that is three years after such
director's election and until such director's successor is elected and has
qualified. Five directors are to be elected at the meeting. The Board of
Directors has nominated Craig S. Hartman; Jerome F. Henry, Jr.; Debra A. Niezer;
Maurice D. O'Daniel; and Joseph D. Ruffolo as directors for three-year terms
expiring at the 2003 annual meeting of shareholders and upon election and
qualification of their successors. Each of the nominees is presently a Class I
director of the Company whose term expires this year. The other members of the
Board, who are Class II and Class III directors, will continue in office in
accordance with their previous elections until the expiration of their terms at
the 2001 or 2002 annual meetings of shareholders, as the case may be.
It is the intention of the persons named in the enclosed proxy to vote
such proxy for the election of the five nominees listed herein. The proposed
nominees for election as director are willing to be elected and serve; but in
the event that any nominee at the time of election is unable to serve or is
otherwise unavailable for election, the Board of Directors may select a
substitute nominee, and in that event the persons named in the enclosed proxy
intend to vote such proxy for the person so selected. If a substitute nominee is
not so selected, such proxy will be voted for the election of the remaining
nominees.
THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR THE NOMINEES LISTED ABOVE.
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<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information regarding the beneficial
ownership of the Company's common stock as of February 15, 2000, by the nominees
for election as directors of the Company, the directors of the Company whose
terms of office will continue after the Annual Meeting, the executive officers
named in the Summary Compensation Table, and all directors and executive
officers of the Company as a group. To the best of the Company's knowledge and
based solely on reports filed under Section 13(d) of the Securities Exchange Act
of 1934, no person owns more than 5% of the Company's outstanding common stock.
Unless otherwise indicated in a footnote, each individual or group possesses
sole voting and investment power with respect to the shares indicated as
beneficially owned.
<TABLE>
<CAPTION>
Number of Shares Percent of Class
Beneficially Beneficially
Name of Beneficial Owner Owned (1) Owned (2)
- ------------------------ --------- ---------
<S> <C> <C>
Curtis A. Brown......................... 12,500 (3) *
Keith E. Busse.......................... 27,937 (4) 1.10%
Peter T. Eshelman....................... 13,968 (5) *
Michael S. Gouloff...................... 13,968 (5) *
Craig S. Hartman........................ 100,040 (6) 3.91%
Jerome F. Henry, Jr..................... 28,450 (7) 1.12%
Kevin J. Himmelhaver.................... 10,800 (8) *
R.V. Prasad Mantravadi, M.D............. 6,880 *
Michael J. Mirro, M.D................... 19,132 (9) *
Debra A. Niezer......................... 3,794 (10) *
William G. Niezer....................... 15,318 (11) *
Maurice D. O'Daniel..................... 62,937 (12) 2.48%
Leonard I. Rifkin....................... 37,715 (13) 1.48%
Joseph D. Ruffolo....................... 21,568 (14) *
Donald F. Schenkel...................... 32,653 (15) 1.28%
Larry L. Smith.......................... 7,984 (16) *
John V. Tippmann, Sr.................... 37,450 (7) 1.47%
J. Richard Tomkinson.................... 13,968 (5) *
Irene A. Walters........................ 13,968 (17) *
All directors and executive officers of
the Company as a group (19 Persons) 481,030 (18) 18.08%
</TABLE>
- ---------------
* Less than 1%
(1) Does not include shares subject to stock options which are not
exercisable within 60 days.
(2) The percentages shown are based on the 2,530,000 shares outstanding as
of February 15, 2000, plus, for each person or group, the number of
shares that the person or group has the right to acquire within 60 days
pursuant to options granted under the Company's 1998 Stock Option and
Incentive Plan (the "1998 Stock Option Plan").
(3) Includes 7,500 shares held by Mr. Brown's wife and children and
presently exercisable stock options to purchase 5,000 shares granted by
the Company.
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<PAGE> 6
(4) Includes presently exercisable stock options to purchase 7,937 shares
granted by the Company.
(5) Includes presently exercisable stock options to purchase 3,968 shares
granted by the Company.
(6) Includes 200 shares owned by Mr. Hartman's wife and includes presently
exercisable stock options to purchase 27,340 shares granted by the
Company.
(7) Includes presently exercisable stock options to purchase 7,450 shares
granted by the Company.
(8) Includes presently exercisable stock options to purchase 5,000 shares
granted by the Company.
