<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SECOND BANCORP, INCORPORATED
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(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)(4) 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.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
SECOND BANCORP LOGO
108 Main Avenue, S.W. - Warren, Ohio 44481
April 1, 1997
NOTICE OF ANNUAL SHAREHOLDERS MEETING
TO THE SHAREHOLDERS OF SECOND BANCORP, INCORPORATED:
Notice is hereby given that the Annual Meeting of Shareholders of Second
Bancorp, Incorporated, will be held in the Directors Room of The Second National
Bank of Warren, 108 Main Avenue, S.W., Warren, Ohio, on Tuesday, May 13, 1997,
at 1:30 P.M. for the following purposes:
1. To fix the number of directors at seven (7).
2. To elect three (3) directors of the Corporation to serve until the
1999 Annual Meeting of Shareholders or until resignation or
removal.
3. To approve an amendment to the Corporation's Articles of
Incorporation for the purpose of increasing the number of
authorized common shares from 10,000,000 to 20,000,000.
4. To ratify the appointment of Ernst & Young LLP as the independent
Certified Public Accountants of Second Bancorp, Incorporated.
5. To transact such other business as may come before the meeting or
any adjournment thereof.
March 15, 1997, has been fixed by the Board of Directors as the record
date. Only those shareholders of record as of the close of business on that date
are entitled to notice of and to vote at the meeting.
WHETHER OR NOT YOU CONTEMPLATE ATTENDING THE ANNUAL SHAREHOLDERS
MEETING, THE BOARD OF DIRECTORS URGES YOU TO SIGN AND RETURN THE PROXY CARD IN
THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE.
YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE BY NOTICE IN
WRITING DELIVERED TO THE SECRETARY OF SECOND BANCORP OR BY EXECUTION OF A LATER
DATED PROXY. IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE
IN PERSON.
A proxy statement is submitted herewith.
Christopher Stanitz
Secretary of Second Bancorp,
Incorporated
<PAGE> 3
SECOND BANCORP LOGO
108 Main Avenue, S.W., Warren, Ohio 44481
April 1, 1997
PROXY STATEMENT
The Annual Meeting of Shareholders (the "Annual Meeting") of Second
Bancorp, Incorporated ("Second Bancorp", the "Company," or the "Corporation"),
will be held Tuesday, May 13, 1997, at 1:30 P.M. in the Board of Directors Room
at the Main Office of The Second National Bank of Warren ("Second National" or
the "Bank"), 108 Main Avenue, S.W., Warren, Ohio. This Proxy Statement is being
mailed on or about April 1, 1997.
Only those shareholders of record at the close of business March 15, 1997,
will be entitled to vote.
The solicitation of proxies will be made by mail except for any incidental
solicitation by officers and representatives of Second Bancorp and of its
subsidiary by personal interviews, by telephone, or by telegraph. Second Bancorp
will bear the cost of the solicitation of proxies, and it may reimburse brokers
and others for their expenses in forwarding solicitation material to beneficial
owners of Second Bancorp.
COMMON AND PREFERRED STOCK OUTSTANDING
As of the record date for the Annual Meeting there were 3,385,248 shares of
common stock outstanding, of which 3,334,987 shares are entitled to vote. The
remaining 50,261 shares are held by Second National, the wholly owned subsidiary
of Second Bancorp, in certain capacities as a fiduciary and cannot be voted.
The general corporation law of Ohio provides that if notice in writing is
given by a shareholder to the president, a vice president, or secretary of the
Corporation, not less than 48 hours before the time fixed for holding the
meeting, that the shareholder desires the voting at such election to be
cumulative, and an announcement of such notice is made upon the convening of the
meeting by the chairman of the meeting, or by or on behalf of the shareholder
giving such notice, then each shareholder shall have cumulative voting rights in
the election of directors. Proxies solicited by the Board of Directors will be
voted cumulatively, if necessary. For all other purposes, each share is entitled
to one vote.
<PAGE> 4
SECURITY OWNERSHIP
As of the record date, there are no persons, or "groups" as the term is
used in Section 13(d)(3) of the Securities and Exchange Act of 1934, who own of
record or beneficially more than five percent of any class of Second Bancorp's
voting securities. The following table indicates the number of shares of Company
stock owned directly or beneficially by all Second Bancorp directors and
officers as a group as of the record date.
<TABLE>
<CAPTION>
AMOUNT OF AND PERCENT
NATURE OF OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------------------------- ------------------------------ -------------------- ------
<S> <C> <C> <C>
Second Bancorp's officers and
Common stock directors as a group(1) 170,070.48 shares(2) 5.024%
</TABLE>
Under Securities laws of the United States, Second Bancorp's directors, its
executive (and certain other) officers, and any persons holding more than ten
percent of any class of Second Bancorp security are required to report their
ownership of Second Bancorp securities and any changes in that ownership to the
Securities and Exchange Commission and to Nasdaq on a timely basis. Second
Bancorp is required to report in this Proxy Statement any failure to make the
necessary filing as and when due. In making the following statement, Second
Bancorp has relied on the written representations of its incumbent directors and
officers and copies of reports known by the Company to have been have filed with
the SEC. During 1996, all of the required filings were made on a timely basis.
