SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ________)
Filed by the Registrant [X]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule
14a-12
[ ] Confidential, for Use of the Commission Only (as Permitted
by Rule 14a-6(e)(2))
SHORELINE FINANCIAL CORPORATION
___________________________________________________________________________
(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] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2),
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
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[SHORELINE FINANCIAL CORPORATION LOGO]
823 RIVERVIEW DRIVE
BENTON HARBOR, MICHIGAN 49022
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________________________________________________________________
The annual meeting of shareholders of Shoreline Financial Corporation
will be held at Lake Michigan College Community Center, 2755 E. Napier
Avenue, Benton Harbor, Michigan, on Wednesday, May 1, 1996, at 3 p.m. local
time, for the following purposes:
1. To elect directors.
2. To consider and approve the Stock Incentive Plan of 1996.
3. To transact any other business that may properly come before
the meeting.
Shareholders of record at the close of business on March 8, 1996, are
entitled to notice of and to vote at the meeting and any adjournment of the
meeting. The following Proxy Statement and enclosed form of proxy are
being furnished to holders of Shoreline Common Stock on and after March 22,
1996.
By Order of the Board of Directors,
/S/ WAYNE R. KOEBEL
Wayne R. Koebel
Secretary
March 22, 1996
___________________________________________________________________________
It is important that your shares be represented at the
meeting. Even if you expect to attend the meeting,
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
SHORELINE FINANCIAL CORPORATION
May 1, 1996
This Proxy Statement and the accompanying form of proxy are being
furnished to holders of Common Stock of Shoreline Financial Corporation
("Shoreline" or the "Corporation") on and after March 22, 1996, in
connection with the solicitation of proxies by the Shoreline Board of
Directors for use at the annual meeting of Shoreline shareholders to be
held on May 1, 1996, and at any adjournment of that meeting. The annual
meeting will be held at Lake Michigan College Community Center,
2755 E. Napier Avenue, Benton Harbor, Michigan, at 3 p.m. local time.
The purpose of the annual meeting is to consider and vote upon: (i)
the election of directors; and (ii) approval of the Stock Incentive Plan of
1996. If a proxy in the form distributed by Shoreline is properly executed
and returned to Shoreline, the shares represented by that proxy will be
voted at the annual meeting of Shoreline shareholders and at any
adjournment of that meeting. If a shareholder specifies a choice, the
proxy will be voted as specified. If no choice is specified, the shares
represented by the proxy will be voted for the election of all nominees of
the Board of Directors named in this Proxy Statement and for the approval
of the Stock Incentive Plan of 1996. Shoreline management does not know of
any other matter to be presented at the annual meeting. If other matters
are presented, all shares represented by the proxy will be voted in
accordance with the judgment of the persons named as proxies with respect
to those other matters.
A proxy may be revoked at any time prior to its exercise by written
notice delivered to the Secretary of Shoreline. A proxy may also be
revoked by attending and voting at the annual meeting.
Solicitation of proxies will be made initially by mail. Directors,
officers and employees of Shoreline and Shoreline Bank may also solicit
proxies in person or by telephone without additional compensation. In
addition, proxies may be solicited by nominees and other fiduciaries who
may mail material to or otherwise communicate with the beneficial owners of
shares held by them. All expenses of solicitation of proxies will be paid
by Shoreline.
ELECTION OF DIRECTORS
The Board of Directors has nominated the following three persons for
reelection to the Shoreline Board of Directors for terms expiring at the
annual meeting to be held in 1999:
NOMINEES
James E. LeBlanc
James F. Murphy
Robert L. Starks
Nine other directors are serving terms that will expire in 1997 and
1998. It is the intent of the persons named in the accompanying proxy to
vote for the election of the three nominees listed above. The proposed
nominees are willing to be elected and to serve. In the event that any
nominee is unable to serve or is otherwise unavailable for election, which
is not contemplated, the incumbent Shoreline Board of Directors may or may
not select a substitute nominee. If a substitute nominee is selected, all
proxies will be voted for the person so selected. If a substitute nominee
is not selected, all proxies will be voted for the election of the
remaining nominees. Proxies will not be voted for a greater number of
persons than the number of nominees named.
A plurality of the shares represented in person or by proxy and voting
at the meeting is required to elect directors. For the purpose of counting
votes on the election of directors, abstentions, broker non-votes and other
shares not voted will not be counted as shares voted, and the number of
shares of which a plurality is required will be reduced by the number of
shares not voted.
YOUR BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS
APPROVAL OF STOCK INCENTIVE PLAN OF 1996
The Board of Directors firmly believes that the Corporation's long-term
interests are best advanced by aligning the interests of its key
leaders and employees with the interests of its shareholders. Therefore,
to attract and retain officers and other key management employees of
exceptional abilities, and in recognition of the significant and
extraordinary contributions to the long-term performance and growth of the
Corporation and Shoreline Bank made by these individuals, on February 21,
1996, the Board of Directors adopted, subject to shareholder approval, the
Stock Incentive Plan of 1996 (the "1996 Incentive Plan"). The 1996
Incentive Plan is intended to supplement the Corporation's 1989 Stock
Option Plan (the "1989 Plan"). Because the 1989 Plan has limited
authorized shares remaining for future stock option grants and does not
provide for certain common forms of equity-based compensation, the Board of
Directors believes that the adoption and implementation of the 1996
Incentive Plan is now advisable to make additional shares available for
stock option grants and restricted stock awards.
-2-
The Board of Directors contemplates that the 1996 Incentive Plan would
primarily be used to grant stock options. However, the 1996 Incentive Plan
would also permit grants of restricted stock and tax benefit rights if
determined to be desirable to advance the purposes of the 1996 Incentive
Plan. Stock options, restricted stock and tax benefit rights are referred
to as "Incentive Awards" in this Proxy Statement. By combining in a single
plan these types of incentives commonly used in long-term incentive
compensation programs, it is intended that the 1996 Incentive Plan would
provide significant flexibility to the Organization, Compensation, and
Stock Option Committee of the Board of Directors (the "Committee"). This
flexibility would allow the Committee to tailor specific long-term
incentives that would best promote the objectives of the 1996 Incentive
Plan, and in turn promote the interests of the Corporation's shareholders.
The following is a summary of the principal features of the 1996
Incentive Plan. The summary is qualified in its entirety by reference to
the terms of the 1996 Incentive Plan, the complete text of which is
attached as Appendix A to this Proxy Statement.
Persons eligible to receive Incentive Awards under the 1996 Incentive
Plan (with certain limitations discussed below) include corporate officers
(currently five persons), including those listed in the Summary
Compensation Table presented in this Proxy Statement, and other key
employees (currently approximately five persons) of the Corporation and
Shoreline Bank. Directors who are not employees of the Corporation or
Shoreline Bank are not eligible to participate in the 1996 Incentive Plan.
Other individuals eligible to participate in the 1996 Incentive Plan may
join the Corporation in the future. A maximum of 50,000 shares of Common
Stock (subject to certain antidilution adjustments) will be available for
Incentive Awards under the 1996 Incentive Plan. Shares to be issued under
the 1996 Incentive Plan will be authorized and unissued shares. Because
officers and key employees of the Corporation and Shoreline Bank may
receive awards under the 1996 Incentive Plan, they may be deemed to have an
interest in the 1996 Incentive Plan. The 1996 Incentive Plan will not be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and will not be subject to the Employee Retirement
Income Security Act of 1974.
The 1996 Incentive Plan will be administered by the Committee. The
Committee will be comprised of two or more directors who are not employees
of the Corporation or Shoreline Bank and who do not participate and are not
eligible to participate in any long-term incentive plan of the Corporation
or Shoreline Bank. The Board of Directors, in its discretion, may also
require that the members of the Committee be "outside directors" as defined
in the rules issued pursuant to Section 162(m) of the Code. The Committee
will make determinations, subject to the terms of the 1996 Incentive Plan,
as to the persons to receive Incentive Awards, the amount of Incentive
Awards to be granted to each person, the terms of each grant, and all other
determinations necessary or advisable for administration of the 1996
-3-
Incentive Plan. The Committee may amend the terms of Incentive Awards
granted under the 1996 Incentive Plan from time to time in a manner
consistent with the 1996 Incentive Plan; provided, that no amendment may be
effective relating to a particular Incentive Award without the consent of
the relevant participant, except to the extent the amendment operates
solely to the benefit of the participant.
Under the 1996 Incentive Plan, participants may be granted stock
options. A stock option is the right to purchase a specified number of
shares of Common Stock for a stated price at specified times. Certain
stock options that may be granted to employees under the 1996 Incentive
Plan may qualify as incentive stock options as defined in Section 422(b) of
the Code ("Incentive Stock Options"). Other stock options will not be
Incentive Stock Options within the meaning of the Code. Stock options may
be granted at any time prior to the termination of the 1996 Incentive Plan
according to its terms or by action of the Committee.
The Committee will set forth the terms of individual grants of stock
options in stock option agreements, which will contain such terms and
conditions, consistent with the provisions of the 1996 Incentive Plan, as
the Committee determines to be appropriate. These restrictions may include
vesting requirements to encourage long-term ownership of shares. The
Corporation will receive no consideration upon the award of options. The
option price per share will be determined by the Committee; provided, that
the option price for an Incentive Stock Option will be a price equal to or
higher than the "market value" of Shoreline Common Stock on the date of
grant. "Market value" means the last reported transaction price of shares
of Common Stock as reported on The NASDAQ Stock Market on the date of
grant, or if no shares were traded on that date, the last preceding date on
which shares were traded. On March 8, 1996, the last reported transaction
price of Common Stock on The NASDAQ Stock Market was $20.125 per share.
When exercising all or a portion of an option, a participant may pay
the exercise price with cash or, with the consent of the Committee, shares
of Common Stock. If shares of Common Stock are used to pay the exercise
price and the Committee consents, a participant may use the value of shares
received upon exercise for further exercises in a single transaction,
permitting a participant to fully exercise an option with a relatively
small initial cash or stock payment. The Committee may also authorize
payment of all or a portion of the option price in the form of a promissory
note or installments on such terms as the Committee may approve. The Board
of Directors may restrict or suspend the power of the Committee to permit
such loans and may require that adequate security be provided.