(9) Includes presently exercisable stock options to purchase 6,132 shares
granted by the Company.
(10) Includes presently exercisable stock options to purchase 794 shares
granted by the Company.
(11) Includes 475 shares owned by Mr. Niezer's wife, 400 shares owned by Mr.
Niezer's children and presently exercisable stock options to purchase
3,968 shares granted by the Company.
(12) Includes 35,000 shares held by Mr. O'Daniel's wife and presently
exercisable stock options to purchase 7,937 shares granted by the
Company.
(13) Includes presently exercisable stock options to purchase 10,715 shares
granted by the Company.
(14) Includes 1,000 shares owned by Mr. Ruffolo's wife, 100 shares owned by
Mr. Ruffolo's children and presently exercisable stock options to
purchase 6,468 shares granted by the Company.
(15) Includes presently exercisable stock options to purchase 15,953 shares
granted by the Company.
(16) Includes presently exercisable stock options to purchase 1,984 shares
granted by the Company.
(17) Includes presently exercisable stock options to purchase 3,968 shares
granted by the Company. Ms. Walters disclaims beneficial ownership of
5,000 shares owned by Ms. Walters' husband.
(18) Includes presently exercisable options to purchase 130,000 shares
granted by the Company.
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<PAGE> 7
INFORMATION ABOUT DIRECTORS, NOMINEES, AND EXECUTIVE OFFICERS
The following information is furnished with respect to each continuing
director, nominee as a director, and executive officer of the Company. Each of
the continuing directors and nominees is currently a director of the Company as
well as a director of Tower Bank & Trust Company ("the Bank") which is the
Company's subsidiary.
<TABLE>
<CAPTION>
HAS SERVED YEAR WHEN TERM
POSITION(S) WITH POSITION(S) AS AS A
NAME AGE TOWER FINANCIAL WITH TOWER BANK DIRECTOR SINCE DIRECTOR EXPIRES
- ---- --- --------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Curtis A. Brown................... 44 Chief Lending Officer Chief Operating
Officer and Chief
Lending Officer
Keith E. Busse.................... 56 Director Director 1998 2002
Peter T. Eshelman................. 46 Director Director 1998 2002
Michael S. Gouloff................ 52 Director Director 1998 2002
Craig S. Hartman.................. 45 Director Director 1998 2000
Jerome F. Henry, Jr............... 49 Director Director 1999 2000
Kevin J. Himmelhaver.............. 44 Chief Financial Chief Financial
Officer and Officer and
Secretary Secretary
R.V. Prasad Mantravadi, M.D....... 54 Director Director 1999 2001
Michael J. Mirro, M.D............. 51 Director Director 1998 2001
Debra A. Niezer................... 45 Director Director 1998 2000
William G. Niezer................. 49 Director Director 1998 2001
Maurice D. O'Daniel............... 68 Director Director 1998 2000
Leonard I. Rifkin................. 68 Director Director 1998 2001
Joseph D. Ruffolo................. 58 Director Director 1998 2000
Donald F. Schenkel................ 58 Chairman of the Chairman of the 1998 2002
Board, President, Board, President,
Chief Executive Chief Executive
Officer and Director Officer and Director
Larry L. Smith.................... 51 Director Director 1998 2001
John V. Tippmann, Sr.............. 58 Director Director 1999 2001
J. Richard Tomkinson.............. 52 Director Director 1998 2002
Irene A. Walters................. 57 Director Director 1998 2002
</TABLE>
The business experience of each of the directors, nominees and
executive officers of the Company for at least the past five years is summarized
below:
Curtis A. Brown is the Chief Lending Officer of the Company and the
Chief Operating Officer and Chief Lending Officer of the Bank, positions he has
held since October 1998. He is a native of Fort Wayne and has over 22 years of
experience in the banking industry. From 1993 until 1998, Mr. Brown managed
corporate banking groups for NBD Bank, Indiana in Fort Wayne, holding the
positions of First Vice President and Group Head.
Keith E. Busse is a director of the Company and the Bank. Since
September 1993, Mr. Busse has served as Chief Executive Officer of Steel
Dynamics, Inc., a primary steel-making company headquartered in Butler, Indiana,
and formed by Mr. Busse and others in 1993. Mr. Busse is also a director of
Steel Dynamics, Inc., and Qualitech Steel Corporation.
