<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 Section240.14a-11(c) or
Section240.14a-12
MERCHANTS 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):
/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:
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(2) Aggregate number of securities to which transaction applies:
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(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>
[LOGO]
March 23, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Merchants Bancorp, Inc. to be held at the Copley Theatre, North Island
Center, 8 East Galena Boulevard, Aurora, Illinois on Tuesday, April 21, 1998 at
9:30 a.m.
As more fully described in the attached Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement, the principal business to be
addressed at the meeting is the election of directors and the ratification of
the appointment of Crowe, Chizek and Company LLP as independent public
accountants for the current fiscal year. In addition, we will review with you
the affairs and progress of the Company during the past fiscal year.
Your participation at this meeting is very important, regardless of the
number of shares you hold. Whether or not you contemplate attending the meeting,
we would appreciate your dating, signing and mailing the enclosed proxy as
promptly as possible in the accompanying envelope. If you attend the meeting,
you may revoke your proxy and vote your shares in person.
We look forward with pleasure to seeing and visiting with you at the
meeting.
Sincerely,
[SIGNATURE]
CALVIN R. MYERS
CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
1851 WEST GALENA BOULEVARD - AURORA, ILLINOIS 60507 - (630) 896-9000
<PAGE>
[LOGO]
1851 WEST GALENA BOULEVARD
AURORA, ILLINOIS 60507-0289
(630) 896-9000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 21, 1998
TO THE STOCKHOLDERS OF MERCHANTS BANCORP, INC., AURORA, ILLINOIS:
The Annual Meeting of Stockholders of Merchants Bancorp, Inc. (the
"Company") will be held at the Copley Theatre, North Island Center, 8 East
Galena Boulevard, Aurora, Illinois 60506, on Tuesday, April 21, 1998, at 9:30
a.m., for the following purposes:
1. To elect three individuals to serve in Class B for a term of three
years.
2. To ratify the appointment of Crowe, Chizek and Company LLP as
independent public accountants for the Company for the year ending
December 31, 1998.
3. To act upon such other business as may properly come before the meeting
or any adjournments or postponements thereof.
Stockholders of record on the books of the Company at the close of business
on March 9, 1998, will be entitled to vote at the meeting. STOCKHOLDERS ARE
REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING. Stockholders giving
proxies retain the right to revoke them at any time before they are voted by
written notice of revocation to the Secretary of the Company, and stockholders
present at the meeting may revoke their proxies and vote in person.
For further information concerning individuals nominated as directors, use
of the proxy, and other related matters, you are respectfully urged to read the
Proxy Statement on the following pages. Enclosed is a copy of the Company's 1997
Annual Report to Stockholders.
By order of the Board of Directors,
[SIGNATURE]
DANA K. HOPP
ADMINISTRATIVE ASSISTANT
AND SECRETARY-TREASURER
Aurora, Illinois
March 23, 1998
<PAGE>
MERCHANTS BANCORP, INC.
1851 WEST GALENA BOULEVARD,
AURORA, ILLINOIS 60507-0289
(630) 896-9000
PROXY STATEMENT
This Proxy Statement is furnished to stockholders of record on March 9,
1998, of Merchants Bancorp, Inc. (the "Company") in connection with the
solicitation on behalf of the Board of Directors of proxies to be used at the
Annual Meeting of Stockholders, or any adjournments or postponements thereof.
The meeting will be held at the Copley Theatre, North Island Center, 8 East
Galena Boulevard, Aurora, Illinois 60506, on Tuesday, April 21, 1998, at 9:30
a.m. The Company is a bank holding company which is the parent of The Merchants
National Bank of Aurora, Aurora, Illinois ("Merchants Bank"), the Fox Valley
Bank, St. Charles, Illinois ("Fox Valley Bank") and the Hinckley State Bank,
Hinckley, Illinois ("Hinckley Bank").