- ---------------
(1) The officer and director group is comprised of 16 individuals. Officer
shareholdings include outstanding stock options exercisable as of the record
date.
(2) See footnotes for directors regarding beneficial ownership. Figures include
shares deemed beneficially owned but as to which the officer or director in
question has disclaimed that beneficial ownership.
2
<PAGE> 5
ELECTION OF DIRECTORS
Pursuant to the Articles of Incorporation of Second Bancorp, the Board of
Directors is divided into two classes, each consisting of approximately one-half
of the entire board. The directors serve staggered two year terms, so that
directors of only one class are elected at each Annual Meeting. At the
forthcoming Annual Meeting, the shareholders will be asked to fix the maximum
number of directors at 7 and to elect 3 directors in Class I. Each director
elected at the Annual Meeting will hold office until the 1999 Annual Meeting of
Shareholders or, if earlier, until resignation or removal. Except as otherwise
specified in the proxy, the shares represented by all properly executed and
returned proxies will be voted for the election of the 3 nominees named below as
directors of Second Bancorp. If, though currently unanticipated, a nominee
should become unavailable to serve, proxies will be voted for the election of
such person, if any, as shall be recommended by the Board of Directors.
The names of the nominees for director of Second Bancorp, together with
specific information about the nominees, are as follows.
<TABLE>
<CAPTION>
NUMBER AND
PERCENTAGE
OF COMMON SHARES
PRINCIPAL OCCUPATION OWNED
DURING THE PAST FIVE BENEFICIALLY AS OF DIRECTOR
NOMINEES AGE YEARS AND DIRECTORSHIPS MARCH 15, 1997 (1) SINCE
- ------------------------- --- --------------------------------- -------------------- --------
<S> <C> <C> <C> <C>
Class I Term Expires in 1999
Norman C. Harbert 63 Chairman, President, and Chief 5,665.75(2) 1987
Executive Officer of the HAWK
Corporation, owner of several
manufacturing firms. Mr. Harbert
is also a director of Caliber
Systems, Inc. and New West
Eyeworks.
John L. Pogue 52 Partner, Hoppe, Frey, Hewitt & 812.44(3) 1987
Milligan (attorneys).
Raymond John Wean, III 48 President and Chief Executive 4,333(4) 1987
Officer of Barto Technical
Services, Inc. Prior to January
1995, President of Danieli Wean,
Inc., and President and Chief
Executive Officer of Wean,
Incorporated, formerly, Wean
United, Inc., designer and
manufacturer of industrial
machinery.
</TABLE>
- ---------------
(1) Unless otherwise stated, each nominee or director's percentage ownership of
the Company's stock is less than 1%.
(2) Includes 2,000 shares of stock held by the trustee of Mr. Harbert's defined
benefit plan and 1,099.55 shares of stock held in a personal trust for his
benefit.
(3) Includes 223 shares of common held in a SEP IRA account for Mr. Pogue's
benefit.
(4) Includes 495 shares owned by Mr. Wean's wife and 990 shares owned by his
minor children, the beneficial ownership of which he has disclaimed.
3
<PAGE> 6
The names of the four remaining Second Bancorp directors, together with
specific information about the directors, are as follows.
<TABLE>
<CAPTION>
NUMBER AND
PERCENTAGE
OF COMMON SHARES
PRINCIPAL OCCUPATION OWNED
CLASS II DURING THE PAST FIVE BENEFICIALLY AS OF DIRECTOR
DIRECTORS AGE YEARS AND DIRECTORSHIPS MARCH 15, 1997 (1) SINCE
- ------------------------- --- --------------------------------- -------------------- --------
<S> <C> <C> <C> <C>
Class II Term Expires in 1998
Alan G. Brant 65 Chairman and President, Second 45,287.22(2,3,4) 1987
Bancorp and President, Director, (1.338%)
and Chief Executive Officer,
Second National Bank.
John A. Anderson 59 Chairman and Chief Executive 8,182.77 1987
Officer; The Taylor-Winfield
Corporation, Ravenna
Manufacturing Company and
Hubparts, Inc.
John C. Gibson 68 Chairman of the Board, Jack 9,683.35(5,6) 1987
Gibson Construction Company,
Director, Sovereign Circuits,
Inc.
Robert J. Webster 73 Retired and past President and 22,045(7) 1987
Chief Executive Officer, Denman
Corporation, manufacturer of
automobile tires and rubber
rolls.
</TABLE>
During 1996 there were 7 meetings of the Board of Directors. Each incumbent
director and director nominee was present for more than 75 percent of the number
of meetings of the Board of Directors. The members of Second National's
Examining (Audit) Committee are Mr. Robert C. Lewis, Jr., a director of Second
National, Joseph D. Rusnak, an officer of Company and Second National Bank and
directors Gibson, Harbert, and Wean, III. The functions of the Examining
Committee are to meet with Second National's auditors to review and inquire as
to audit functions and other financial matters and to review the year-end
audited financial statements of Second Bancorp and its subsidiary and reports of
the national bank examiners as related to Second National. The Examining
Committee held 6 meetings in 1996. Second Bancorp's board of directors has no
Nominating Committee.