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<PAGE> 8
Peter T. Eshelman is a director of the Company and the Bank. Mr.
Eshelman is President and Chief Executive Officer of American Specialty
Companies, Inc., a sports and entertainment risk management company based in
Roanoke, Indiana, of which he is the majority shareholder. He has held these
positions since 1989.
Michael S. Gouloff is a director of the Company and the Bank. Mr.
Gouloff has served as President of Schenkel Schultz Architects, a national
architectural firm known for the design of educational and correctional
facilities, since 1985 and has been employed by the firm since 1973.
Craig S. Hartman is a director of the Company and the Bank. Mr. Hartman
is the chairman of the board of Preferred, Inc., an industrial roofing and
painting company. He founded the company in 1973 and served as its chief
executive officer.
Jerome F. Henry, Jr. is a director of the Company and the Bank. Mr.
Henry founded and is the President of Midwest Pipe & Steel, Inc., a company
specializing in steel service, industrial scrap and steel brokerage. Mr. Henry
has held this position since 1975. Mr. Henry is also President of Paragon Tube
Corporation, a manufacturer of steel tubing, and Paragon Steel Trading, Inc., a
distributor of steel coils. Each company is headquartered in Fort Wayne. He has
held these respective positions since 1990 and 1995.
Kevin J. Himmelhaver is the Chief Financial Officer and Secretary of
the Company and the Bank, positions he has held since October 1998 and November
1998, respectively. Mr. Himmelhaver has over 20 years of banking experience in
the Fort Wayne area. From 1993 to 1998, Mr. Himmelhaver served as Senior Vice
President and Chief Financial Officer and as a director of Norwest Bank Indiana,
N.A., and Norwest Bank Ohio, N.A.
R. V. Prasad Mantravadi, M.D. is a director of the Company and the
Bank. Dr. Mantravadi has been a partner with Radiation Oncology Association P.C.
since 1983. Radiation Oncology is a physicians' group providing health services
to the entire Northeast Indiana Region.
Michael J. Mirro, M.D. is a director of the Company and the Bank. Dr.
Mirro has been a partner of Fort Wayne Cardiology since 1982. In 1998 Fort Wayne
Cardiology merged with a multi-specialty internal medicine group to form Indiana
Medical Associates, LLC. Indiana Medical Associates, LLC is a group of 46
physicians providing health services to the entire Northeast Indiana Region.
Debra A. Niezer is a director of the Company and the Bank. Ms. Niezer
is the Vice President and Assistant Treasurer of AALCO Distributing Company, a
beer distributor in Fort Wayne. She has held these positions since April 1995.
From January 1989 to March 1995, Ms. Niezer served as Vice President and
Employee Benefits Officer for NBD Bank, Indiana in Fort Wayne.
William G. Niezer is a director of the Company and the Bank. Mr. Niezer
is the President and Chief Executive Officer of Acordia of Indiana, Inc., an
insurance broker, positions he has held since September 1997. Mr. Niezer
previously served as President and Chief Executive Officer of Acordia of
Northeast Indiana, Inc., an insurance broker and third-party administrator, from
February 1995 to September 1997 and as Director of Property & Casualty
Operations of Acordia of Northeast Indiana, Inc., from October 1994 to February
1995.
Maurice D. O'Daniel is a director of the Company and the Bank. Mr.
O'Daniel is the Chairman and Chief Executive Officer of O'Daniel Automotive,
Inc., an automobile dealership with four locations in the Fort Wayne area. Mr.
O'Daniel has served in these positions since July 1979.
Leonard I. Rifkin is a director of the Company and the Bank. Mr. Rifkin
served as Chief Executive Officer and President of OmniSource, Inc., from 1970
until 1996, when he was appointed Chairman and Chief Executive Officer,
positions he currently holds. OmniSource is a scrap metal processing, trading
and brokerage company that specializes in scrap management programs throughout
the United States and Canada. Mr. Rifkin is also a director of Steel Dynamics,
Inc., and Qualitech Steel Corporation.
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<PAGE> 9
Joseph D. Ruffolo is a director of the Company and the Bank. Since
1993, Mr. Ruffolo has been a member of Ruffolo Richard LLC, a business
investment firm located in Fort Wayne. Ruffolo Richard LLC specializes in
management buy-outs, capital sourcing and acquisitions.