The Board of Directors would like to have all stockholders represented at
the meeting. Whether or not you plan to attend, please complete, sign and date
the enclosed proxy and return it in the accompanying postpaid return envelope as
promptly as possible. Stockholders giving proxies retain the right to revoke
them at any time before they are voted by written notice of revocation to the
Secretary of the Company, and stockholders present at the meeting may revoke
their proxy and vote in person. A proxy, when properly executed and not so
revoked, will be voted in accordance therewith. A majority of the shares of the
Common Stock, present in person or represented by proxy, shall constitute a
quorum for purposes of the meeting. Abstentions and broker non-votes will be
counted for purposes of determining a quorum.
Stockholders of record on the books of the Company, at the close of business
on March 9, 1998, will be entitled to vote at the meeting. As of March 9, 1998,
the Company had outstanding 5,168,557 shares of Common Stock, par value $1.00
per share, with each share entitling its owner to one vote on each matter
submitted to a vote at the Annual Meeting. In all matters other than the
election of directors, the affirmative vote of the majority of shares present in
person or represented by proxy at the meeting and entitled to vote on the
subject matter shall be required to constitute stockholder approval. Directors
shall be elected by a plurality of the votes present in person or represented by
proxy at the meeting and entitled to vote. Abstentions will be treated as votes
against a proposal and broker non-votes will have no effect on the vote.
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited personally or by telephone, courier
or facsimile transmission by officers, directors and certain employees of the
Company who will not be specially compensated for such solicitation. This Proxy
Statement and the accompanying proxy card were mailed or given to stockholders
commencing on or about March 23, 1998.
ELECTION OF DIRECTORS
At the Annual Meeting of the Stockholders to be held on April 21, 1998, the
stockholders will be entitled to elect three (3) Class B directors for a term
expiring in 2001. The directors of the Company are divided into three classes
having staggered terms of three years. All of the nominees for election as Class
B directors are incumbent directors. The Company has no knowledge that any of
the nominees will refuse or be unable to serve, but if any of the nominees
becomes unavailable for election, the holders of the proxies reserve the right
to substitute another person of their choice as a nominee when voting at the
meeting.
Set forth below is information concerning the nominees for election and for
the other persons whose terms of office will continue after the meeting,
including age, year first elected a director and business experience during the
previous five years of each, as of March 9, 1998. Each of the three nominees for
Class B director, if elected at the Annual Meeting of Stockholders, will serve
as a Class B director for a
<PAGE>
three year term expiring in 2001. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE YOUR SHARES FOR EACH OF THE NOMINEES.
NOMINEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR THE PAST YEAR ELECTED
NAME AND AGE FIVE YEARS AND OTHER DIRECTORSHIPS TO THE BOARD
- ------------------------------------ ------------------------------------------------------------- ---------------
<S> <C> <C>
CLASS B
(TERM EXPIRES 2001)
William C. Glenn ................... President and Director, Olsson Roofing Company, Inc. (roofing 1982
(Age 59) and sheet metal contractor); Director, Merchants National
Bank (1977-present)
John M. Lies ....................... Vice President and Treasurer, Arnold Lies Co. (real estate 1995
(Age 51) investment and management company)(1969-present); Director,
Merchants National Bank (1989-present)
Norman L. Titiner .................. President, Carpetville, Inc. (retail floor coverings) 1989
(Age 64) (1966-present); Director, Merchants National Bank
(1988-present)
CONTINUING DIRECTORS
CLASS C
(TERM EXPIRES 1999)
C. Tell Coffey ..................... Self employed, construction business (1985-present); 1982
(Age 69) Director, Merchants National Bank (1981-present)
Calvin R. Myers .................... Chairman of the Board, President and CEO of Merchants 1986
(Age 55) Bancorp, Inc. and of The Merchants National Bank of Aurora;
Director and President, VBH Corp. (1996-present); Director
and President, Valley Banc Services Corp. (1996-present);
Director, Fox Valley Bank of St. Charles (1996-present)
John J. Swalec ..................... President, Waubonsee Community College (1981-present); 1988
(Age 63) Director, Merchants National Bank (1987-present)
CLASS A
(TERM EXPIRES 2000)
William F. Hejna, M.D .............. Senior Attending Surgeon, Rush-Presbyterian-St. Luke's 1996
(Age 65) Medical Center, Chicago, Illinois; Professor, Rush Medical
College and Rush College of Health Sciences; Managing
Partner, Pain & Rehabilitation Clinic of Chicago; Director,
MacNeal Memorial Hospital Association
James D. Pearson ................... President and Director, Aurora Metals Division, LLC 1982
(Age 60) (non-ferrous foundry) (1981-present); Director, Merchants
National Bank (1982-present)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR THE PAST YEAR ELECTED
NAME AND AGE FIVE YEARS AND OTHER DIRECTORSHIPS TO THE BOARD
- ------------------------------------ ------------------------------------------------------------- ---------------
<S> <C> <C>
Frank A. Sarnecki .................. Director General, Moose International, Inc. (fraternal 1994
(Age 62) organization) (1994-present); Real Estate Appraiser, Joy
Appraisal Co. (1969-1994); Director, Merchants National Bank
(1994-present)
</TABLE>
- ------------------------
There are no arrangements or understandings between any of the directors,
executive officers or any other person pursuant to which any of the directors or
executive officers have been selected for their respective positions.