- ---------------
(1) Unless otherwise stated, each nominee or director's percentage ownership of
Second Bancorp stock is less than 1%.
(2) Includes 7,853 shares of stock held by Mr. Brant's wife, the beneficial
ownership of which he has disclaimed.
(3) Includes 9,248.22 shares of stock held for Mr. Brant's benefit by the Bank's
Savings Plan. Mr. Brant is 100% vested in these shares.
(4) Includes 7,500 shares of stock representing a like number of currently
exercisable options owned by Mr. Brant.
(5) Includes 887.45 shares of common stock owned by, or for the benefit of, Mr.
Gibson's wife, the beneficial ownership of which he has disclaimed.
(6) Includes 1,133.23 shares which are owned by the Jack Gibson Construction
Company which company is controlled by Mr. Gibson.
(7) Includes 5,116 shares of stock owned by Mr. Webster's wife, the beneficial
ownership of which he has disclaimed.
4
<PAGE> 7
EXECUTIVE COMPENSATION
Under proxy rules and regulations promulgated by the Securities and
Exchange Commission, publicly held corporations are required to disclose to
their shareholders certain information concerning, or deemed relevant to,
compensation paid to its Named Officers (as defined in the next sentence) and to
present that information in tabular and graphic form. The first table contains a
summary of annual and long-term compensation for services in all capacities to
Second Bancorp and its subsidiary for calendar years 1996, 1995, and 1994, of
those persons who were, at December 31, 1996, (i) the chief executive officer
and (ii) the four other most highly compensated executive officers of Second
Bancorp and its subsidiary (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
----------------------------- OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(2) COMPENSATION(3)
- --------------------------------- ---- -------- ------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Alan G. Brant, 1996 $238,000 $82,000 3,750 $ 9,168
Chairman and President of
Second Bancorp, Inc., and 1995 $230,000 $86,000 3,750 $ 8,973
Chief Executive Officer,
Director,
and President of The Second 1994 $200,000 $80,000 3,750 $ 9,168
National Bank of Warren(1)
George R. Dovich, 1996 $125,500 $43,000 3,500 $ 7,828
Vice President of Second
Bancorp, Inc., and Executive 1995 $119,500 $43,000 3,300 $ 7,605
Vice President and Director
of The Second National 1994 $114,500 $40,000 3,300 $ 5,801
Bank of Warren
William Hanshaw, 1996 $105,500 $35,000 3,200 $ 4,078
Executive Officer of
Second Bancorp, Inc. and 1995 $101,000 $30,000 3,000 $ 3,978
Senior Vice President of
The Second National Bank 1994 $ 97,000 $27,000 3,000 $ 4,044
of Warren
David L. Kellerman, 1996 $ 90,375 $36,000 3,500 $ 5,226
Treasurer of Second
Bancorp, Inc., and Senior Vice 1995 $ 82,667 $34,000 3,300 $ 4,843
President and Chief Financial
Officer of The Second National 1994 $ 74,000 $30,000 3,300 $ 3,375
Bank of Warren
Diane C. Bastic, 1996 $ 94,917 $28,000 3,200 $ 6,157
Executive Officer of
Second Bancorp, Inc., and 1995 $ 90,333 $26,000 3,000 $ 5,837
Senior Vice President of The
Second National Bank of Warren 1994 $ 85,917 $24,000 3,000 $ 4,445
</TABLE>
- ---------------
(1) Mr. Brant also received fees in the amount of $7,700 for 1996, $8,400 for
1995, and $4,500 for 1994 in compensation for his services as a director of
Second Bancorp.
(2) Option awards for 1994 have been adjusted to take into account a May 1,
1995, 3-for-2 common stock split.
(3) Amounts reported for 1996 represent the sum of the Company's contributions
on behalf of each of the Named Officers under the Company's employee savings
plan ($7,125, $7,125, $3,619, $4,739 and $5,531 respectively for Officers
Brant, Dovich, Hanshaw, Kellerman, and Bastic) and executive long term
disability plan ($2,043, $703, $459, $487, and $626 respectively for
Officers Brant, Dovich, Hanshaw, Kellerman, and Bastic).
5
<PAGE> 8
OPTION GRANTS DURING 1996
The second table contains information on stock options granted during 1996
to the Named Officers and their potential realizable value.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION ----------------------------
NAME GRANTED(1) FISCAL YEAR BASE PRICE(2) DATE(3) 5% 10%
- --------------------- --------- ------------ ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Alan G. Brant 3,750 11.9% $26.875 6/20/06 $ 63,375 $ 160,613
George R. Dovich 3,500 11.1% $26.875 6/20/06 $ 59,150 $ 149,905
William Hanshaw 3,200 10.1% $26.875 6/20/06 $ 54,080 $ 137,056
David L. Kellerman 3,500 11.1% $26.875 6/20/06 $ 59,150 $ 149,905
Diane C. Bastic 3,200 10.1% $26.875 6/20/06 $ 54,080 $ 137,056
ALL COMMON
SHAREHOLDERS NA NA NA NA $57,244,544 $145,024,024
</TABLE>
- --------------------------------------------------------------------------------
(1) Stock options awarded to the Named Officers were granted June 21, 1996, but
are not exercisable until June 21, 1997.