Donald F. Schenkel is the President and Chief Executive Officer and a
director of the Company and the Bank, positions he has held since July 1998, and
was elected the Chairman of the Board of Tower Financial and Tower Bank in
October 1998. Mr. Schenkel is a native of Fort Wayne and has over 30 years of
experience in the banking industry. Prior to joining the Company, he served as
First Vice President of NBD Bank, Indiana. From 1993 to 1998, he served as
Division Head of Retail Banking and Private Banking & Investments for NBD Bank,
Indiana.
Larry L. Smith is a director of the Company and the Bank. Mr. Smith has
served since March 1993 as President and Chief Executive Officer of QCOnics,
Inc., an automotive supplier based in Angola, Indiana.
John V. Tippmann, Sr. is a director of the Company and the Bank. Mr.
Tippmann is Chairman of the Tippmann Group, a position he has held since 1985.
The Tippmann Group, through its three subsidiaries, operates frozen/refrigerated
distribution warehouses, specializes in the design and construction of frozen
food process and cold storage facilities, and manages approximately 41 buildings
throughout the Midwest.
J. Richard Tomkinson is a director of the Company and the Bank. Mr.
Tomkinson is the owner and serves as President of Tomkinson Automotive Group. He
has served in this position since 1979. Tomkinson Automotive Group operates two
Fort Wayne area automobile dealerships. Mr. Tomkinson also co-owns and is
President of Lincoln Graphics, Inc., a Fort Wayne graphics design and
reproduction company serving architects and construction companies in Northeast
Indiana, and co-owner and Vice President of Gallatin Highlands Corporation, a
Big Sky, Montana real estate development company.
Irene A. Walters is a director of the Company and the Bank. Ms. Walters
is the Director of University Relations and Communications at Indiana
University-Purdue University Fort Wayne. Ms. Walters has held this position
since 1995. Prior to that time, from 1990 to 1995, Ms. Walters was the Executive
Director of the Fort Wayne Bicentennial Celebration Council.
Mr. Rifkin is the first cousin of Ms. Walters' spouse. Ms. Niezer is
the sister-in-law of Mr. Niezer. There are no other family relationships among
the directors and executive officers of the Company.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company has a standing Audit Committee, Compensation Committee,
Executive Committee, Loan and Investment Committee, and Trust Committee of the
Board of Directors. The Company's Board of Directors does not have a Nominating
Committee.
The members of the Audit Committee are Jerome F. Henry, Jr.; R.V.
Prasad Mantravadi, M.D.; William G. Niezer; and J. Richard Tomkinson. The Audit
Committee's responsibilities include recommending to the Board of Directors the
selection of independent accountants, approving the scope of audit and non-audit
services performed by the independent accountants, reviewing the results of
their audit, reviewing the Company's internal auditing activities and financial
statements, reviewing its system of accounting controls and recordkeeping, and
reviewing all potential conflict of interest situations. See "Related Party
Transactions." The Audit Committee held two meetings during 1999.
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<PAGE> 10
The members of the Compensation Committee are Keith E. Busse, Peter T.
Eshelman, Michael S. Gouloff, Craig S. Hartman, and Joseph D. Ruffolo. The
Compensation Committee's responsibilities include considering and recommending
to the Board of Directors any changes in compensation and benefits for officers
of the Company. The Compensation Committee also administers the 1998 Stock
Option Plan. The Compensation Committee held six meetings during 1999.
The members of the Executive Committee are Keith E. Busse, Peter T.
Eshelman, Michael S. Gouloff, Craig S. Hartman, Joseph D. Ruffolo, and Donald F.
Schenkel. The Executive Committee responsibilities include considering and
recommending to the Board of Directors issues concerning strategic planning and
direction, business line expansion and any other major issues. The Executive
Committee held nine meetings during 1999.
The members of the Loan and Investment Committee are Michael J. Mirro,
M.D.; Maurice D. O'Daniel; Joseph D. Ruffolo; and Larry L. Smith. The Loan and
Investment Committee responsibilities include the oversight of Loan, Investment
and Asset Liability Committee operating policies. The Committee reviews Reg O
credits, credits that exceed in-house limits and loan review procedures. The
Committee also reviews investment activity and the Company's liquidity and rate
sensitivity positions. The Loan and Investment Committee held nine meetings
during 1999.
The members of the Trust Committee are Debra A. Niezer; Leonard I.