Although the term of each stock option will be determined by the
Committee, no Incentive Stock Option will be exercisable under the 1996
Incentive Plan after 10 years from the date it was granted. Options
generally will be exercisable for limited periods of time if an option
holder is terminated from employment with the Corporation or Shoreline Bank
-4-
without cause, dies or becomes disabled. If an option holder is terminated
for cause, the option holder will forfeit all rights to exercise any
outstanding options. Options granted to participants under the 1996
Incentive Plan may not be transferred except by will or by the laws of
descent and distribution. No individual participant may be granted, during
any calendar year, options to purchase more than 10,000 shares of Common
Stock under the 1996 Incentive Plan. The Committee may permit an option
holder to exercise an option for an extended period, which may not extend
beyond the earlier of either three years from the date of termination or
the date on which the options expire by their terms, if (i) the option
holder retires after age 62 or upon any other age determined by the
Committee ("Normal Retirement"), or (ii) the option holder voluntarily
terminates employment and the Committee determines the termination to be in
the best interests of the Corporation ("Consensual Severance").
Because the specific participants and the market value of Common Stock
on the grant date cannot presently be determined, the benefits or amounts
that will be received by participants under the 1996 Incentive Plan in the
future are not determinable. Similarly, the benefits or amounts that would
have been received by participants had the 1996 Incentive Plan been in
effect during the last completed fiscal year are not determinable.
Under current federal income tax laws, no income will be realized when
an option is granted pursuant to the 1996 Incentive Plan. A participant
exercising an Incentive Stock Option will not recognize income at the time
of exercise. The difference between the market value and the exercise
price will, however, be a tax preference item for the purpose of
calculating alternative minimum tax. Upon sale of the stock, so long as
the participant held the stock for at least one year after the exercise of
the option and at least two years after the grant of the option, the
participant's basis will equal the option price, and the participant will
pay tax on the difference between the sale price and the option price as
capital gain, in which case the Corporation will not be entitled to any
deduction for compensation income. If, prior to the expiration of either
of the above holding periods, the participant sells shares acquired under
an Incentive Stock Option, the tax deferral will be lost, and the
participant will recognize compensation income equal to the difference
between the option price and the fair market value of the shares sold at
the time of exercise, but not more than the maximum amount that will not
result in a loss on the disposition (generally the difference between the
option price and the price at which the shares are sold). The Corporation
will then receive a corresponding deduction for federal income tax
purposes. Additional gains, if any, will be recognized by the participant
as short- or long-term capital gain.
If a participant exercises stock options that are not Incentive Stock
Options, the participant will recognize compensation income in the year of
exercise equal to the difference between the stock option price and the
fair market value of the shares on the date of exercise. The Corporation
-5-
will receive a corresponding deduction for federal income tax purposes.
The participant's tax basis in the shares acquired will be increased by the
amount of compensation income recognized. Sale of the stock after exercise
will result in recognition of short- or long-term capital gain (or loss).
In addition to the authority to grant stock options under the 1996
Incentive Plan, the 1996 Incentive Plan will allow the Committee to award
restricted stock. Restricted stock will be subject to such terms and
conditions, consistent with the provisions of the 1996 Incentive Plan, as
the Committee from time to time may determine. As with stock option
grants, the Committee will set forth the terms of individual awards of
restricted stock in restricted stock agreements. If a participant's
employment or director or officer status is terminated during the
restricted period set by the Committee for any reason other than death or
disability, or any additional reason as may be permitted by the Committee,
then any shares of restricted stock still subject to restrictions will be
forfeited. Unless the Committee provides otherwise in a restricted stock
agreement, if a participant's employment or director or officer status is
terminated during the restricted period by reason of death or disability,
the restrictions on the participant's shares will terminate automatically
as of the date of death or disability. The Committee, in its discretion,
may provide that all or part of the restrictions on the restricted stock
will lapse upon termination if the termination is by reason of Consensual
Severance or Normal Retirement.
Without Committee authorization, a recipient of restricted stock may
not sell, exchange, transfer, pledge, assign or otherwise dispose of such
stock other than to the Corporation or by will or the laws of descent or
distribution. In addition, the Committee may impose other restrictions on
shares of restricted stock. However, holders of restricted stock will
enjoy all other rights of shareholders with respect to restricted stock,
including the right to vote restricted shares at shareholders' meetings and
the right to receive all dividends paid with respect to restricted stock.
Any securities received by a holder of restricted stock pursuant to a stock
dividend, stock split, recapitalization or reorganization will be subject
to the same terms, conditions and restrictions that are applicable to the
restricted stock for which such shares are received.
Generally, a participant will not recognize income upon the award of
restricted stock. However, a participant will recognize compensation
income on the value of restricted stock at the time the restricted stock
vests (when the restrictions lapse). At the time the participant
recognizes this compensation income, the Corporation will be entitled to a
corresponding deduction for federal income tax purposes. If restricted
stock is forfeited by a participant, the participant will not recognize
income and the Corporation will not receive a deduction. Prior to the
lapse of the restrictions, dividends paid on restricted stock will be
reported as compensation income to the participant and the Corporation will
receive a corresponding deduction.
-6-
A participant may, within 30 days after the date of an award of
restricted stock, elect to report compensation income for the tax year in
which the award of restricted stock occurred. If the participant makes
such an election, the amount of compensation income will be the value of
the restricted stock at the time of the award. Any later appreciation in
the value of the restricted stock will be treated as capital gain and
realized only upon the sale of the restricted stock. Dividends received
after such an election will be taxable as dividends and not treated as
additional compensation income. If, however, restricted stock is forfeited
after the participant makes an election as described above, the participant
will not be allowed any deduction for the amount earlier taken into income.
Upon the sale of restricted stock, a participant will realize capital gain
(or loss) in the amount of the difference between the sale price and the
value of the stock previously reported by the participant as compensation
income.
Upon the occurrence of a "change in control" of the Corporation (as
defined in the 1996 Incentive Plan), all restricted stock immediately
becomes fully vested and nonforfeitable. The Committee may provide in the
restricted stock agreement that the number of shares that will
automatically vest will be limited in value to the extent that any payments
that are deemed "parachute payments" as defined in Section 280G(b)(2) of
the Code would not be subject to the excise tax imposed by Section 4999 of
the Code.
The Committee may also grant tax benefit rights under the 1996
Incentive Plan. As with options and restricted stock, the Committee will
set forth the terms and conditions of tax benefit rights granted and the
participants to receive tax benefit rights in written agreements. A tax
benefit right entitles a participant to receive a cash payment from the
Corporation or Shoreline Bank to encourage the participant to exercise his
or her options. The amount of the payment may not exceed the amount
calculated by multiplying the ordinary income, if any, realized by the
participant for federal tax purposes as a result of the exercise of a
non-Incentive Stock Option, or as a result of the disqualifying disposition of
shares acquired under an Incentive Stock Option, by the maximum federal
income tax rate (including any surtax or similar charge or assessment) for
corporations, plus the applicable state and local tax imposed on the
exercise of the option or disqualifying disposition. Tax benefit rights
may be granted only with respect to a stock option issued and outstanding
or to be issued under the 1996 Incentive Plan or any prior plans. A
participant may refuse the issuance of a tax benefit right if the effect of
the tax benefit right would disqualify an Incentive Stock Option, change
the date of the grant or exercise price or impair the participant's
existing stock options. An officer or employee subject to Section 16 of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), may not
exercise an option to which a tax benefit right has attached for a period
of six months from the date of grant of the tax benefit right.
-7-
Whenever Incentive Awards are made under the 1996 Incentive Plan, the
Corporation may withhold from any cash otherwise payable to the participant
or require the participant to remit to the Corporation an amount sufficient
to satisfy all applicable federal, state and local withholding taxes.
Withholding may be satisfied by withholding Common Stock to be received
upon exercise of an option or by delivery to the Corporation of shares of
previously owned Common Stock.
The Board of Directors may terminate the 1996 Incentive Plan at any
time and may from time to time amend the 1996 Incentive Plan as it deems
proper and in the best interests of the Corporation, provided that without
shareholder approval no such amendment may materially increase the number
of shares that may be issued under the 1996 Incentive Plan, or impair any
outstanding Incentive Award without the consent of the participant, except
according to the terms of the Incentive Award. Subject to shareholder
approval, the 1996 Incentive Plan will take effect on May 1, 1996 and,
unless previously terminated by the Board of Directors, the 1996 Incentive
Plan will terminate on April 30, 2006. No award may be made under the 1996
Incentive Plan after that date.
The Corporation intends to register shares covered by the 1996
Incentive Plan under the Securities Act of 1933 before any Incentive Award
vests or becomes exercisable.
The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy and voting on this
proposal is required to approve the 1996 Incentive Plan. For purposes of
counting votes on this proposal, abstentions, broker non-votes and other
shares not voted will not be counted as voted on this proposal, and the
number of shares of which a majority is required will be reduced by the
number of shares not voted. The Board of Directors has determined that the
1996 Incentive Plan is in the best interests of the Corporation and its
shareholders. Unless specific instructions to the contrary are indicated,
the shares represented by proxies received will be voted FOR approval of
the 1996 Incentive Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR APPROVAL OF THE STOCK INCENTIVE PLAN OF 1996
VOTING SECURITIES
Holders of record of Common Stock at the close of business on March 8,
1996, will be entitled to vote at the annual meeting of shareholders on May
1, 1996, and any adjournment of that meeting. As of March 8, 1996, there
were 5,255,348 shares of Common Stock issued and outstanding. Each share
of Common Stock is entitled to one vote on each matter submitted for
shareholder action.