BOARD COMMITTEES AND MEETINGS
The Board of Directors of the Company has established an Executive
Committee. The directors of the Company who are members of the Executive
Committee are William C. Glenn, C. Tell Coffey, John M. Lies, James D. Pearson,
Frank A. Sarnecki, and John J. Swalec. This committee has the responsibility for
nominating persons for vacancies on the board and for reviewing and approving
the compensation of executive officers. The Executive Committee also handles
such other matters as are delegated to it by the Board of Directors, including,
without limitation, acting in lieu of the full Board of Directors between
regularly scheduled quarterly meetings. The Executive Committee met four times
in 1997. The Executive Committee will consider suggestions for nominations of
possible candidates for directors submitted by stockholders. Stockholders who
wish to suggest qualified candidates should write to the Secretary of the
Company at 1851 West Galena Boulevard, Aurora, Illinois 60507-0289, stating in
detail the qualifications of such person for consideration by the committee. In
addition, such nominations must comply with the other provisions of Article II,
Section 10 of the Company's Bylaws.
The Board of Directors of the Company also has established an Examining
Committee. The directors of the Company who are members of the Examining
Committee are C. Tell Coffey, William F. Hejna and Frank A. Sarnecki. The
Examining Committee confers with the independent auditors of the Company and
otherwise reviews the standards of internal controls, reviews the scope and
results of the audits, assesses the accounting principles followed by the
Company and recommends the selection of independent auditors. The Examining
Committee met three times in 1997.
The Board of Directors of the Company had five meetings during 1997. All of
the directors during their terms of office in 1997 attended at least 75% of the
Board of Directors meetings and committee meetings on which they served, except
Dr. Swalec, who attended 44% of such meetings.
COMPENSATION OF DIRECTORS
Through December, 1997, directors' fees paid by the Company included $400
for each quarterly meeting of the Board of Directors attended, $200 for each
Executive Committee meeting attended and $150 for each Examining Committee
meeting attended. Mr. Myers receives no fees for his services as a director of
the Company and, in addition to the above fees, Dr. Hejna receives an annual
retainer of $1,500. Directors' remuneration is paid quarterly.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock at March 15, 1998, by each
person known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, by each director or nominee, by each executive
3
<PAGE>
officer named in the Summary Compensation Table and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF INDIVIDUAL OR BENEFICIAL PERCENT
NUMBER OF INDIVIDUALS IN GROUP OWNERSHIP(1) OF CLASS
- -------------------------------------------------------------------------------- ---------------------- -----------
<S> <C> <C>
5% STOCKHOLDERS................................................................. 157,310(2) 6.10%
The Banc Funds Company, L.L.C.