Rifkin; Donald F. Schenkel; John V. Tippmann, Sr.; and Irene A. Walters. The
Trust Committee has the responsibility to oversee the trust operating policies
and the activities of trust services including investment fund strategies and
fee schedules. The Trust Committee held one meeting during 1999.
During 1999, there were a total of 10 meetings of the Board of
Directors of the Company and the Bank. Each director attended at least 75% of
the meetings of the Board of Directors and each committee of the Board on which
the director served except Peter T. Eshelman, 70%; R.V. Prasad Mantravadi, M.D.,
67%; Michael J. Mirro, M.D., 47%; Leonard I. Rifkin, 50%; Larry L.
Smith, 58%; J. Richard Tomkinson, 58%; and Irene A. Walters, 73%.
COMPENSATION OF DIRECTORS
On January 29, 1999, the Company granted non-qualified options to
purchase an aggregate of 150,000 shares of common stock under the 1998 Stock
Option Plan to the members of the Board of Directors of the Company on such
date. The options were granted pro rata based upon the number of shares of
common stock purchased in the initial public offering by each director at that
time as listed below. One-third of the options granted to each director vested
on July 29, 1999, an additional one-third increment vested on January 29, 2000,
and the final one-third increment will vest on January 29, 2001. These options
were granted with an exercise price of $10.00, which is equal to the initial
public offering price of the Company's common stock on the date of grant. The
options have a term of 10 years.
In addition, on January 4, 1999, directors Joseph D. Ruffolo and Craig
S. Hartman received options to purchase 2,500 and 7,500 shares, respectively, as
compensation for consulting services provided to the Company and the Bank during
the Company's development phase. These options became exercisable upon the
closing of the initial public offering and expire 10 years from the date of
grant. The options have an exercise price equal to the initial public offering
price of $10.00 per share.
<TABLE>
<CAPTION>
Name Number of Shares Underlying Options
---- -----------------------------------
<S> <C>
Keith E. Busse 14,151
Peter T. Eshelman 7,076
Michael S. Gouloff 7,076
Craig S. Hartman 42,877
Michael J. Mirro, M.D. 9,198
Debra A. Niezer 1,415
William G. Niezer 7,076
Maurice D. O'Daniel 14,151
Leonard I. Rifkin 19,102
Joseph D. Ruffolo 9,576
Donald F. Schenkel 10,613
Larry L. Smith 3,537
J. Richard Tomkinson 7,076
Irene A. Walters 7,076
</TABLE>
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<PAGE> 11
No other compensation was paid to any director of the Company or the
Bank for his or her services during 1999. The Company may determine that
reasonable fees or compensation should be paid to directors (although it has no
present plans to do so). In that event, it is likely that directors of the
Company and the Bank would receive compensation, such as meeting fees, which
would be consistent with the compensation paid to directors of financial
institution holding companies and banks of similar size.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and persons who own more than 10% of
common stock, to file reports of ownership with the Securities and Exchange
Commission. Such persons also are required to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during fiscal 1999 all
filing requirements applicable to its executive officers, directors and any
greater than 10% shareholders were complied with except that William G. Niezer
and John V. Tippmann, Sr. each failed to file a Form 4 to report a purchase
transaction. The respective Forms 4 were subsequently filed after the due date.
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<PAGE> 12
COMPENSATION OF EXECUTIVE OFFICERS
AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid or accrued during the period from July 8,1998 (inception) to
December 31, 1998 and the year ended December 31, 1999, to the Company's chief
executive officer and each of the Company's two other most highly compensated
executive officers (the "Named Executive Officers"), based on salaries and
bonuses earned during 1999. No other officers of the Company or the Bank earned
more than $100,000 in annual compensation during 1999.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options(1) Compensation
--------------------------- ---- ------ ----- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Donald F. Schenkel................................ 1999 $145,000 $50,000 $16,064 (2) 50,613 $ 52,542 (3)
Chairman of the Board, President, and 1998 66,923 0 9,481 (4) 0 101,792 (5)
Chief Executive Officer of the Company
and the Bank
Curtis A. Brown................................... 1999 115,000 27,500 5,319 (6) 20,000 35,000 (7)
Chief Lending Officer of the Company 1998 23,960 0 4,140 (8) 0 0
and the Bank and Chief Operating
Officer of the Bank
Kevin J. Himmelhaver.............................. 1999 105,000 27,500 2,950 (9) 20,000 20,000 (7)
Chief Financial Officer and Secretary 1998 26,250 0 845 (10) 0 20,000 (11)
of the Company and the Bank
</TABLE>
(1) Options to acquire shares of common stock. The Company has never
granted SARs or restricted stock awards.