-8-
The following table sets forth information concerning the number of
shares of Common Stock held as of February 15, 1996, by the only
shareholder who is known to Shoreline management to have been the
beneficial owner of more than 5% of the outstanding shares as of that date:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF COMMON STOCK<F1>
SOLE VOTING SHARED
AND VOTING OR TOTAL PERCENT
NAME AND ADDRESS OF DISPOSITIVE DISPOSITIVE BENEFICIAL OF
BENEFICIAL OWNER POWER POWER<F2> OWNERSHIP CLASS
<S> <C> <C> <C> <C>
Shoreline Bank
Trust Department
720 Pleasant Street
St. Joseph, Michigan 49085<F3> 245,368 569,601 814,969 15.51%
</TABLE>
The following table sets forth information concerning the number of
shares of Common Stock held as of March 8, 1996, by each of Shoreline's
directors and nominees for director, each of the named executive officers
and all of Shoreline's directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF COMMON STOCK<F1>
SOLE VOTING SHARED
AND VOTING OR TOTAL PERCENT
NAME OF DISPOSITIVE DISPOSITIVE BENEFICIAL OF
BENEFICIAL OWNER POWER POWER<F2> OWNERSHIP CLASS
<S> <C> <C> <C> <C>
Richard D. Bailey, II 505<F4> -- 505<F4> <F*>
Robert K. Burch 8,322<F4> 1,661 9,983<F4> <F*>
Louis A. Desenberg -- 20,475 20,475 <F*>
Merlin J. Hanson 125,972 -- 125,972 2.40%
Thomas T. Huff 27,739 -- 27,739 <F*>
Ronald F. Kinney 3,108 -- 3,108 <F*>
Wayne R. Koebel 8,750<F4> 7,088 15,838<F4> <F*>
James E. LeBlanc 622 -- 622 <F*>
L. Richard Marzke 27,470 -- 27,470 <F*>
James F. Murphy 15,315<F4> 48,980 64,295<F4> 1.22
Dan L. Smith 13,872<F4> 35,641 49,513<F4> <F*>
Robert L. Starks 83,209 12,242 95,451 1.82
Jeffery H. Tobian 118,294 -- 118,294 2.25
Harry C. Vorys 4,791<F4> -- 4,791<F4> <F*>
Hyman Warshawsky 11,573 6,192 17,765 <F*>
Ronald L. Zile 29,912<F4> 8,800 38,712<F4> <F*>
-9-
All directors and
executive officers
as a group 487,776<F4> 141,689 629,465<F4> 11.98%
<FN>
_______________________
<F*> Less than 1%.
<F1> The numbers of shares stated are based on information furnished by
each person listed and include shares personally owned of record by
that person and shares that under applicable regulations are
considered to be otherwise beneficially owned by that person. Under
these regulations, a beneficial owner of a security includes any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting power
or dispositive power with respect to the security. Voting power
includes the power to vote or direct the voting of the security.
Dispositive power includes the power to dispose or direct the
disposition of the security. A person will also be considered the
beneficial owner of a security if the person has a right to acquire
beneficial ownership of the security within 60 days. Shares held in
fiduciary capacities by Shoreline Bank are not included unless
otherwise indicated. Shoreline and the directors and officers of
Shoreline and Shoreline Bank disclaim beneficial ownership of shares
held by Shoreline Bank in fiduciary capacities.
<F2> These numbers include shares as to which the listed person is legally
entitled to share voting or dispositive power by reason of joint
ownership, trust or other contract or property right, and shares held
by spouses and minor children over whom the listed person may have
substantial influence by reason of relationship. Shares held in
fiduciary capacities by Shoreline Bank are not included unless
otherwise indicated. The directors and officers of Shoreline and
Shoreline Bank may, by reason of their positions, be in a position to
influence the voting or disposition of shares held in trust by
Shoreline Bank to some degree, but disclaim beneficial ownership of
these shares.
<F3> These numbers consist of shares held in various fiduciary capacities
through the trust department of Shoreline Bank. Shoreline and the
directors and officers of Shoreline and Shoreline Bank disclaim
beneficial ownership of these shares.
<F4> These numbers include shares of Common Stock that may be acquired
through the exercise of stock options within 60 days. The right to
exercise stock options vests over a five-year period. The number of
shares subject to vested stock options for each listed person is shown
below:
-10-
Mr. Bailey --
Mr. Burch 8,322
Mr. Koebel 5,285
Mr. Murphy 7,196
Mr. Smith 13,872
Mr. Vorys 3,000
Mr. Zile 10,504
All directors and
executive officers
as a group 56,501
</FN>
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
Shoreline's Board of Directors is divided into three classes, which
are as nearly equal in number as possible. Each class of directors serves
a successive three-year term of office. Three members of the present Board
of Directors are standing for reelection with terms expiring in 1999.
Biographical information concerning Shoreline's directors and
executive officers, including the three nominees who are nominated for
election to the Board of Directors at the annual meeting, is presented
below. Except as otherwise indicated, all directors and executive officers
have had the same principal employment for over five years. Except as
otherwise indicated, all directors and executive officers have held their
positions with Shoreline since 1987. All executive officers are appointed
annually and serve at the pleasure of the Board of Directors. Effective
May 27, 1994, Inter-City Bank and Citizens Trust and Savings Bank, both
wholly owned subsidiaries of Shoreline, were consolidated into a single
bank under the name "Shoreline Bank" (the "Consolidation").
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 1999
JAMES E. LEBLANC (age 53) is Chairman, President and Chief Executive
Officer of Whirlpool Financial Corporation, a financial services company,
and Corporate Vice President of Whirlpool Corporation, a manufacturer of
kitchen and household appliances. He has been a director of Shoreline
since 1993. Mr. LeBlanc has also been a director of Shoreline Bank and,
before the Consolidation, Inter-City Bank since 1990.
JAMES F. MURPHY (age 65) retired on December 31, 1992, after serving
as Chairman of the Board and Chief Executive Officer of Shoreline since
1987 and as Chairman of the Board of Inter-City Bank since 1978.
Mr. Murphy has been a director of Shoreline Bank and, before the
Consolidation, Inter-City Bank since 1972.
ROBERT L. STARKS (age 64) is Chairman of Kerley & Starks Funeral
Homes, Inc. He has been a director of Shoreline Bank and, before the
Consolidation, Inter-City Bank since 1983.
-11-
DIRECTORS WITH TERMS EXPIRING IN 1997
LOUIS A. DESENBERG (age 52) is a shareholder in the law firm of
Desenberg & Colip, P.C. He has been a director of Shoreline Bank and,
before the Consolidation, Inter-City Bank since 1978.
MERLIN J. HANSON (age 68) has been Chairman of the Board of Hanson
Group, Inc., a diversified manufacturing company, since 1987. He has also
been Chairman of the Board of Hanson Cold Storage Co., a refrigerated
warehousing company, since 1991. He has been a director of Shoreline since
1991 and a director of Shoreline Bank and, before the Consolidation, Inter-City
Bank since 1987.
RONALD F. KINNEY (age 64) is Chairman of All-Phase Electric Supply
Co., Inc., a wholesale and retail distributor of electrical equipment.
Prior to 1995, Mr. Kinney was a director of Shoreline Bank and, before the
Consolidation, Inter-City Bank since 1967.
JEFFERY H. TOBIAN (age 44) has been President of J.T. Investments,
Inc., a personal investment company, since 1994. Before 1994, Mr. Tobian
was the owner and President of Tobian Metals, Inc., a scrap metal company.
HARRY C. VORYS (age 71) retired in 1990 after serving as Executive
Vice President and Treasurer of Shoreline and Executive Vice President of
Citizens Trust and Savings Bank. Mr. Vorys was also a director of Citizens
from 1988 until 1990. Mr. Vorys joined Citizens in 1986 as its Senior Vice
President and Chief Lending Officer. Mr. Vorys is also a director of
Manatron, Inc.
DIRECTORS WITH TERMS EXPIRING IN 1998
THOMAS T. HUFF (age 53) is a partner in the law firm of Varnum,
Riddering, Schmidt & Howlett LLP. He has been a director of Shoreline Bank
and, before the Consolidation, Citizens Trust and Savings Bank since 1986.
L. RICHARD MARZKE (age 62) is President and Chief Executive Officer of
Pri-Mar Petroleum, Inc., a wholesale and retail distributor of gasoline and
other petroleum products and convenience store operator. He has been a
director of Shoreline Bank and, before the Consolidation, Inter-City Bank
since 1977.
DAN L. SMITH (age 60) is Chairman of the Board, President and Chief
Executive Officer of Shoreline. Mr. Smith became Chairman of the Board and
Chief Executive Officer on January 1, 1993, having previously served as
President of the Corporation. Mr. Smith was Secretary of Shoreline until
1992. Mr. Smith has served as Chairman of the Board, President and Chief
Executive Officer of Shoreline Bank since the Consolidation. Before the
Consolidation, Mr. Smith had served as President of Inter-City Bank since
1978, Chief Executive Officer of Inter-City since 1988, and a director of
Inter-City since 1972.
-12-
RONALD L. ZILE (age 63) retired on December 31, 1994, after serving as
Vice Chairman of the Board of Shoreline since 1987 and Vice Chairman of the
Board of Shoreline Bank since the Consolidation. Before the Consolidation,
Mr. Zile had served as President and Chief Executive Officer of Citizens
Trust and Savings Bank since 1979, Chairman of the Board of Citizens since
1984 and a director of Citizens since 1978.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
RICHARD D. BAILEY, II (age 42) has been Senior Vice President of
Shoreline Bank and, before the Consolidation, Inter-City Bank since 1993.
Before 1993, Mr. Bailey was a Vice President and Commercial Loan Officer at
Old Kent Bank.
ROBERT K. BURCH (age 40) is Executive Vice President of Shoreline Bank
and, before the Consolidation, had served in that position at Inter-City
Bank since 1992. Before 1992, he served Inter-City Bank in various other
executive capacities.
WAYNE R. KOEBEL (age 49) is Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of Shoreline. Mr. Koebel became Executive
Vice President in August 1994. Before August 1994, Mr. Koebel had served
as Senior Vice President of Shoreline. Mr. Koebel became Secretary and
Treasurer in January 1993. Mr. Koebel is Executive Vice President and
Chief Financial Officer of Shoreline Bank and, before the Consolidation,
had served as Senior Vice President and Chief Financial Officer of Inter-City
Bank since 1986. Before 1986, he served as Senior Vice President and
Controller of Inter-City Bank.
JAMES R. MILROY (age 35) has been Senior Vice President and Controller
of Shoreline since May 1993. He previously served as Vice President and
Controller of Shoreline and Inter-City Bank from 1990 until 1993. Before
1990, Mr. Milroy was an associate and manager at Crowe, Chizek and Company
LLP, an accounting firm.