208 South LaSalle Street
Chicago, IL 60604
DIRECTORS AND NOMINEES
C. Tell Coffey.................................................................. 20,000(3) *
William C. Glenn................................................................ 71,906(4) 1.39%
William F. Hejna, M.D........................................................... 10,000 *
John M. Lies.................................................................... 6,508 *
Calvin R. Myers................................................................. 81,116(5) 1.57%
James D. Pearson................................................................ 29,409 *
Frank A. Sarnecki............................................................... 1,052 *
John J. Swalec.................................................................. 2,804 *
Norman L. Titiner............................................................... 5,843 *
OTHER EXECUTIVE OFFICERS
Frank K. Voris.................................................................. 70,995(6) 1.37%
Terence L. Kothe................................................................ 31,673(7) *
Randal A. Wright................................................................ 33,078(8) *
J. Douglas Cheatham............................................................. 16,816(9) *
All directors and executive officers as a group (15 persons).................... 368,343(10) 7.13%
</TABLE>
- ------------------------
* Less than 1%
(1) The information contained in this column is based upon information furnished
to the Company by the individuals named above. The nature of beneficial
ownership for shares shown in this column is sole voting and investment
power, except as set forth in the footnotes below.
(2) As reported in a 13(d) filed on June 10, 1997.
(3) Represents shares held by Merchants Bank as agent and over which Mr. Coffey
has no voting and sole investment power.
(4) Includes 25,000 shares held by Merchants Bank as agent and over which Mr.
Glenn has no voting and sole investment power. Excludes 2,652 shares
beneficially owned by Mr. Glenn's adult children. Mr. Glenn disclaims
beneficial ownership of all such excluded shares.
(5) Includes 18,282 shares held in joint tenancy with Mr. Myers' spouse and over
which voting and investment power is shared and 47,698 shares subject to
options awarded pursuant to the Merchants Bancorp, Inc. 1993 Stock Incentive
Plan (the "Stock Option Plan") which are presently exercisable and over
which Mr. Myers has no voting and sole investment power.
(6) Includes 25,000 shares held in trust as part of the Estate of Frank Voris
over which Mr. Voris shares investment power but has no voting power and
21,532 shares subject to options awarded pursuant to the Stock Option Plan
which are presently exercisable and over which Mr. Voris has no voting and
sole investment power. Excludes 5,940 shares held by Mr. Voris' spouse and
2,735 shares beneficially owned by Mr. Voris' adult children, the beneficial
ownership of which shares is disclaimed by Mr. Voris.
4
<PAGE>
(7) Includes 14,210 shares subject to options awarded pursuant to the Stock
Option Plan which are presently exercisable and over which Mr. Kothe has no
voting and sole investment power.
(8) Includes 3,796 shares held in joint tenancy with Mr. Wright's spouse and
over which voting and investment power is shared, and 548 shares held in an
IRA of Mr. Wright's spouse, over which shares Mr. Wright has no voting or
investment power. Also includes 15,764 shares subject to options awarded
pursuant to the Company's Stock Option Plan which are presently exercisable
and over which Mr. Wright has no voting and sole investment power.
(9) Includes 12,596 shares subject to options awarded pursuant to the Company's
Stock Option Plan which are presently exercisable and over which Mr.
Cheatham has no voting and sole investment power.
(10) Includes an aggregate of 111,800 shares subject to options awarded to
certain directors and officers pursuant to the Stock Option Plan which are
presently exercisable and over which the respective directors and/or
officers have no voting and sole investment power.
As of March 9, 1998, Merchants Bank held in its Trust Department in various
fiduciary capacities 841,029 shares of the Company's Common Stock (16.3% of the
total outstanding). Merchants Bank had full voting responsibility with respect
to 420,466 of such shares (8.1% of the total outstanding). Merchants Bank shared
voting responsibility with respect to 59,284 of such shares (1.1% of the total
outstanding). If Merchants Bank and the person or entity with which it shares
voting power do not agree on how these shares should be voted, these shares
would not be voted. It is the general policy of Merchants Bank to vote shares of
stock of the Company in accordance with the recommendations of the Board of
Directors. Merchants Bank had full investment power with respect to 281,194
shares (5.4% of the total outstanding) and shared investment power with respect
to 80,984 shares (1.6% of the total outstanding).