(2) Includes $9,264 for a car allowance and $6,800 for club dues.
(3) Includes $50,750 incentive bonus paid upon the commencement of business
of the Bank and $1,792 in life insurance premiums.
(4) Includes $4,256 for a car allowance and $5,225 for club dues.
(5) Includes signing bonus of $100,000 paid pursuant to Mr. Schenkel's
employment agreement and life insurance premiums paid by the Company in
the amount of $1,792.
(6) Includes $4,569 for a car allowance and $750 for club dues.
(7) Represents incentive bonus paid upon the commencement of business of
the Bank.
(8) Includes $4,140 for club dues.
(9) Includes $2,950 for club dues.
(10) Includes $845 for club dues.
(11) Represents signing bonus paid to Mr. Himmelhaver pursuant to his
employment agreement for accrued benefits forfeited by him upon leaving
his previous employer.
10
<PAGE> 13
1998 STOCK OPTION AND INCENTIVE PLAN
On December 14, 1998, the Board of Directors and the sole stockholder
of the Company adopted the 1998 Stock Option and Incentive Plan (the "1998 Stock
Option Plan"). Under the 1998 Stock Option Plan, the Company may award qualified
and non-qualified stock options and performance shares to employees and
directors of the Company. The aggregate number of shares of common stock that
may be awarded under the 1998 Stock Option Plan is 310,000, subject to
adjustment in certain events. No individual participant may receive awards for
more than 75,000 shares in any calendar year. As of December 31, 1999, options
to purchase 305,430 shares of common stock were outstanding under the 1998 Stock
Option Plan.
The 1998 Stock Option Plan is administered by the Compensation
Committee. Subject to the terms of the 1998 Stock Option Plan, the Compensation
Committee has the sole discretion and authority to select those persons to whom
awards will be made, to designate the number of shares to be covered by each
award, to establish vesting schedules, to specify all other terms of the awards
(subject to certain restrictions) and to interpret the 1998 Stock Option Plan.
With respect to stock options under the 1998 Stock Option Plan that are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code, the option price must be at least 100% (or, in the case
of a holder of more than 10% of the common stock, 110%) of the fair market value
of a share of common stock on the date of the grant of the stock option. The
Compensation Committee will establish, at the time the options are granted, the
exercise price of options that do not qualify as incentive stock options
("non-qualified stock options"), which may not be less than 100% of the fair
market value of a share of common stock on the date of grant. No incentive stock
option granted under the 1998 Stock Option Plan may be exercised more than 10
years (or, in the case of a holder of more than 10% of the common stock, five
years) from the date of grant or such shorter period as the Compensation
Committee may determine at the time of the grant, which period may not be more
than 10 years from the date of grant. Under the 1998 Stock Option Plan, the
Compensation Committee may also make awards of performance shares, in which case
the grantee would be awarded shares of common stock, subject to the Company's
satisfaction of performance goals determined by the Compensation Committee.
The following table provides information on options granted by the
Company under the 1998 Stock Option Plan to the Named Executive Officers during
the year ended December 31, 1999:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------
Number of Shares % of Total
Underlying Options Granted Exercise
Options to Employees Price Expiration
Name Granted in 1999 Per Share (1) Date
---- ---------------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
Donald F. Schenkel..................... 40,000 (2) 25.3 % $ 10.00 1/04/09
10,613 (3) 6.7 10.00 1/29/09
Curtis A. Brown........................ 20,000 (2) 12.7 10.00 1/04/09
Kevin J. Himmelhaver................... 20,000 (2) 12.7 10.00 1/04/09
</TABLE>
(1) The exercise price may be paid in cash, by delivery of previously owned
shares, or a combination thereof.
(2) Consists of incentive stock options which were granted at the initial
public offering price. The options are exercisable 25% on January 4,
2000; 25% on January 4, 2001; 25% on January 4, 2002; and 25% on
January 4, 2003.
(3) Consists of options which were granted to directors of the Company at
the initial public offering price. These options are exercisable in
one-third increments on July 29, 1999; January 29, 2000; and January
29, 2001.