BOARD COMMITTEES AND MEETINGS
The Shoreline Board of Directors has four standing committees:
AUDIT COMMITTEE. The Audit Committee is responsible for causing a
suitable examination of the financial records and operations of Shoreline
and Shoreline Bank to be made by the internal auditors of Shoreline and
Shoreline Bank through a program of continuous internal audits. The Audit
Committee recommends to Shoreline's Board of Directors independent
certified public accountants for employment to examine the financial
statements of Shoreline and make such additional examinations as the
committee deems advisable. The Audit Committee also reviews reports of
examination of Shoreline and Shoreline Bank received from regulatory
authorities and reports to the Board of Directors at least once each
-13-
calendar year the results of examinations made and such conclusions and
recommendations as the committee deems appropriate. Directors Marzke,
Starks, Vorys and Warshawsky presently serve on this committee. The Audit
Committee met four times during 1995.
ORGANIZATION, COMPENSATION, AND STOCK OPTION COMMITTEE. The
Organization, Compensation, and Stock Option Committee administers
Shoreline's Retirement Plan, Profit-Sharing/401(k) Plan and bonus plan.
This committee also reviews key personnel policies and programs, including
individual salaries of executive officers, and submits recommendations to
the Board of Directors. This committee also serves as Shoreline's Stock
Option Committee and administers Shoreline's 1989 Stock Option Plan. In
this capacity, the committee determines the persons to be granted options
and rights, the amount of stock subject to options and rights to be granted
to each such person and the terms of the options and rights to be granted.
Directors who are also employees of Shoreline or Shoreline Bank and who may
participate in the plans that this committee administers may not serve on
this committee. Directors Hanson, LeBlanc and Marzke presently serve on
this committee. The Organization, Compensation, and Stock Option Committee
met two times during 1995.
NOMINATING COMMITTEE. The Nominating Committee considers nominees for
election as directors of Shoreline submitted by any shareholder of record.
Any shareholder desiring to nominate a candidate for director must deliver
a notice to the Secretary of Shoreline, not less than 120 days prior to the
meeting, setting forth (i) the name, age, business address and residence
address of the nominee; (ii) the principal occupation or employment of the
nominee; (iii) the number of shares of Common Stock beneficially owned by
the nominee; (iv) a statement that the nominee is willing to be nominated
and serve; and (v) such other information regarding the nominee as would be
required under the rules of the Securities and Exchange Commission to be
included in a proxy statement soliciting proxies for the election of the
nominee. Directors Hanson, Huff, Murphy, Smith and Warshawsky presently
serve on this committee. The Nominating Committee did not meet during
1995.
STRATEGIC ISSUES COMMITTEE. The Strategic Issues Committee
investigates and considers issues related to business expansion, lines of
business and corporate structure. Directors Hanson, Huff, Marzke, Smith
and Starks presently serve on this committee. The Strategic Issues
Committee met two times during 1995.
During 1995, the Shoreline Board of Directors held four regular
meetings and one special meeting. All directors except Mr. Hanson and Mr.
Kinney attended at least 75% of the aggregate number of meetings of the
Board of Directors and meetings of committees on which they served during
the year.
-14-
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Exchange Act requires directors and officers of
Shoreline and persons beneficially owning more than 10% of the outstanding
shares of Common Stock to file reports of ownership and changes in
ownership of shares of Common Stock with the Securities and Exchange
Commission. Directors, officers and greater than 10% beneficial owners are
required by Securities and Exchange Commission regulations to furnish
Shoreline with copies of all Section 16(a) reports they file. Based on its
review of the copies of such reports received by it or written
representations from certain reporting persons that no Forms 5 were
required for those persons, Shoreline believes that, except as described
below, all applicable Section 16(a) reporting and filing requirements were
satisfied from January 1, 1995, through December 31, 1995. One report for
Mr. Starks covering one transaction was not filed. This omission was due
to an oversight by Shoreline personnel. Because this oversight was not
discovered until after the annual year-end report was due, the year-end
report that was filed on behalf of Mr. Starks did not report the omission.
An amended year-end report was filed on behalf of Mr. Starks upon discovery
of this oversight.
ORGANIZATION, COMPENSATION, AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Organization, Compensation, and Stock Option Committee of
Shoreline's Board of Directors (the "Committee") administers benefit plans,
reviews Shoreline's key personnel policies and programs, including
individual salaries of executive officers, and submits recommendations to
the Board of Directors. Directors who are also employees of Shoreline or
Shoreline Bank and who may participate in the plans that the Committee
administers may not serve on the Committee.
Successful long-term financial performance and increasing shareholder
value are Shoreline's primary corporate goals. Shoreline's executive
compensation practices are intended to encourage successful financial
performance and attract and retain talented key executives who are critical
to the Corporation's long-term success.
Shoreline's executive compensation program consists of three
components: base salary, annual cash incentive bonus opportunities, and
long-term incentives through awards of stock options. In determining the
levels of some components, the Committee considers corporate performance
alone. In determining the levels of other components, such as base salary,
the Committee will consider a number of factors in addition to corporate
performance.
The Committee's primary goal in establishing base salary levels is to
be competitive. The Committee establishes ranges for base salaries of
-15-
executive officers by comparing the Corporation to other more or less
comparable bank holding companies. In general, salaries paid to Shoreline
executives have been closer to the median rather than either the high or
low end of each range. Although corporate performance is considered by the
Committee in establishing base salary levels, corporate performance is not
the most important factor. A discretionary assessment of job performance
is another factor considered by the Committee in establishing base salary
levels.
Annual cash incentive bonuses are based entirely on corporate
performance. Annual cash bonus awards are determined by the application of
a formula. A three-part bonus formula was used for 1993. Shoreline's rate
of net income growth over the most recent three-year period was the most
important component. The other two components of the 1993 bonus formula
compared Shoreline's overhead and capital ratios to those of a national
peer group of bank holding companies with assets between $500 million and
$1 billion as reported in the Uniform Bank Performance Report for bank
holding companies published by Federal Financial Institution Examination
Counsel. The maximum cash bonus allowable under the plan was 30% of base
salary.
While a three-part formula was used once again for 1994 and 1995, it
was not the same formula used for 1993. The comparison of Shoreline's
results to a peer group of banks was discontinued, and an asset quality
component replaced the 1993 formula's capital adequacy component.
Shoreline's overhead and nonperforming asset ratios were compared to
targeted levels to determine the amount of bonus payable under those two
components of the formula. The maximum cash bonus allowable under the 1994
and 1995 plans was 39% of base salary.
Long-term incentives are provided to reward executives for achieving
the long-term goal of increasing shareholder value. All of Shoreline's
long-term incentives involve awards of stock options. Stock ownership is
considered important. Through stock ownership, the interests of executives
are joined with those of the shareholders. Under Shoreline's 1989 Stock
Option Plan, executives are rewarded for the enhancement of shareholder
value through the increase in the value of shares subject to options. No
stock options were awarded to executive officers of Shoreline during 1995.
Shoreline generally maintains a conservative level of perquisites and
personal benefits. The dollar value of perquisites and personal benefits
provided to executive officers does not exceed 10% of each executive
officer's respective annual salary and bonus.
Dan L. Smith, Shoreline's Chief Executive Officer during 1995, also
serves as Chairman, President and Chief Executive Officer of Shoreline
Bank. Prior to 1993, Mr. Smith was President and Secretary of Shoreline
and President and Chief Executive Officer of Inter-City Bank.
-16-
In determining Mr. Smith's base salary for 1995, the Committee
recognized Mr. Smith's efforts in successfully merging the Corporation's
two banks during 1994. Shareholder value should be enhanced through the
cost containment opportunities presented by the new, one-bank structure.
In setting Mr. Smith's 1995 base salary at $210,000, the Committee also was
attempting to make Mr. Smith's compensation comparable to that of chief
executive officers of other bank holding companies with assets of $500
million to $1 billion.
Mr. Smith's 1995 incentive bonus of $75,600 was based entirely on
corporate performance as measured by the bonus formula used for all
executives that is discussed above. Mr. Smith was not awarded any stock
options during 1995.
Section 162(m) of the Code provides that publicly held corporations
may not deduct compensation paid to certain executive officers in excess of
$1 million annually, with certain exemptions. Shoreline has examined its
executive compensation policies in light of Section 162(m) and the
regulations adopted by the Internal Revenue Service to implement that
section. It is not expected that any portion of the Corporation's
deduction for employee remuneration will be disallowed in 1996 or in future
years by reason of actions expected to be taken in 1996.
During 1995, all recommendations of the Committee were unanimously
approved by the Board of Directors without modification.
Respectfully submitted,
Merlin J. Hanson
James E. LeBlanc
L. Richard Marzke
STOCK PERFORMANCE
The following graph compares the cumulative total shareholder return
on Shoreline Common Stock to the Standard & Poor's 500 Stock Index and the
KBW 50 Index. The Standard & Poor's 500 Stock Index is a broad equity
market index published by Standard & Poor's. The KBW 50 Index is a market
capitalization weighted bank stock index published by Keefe, Bruyette &
Woods, Inc., an investment banking firm that specializes in the banking
industry. The KBW 50 Index is composed of 50 money center and regional
bank holding companies. The Standard & Poor's 500 Stock Index and the KBW
50 Index both assume dividend reinvestment. Cumulative total return is
measured by dividing the sum of the cumulative amount of dividends for the
measurement period, assuming dividend reinvestment, and the difference
between the share price at the end and the beginning of the measurement
period by the share price at the beginning of the measurement period.
-17-
STOCK PERFORMANCE GRAPH
Five Year Cumulative Total Shareholder Return
[STOCK PERFORMANCE GRAPH]
The dollar values for total shareholder return plotted in the graph
above are shown in the table below:
<TABLE>
<CAPTION>
KBW 50 S & P 500
DECEMBER 31, SHORELINE INDEX INDEX
<S> <C> <C> <C> <C>
1990 $ 100.0 $ 100.0 $ 100.0
1991 144.0 158.3 130.5
1992 212.8 201.7 140.4
1993 285.5 212.8 154.6
1994 256.0 201.9 156.6
1995 309.5 323.4 215.5
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table shows certain information concerning the
compensation for services rendered during each of the three years in the
period ended December 31, 1995, of each executive officer of Shoreline
whose cash compensation exceeded $100,000 during 1995. Each executive
officer was compensated by Shoreline Bank (or, before the Consolidation,
the respective predecessor bank) in the capacity indicated in the table.