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers, directors and persons who own more than 10% of the
Company's Common Stock file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Such persons are also required to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on the Company's review of the copies of such forms, and, if appropriate,
representations made to the Company by any such reporting person concerning
whether a Form 5 was required to be filed for 1997, the Company is not aware
that any of its directors, executive officers or 10% stockholders failed to
comply with the filing requirements of Section 16(a) during the period
commencing January 1, 1997 through December 31, 1997.
5
<PAGE>
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table shows the compensation earned for the last three fiscal
years by the Chief Executive Officer and those executive officers of the Company
(including those employed by the Company's subsidiaries) whose 1997 salary and
bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
(A) (B) (C) (D) (G) (I)
SECURITIES ALL OTHER
NAME AND UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) OPTIONS/SARS(#)(3) ($)(4)
<S> <C> <C> <C> <C> <C>
Calvin R. Myers 1997 $ 288,456 $ 45,377 16,082 $ 18,729
Chairman of the Board, President 1996 250,001 53,754 16,022 12,000
and Chief Executive Officer of 1995 216,231 24,099 15,744 6,920
the Company and Merchants Bank
Frank K. Voris 1997 $ 146,769 $ 19,024 6,968 $ 13,589
Vice President of the Company 1996 134,500 24,073 7,318 11,609
and Executive Vice President and 1995 123,381 10,608 7,080 6,498
Chief Operating Officer of
Merchants Bank
Terence L. Kothe 1997 $ 126,308 $ 14,449 4,854 $ 37,736
Executive Vice President, Trust 1996 118,750 10,936 5,366 25,741
and Financial Services Division 1995 113,112 6,646 4,436 24,065
of Merchants Bank
Randal A. Wright 1997 $ 133,231 $ 17,602 5,068 $ 12,044
Executive Vice President, 1996 124,063 12,012 5,488 10,510
Commercial Banking Division of 1995 115,559 7,449 5,304 5,935
Merchants Bank
J. Douglas Cheatham 1997 $ 93,215 $ 15,907 3,722 $ 8,631
Chief Financial Officer of the 1996 84,400 10,830 4,282 7,304
Company and Merchants Bank 1995 76,096 6,678 4,594 3,958
</TABLE>
(1) Includes amounts deferred under the Merchants Bancorp, Inc. Thrift Plan.
(2) These amounts primarily include cash awards under the Management Incentive
Plan. The Management Incentive Plan provides for the payment of cash awards
based upon the executive's salary and the Company's return on equity for the
year. Management Incentive Plan awards are paid in the year following the
year earned.
(3) Represents options to buy Common Stock of the Company granted under the
Stock Option Plan as adjusted for the 2 for 1 stock split on September 30,
1997.
(4) The total amounts in this column reflect the Company's contributions under
the Merchants Bancorp, Inc. Thrift Plan and, with respect to Mr. Kothe, such
amount also reflects compensation received under an incentive compensation
program relating to new accounts he is directly responsible for bringing to
the organization.
6
<PAGE>
STOCK OPTION INFORMATION
The following table sets forth certain information concerning the number and
value of stock options granted in the last fiscal year to the individuals named
in the Summary Compensation Table:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
OPTION TERM
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
OPTIONS OPTIONS GRANTED EXERCISE OR
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Calvin R. Myers 16,082 40% $ 18.25 4/14/07 $ 184,621 $ 467,825
Frank K. Voris 6,968 17% 18.25 4/14/07 79,993 202,699
Terence L. Kothe 4,854 12% 18.25 4/14/07 55,724 141,203
Randal A. Wright 5,068 13% 18.25 4/14/07 58,181 147,428
J. Douglas Cheatham 3,722 9% 18.25 4/14/07 42,729 108,273
</TABLE>
(1) Options become exercisable in equal portions (rounded to nearest share) on
October 14, 1997, April 14, 1998 and April 14, 1999.