(2) The base price of each option awarded was equal to the mean of the bid and
ask price of the Corporation's common stock on the date the option was
granted.
(3) Notwithstanding the stated expiration date, all stock options held by an
individual terminate if that person ceases to be an employee for any reason
other than death or retirement. In the event of death or retirement, options
must be exercised by the earlier of the expiration date of the option or the
third anniversary date of the event.
AGGREGATED OPTION/SAR EXERCISES IN 1996 AND YEAR-END OPTION/SAR VALUES
The third table contains information on the value realized by the Named
Officers during 1996 on their exercise of stock appreciation rights (SARs) and
stock options and the number and value of unexercised stock options and SARs at
year-end 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AND SARS AT AND SARS AT YEAR-
SHARES YEAR-END 1996 END 1996(2)
ACQUIRED VALUE -------------------------------- -----------------------------
NAME ON EXERCISE(1) REALIZED(2) EXERCISABLE(3) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- -------------- ----------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan G. Brant(4) 12,150 $ 240,161 19,650 3,750 $ 316,934 $18,281
George R. Dovich 0 0 12,900 3,500 $ 179,972 $17,063
William Hanshaw(5) 5,250 $ 46,748 3,000 3,200 $ 31,875 $15,600
David L. Kellerman(6) 5,550 $ 56,523 3,300 3,500 $ 35,063 $17,063
Diane C. Bastic(7) 1,800 $ 32,099 8,250 3,200 $ 102,061 $15,600
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For all SARs exercised, the number of underlying securities with respect to
which the SARs were exercised.
(2) Market value of underlying securities at exercise or year-end, minus the
exercise or base price.
(3) The number of all options and SARs granted prior to 1995 adjusted for a
3-for-2 common stock split May 1, 1995.
(4) 9,900 SARs with a base price of $7.30 per share exercised March 4, 1996, at
a 5 day average price of $28.50 per share ($209,880 value realized) and
2,250 share stock option with a base price of $14.667 per share exercised
March 18, 1996, on which date the price of the Company's common stock was
$28.125 per share ($30,281 value realized).
(5) 2,250 share stock option with a base price of $18.417 per share exercised
January 2, 1996, on which date the price of the Company's common stock was
$28.75 per share ($23,249 value realized), and 3,000 share stock option with
a base price of $21.167 per share exercised February 2, 1996, on which date
the price of the Company's common stock was $29 per share ($23,499 value
realized).
(6) 2,250 share stock option with a base price of $18.417 per share exercised
January 2, 1996, on which date the price of the Company's common stock was
$28.75 per share ($23,249 value realized), and 3,300 share stock option with
a base price of $21.167 per share exercised August 20, 1996, on which date
the price of the Company's common stock was $31.25 per share ($33,274 value
realized).
(7) 1,800 share stock option with a base price of $14.667 per share exercised
September 18, 1996, on which date the price of the Company's common stock
was $32.50 per share ($32,099 value realized).
6
<PAGE> 9
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation and Organization Committee of the Board of Directors (the
"Committee") is a joint committee of Second Bancorp, Inc., and its subsidiary,
The Second National Bank of Warren (together, the "Company"), and is composed of
outside directors John A. Anderson (Committee chairman), Cloyd J. Abruzzo, and
Robert J. Webster. The Committee reviews and approves all officer compensation
levels with a view toward attracting and retaining qualified, competent
executives to lead the Company in its achievement of its business objectives and
to enhance long-term shareholder value.
EXECUTIVE OFFICER COMPENSATION
The Company's executive officer compensation program comprises base
salaries, discretionary cash incentive bonuses, and long-term incentives in the
form of stock option grants and, previously, stock appreciation rights ("SARs").
Base Salary. Each executive officer's salary level is reviewed annually
based upon performance of functional responsibilities, contribution to corporate
strategic goals, experience, and demonstrated capabilities. Measurements of
performance may be quantitative and/or qualitative depending upon the context of
the job under evaluation.
Discretionary Cash Incentive Bonus. The Company pays discretionary bonuses
to its executive officers from an incentive pool derived from a pre-set
percentage of the Company's pre-tax earnings (excluding security transactions).
The pool for 1995 from which bonuses were paid in 1996 (following independent
audit of 1995 results) was set at 3% of such pre-tax earnings. The payment of
discretionary cash incentive bonuses during 1996 reflected the fact that as a
result of executive management's efforts, the Company met or exceeded financial
goals set at the beginning of 1995 for, among other things, profitability and
asset growth, and continued to implement strategies focused on sustainable,
long-term performance of the organization. Cash bonuses were paid from the
incentive pool during 1996 to 9 individuals in amounts representing the
Committee's subjective assessment of the executive's contribution to the
Company's success, experience and demonstrated capabilities.