-18-
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION
NAME AND
PRINCIPAL ALL OTHER
POSITION<F1> YEAR SALARY<F2> BONUS<F3> COMPENSATION<F4>
<S> <C> <C> <C> <C>
Dan L. Smith 1995 $220,000 $75,600 $12,842
Chairman of the Board, 1994 199,000 51,300 11,074
President and Chief 1993 173,000 41,250 22,111
Executive Officer of
Shoreline and Shoreline Bank
Wayne R. Koebel, 1995 110,000 39,600 10,083
Executive Vice President, 1994 97,906 27,000 7,673
Chief Financial Officer, 1993 90,811 22,703 8,555
Secretary and Treasurer of
Shoreline and Executive Vice
President and Chief Financial
Officer of Shoreline Bank
Robert K. Burch 1995 90,000 32,400 8,674
Executive Vice President 1994 81,000 21,870 6,861
of Shoreline Bank 1993 75,000 18,750 5,850
Richard D. Bailey, II 1995 80,000 28,800 7,207
Senior Vice President of 1994 75,000 11,813 625
Shoreline Bank 1993 18,013 -- --
<FN>
___________________________
<F1> Capacities indicated are those in which a majority of compensation was
paid if capacities changed during the year. All of Shoreline's
executive officers also serve as executive officers of Shoreline Bank.
<F2> Includes compensation deferred under Shoreline's Profit-Sharing/401(k)
Plan and director fees paid by Shoreline, Shoreline Bank and/or Inter-
City Bank to Mr. Smith.
<F3> Includes compensation deferred under Shoreline's Profit-Sharing/401(k)
Plan.
<F4> All other compensation includes: (i) 401(k) matching contributions by
Shoreline under the Shoreline Profit-Sharing/401(k) Plan; and
(ii) profit-sharing contributions by Shoreline under the Shoreline
Profit-Sharing/401(k) Plan. The amounts included for each such factor
for 1995 are:
-19-
(I) (II)
Mr. Smith $ 3,850 $ 8,992
Mr. Koebel 1,870 8,213
Mr. Burch 2,057 6,617
Mr. Bailey 1,703 5,504
</FN>
</TABLE>
Shoreline's 1989 Stock Option Plan provides that options to purchase
shares of Common Stock and related tax benefit rights may be granted to
officers and other key employees of Shoreline and Shoreline Bank. A stock
option entitles the recipient to purchase shares of Common Stock for a
specified period of time at a specified price. Subject to certain
restrictions, the Organization, Compensation, and Stock Option Committee of
Shoreline's Board of Directors determines who will be granted options, the
number of shares subject to each option, the form of consideration that may
be paid upon exercise of an option and other matters related to the plan.
Tax benefit rights granted under the plan entitle a recipient to receive a
cash payment upon the exercise of a related option. No tax benefit rights
have been awarded under the plan.
The following table sets forth information concerning stock options
exercised by the specified individuals during 1995 and options held by such
individuals at December 31, 1995. No stock options were granted to the
named executives during 1995.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF NUMBER OF SHARES VALUE OF
SHARES UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END<F1> OPTIONS AT FISCAL YEAR-END<F2>
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Dan L. Smith 2,775 $30,331 13,872/0 $149,887/0
Wayne R. Koebel 1,226 8,925 7,035/0 76,013/0
Robert K. Burch 0 0 8,322/0 89,919/0
Richard D. Bailey, II 0 0 0/0 0/0
<FN>
______________________
-20-
<F1> Under the stock option plan, the per share exercise price for
each option is 100% of the market value of Common Stock at the
time the option is granted. Options terminate, subject to
certain limited exercise provisions, in the event of retirement,
death or other termination of employment. The right to exercise
options vests proportionately over a 5-year period.
<F2> The value of options is based on the trading value of Shoreline
Common Stock of $18.875 per share as of the close of business on
December 31, 1995.
</FN>
</TABLE>
Shoreline adopted a defined benefit pension plan effective
January 1, 1989. The plan was established through a merger of two
separate defined benefit pension plans previously maintained by
Inter-City Bank and Citizens Trust and Savings Bank. Executive
officers of Shoreline or Shoreline Bank who satisfy certain eligibility
requirements are participants in the plan. The plan provides no
vesting until a participant has completed five years of credited
service, at which time the participant becomes 100% vested. All
participants in the plan receive credit for vesting purposes for all
periods of prior service with Inter-City or Citizens. The Code
imposes certain limitations on the amount of compensation that may be
considered in determining benefits payable and that may actually be
paid under qualified defined benefit plans. In 1995, the Company
adopted a nonqualified supplemental pension plan applicable to certain
executive officers and management employees of Shoreline, including
Mr. Smith. Under the supplemental pension plan, participants will
receive supplemental retirement benefits equal to the difference
between the benefits to which they are entitled under the qualified
pension plan and the benefits to which they would have been entitled
under that plan if those benefits were based on compensation including
compensation deferred by the participant and if the limits on
compensation and benefits specified in the Code did not apply.
The following table illustrates the projected combined annual
pension benefit payable under the qualified pension plan and the
supplemental pension plan to Shoreline's executive officers upon
retirement at age 65 at the annual levels of average remuneration and
years of service indicated:
-21-
<TABLE>
PENSION PLAN TABLE
<CAPTION>
AVERAGE
REMUNERATION YEARS OF BENEFIT SERVICE
10 15 20 25 30 OR MORE
<S> <C> <C> <C> <C> <C> <C>
$ 80,000 $10,550 $15,825 $21,100 $ 26,375 $ 31,650
120,000 16,150 24,225 32,300 40,375 48,450
160,000 21,750 32,625 43,500 54,375 65,250
200,000 27,350 41,025 54,700 68,375 82,050
240,000 32,950 49,425 65,900 82,375 98,850
280,000 38,550 57,825 77,100 96,375 115,650
320,000 44,150 66,225 88,300 110,375 132,450
360,000 49,750 74,625 99,500 124,375 149,250
</TABLE>
As of February 15, 1996, Mr. Smith had thirty years of service
under the plans, Mr. Koebel had eighteen years of service under the
qualified plan, Mr. Burch had ten years of service under the qualified
plan and Mr. Bailey had two years of service under the qualified plan.
Pension benefits under the plans are payable monthly under a ten year
certain and life annuity. Participants may elect upon retirement to
receive a lump-sum payment equal to the present value of benefits
payable under the plans. Benefits are based on the average of the
highest compensation received by a participant during any period of
five consecutive years within the last ten years prior to the
participant's retirement ("average remuneration"). The compensation
covered by the plans is the participant's gross salary, wages and
other compensation, including any elective deferrals that are excluded
from gross income. Covered compensation for the four individuals
named in the Summary Compensation Table is substantially the same as
the aggregate amount reported as "Annual Compensation" in that table.
The benefits shown in the above table are based upon 0.75% of a
participant's average remuneration, multiplied by the number of the
participant's years of credited service for benefits (subject to a
maximum of 30 years), plus 0.65% of the participant's excess average
remuneration (determined by reference to the Social Security wage
base), multiplied by the number of the participant's years of credited
service for benefits (subject to a maximum of 30 years). The above
benefits are not reduced by primary Social Security payments.
The Shoreline defined benefit plan also contains a "grandfather"
provision under which participants may receive a pension benefit based
upon their accrued benefit as of December 31, 1988, under the defined
benefit plan previously maintained by Inter-City Bank or Citizens
Trust and Savings Bank, as the case may be, if that accrued benefit
-22-
would exceed the pension benefits determined under the other
provisions of the Shoreline defined benefit plan described above.
Certain individuals who previously participated in the Citizens
defined benefit plan and who had attained age 45 and had at least ten
years of credited service for benefits as of December 31, 1988, or who
had attained age 55 and had at least five years of credited service
for benefits as of December 31, 1988, have entered into agreements
with Citizens (now Shoreline Bank) regarding their retirement
benefits. Under these agreements, periodic payments are made to these
individuals following retirement which, when added to their retirement
benefit under the Shoreline defined benefit plan, will provide a total
retirement benefit equal to that which they would have received under
the Citizens plan.
Dan L. Smith and Wayne R. Koebel have employment agreements with
Shoreline. Under these agreements, each individual is to serve
Shoreline and Shoreline Bank in his present capacities. Salaries
under the agreements are to be determined by the Organization,
Compensation, and Stock Option Committee of Shoreline's Board of
Directors, and may be paid either by Shoreline or Shoreline Bank. The
individual's salary may not be reduced without his consent, except
pursuant to a general decrease in the salaries of all senior officers
of Shoreline. Upon termination of his employment agreement by
Shoreline without "cause" or by the individual for "good reason" (as
these terms are defined in the agreements), the individual is entitled
to receive monthly severance payments equal to the average of his
aggregate monthly cash compensation received from Shoreline and
Shoreline Bank during the five fiscal years preceding termination, any
bonus that was or would have been accrued by Shoreline or Shoreline
Bank on the date of termination, and continued participation in the
employee benefit plans of Shoreline or Shoreline Bank for the period
during which severance payments are required to be made. Under Mr.
Smith's agreement, such severance payments are payable for a number of
months equal to the number of years Mr. Smith has been employed by
Shoreline or any of its subsidiary banks. Under Mr. Koebel's
agreement, such severance payments are payable for a minimum of 36
months only if termination occurs within three years following a
change in control of Shoreline.
During 1995, Shoreline and Shoreline Bank compensated their
respective directors at the rate of $5,000 per year, and directors who
were not executive officers of Shoreline or Shoreline Bank also
received $275 per regular board meeting attended and $275 per
committee meeting attended. Shoreline Bank has entered into deferred
compensation agreements with certain of its directors under which
payments will be made to these directors after their retirement.
Shoreline adopted a Director's Deferred Compensation Plan
effective July 1, 1996. Under that plan, directors of Shoreline or
-23-
Shoreline Bank who are not employees of Shoreline or Shoreline Bank
may elect at the beginning of each year to defer payment of either all
or 50% of any fees payable to them for service as directors of
Shoreline or Shoreline Bank during the year. Amounts deferred under
the plan are payable, at the election of each director, to each
director or his or her designated beneficiary in a lump sum within 30
days of the date of termination as a director, in a lump sum on a date
determined by the director not to exceed six years after the date of
termination as a director, or in five annual installments beginning on
the first anniversary of the date of termination as a director.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and officers of Shoreline and their associates were
customers of and had transactions with Shoreline Bank in the ordinary
course of business between January 1, 1995, and March 8, 1996. It is
anticipated that such transactions will take place in the future in
the ordinary course of business. All loans and commitments included
in 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 persons and did not
involve more than the normal risk of collectibility or present other
unfavorable features.