11
<PAGE> 14
The following table provides information on the exercise of stock
options during the year ended December 31, 1999 by the Named Executive Officers
and the value of unexercised options at December 31, 1999:
AGGREGATE STOCK OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Shares Unexercised Unexercised In-the-Money
Acquired on Value Options at 12/31/99 Options at 12/31/99
Name Exercise Realized Exercisable / Unexercisable Exercisable / Unexercisable (1)
---- -------- -------- --------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald F. Schenkel.......... 0 0 13,537 37,076 0 0
Curtis A. Brown............. 0 0 5,000 15,000 0 0
Kevin J. Himmelhaver........ 0 0 5,000 15,000 0 0
</TABLE>
- -----------------
(1) The average of the closing bid and asked prices reported on the OTC
Bulletin Board on December 31, 1999 was $6.875. The exercise prices of
the options in the table exceeded $6.875 and therefore were not
"in-the-money."
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements effective December
21, 1998, with Messrs. Schenkel, Himmelhaver and Brown, each for an initial term
of three years with automatic one-year renewals. Each agreement provides that,
if the executive's employment is terminated by the Company without cause, the
Company will pay to the executive the aggregate amount of the salary he would be
entitled to receive under the agreement for the balance of the employment term,
provided that such payment will not be less than one year's salary at the
then-effective rate being paid to the executive. The agreements prohibit the
officers from competing with the Company during the periods of their employment
and for an additional 24 months thereafter (12 months if their employment is
terminated by the Company without cause).
The agreements provide for initial annual salaries of $145,000,
$105,000 and $115,000 for Messrs. Schenkel, Himmelhaver and Brown, respectively,
each of which may be increased from time to time by the Board of Directors. Mr.
Schenkel's agreement provides that he is eligible to qualify for an annual
performance bonus equal to a minimum of 30% (and up to a maximum of 100%) of his
annual salary upon compliance with goals set from time to time by the
Compensation Committee in its sole discretion. Mr. Himmelhaver's agreement
entitled him to (a) a signing bonus of $20,000, payable no later than January
31, 1999, to compensate him for accrued benefits forfeited by him upon leaving
his previous employer to accept his positions with the Company and (b) an
incentive bonus payment of $10,000 payable within 30 days after the Bank
commenced business. Mr. Brown's agreement entitled him to an incentive bonus
payment of $25,000 payable within 30 days after the Bank commenced business. The
Company paid all of these bonuses during February of 1999.
RELATED PARTY TRANSACTIONS
Since its inception, the Company has engaged in transactions with
entities controlled by its directors and their affiliates. Management believes
that each of these transactions was on terms no less favorable to the Company
than those that could be obtained from an unaffiliated third party. The Company
anticipates that it will continue to engage in certain of these transactions if
economically advantageous to the Company. Future
12
<PAGE> 15
related party transactions are subject to the review and approval of the
Company's Audit Committee, which is composed exclusively of outside directors.
LOANS FROM DIRECTORS
During the development phase of the Company, each of the initial
directors made a loan to the Company to fund start-up expenses. These loans
total $760,000. Each loan was evidenced by a promissory note payable to the
director, which was non-interest bearing and was due on or before March 1, 1999.
The Company repaid the loans on January 29, 1999 following the completion of its
initial public offering.
BANKING TRANSACTIONS
Directors and officers of the Company and the Bank and the companies
with which they are associated have banking and other transactions with the
Company and the Bank in the ordinary course of business. Any loans and
commitments to lend to such affiliated persons or entities are made in
accordance with all applicable laws and regulations and on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unaffiliated parties of similar
creditworthiness and may not involve more than normal risk or present other
unfavorable features to the Company and the Bank. Management believes that all
transactions between the Company or the Bank on one hand, and any officer,
director, principal shareholder, or other affiliate of the Company or the Bank
on the other hand, are on terms no less favorable to the Company or the Bank
than could be obtained on an arm's-length basis from unaffiliated third parties.
As of December 31, 1999, the Bank had outstanding 33 loans to the directors and
executive officers of the Company totaling $10,022,412 and an aggregate amount
under commitment totaling $10,980,651.