The following table sets forth certain information concerning the
exercisable and nonexercisable stock options at December 31, 1997 held by the
individuals named in the Summary Compensation Table:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FY-END IN-THE-MONEY OPTIONS
ACQUIRED VALUE (#)(D) AT FY-END ($)(E)
NAME ON EXERCISE REALIZED
(#)(A) (#)(B) ($)(C) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Calvin R. Myers -- $ -- 47,698 16,058 $ 699,273 $ 177,267
Frank K. Voris -- -- 21,532 7,082 316,062 78,410
Terence L. Kothe -- -- 14,210 5,022 206,953 55,759
Randal A. Wright -- -- 15,764 5,206 231,177 57,738
J. Douglas Cheatham -- -- 12,596 3,906 185,558 43,470
</TABLE>
EMPLOYMENT AGREEMENTS
The Company entered into a three-year employment agreement with Mr. Myers on
August 30, 1993. In the absence of a notice from either party to the contrary,
the employment term under the agreement extends for an additional year on each
anniversary of the agreement. Under this agreement, Mr. Myers
7
<PAGE>
received an annual salary of $288,456 in 1997. The agreement includes provisions
for periodic increases of Mr. Myers' salary, incentive compensation and
participation in the Company's benefit plans.
The agreement is terminable at any time by either the Company's Board of
Directors or Mr. Myers. The Company may terminate the agreement at any time for
cause without incurring any post-termination obligation to Mr. Myers. The
agreement provides severance benefits in the event Mr. Myers is terminated
without cause. The severance benefits are equal to two times his annual salary
and continued benefit plan participation for two years. The Company also must
pay Mr. Myers all accrued salary, vested deferred compensation and other
benefits due to him on the termination date. If Mr. Myers is terminated in
connection with a change in control, he is to be paid severance compensation
equal to three times his annual salary and other compensation at the rates then
in effect at the time of termination, and he will be entitled to continue
participating in other benefit plans for three years. Mr. Myers is prohibited
from competing with the Company or its subsidiaries within a 25-mile radius of
the Company's main office for a period of one year following the termination of
his employment.
The Company maintains severance agreements with certain key individuals
(including the additional four persons named in the cash compensation table)
providing for guaranteed severance payments equal to two times the sum of annual
compensation (including amounts paid under the Company's Management Incentive
Plan), legal fees, and the continuation of life and health insurance benefits
for two years if there is a change of control of the Company and the employee is
terminated within two years thereafter. These agreements also provide for a cash
payment of the amount necessary to compensate the employees for the costs
resulting from the imposition of excise taxes payable under the Internal Revenue
Code.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program is administered by the Executive
Committee of the Board of Directors. The Committee is comprised of six
independent, non-employee directors. The Chief Executive Officer serves on this
committee ex-officio, but not as Chairman. Following review and approval by the
Executive Committee, all matters regarding executive compensation are referred
to the Board of Directors for final approval.
In determining appropriate levels of executive compensation, the Committee
has at its disposal reference information regarding compensation ranges and
levels for executive positions in comparable companies. In determining
compensation to be paid to executive officers, primary consideration is given to
quality long-term earnings growth to be accomplished by achieving both financial
and non-financial goals such as the implementation of the sales program, asset
quality and growth and staff training. The objectives of this philosophy are to
(i) encourage a consistent and competitive return to stockholders, (ii) reward
bank and individual performance, (iii) provide financial rewards for performance
for those having significant impact on corporate profitability and (iv) provide
competitive compensation in order to attract and retain key personnel.
The two basic components to the total compensation of all key executives,
including the Chief Executive Officer, are base salary and an incentive
component. The salary component is reflective of levels of responsibility,
authority and performance relative to similar positions in the banking industry.
These criteria are quantified by an external, nationally-recognized compensation
consulting company and are converted to salary ranges for various positions
within the organization, including that of Chief Executive Officer. The practice
of the Compensation Committee for the expected level of performance by an
executive in that particular job position is to have base salary reflect a level
consistent with the mid-point of the relevant range.