During 1995, Shoreline and Shoreline Bank and its predecessors
paid legal fees to law firms in which Messrs. Desenberg and Huff are
shareholders or partners. Shoreline and Shoreline Bank, combined,
paid legal fees of $45,204 to Mr. Desenberg's firm. These fees were
billed at the regular rates charged by the respective attorneys that
were applicable to all of the firm's clients. The fees paid by
Shoreline and Shoreline Bank to the firm with which Mr. Huff is
associated did not exceed 5% of that firm's gross revenues for its
last full fiscal year.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The board of directors has again selected Crowe, Chizek and
Company LLP, certified public accountants, as Shoreline's principal
accountant for 1996. A representative of Crowe, Chizek and Company
LLP is expected to be present at the annual meeting, will have an
opportunity to make a statement, and is expected to be available to
respond to appropriate questions.
-24-
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1997
annual meeting must be received by Shoreline for consideration for
inclusion in its proxy statement and form of proxy relating to that
meeting by November 22, 1996. Proposals of shareholders should be
made in accordance with Securities and Exchange Commission Rule 14a-8.
FORM 10-K REPORT AVAILABLE
SHORELINE'S FORM 10-K ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES, WILL BE PROVIDED WITHOUT CHARGE TO SHAREHOLDERS
UPON WRITTEN REQUEST. REQUESTS SHOULD HE DIRECTED TO MR. WAYNE R.
KOEBEL, EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER, SECRETARY
AND TREASURER, SHORELINE FINANCIAL CORPORATION, 823 RIVERVIEW DRIVE,
BENTON HARBOR, MICHIGAN 49022.
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APPENDIX A
SHORELINE FINANCIAL CORPORATION
STOCK INCENTIVE PLAN OF 1996
SECTION 1
ESTABLISHMENT OF PLAN; PURPOSE OF PLAN
1.1 ESTABLISHMENT OF PLAN. The Company hereby establishes the
Stock Incentive Plan of 1996 (the "Plan") for its corporate and
Subsidiary officers and other key management employees. The Plan
permits the grant or award of Options, Restricted Stock and Tax
Benefit Rights.
1.2 PURPOSE OF PLAN. The purpose of the Plan is to provide
officers and key management employees of the Company and its
Subsidiaries with an increased incentive to make significant
contributions to the long-term performance and growth of the Company
and its Subsidiaries, to join the interests of officers and key
employees with the interests of the Company's shareholders through the
opportunity for increased stock ownership, and to attract and retain
officers and key employees. The Plan is further intended to provide
flexibility to the Company in structuring long-term incentive
compensation to best promote the foregoing objectives.
SECTION 2
DEFINITIONS
The following words have the following meanings unless a
different meaning is plainly required by the context:
2.1 "Act" means the Securities Exchange Act of 1934, as amended.
2.2 "Base Salary" means a Participant's total salary that would
be paid to the Participant for a full year if the rate of salary in
effect for such Participant at the date of grant of an Option were
paid for a full year, regardless of whether such Participant has been
or will be employed for the full year at that rate of salary.
2.3 "Board" means the Board of Directors of the Company.
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2.4 "Change in Control" means:
(a) There has been a change in the control of the
Company of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"),
provided that, without limitation, such a change in
control shall be deemed to have occurred if (i) any
"person" (as that term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities
of the Company representing 25 percent or more of the
combined voting power of the Company's then outstanding
securities, or (ii) during any period of two (2)
consecutive years, individuals who at the beginning of
such period constitute the Board cease for any reason
to constitute at least a majority thereof (unless the
election or nomination for election by the Company's
shareholders of each new director was approved by a
vote of at least two-thirds (2/3) of the directors then
still in office who were directors at the beginning of
such period);
(b) The Board has received any notice or other
communication from any individual, corporation,
partnership, joint venture or other entity expressing a
desire to propose, negotiate or discuss any tender
offer, exchange offer, merger, consolidation, sale of
shares, sale of assets not in the ordinary course, or
other business combination involving the Company or any
Subsidiary ("Business Combination") and such notice,
communication or proposal has not been withdrawn or
terminated; or
(c) Public announcement by any individual,
corporation, partnership, joint venture or other entity
expressing an intent to seek any Business Combination
and such announcement or intent has not been withdrawn
or terminated.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means a committee the Board shall designate to
administer the Plan. The Committee shall consist of at least two
members of the Board appointed by the Board, all of whom shall be
"disinterested persons" as defined in Rule 16b-3 under the Act. The
Board, in its discretion, may also require that members of the
Committee be "outside directors" as defined in the rules promulgated
pursuant to Section 162(m) of the Code.
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2.7 "Common Stock" means the common stock of the Company.
2.8 "Company" means Shoreline Financial Corporation, a Michigan
corporation.
2.9 "Competition" means participation, directly or indirectly,
in the ownership, management, financing or control of any business
that is the same as or similar to the present or future businesses of
the Company or its parent or any Subsidiary. Such participation may
be by way of employment, consulting services, directorship or
officership. Ownership of less than five percent (5%) of the shares
of any corporation whose shares are traded publicly on any national or
regional stock exchange or over the counter shall not be deemed
Competition.
2.10 "Consensual Severance" means the voluntary termination of
all employment by the Participant with the Company or any of its
Subsidiaries which the Committee determines to be in the best
interests of the Company.
2.11 "Incentive Award" means the award or grant of an Option,
Restricted Stock or Tax Benefit Right to a Participant under the Plan.
2.12 "Market Value" of any security on any given date means: (a)
if the security is listed for trading on The NASDAQ Stock Market or
one or more national securities exchanges, the last reported sales
price on the date in question, or if such security shall not have been
traded on such principal exchange on such date, the last reported
sales price on the first day prior thereto on which such security was
so traded; (b) if the security is not so listed for trading but is
traded in the over-the-counter market, the mean of highest bid and
lowest asked prices for such security on the date in question, or if
there are no such bid and asked prices for such security on such date,
the mean of the highest bid and lowest asked prices on the first day
prior thereto on which such prices existed; or (c) if neither (a) nor
(b) is applicable, the value as determined by any means deemed fair
and reasonable by the Committee, which determination shall be final
and binding on all parties.
2.13 "Normal Retirement" means the voluntary termination of all
employment by a Participant after the Participant has attained 62
years of age, or such other age as shall be determined by the
Committee in its sole discretion or as otherwise may be set forth in
the Incentive Award agreement or other grant document with respect to
a Participant and a particular Incentive Award.
2.14 "Option" means the right to purchase Common Stock at a
stated price for a specified period of time. For purposes of the
Plan, an Option may be either an incentive stock option within the
meaning of Section 422(b) of the Code or a nonstatutory stock option.
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2.15 "Participant" means the officers and other key management
employees of the Company and its Subsidiaries who the Committee
determines are eligible to participate in the Plan and who are
designated to be granted an Incentive Award under the Plan.
2.16 "Restricted Period" means the period of time during which
Restricted Stock awarded under the Plan is subject to restrictions.
The Restricted Period may differ among Participants and may have
different expiration dates with respect to shares of Common Stock
covered by the same Incentive Award.
2.17 "Restricted Stock" means Common Stock awarded to a
Participant under Section 6 of the Plan.
2.18 "Subsidiary" means Shoreline Bank, and any other corporation
of which fifty percent (50%) or more of the outstanding voting stock
is directly or indirectly owned or controlled by the Company, or by
one or more Subsidiaries.
2.19 "Tax Benefit Right" means any right granted to a Participant
under Section 7 of the Plan.
SECTION 3
ADMINISTRATION
3.1 POWER AND AUTHORITY. The Committee shall administer the
Plan, shall have full power and authority to interpret the provisions
of the Plan, and shall have full power and authority to supervise the
administration of the Plan. All determinations, interpretations and
selections made by the Committee regarding the Plan shall be final and
conclusive. The Committee shall hold its meetings at such times and
places as it deems advisable. Action may be taken by a written
instrument signed by all of the members of the Committee, and any
action so taken shall be fully as effective as if it had been taken at
a meeting duly called and held.
3.2 GRANTS OR AWARDS TO PARTICIPANTS. In accordance with and
subject to the provisions of the Plan, the Committee shall have the
authority to determine all provisions of Incentive Awards as the
Committee may deem necessary or desirable and as are consistent with
the terms of the Plan, including, without limitation, the authority
to: (a) determine whether and when Incentive Awards will be granted,
the persons to be granted Incentive Awards, the amount of Incentive
Awards to be granted to each person and the terms of the Incentive
Awards to be granted; (b) determine and amend vesting schedules, if
any; (c) permit delivery or withholding of stock in payment of the
exercise price or to satisfy tax withholding obligations; and (d)
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waive any restrictions or conditions applicable to any Incentive
Award. Incentive Awards shall be granted or awarded by the Committee,
and Incentive Awards may be amended by the Committee consistent with
the Plan, provided that no such amendment may become effective without
the consent of the Participant, except to the extent that the
amendment operates solely to the benefit of the Participant.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in
subsection 4.2 of the Plan, a maximum of 50,000 shares of Common Stock
shall be available for Incentive Awards under the Plan. Such shares
shall be authorized and unissued shares.
4.2 ADJUSTMENTS. If the number of shares of Common Stock
outstanding changes by reason of a stock dividend, stock split,
recapitalization, merger, consolidation, combination, exchange of
shares or any other change in the corporate structure or shares of the
Company, the aggregate number and class of shares available for grants
or awards under the Plan, together with the Option prices, award
limits and other appropriate terms of this Plan, shall be
appropriately adjusted. No fractional shares shall be issued pursuant
to the Plan, and any fractional shares resulting from adjustments
shall be eliminated from the respective Incentive Award, with an
appropriate cash adjustment for the value of any Incentive Awards
eliminated. If an Incentive Award is canceled, surrendered, modified,
expired or terminated during the term of the Plan but prior to the
exercise or vesting of the Incentive Award in full, the shares subject
to but not purchased or retained by the Participant under such
Incentive Award shall be available for other Incentive Awards.