Stock Option Grants. To achieve long-term enhancement of shareholder value,
the Company has an incentive program which involves the granting of stock
options to a limited number of key officers, including its executive officers.
Options are awarded by the Committee under the Company's Stock Option Incentive
Plan originally approved by the shareholders on May 14, 1991 and amended on May
10, 1994. Options are awarded under the plan at an exercise price determined by
the Committee, such price to be no less than the mean of the "bid" and "ask"
prices of Second Bancorp's common stock on the date of the grant. Options are
awarded for ten year periods but are not exercisable until the first anniversary
of any grant and are currently subject to an annual limit of 3,750 shares to any
individual. Options are awarded subjectively with the Committee taking into
consideration the same attributes that are considered in the setting of salaries
and the distribution of cash incentive bonuses. During 1996, a total of 31,650
options representing a like number of Company shares were awarded to 10
individuals under the plan.
CHIEF EXECUTIVE OFFICER COMPENSATION
Measurements employed in determining compensation paid to Alan G. Brant are
generally similar to those applicable to other executive officers, but also
include his performance in attracting, developing, retaining, and motivating key
management members critical to the achievement of the Company's short and long
term growth, earnings, and strategic goals. Enhancement of shareholder value on
a total return basis as demonstrated by the common stock performance graph on
the following page is also considered in the assessment of Mr. Brant's
performance. Elements of Mr. Brant's compensation thus set by the Committee are
reviewed and approved by remaining outside members of the Board.
The base salary and incentive cash bonus paid Mr. Brant in 1996 (as
indicated in the Executive Compensation Table in this proxy statement) were a
direct and indirect reflection of (i) the Company's progress and performance,
and to a lesser extent (ii) salaries and bonuses paid to CEOs of banking
companies similar to the Company in size and market areas.
7
<PAGE> 10
Since stock option grants, and previously awarded stock appreciation
rights, depend upon increases in the Company's common stock price to have value
as an incentive to the recipient, such grants/awards are viewed by the Committee
as integral components of Mr. Brant's (and other key executives') compensation
arrangement. They are a highly effective tool in directly aligning his financial
interests, and the interests of the executive team, with those of the Company's
shareholders.
Cloyd J. Abruzzo
John A. Anderson
Robert J. Webster
COMMON STOCK PERFORMANCE GRAPH
As part of the executive compensation information presented in this Proxy
Statement, the Securities and Exchange Commission requires a five year
comparison of total return to Second Bancorp common shareholders with an
appropriate broad based market index and an index of stock performance by a peer
group of publicly traded companies. The graph that follows compares year-end
total shareholder returns, assuming dividend reinvestment, for the five-year
period ending December 31, 1996, on Second Bancorp common stock with the Nasdaq
Bank Stocks Index (Nasdaq Banks) and Nasdaq Stock Market Index (Nasdaq Market).
The Nasdaq Bank Stocks Index is a peer group index of total stock return for all
domestic banks traded on the Nasdaq. The Nasdaq Stock Market Index is a broad
based index of total stock return for all U.S. Companies traded on the Nasdaq
National Market.
COMMON STOCK PERFORMANCE GRAPH
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) SECOND BANCORP NASDAQ BANKS NASDAQ MARKET
<S> <C> <C> <C>
YE '91 100.00 100.00 100.00
YE '92 140.70 145.60 116.40
YE '93 197.50 166.00 133.60
YE '94 205.50 165.40 130.60
YE '95 286.10 246.30 184.70
YE '96 315.30 325.60 227.20
</TABLE>
DIRECTOR COMPENSATION
Each Second Bancorp director was paid $4,500 for serving on the Board of
Directors in 1996 and $400 for each board meeting attended.
PENSION PLAN
Second Bancorp has no pension plan, but its officers are participants in
the pension plan of Second National. Second National has a defined benefit
non-contributory pension plan for all of its employees, "The Employees
Retirement Plan of The Second National Bank of Warren". Due to the plan's fully
funded status, the aggregate contribution for all plan participants for 1996 was
0 percent of the total remuneration of the plan participants. Remuneration for
the purposes of the plan is the total of salaries, commissions, and bonuses paid
during the year as set forth above. The retirement benefits under the pension
plan are based primarily on years of service and
8
<PAGE> 11
remuneration and take into account, among other things, the retirement benefit
paid under the Social Security Act. The normal retirement date for the pension
plan is age 65. No pension benefits were paid to the Named Officers in 1996.
The following table sets forth the estimated annual benefits at normal
retirement age pursuant to the provisions of the pension plan to persons in
specified remuneration and year-of-service classifications:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION
FOR REPRESENTATIVE YEARS
OF CREDIT SERVICE
FINAL AVERAGE -------------------------------------------
REMUNERATION 10 20 30 40
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 100,000 $20,100 $40,200 $50,200 $50,200
125,000 25,300 50,700 63,300 63,300
150,000 30,600 61,200 76,500 76,500
175,000 32,700 65,400 81,700 81,700
200,000 32,700 65,400 81,700 81,700
250,000 32,700 65,400 81,700 81,700
300,000 32,700 65,400 81,700 81,700
</TABLE>
Officers Brant, Dovich, Hanshaw, Kellerman, and Bastic had as of December
31, 1996, 11, 11, 7, 15, and 11 years, respectively, of completed credited
service under Second National's pension plan.