The incentive portion is directly related to overall executive performance
as measured by growth in earnings per share, asset growth, return on equity, new
trust business or other organizational issues such as investigating the
appropriateness of new lines of business, various opportunities for expansion
and other measures reflective of organizational growth and progress. The
incentive portion of the Chief Executive
8
<PAGE>
Officer's compensation is a function of the degree to which the incumbent has
successfully met a variety of objectives set forth in writing by the Board of
Directors at the beginning of the year. His percentage completion of these
objectives is then used to determine the degree to which he participates in the
final incentive award.
The stock option portion of compensation closely follows the cash incentive
portion. The mid-point of the executive's salary range is adjusted downward by a
weighing factor and then multiplied by the same percentage of completion as was
used to determine the cash incentive portion. This figure is then divided by a
number provided by an independent, external consulting agency which reflects the
present value of the option, itself.
The 1997 compensation of the Chief Executive Officer was determined by the
Executive Committee based on the policies previously described. The Chief
Executive Officer, while primarily compensated by Merchants Bank, has a range of
responsibility for the management of both the Company and its subsidiaries which
is considered when establishing levels of compensation.
William C. Glenn, Chairman
C. Tell Coffey
John M. Lies
James D. Pearson
Frank A. Sarnecki
John J. Swalec
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Myers served in an ex-officio capacity on the Executive Committee of the
Company during the past fiscal year. However, Mr. Myers did not participate in
any decision pertaining to his own compensation.
THE INCORPORATION BY REFERENCE OF THIS PROXY STATEMENT INTO ANY DOCUMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BY THE COMPANY SHALL NOT BE
DEEMED TO INCLUDE THE FOLLOWING PERFORMANCE GRAPH AND RELATED INFORMATION UNLESS
SUCH GRAPH AND RELATED INFORMATION ARE SPECIFICALLY STATED TO BE INCORPORATED BY
REFERENCE INTO SUCH DOCUMENT.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The following graph shows a five year comparison of cumulative total returns
for the Company, the Nasdaq Stock Market (US Companies) and an index of Nasdaq
Bank Stocks. The Common Stock of the Company trades in the over-the-counter
market and was first listed for quotation on the Nasdaq Stock Market in October,
1993. The graph was prepared at the Company's request by Research Data Group,
San Francisco, California.
9
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
ASSUMES $100 INVESTED ON DECEMBER 31, 1992
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MERCHANTS BANCORP, INC. NASDAQ STOCK MARKET - US NASDAQ BANK
<S> <C> <C> <C>
12/92 $100 $100 $100
12/93 $145 $115 $114
12/94 $148 $112 $114
12/95 $200 $159 $169
12/96 $222 $195 $223
12/97 $413 $240 $377
</TABLE>
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Merchants Bancorp Inc. $ 100 $ 145 $ 148 $ 200 $ 222 $ 413
Nasdaq Stock Market--US $ 100 $ 115 $ 112 $ 159 $ 195 $ 240
Nasdaq Bank Index $ 100 $ 114 $ 114 $ 169 $ 223 $ 377
</TABLE>
TRANSACTIONS WITH MANAGEMENT
Certain directors and executive officers of the Company (including their
affiliates, families and companies in which they are principal owners, officers
or directors) were loan customers of, and had other transactions with, the
Company and its subsidiaries in the ordinary course of business. Such loans and
lines of credit were made in the ordinary course of business on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for transactions with other persons and did not involve more than the
normal risk of collectibility or present other unfavorable features.
Mr. C. Tell Coffey, a director of the Company, holds a 48% beneficial
interest in the real estate that Merchants Bank leases at 2255 Sullivan Road,
Ste. B, Aurora, Illinois 60506. The term of the lease is from May 1, 1997 and
will terminate on April 30, 2004. The monthly rent payments are $18,422.43 until
April 30, 1998 and then increase at the rate of 2% annually thereafter until
April 30, 2004.