SECTION 5
OPTIONS
5.1 GRANT. A Participant may be granted one or more Options
under the Plan. Options shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as shall
be determined by the Committee in its sole discretion. The Committee
may vary, among Participants and among Options granted to the same
Participant, any and all of the terms and conditions of the Options
granted under the Plan. Subject to subsection 5.6, the Committee
shall have complete discretion in determining the number of Options
granted to each Participant. The Committee may designate whether or
not an Option is to be considered an incentive stock option as defined
in Section 422(b) of the Code.
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5.2 OPTION AGREEMENTS. Each Option shall be evidenced by an
Option agreement containing such terms and conditions, consistent with
the provisions of the Plan, as the Committee from time to time
determines.
5.3 OPTION PRICE. Except for Options intended to qualify as
incentive stock options, the per share Option price shall be
determined by the Committee. Any Options intended to qualify as
incentive stock options shall be equal to or greater than 100% of the
Market Value on the date of grant. The date of grant of an Option
shall be the date the Option is authorized by the Committee or a
future date specified by the Committee as the date for issuing the
Option.
5.4 MEDIUM AND TIME OF PAYMENT. The exercise price for each
share purchased pursuant to an Option granted under the Plan shall be
payable in cash or, if the Committee consents, in shares of Common
Stock (including Common Stock to be received upon a simultaneous
exercise). The time and terms of payment may be amended before or
after exercise of an option (a) by the Committee in its sole
discretion, if the terms of such amendment are more favorable to the
Participant, or (b) in all other cases, with the consent of the
Participant. The Committee may from time to time authorize payment of
all or a portion of the Option price in the form of a promissory note
or installments according to such terms as the Committee may approve.
The Board may restrict or suspend the power of the Committee to permit
such loans and may require that adequate security be provided.
5.5 OPTIONS GRANTED TO TEN PERCENT SHAREHOLDERS. No Option
granted to any Participant who at the time of such grant owns,
together with stock attributed to such Participant under
Section 424(d) of the Code, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any of
its Subsidiaries may be designated as an incentive stock option,
unless such Option provides an exercise price equal to at least one
hundred ten percent (110%) of the Market Value of the Common Stock,
and the exercise of the Option after the expiration of five years from
the date of grant of the Option is prohibited by its terms.
5.6 LIMITS ON GRANTS. No Participant shall be granted, during
any calendar year, Options to purchase more than 10,000 shares of
Common Stock, subject to adjustment as provided in subsection 4.2 of
the Plan. The purpose of this subsection 5.6 is to ensure that the
Plan provides performance based compensation under Section 162(m) of
the Code. This subsection 5.6 shall be interpreted or amended to
achieve that purpose.
5.7 LIMITS ON EXERCISABILITY. Options shall be exercisable for
such periods as may be fixed by the Committee. Options intended to
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qualify as incentive stock options shall have terms not to exceed ten
years from the grant date. The Committee may in its discretion
require a Participant to continue service with the Company and its
Subsidiaries for a certain length of time prior to an Option becoming
exercisable and may eliminate such delayed vesting provisions. The
Committee may also vary, among Participants and among Options granted
to the same Participant, any and all of the terms and conditions of
Options granted under the Plan.
5.8 TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents
or unless the terms of the Option agreement provide
otherwise, no Option granted under the Plan may be sold,
transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent
and distribution. In addition, all Options granted to a
Participant during the Participant's lifetime shall be
exercisable during the Participant's lifetime only by such
Participant, his guardian, or legal representative.
(b) OTHER RESTRICTIONS. The Committee may impose such
restrictions on any shares of Common Stock acquired pursuant
to the exercise of an Option under the Plan as it deems
advisable, including, without limitation, restrictions
intended to assure compliance with applicable federal or
state securities laws.
5.9 TERMINATION OF EMPLOYMENT OR DIRECTOR OR OFFICER STATUS.
(a) GENERAL. If a Participant ceases to be employed by
or ceases to be an officer of the Company or one of its
Subsidiaries for any reason other than the Participant's
death, disability, termination for cause, or any additional
provision as determined by the Committee, the Participant
may exercise an Option only for a period of 90 days after
such termination of employment or officer status, but only
to the extent the Participant was entitled to exercise the
Option on the date of termination, unless the Committee
otherwise consents or the terms of the Option agreement
provide otherwise. For purposes of the Plan, the following
shall not be deemed a termination of employment or
termination as an officer: (i) a transfer of employment
among the Company and its Subsidiaries; (ii) a leave of
absence, duly authorized in writing by the Company, for
military service or for any other purpose approved by the
Company if the period of such leave does not exceed 90 days;
(iii) a leave of absence in excess of 90 days, duly
authorized in writing by the Company, provided the
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employee's right to reemployment is guaranteed either by
statute or contract; or (iv) a termination of employment
with continued service as an officer or director.
(b) DEATH. If a Participant dies either while an
employee or officer of the Company or one of its
Subsidiaries or after the termination of employment other
than for cause but during the time when the Participant
could have exercised an Option under the Plan, the Option
issued to such Participant shall be exercisable by the
personal representative of such Participant or other
successor to the interest of the Participant for a period of
90 days after the Participant's death, but only to the
extent that the Participant was entitled to exercise the
Option on the date of death or termination of employment,
whichever first occurred, unless the Committee otherwise
consents or the terms of the Option agreement provide
otherwise.
(c) DISABILITY. If a Participant ceases to be an
employee or officer of the Company or one of its
Subsidiaries due to the Participant's disability, the
Participant may exercise an Option for a period of one year
following such termination of employment, but only to the
extent the Participant was entitled to exercise the Option
on the date of such event, unless the Committee otherwise
consents or the terms of the Option agreement provide
otherwise.
(d) ADDITIONAL PROVISIONS IN OPTION AGREEMENTS. The
Committee may, in its sole discretion, provide provisions in
any Option agreement entered into with a Participant
permitting or by resolution approve the Participant to
exercise any outstanding options upon termination due to
Normal Retirement or Consensual Severance for a period of
time after such termination as may be determined by the
Committee, PROVIDED that (i) such period may not extend
beyond the earlier of three (3) years after the date of
termination or the date on which the Options expire by their
terms, (ii) the Participant may exercise the Option only to
the extent the Participant was entitled to exercise the
Option on the date of termination, and (iii) the Participant
shall have no further right to exercise any Options after
termination due to Normal Retirement or Consensual Severance
if the Committee determines the Participant has entered into
Competition with the Company.
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(e) TERMINATION FOR CAUSE. If a Participant is
terminated for cause, the Participant shall have no further
right to exercise any outstanding unexercised Option issued
under the Plan.
(f) SUSPENSION OF EXERCISABILITY. If the Participant
receives notice from the Company that the Participant may be
terminated for cause, the Participant shall have no right to
exercise any Options previously granted for a period of
sixty days from the receipt of such notice. If the
Participant is terminated for cause within such sixty-day
period, the Participant shall have no further right to
exercise any Option previously granted. If the Participant
is not terminated for cause within the sixty-day period, the
provisions of the Option agreement and the Plan shall
continue to apply to the exercisability of the Participant's
Options.
SECTION 6
RESTRICTED STOCK
6.1 GRANT. A Participant may be granted Restricted Stock under
the Plan. Restricted Stock shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as shall
be determined by the Committee in its sole discretion. Restricted
Stock shall be awarded on the condition that the Participant remain in
the employ of the Company or one of its Subsidiaries during the
Restricted Period. Such condition shall have no effect on the right
of the Company or any Subsidiary to terminate the Participant's
employment at any time. No payment is required from a Participant for
an award of Restricted Stock.
6.2 RESTRICTED STOCK AGREEMENTS. Each award of Restricted Stock
shall be evidenced by a Restricted Stock agreement containing such
terms and conditions, consistent with the provisions of the Plan, as
the Committee from time to time determines.
6.3 TERMINATION OF EMPLOYMENT OR DIRECTOR OR OFFICER STATUS.
(a) GENERAL. If a Participant ceases to be employed
by the Company or one of its subsidiaries, or ceases to be
an officer of the Company or one of its subsidiaries for any
reason other than the Participant's death, disability, or
any other additional provisions as determined by the
Committee, then any shares of Restricted Stock still subject
to restrictions on the date of such termination shall
automatically be forfeited and returned to the Company. For
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purposes of the Plan, the following shall not be deemed a
termination of employment or termination as an officer: (i)
a transfer of employment among the Company and its
Subsidiaries; (ii) a leave of absence, duly authorized in
writing by the Company, for military service or for any
other purpose approved by the Company if the period of such
leave does not exceed 90 days; (iii) a leave of absence in
excess of 90 days, duly authorized in writing by the
Company, provided the employee's right to reemployment is
guaranteed either by statute or contract; or (iv) a
termination of employment with continued service as an
officer or director.
(b) DEATH OR DISABILITY. Unless the terms of the
Restricted Stock agreement or grant provide otherwise, in
the event a Participant terminates employment with the
Company or any subsidiary because of death or disability
during the Restricted Period, the restrictions applicable to
the shares of Restricted Stock shall automatically vest as
of the date of termination.
(c) ADDITIONAL PROVISIONS AS DETERMINED BY COMMITTEE.
The Committee may, in its sole discretion, provide
provisions in any Restricted Stock agreement permitting or
by resolution approve vesting of all or part of any
Restricted Stock awarded to a Participant upon termination
due to Normal Retirement or Consensual Severance.
6.4 RESTRICTIONS ON TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents
or unless the terms of the Restricted Stock agreement
provide otherwise, shares of Restricted Stock shall not be
sold, exchanged, transferred, pledged or otherwise disposed
of by a Participant during the Restricted Period other than
to the Company pursuant to subsection 6.3 or 6.4(b) or by
will or the laws of descent and distribution.
(b) SURRENDER TO THE COMPANY. If any sale, exchange,
transfer, pledge or other disposition, voluntary or
involuntary, of Restricted Stock that has not vested shall
be made or attempted during the Restricted Period, except as
provided above in subsections 6.3 and 6.4(a), the
Participant's right to the Restricted Stock shall
immediately cease and terminate, and the Participant shall
promptly forfeit and surrender to the Company all such
Restricted Stock.
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(c) OTHER RESTRICTIONS. The Committee may impose
other restrictions on any shares of Common Stock acquired
pursuant to an award of Restricted Stock as the Committee
deems advisable.
6.5 CHANGE IN CONTROL
(a) ACCELERATION OF VESTING. Subject to the
provisions of Section 6.5(b), if a Change in Control of the
Company shall occur, then all outstanding Restricted Stock
shall immediately become fully vested and nonforfeitable.