EMPLOYEES' SAVINGS PLAN
The officers of Second Bancorp are participants in The Employees' Savings
Plan of The Second National Bank of Warren (the "Plan"). Any employee who has
completed 1,000 hours of service to Second National is eligible to participate
in the Plan. The Plan provides that any eligible employee may elect a deduction
from his/her salary, ranging from 1-15% of compensation per payroll period, the
amount of which will be held by the Plan trustee for the account of such
employee. Under the Plan, Second National will contribute to the Plan, on behalf
of each participating employee, an amount equal to 75% of the lesser of (i) the
participating employee's contribution to the Plan, or (ii) 6% of the
participating employee's compensation. Participation in the Plan is voluntary.
Amounts held by the Plan trustee for a participating employee may be withdrawn
by such employee upon termination of employment with Second National, or upon
reaching the age of 59 1/2. Amounts set aside for a participating employee's
benefit, through salary deduction, will be invested by the Plan trustee at the
participant's direction in one of several investment vehicles -- a Money Market
Fund, a Second Bancorp Stock Fund, a Fixed Income Common Trust Fund, an Equity
Common Trust Fund, or a Growth Common Trust Fund. Second National's portion of
the contribution is invested solely in the Second Bancorp Stock Fund. The trust
agreement governing administration of the Plan was amended in 1996 to pass
through voting authority over vested Second Bancorp shares held in the Plan to
individual employee participants.
CERTAIN AGREEMENTS WITH EXECUTIVE OFFICERS
Second Bancorp and Mr. Brant are parties to a stock appreciation rights
agreement. Pursuant to the terms of that agreement, Mr. Brant has been granted
appreciation rights in Second Bancorp common stock. On the occurrence of certain
specified events, such rights would entitle him to receive a cash payment in an
amount equal to the increase in value of a share between the date of the grant
of such rights and the reference date for payment, times the number of stock
appreciation rights being exercised. By written action effective December 18,
1996, Second Bancorp's Board of Directors authorized a two year extension of Mr.
Brant's stock appreciation rights agreement to March 31, 1999 to coincide with
the expiration of his employment agreement (see the following). Second Bancorp
and Mr. Brant are also parties to an employment agreement, a consulting
agreement, and a deferred compensation agreement. The employment agreement,
which is presently operative, sets forth the terms and conditions applicable to
Mr. Brant's service as President and Chief Executive Officer of Second National.
The term of Mr. Brant's employment agreement runs through March 31, 1999. The
consulting agreement, which is not presently operative, sets forth the terms and
conditions which would be applicable to Mr. Brant's rendering consulting
services to Second National in the event he ceases to hold the offices of
President and Chief Executive Officer of Second National. Under the consulting
agreement, Mr. Brant is obligated to provide consulting services to
9
<PAGE> 12
Second National for a period of three years following the date of termination of
his employment as a result of a change in control of the Company or one year if
he is otherwise terminated (other than for cause), in return for which he will
receive his annual salary in effect at the date of termination of his employment
plus bonus and normal employment fringe benefits, during each year in the
consulting term. The deferred compensation agreement replaces a supplemental
pension agreement which provided that Mr. Brant would receive an additional year
of pension credit for every two years of service. The deferred compensation
agreement provides that Mr. Brant will receive the benefit contemplated by the
supplemental pension agreement without regard to the limits placed on executive
compensation by the Internal Revenue Code.
Second Bancorp has entered into severance agreements with Messrs. Dovich,
Hanshaw, Kellerman, Ms. Bastic, and four other key executives. Those agreements
generally provide certain benefits to the executive if his/her employment is
terminated within one year after the date of any change in control of the
Company or if the executive resigns within that time frame as a result of a
significant reduction in job responsibilities or compensation, or relocation of
his/her job to a place more than 40 miles distant. Upon any such occurrence, the
executive will be entitled to a continuation of salary and benefits for three
years and executive job search assistance. These agreements remain in effect
through May 31, 2003, unless the executive voluntarily leaves the Company's
employ or is terminated for cause before that date.
TRANSACTIONS WITH DIRECTORS AND MANAGEMENT
All of the directors and officers of Second Bancorp and Second National,
and the companies with which they are associated, were customers of and had
banking transactions with Second National in the ordinary course of the bank's
business during fiscal year 1996 and to date. Except as disclosed herein, loans
and commitments to loan included among such transactions were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other unrelated persons.
Such transactions did not involve more than the normal risk of collectibility or
present other unfavorable features.