10
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The appointment of independent public accountants is approved annually by
the Board of Directors. The decision of the Board of Directors is based on the
recommendation of the Examining Committee. In making its recommendation, the
Examining Committee reviews both the audit scope and estimated fees for
professional services for the coming year. The Board of Directors has authorized
the engagement of Crowe, Chizek and Company LLP ("Crowe Chizek") as its
independent public accountants for the fiscal year 1998. Crowe Chizek has had
the responsibility for examining the consolidated financial statements of the
Company and its subsidiaries since 1992. A proposal will be presented at the
meeting to ratify the appointment of Crowe Chizek. If the appointment of Crowe
Chizek is not ratified, the matter of the appointment of independent public
accountants will be considered by the Board of Directors.
One or more representatives of Crowe Chizek are expected to be present at
the annual meeting with the opportunity to make a statement, if they desire to
do so, and to be available to respond to the appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THIS
APPOINTMENT.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
For inclusion in the Company's Proxy Statement and form of proxy relating to
the 1999 Annual Meeting of Stockholders, stockholder proposals must be received
by the Company on or before November 23, 1998. In order to be presented at such
meeting, notice of the proposal must be received by the Company on or before
February 22, 1999, and must otherwise comply with the Company's bylaws.
OTHER MATTERS
Management does not intend to present any other business at the meeting and
knows of no other matters which will be presented. However, if any other matters
come before the meeting, it is the intention of the persons named in the
accompanying proxy to vote in accordance with their best judgment on those
matters.
VOTING OF PROXIES
Unless a stockholder indicates otherwise, shares represented by proxy will
be voted in favor of the election of the three nominees for Class B director
named in this proxy statement (or such other person designated by the Board of
Directors in the event a nominee is unable or declines to serve), and in favor
of the ratification of the appointment of Crowe Chizek as independent public
accountants for the Company for the year ending December 31, 1998.
By order of the Board of Directors,
[SIGNATURE]
DANA K. HOPP
ADMINISTRATIVE ASSISTANT
AND SECRETARY-TREASURER
Aurora, Illinois
March 23, 1998
11
<PAGE>
PROXY MERCHANTS BANCORP, INC. PROXY
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS -- APRIL 21, 1998
The undersigned hereby appoints Walter E. Deuchler, Jr., Edward J. McWethy
and Ralph D. Voris, or any of them acting in the absence of the others, with
full power of substitution, attorneys and proxies, for and in the name and place
of the undersigned, to vote the number of shares of Common Stock that the
undersigned would be entitled to vote if then personally present at the Annual
Meeting of Stockholders of Merchants Bancorp, Inc., to be held at the Copley
Theatre, North Island Center, 8 East Galena Boulevard, Aurora, Illinois 60506,
on Tuesday, April 21, 1998, at 9:30 a.m., local time, or any adjournments or
postponements thereof, upon the matters set forth in the Notice of Annual
Meeting and Proxy Statement (receipt of which is hereby acknowledged) as
designated on the reverse side, and in their discretion, the proxies are
authorized to vote upon such other business as may come before the meeting.
/ / Check here for address change. / / Check here if you plan to
attend the meeting.
New Address: _________________
______________________________
______________________________
(Continued and to be signed on reverse side.)
<PAGE>
MERCHANTS BANCORP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
<TABLE>
<CAPTION>
For Withhold For All
All All (Except Nominee(s)
written below)
<S> <C> <C> <C>
1. Election of Directors - Class B 0 0 0
NOMINEES: William C. Glenn,
John M. Lies and Norman L. Titiner
2. To ratify the selection of Crowe, For Against Abstain THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
Chizek & Company LLP as SPECIFICATION MADE. IF NO CHOICES ARE
independent auditors for the 0 0 0 INDICATED, THIS PROXY WILL BE VOTED
Company for 1998. FOR ALL PROPOSALS.
The Board of Directors recommends a vote FOR
all proposals.
Dated:________________________, 1998
Signature(s)________________________________
____________________________________________
NOTE: Please sign exactly as your name(s)
appears. For joint accounts, each owner
should sign. When signing as executor,
administrator, attorney, trustee or guardian,
etc., please give your full title.
- --------------------------------------------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
</TABLE>