(b) LIMITATION ON CHANGE IN CONTROL PAYMENTS. In the
Restricted Stock agreements entered into with a Participant,
the Committee may, in its sole discretion, provide that if
the acceleration of the vesting of Restricted Stock as
provided in Section 6.5(a), together with any other payments
that such Participant has the right to receive from the
Company or any corporation that is a member of an
"affiliated group" (as defined in Section 1504(a) of the
Code without regard to Section 1504(b) of the Code) of which
the Company is a member, would constitute a "parachute
payment" (as defined in Section 280G(b)(2) of the Code), the
number of shares which shall become immediately fully vested
and nonforfeitable under Section 6.5(a) may be reduced to
the largest amount as will result in no portion of such
payments being subject to the excise tax imposed by Section
4999 of the Code.
6.6 RIGHTS AS A SHAREHOLDER. During the Restricted Period, a
Participant shall have all rights of a shareholder with respect to his
Restricted Stock, including (a) the right to vote any shares at
shareholders' meetings; (b) the right to receive, without restriction,
all cash dividends paid with respect to such Restricted Stock; and (c)
the right to participate with respect to such Restricted Stock in any
stock dividend, stock split, recapitalization or other adjustment in
the Common Stock of the Company or any merger, consolidation or other
reorganization involving an increase or decrease or adjustment in the
Common Stock of the Company. Any new, additional or different shares
or other security received by the Participant pursuant to any such
stock dividend, stock split, recapitalization or reorganization shall
be subject to the same terms, conditions and restrictions as those
relating to the Restricted Stock for which such shares were received.
6.7 DEPOSIT OF CERTIFICATES; LEGENDING OF RESTRICTED STOCK.
(a) DEPOSIT OF CERTIFICATES. Any certificates
evidencing shares of Restricted Stock awarded pursuant to
the Plan shall be registered in the name of the relevant
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Participant and deposited, together with a stock power
endorsed in blank, with the Company. In the discretion of
the Committee, any such certificates may be deposited in a
bank designated by the Committee or delivered to the
Participant. Certificates for shares of Restricted Stock
that have vested shall be delivered to the Participant upon
request within a reasonable period of time. The Participant
shall sign all documents necessary or appropriate to
facilitate such delivery.
(b) LEGEND. Any certificates evidencing shares of
Restricted Stock awarded pursuant to the Plan shall bear the
following legend:
This certificate is held subject to the terms and
conditions contained in a restricted stock
agreement that includes a prohibition against the
sale or transfer of the stock represented by this
certificate except in compliance with that
agreement, and that provides for forfeiture upon
certain events. A copy of that agreement is on
file in the office of the Secretary of Shoreline
Financial Corporation.
6.8 RESALE. The Participant shall agree not to resell or
redistribute such Restricted Stock after the Restricted Period except
upon such conditions as the Company may reasonably specify to ensure
compliance with federal and state securities laws.
SECTION 7
TAX BENEFIT RIGHTS
7.1 GRANT. A Participant may be granted Tax Benefit Rights
under the Plan to encourage a Participant to exercise Options and
provide certain tax benefits to the Company. A Tax Benefit Right
entitles a Participant to receive from the Company or a Subsidiary a
cash payment not to exceed the amount calculated by multiplying the
ordinary income, if any, realized by the Participant for federal tax
purposes as a result of the exercise of a non-qualified stock option,
or the disqualifying disposition of shares acquired under an incentive
stock option, by the maximum federal income tax rate (including any
surtax or similar charge or assessment) for corporations, plus any
other applicable state and local tax against which the Company is
entitled to a deduction or credit by reason of exercise of the Option
or the disqualifying disposition.
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7.2 RESTRICTIONS. A Tax Benefit Right may be granted only with
respect to a stock option issued and outstanding or to be issued under
the Plan and may be granted concurrently with or after the grant of
the stock option. Such rights with respect to outstanding stock
options shall be issued only with the consent of the Participant if
the effect would be to disqualify an incentive stock option, change
the date of grant or the exercise price, or otherwise impair the
Participant's existing stock options. A stock option to which a Tax
Benefit Right has been attached shall not be exercisable by an officer
or employee subject to Section 16 of the Act for a period of six
months from the date of the grant of the Tax Benefit Right.
7.3 TERMS AND CONDITIONS. The Committee shall determine the
terms and conditions of any Tax Benefit Rights granted and the
Participants to whom such rights will be granted with respect to stock
options under the Plan or any other plan of the Company. The
Committee may amend, cancel, limit the term of, or limit the amount
payable under a Tax Benefit Right at any time prior to the exercise of
the related stock option, unless otherwise provided under the terms of
the Tax Benefit Right. The net amount of a Tax Benefit Right, subject
to withholding, may be used to pay a portion of the stock option
price, unless otherwise provided by the Committee.
SECTION 8
GENERAL PROVISIONS
8.1 NO RIGHTS TO AWARDS. No Participant or other person shall
have any claim to be granted any Incentive Award, and there is no
obligation of uniformity of treatment of Participants or holders or
beneficiaries of Incentive Awards. The terms and conditions of the
Incentive Awards of the same type and the determination of the
Committee to grant a waiver or modification of any Incentive Award and
the terms and conditions thereof need not be the same with respect to
each Participant.
8.2 WITHHOLDING. The Company or a Subsidiary shall be entitled
to (a) withhold and deduct from future wages of a Participant (or from
other amounts that may be due and owing to a Participant from the
Company or a Subsidiary), or make other arrangements for the
collection of, all amounts deemed necessary to satisfy any and all
federal, state and local withholding and employment-related tax
requirements attributable to an Incentive Award, including, without
limitation, the grant, exercise or vesting of, or payment of dividends
with respect to, an Incentive Award or a disqualifying disposition of
Common Stock received upon exercise of an incentive stock option; or
(b) require a Participant promptly to remit the amount of such
withholding to the Company before taking any action with respect to an
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Incentive Award. Unless the Committee determines otherwise,
withholding may be satisfied by withholding Common Stock to be
received upon exercise or by delivery to the Company of previously
owned Common Stock. The Company may establish such rules and
procedures concerning timing of any withholding election as it deems
appropriate to comply with Rule 16b-3 under the Act.
8.3 COMPLIANCE WITH LAWS; LISTING AND REGISTRATION OF SHARES.
All Incentive Awards granted under the Plan (and all issuances of
Common Stock or other securities under the Plan) shall be subject to
applicable laws, rules and regulations, and to the requirement that if
at any time the Committee determines, in its sole discretion, that the
listing, registration or qualification of the shares covered thereby
upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the granting of
such Incentive Award or the issue or purchase of shares thereunder,
such Incentive Award may not be exercised in whole or in part, or the
restrictions on such Incentive Award shall not lapse, unless and until
such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable
to the Committee.
8.4 NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing
contained in the Plan shall prevent the Company or any Subsidiary from
adopting or continuing in effect other or additional compensation
arrangements, including the grant of options and other stock-based
awards, and such arrangements may be either generally applicable or
applicable only in specific cases.
8.5 NO RIGHT TO EMPLOYMENT. The grant of an Incentive Award
shall not be construed as giving a Participant the right to be
retained in the employ of the Company or any Subsidiary. The Company
or any Subsidiary may at any time dismiss a Participant from
employment, free from any liability or any claim under the Plan,
unless otherwise expressly provided in the Plan or in any written
agreement with a Participant.
8.6 GOVERNING LAW. The validity, construction and effect of the
Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of Michigan and
applicable federal law.
8.7 SEVERABILITY. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the
Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
A-14
SECTION 9
EFFECTIVE DATE AND DURATION OF THE PLAN
This Plan shall take effect May 1, 1996 subject to approval by
the shareholders at the 1996 Annual Meeting of Shareholders, or any
adjournment thereof or at a special meeting of shareholders. Unless
earlier terminated by the Board of Directors, no Incentive Award shall
be granted under this Plan after April 30, 2006.
SECTION 10
TERMINATION AND AMENDMENT
The Board may terminate the Plan at any time, or may from time to
time amend the Plan, provided that without shareholder approval no
such amendment may (a) materially increase the number of shares that
may be issued under the Plan; or (b) impair any outstanding Incentive
Award without the consent of the Participant, except according to the
terms of the Incentive Award. No termination, amendment or
modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior
written consent of the Participant holding such Incentive Award unless
such amendment or modification operates solely to the benefit of the
Participant.
A-15
[FRONT]
SHORELINE FINANCIAL CORPORATION
P R O X Y 823 RIVERVIEW DRIVE
BENTON HARBOR, MICHIGAN 49022
ANNUAL MEETING OF SHAREHOLDERS - MAY 1, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. IF THIS
PROXY IS PROPERLY EXECUTED AND DELIVERED, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE,
THE SHARES WILL BE VOTED FOR ELECTION OF ALL NOMINEES NAMED ON THIS
PROXY AND FOR APPROVAL OF THE STOCK INCENTIVE PLAN OF 1996. THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF
THE PROXIES ON ANY OTHER MATTERS WHICH MAY COME BEFORE THE MEETING OR
ANY ADJOURNMENT OF THE MEETING.
1. Election of Directors
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as indicated to vote for all nominees
below) listed below
James E. LeBlanc James F. Murphy Robert L. Starks
(Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.)
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES
2. Approval of the Stock Incentive Plan of 1996
[ ] FOR [ ] AGAINST [ ] ABSTAIN
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR APPROVAL OF THE STOCK INCENTIVE PLAN OF 1996
IMPORTANT! - PLEASE DATE AND SIGN THE OTHER SIDE
[BACK]
The undersigned shareholder appoints Dan L. Smith and
Wayne R. Koebel, or either of them, each with the power to appoint his
substitute, attorneys and proxies to represent the shareholder and to
vote and act, with respect to all shares that the shareholder would be
entitled to vote at the annual meeting of shareholders of Shoreline
Financial Corporation referred to above and at any adjournment of that
meeting, on all matters which come before the meeting.
Please sign exactly as your name
appears on this proxy. If signing
for estates, trusts or
corporations, title or capacity
should be stated. IF SHARES ARE
HELD JOINTLY, EACH HOLDER SHOULD
SIGN.
___________________________________
Signature
___________________________________
Signature if held jointly
Dated: ______________________, 1996