In 1987 Courthouse Square Realty, a general partnership ("Realty"),
obtained a $1,000,000 commercial loan from the Bank for the purpose of financing
the renovation of a commercial office building in Warren, Ohio. That loan was
defaulted upon in December, 1990 and, with the exception of the application of
rental payments received from a tenant of the properties which collateralized
the credit, no payments were made on the loan thereafter. Collection efforts
were commenced by the Bank and resulted in a settlement of the remaining
indebtedness as of December 31, 1996. Under the terms of the settlement the Bank
received a $400,000 cash payment, waived its right to accrued but unpaid
interest on the loan, and agreed to refinance the remaining principal balance.
Realty has been dissolved and replaced by Park Properties, Inc. as primary
obligor on the loan. The refinanced loan continues to perform as agreed through
the date of this Proxy Statement. John L. Pogue, a Second Bancorp director, was
a non-guarantying general partner of Realty.
Two of the Bank's branches are owned by John C. Gibson, a director of the
Company and the Bank, or related entities. During 1996, the Bank leased its
Newton Falls branch from Mr. Gibson and J. D. Gibson at an annual lease rental
rate of $33,600. In addition, during 1996, the Bank also leased its Champion
branch from the Cousins Company, an entity 50% owned by Mr. Gibson, at an annual
lease rental rate of $40,158. The Bank continues to make monthly lease payments
to both Mr. Gibson and Cousins Company for those branches under lease agreements
expiring in 2001 and 2004, respectively.
Mr. Gibson also serves as Chairman of the Board of Jack Gibson Construction
Company ("Gibson Construction"). During 1996, the Bank contracted with Gibson
Construction with respect to a number of facilities renovation and repair
projects primarily at the Bank's main office and the Company's headquarters in
Warren, Ohio. Fees paid to Gibson Construction by the Company during 1996 for
services performed in the normal course of business totaled $110,498.
The Bank subleases space in its main office building to various entities
including the Raymond John Wean Foundation, which subleased office space in 1996
at an annual lease rental rate of $15,120. Raymond John Wean, III, a director of
the Company, is one of four administrators of that Foundation.
The firm of Hoppe, Frey, Hewitt & Milligan, of which John L. Pogue, a
director of the Company, is a partner, was paid fees for various legal services
performed for the Company and the Bank in the normal course of their business
during 1996 and it is anticipated that they will continue to do so. Legal fees
(and including director fees
10
<PAGE> 13
due Mr. Pogue) paid to that firm in 1996 were approximately $179,537. In
addition, the firm subleased space from the Bank in its main office building
during 1996 at an annual lease rental rate of $74,820.
PROPOSED AMENDMENT TO SECOND BANCORP'S ARTICLES OF INCORPORATION
At the meeting there will be presented to the shareholders a proposal to
amend Second Bancorp's Articles of Incorporation (the "Articles") for the sole
purpose of increasing the number of authorized common shares of the Company from
ten million (10,000,000) shares to twenty million (20,000,000) shares.
Specifically, it will be proposed that the shareholders of the Company adopt the
following resolutions:
RESOLVED, that Article FOURTH of the Articles of Incorporation of Second
Bancorp, Incorporated be amended by restating the preamble thereof to read
as follows:
"FOURTH: The maximum number of shares of capital stock which this
Corporation is authorized to have issued or to have outstanding at
any time shall be twenty-three million (23,000,000) shares,
consisting of twenty million (20,000,000) shares of Common Stock,
without par value ("Common Shares"), one and one-half million
(1,500,000) shares of Class A Serial Preferred Stock, without par
value ("Class A Serial Preferred Shares"), and one and one-half
million (1,500,000) shares of Class B Serial Preferred Stack,
without par value ("Class B Serial Preferred Shares"). The Board
of Directors of the Corporation is hereby empowered to issue, from
time to time, shares of its stock, whether now or hereafter
authorized. No holder of any class of shares of the Corporation
shall have any pre-emptive rights to purchase or to have offered
to them for purchase any shares or other Securities of the
Corporation."
FURTHER RESOLVED, that except as specifically amended hereby, Article
FOURTH and the Articles of Incorporation of the Company be unaffected hereby.
The Company has announced its intention to split its common stock
two-for-one effective May 1, 1997 to shareholders of record as of the close of
business on April 30, 1997. After giving effect to that stock split, the Company
will have in excess of six million seven hundred thousand (6,700,000) shares of
common stock outstanding. The intent of the proposed amendment is to assure that
the Company will have sufficient authorized share capacity to accommodate future
capital needs and support possible/anticipated acquisition activity.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION.
AUDITORS
The Board of Directors has appointed Ernst & Young LLP as the independent
Certified Public Accountants of Second Bancorp for the year 1997. A resolution
requesting shareholder ratification of this appointment will be presented at the
Annual Meeting.
A representative of Ernst & Young LLP will be present at the Annual Meeting
and will be available to respond to appropriate questions and to make a
statement, if desired.
MISCELLANEOUS
The Board of Directors of Second Bancorp is not aware of any matters which
are to be presented at the forthcoming Annual Meeting of Shareholders other than
those specifically enumerated herein and in the notice of the meeting.
Whether or not you expect to be present at the Annual Shareholders Meeting,
it is important that you sign and return the enclosed proxy. If you do attend
the Meeting, you may vote personally rather than by proxy.