LEASE OF HEADQUARTERS BUILDING
The Company leases its headquarters facility, which contains the only
current branch of the Bank, from Tippmann Properties, Inc., agent for director
John V. Tippmann, Sr. The lease is a 10-year lease which commenced on January 1,
1999, with annual rental payments of $9.75 per square foot for the first two
years of the lease and fixed increases at the rate of $1.25 per square foot
every two years thereafter, ending at $14.75 per square foot for the last two
years of the lease. The lease provides for one renewal of 10 years at then
prevailing market rates. Subsequent addenda to the lease were signed during 1999
as the Company expanded its staff and needed additional space. These addenda
contain similar lease rates and have identical expiration dates as the original
lease agreement. During 1999, the Company paid Tippmann Properties, Inc.
approximately $148,518 for rent and various building expenses.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected PricewaterhouseCoopers LLP as the
Corporation's principal independent auditors for the year ending December 31,
2000. The selection of PricewaterhouseCoopers LLP as independent auditors for
the Company will be submitted to the meeting in order to permit the shareholders
to express their approval or disapproval. In the event of a negative vote, a
selection of other auditors will be made by the Board. Representatives of
PricewaterhouseCoopers LLP are expected to be present at the meeting, will be
given an opportunity to make a statement if they desire and will respond to
appropriate questions by shareholders. Notwithstanding approval by the
shareholders, the Board of Directors reserves the right to replace the auditors
at any time upon the recommendation of the Audit Committee of the Board of
Directors.
SHAREHOLDERS' PROPOSALS FOR 2001 ANNUAL MEETING
A proposal submitted by a shareholder for the 2001 Annual Meeting of
Shareholders must be sent to the Secretary of the Company, 116 East Berry
Street, Fort Wayne, Indiana, 46802, and received by November 18, 2000 in order
to be eligible to be included in the Company's Proxy Statement for the meeting.
13
<PAGE> 16
OTHER MATTERS
The Board of Directors does not know of any other matters to be brought
before the Annual Meeting. If other matters are presented upon which a vote may
properly be taken, it is the intention of the persons named in the proxy to vote
the proxies in accordance with their best judgment.
14
<PAGE> 17
PROXY
TOWER FINANCIAL CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 18, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of shares of Common Stock of Tower Financial
Corporation (the "Company") hereby appoints Donald F. Schenkel and Kevin J.
Himmelhaver and each of them, the Proxies of the undersigned, with full power
of substitution, to attend and represent the undersigned at the Annual Meeting
of Shareholders of the Company to be held at 116 East Berry Street, Fort Wayne,
Indiana, on Tuesday, April 18, 2000, at 5:00 P.M., and at any adjournment or
adjournments thereof, and to vote all of such shares that the undersigned is
entitled to vote at such Annual Meeting or at any adjournment or postponement
thereof, as follows on the reverse side.
The undersigned hereby acknowledges receipt of the Notice of the Annual Meeting
of Shareholders, the Proxy Statement furnished herewith, and the 1999 Annual
Report to Shareholders. Any proxy heretofore given to vote the shares which the
undersigned is entitled to vote at the Annual Meeting of Shareholders is hereby
revoked.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
[X] Please mark
votes as in
this example.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED HEREON AND, IN THE ABSENCE OF SPECIFICATION, WILL BE VOTED
FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR ALL OTHER PROPOSALS.
1. ELECTION OF DIRECTORS. To elect five directors of the FOR AGAINST ABSTAIN
Company to serve until the 2003 annual meeting of shareholders. 2. PROPOSAL TO RATIFY THE
APPOINTMENT OF Pricewater- --- --- ---
Nominees: (01) Craig S. Hartman, (02) Jerome F. Henry, Jr., houseCoopers LLP, as auditors of
(03) Debra A. Niezer, (04) Maurice D. O'Daniel, and the Company for the year ending
(05) Joseph D. Ruffolo. December 31, 2000.
For all nominees Withheld from all nominees 3. In their discretion, the Proxies are authorized to vote
--- --- upon such other matters (none known at the time of
solicitation of this proxy) as may properly come before
[ ] the Annual Meeting or any adjournment or postponement
--------------------------------------------------- thereof.
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please fill in, sign, date and return the proxy card promptly
using the enclosed envelope.
NOTE: Please sign exactly as name appears hereon. When shares
are held by two or more persons, all of them should sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign the full corporate name by a duly authorized
officer. If a partnership, please sign in partnership name by
authorized person. (Please note any change of address on this
proxy).
Signature: Date: Signature: Date:
------------------------------- ------------------- -------------------------------- -----------------
</TABLE>