All shares represented by proxy in the form enclosed herewith will, in the
absence of other instructions, be voted in favor of:
(1) Fixing the number of directors at 7;
11
<PAGE> 14
(2) Electing Norman C. Harbert, John L. Pogue, and Raymond John Wean, III
as directors to serve until the 1999 Annual Meeting of Shareholders or
until a successor is elected and qualified;
(3) Amending the Articles of Incorporation of the Company for the purpose
of increasing the number authorized common shares from ten million
(10,000,000) shares to twenty million (20,000,000) shares; and
(4) Ratifying the appointment of Ernst & Young LLP as the independent
Certified Public Accountants of Second Bancorp.
Management knows of no other matters to be voted upon at the Annual
Meeting. If any other matter properly comes before the Annual Meeting, it is the
intention of the persons named in the form of proxy to vote upon any such
matters in accordance with the recommendations of the Board of Directors.
The cost of solicitation of proxies shall be borne by Second Bancorp,
including the cost of preparing and mailing this Proxy Statement. Such
solicitation will be made by mail and may be by contacts made by the Board of
Directors and employees of Second Bancorp and Second National personally or by
telephone or telegram.
SHAREHOLDER PROPOSALS -- 1998
In order for shareholder proposals to be considered for presentation at the
1998 Annual Meeting of Shareholders, such proposals must be received by Second
Bancorp by December 1, 1997.
THE PROXIES ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE PROXIES
MAY BE REVOKED AT ANY TIME PRIOR TO THEIR EXERCISE BY NOTICE IN WRITING
DELIVERED TO THE SECRETARY OF SECOND BANCORP OR BY EXECUTION OF A LATER DATED
PROXY. FINANCIAL STATEMENTS FOR THE LATEST FISCAL YEAR, PREPARED IN ACCORDANCE
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, ARE CONTAINED IN SECOND BANCORP'S
1996 ANNUAL REPORT MAILED TO SHAREHOLDERS WITH THIS NOTICE AND PROXY STATEMENT.
ADDITIONAL COPIES OF SECOND BANCORP'S ANNUAL REPORT FOR 1996 CAN BE OBTAINED
WITHOUT CHARGE UPON WRITTEN REQUEST DIRECTED TO THE CORPORATION'S SECRETARY,
CHRISTOPHER STANITZ, AT THE ADDRESS SET FORTH ON THE COVER OF THIS PROXY
STATEMENT.
Christopher Stanitz
Secretary
Second Bancorp, Incorporated
12
<PAGE> 15
SECOND BANCORP, INCORPORATED
PROXY FOR ANNUAL MEETINGS OF SHAREHOLDERS
TO BE HELD MAY 13, 1997
The undersigned hereby appoints Eugene E. Rossi, Michael G. Casale, and
Frederick M. Shape, and each of them, with power of substitution, proxies to
represent the undersigned to vote all common shares of Second Bancorp,
Incorporated, owned by the undersigned at the Annual Meeting of Shareholders to
be held in the Directors Room at the Main Office of The Second National Bank of
Warren, 108 Main Avenue, S.W., Warren, Ohio, on Tuesday, May 13, 1997, at 1:30
P.M. and any adjournment thereof, as marked on the reverse side hereof.
The proxies are also authorized to vote upon such other business as may
properly come before the meeting.
None of the above named proxy holders are officers or employees of Second
Bancorp, Incorporated.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OR DIRECTORS. THIS PROXY CONFERS
AUTHORITY TO VOTE "FOR" THE PROPOSITIONS LISTED ON THIS PROXY CARD UNLESS OTHER
INSTRUCTIONS ARE PROVIDED. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING,
THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS. THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE.
<PAGE> 16
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING PROPOSALS.
1. To fix the number of For Against Abstain
Directors at 7.
------- ------- -------
Withhold
2. To elect Directors in Class I to For Vote
serve a term of two years. Nominees:
Harbert, Pogue, and Wean, III ------- -------
A SHAREHOLDER MAY WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE BY
LINING THROUGH THE NOMINEE'S NAME LISTED ABOVE.
3. To amend Second Bancorp's For Against Abstain
Articles of Incorporation
for the purpose of increasing
the number of authorized ------- ------- -------
common shares from 10,000,000
to 20,000,000
4. To Ratify the appointment of For Against Abstain
Ernst & Young LLP, as the
independent Certified Public
Accountants of Second Bancorp, ------- ------- -------
Incorporated.
The undersigned hereby ratifies and confirms all that said
proxies, or any of them, or their substitutes, shall lawfully do
or cause to be done by virtue hereof, and hereby revokes any and
all proxies heretofore given by the undersigned to vote at said
meeting. The undersigned acknowledges receipt of Notice of Annual
Shareholders Meeting and the Proxy Statement accompanying the
notice.
Please sign exactly as name appears at left. When shares are held
as joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full
title. If a corporation or partnership, please sign corporate or
partnership name by authorized officer.
Dated Signed , 1997
----------- --------------------------------
--------------------------------
Signature of Shareholders(s)
