<PAGE> 1
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]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Commercial National 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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 2
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, APRIL 27, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The annual meeting of shareholders of Commercial National Financial
Corporation will be held at the Ithaca Community Center, 120 North Maple Street,
Ithaca, Michigan 48847, on Tuesday, April 27, 1999, at 7:00 p.m. to consider and
vote upon:
1. Election of Directors.
2. Approval of an amendment to the Restated Articles of
Incorporation to increase the number of authorized shares of
Common Stock from 1,750,000 to 5,000,000.
3. To transact any other business that may come before the meeting.
Shareholders of record at the close of business on March 12, 1999, are
entitled to notice of and to vote at the meeting or any adjournment of the
meeting.
By Order of the Board of Directors,
Jeffrey S. Barker
President and Chief Executive Officer
March 26, 1999
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- --------------------------------------------------------------------------------
It is important that your shares be represented at the
meeting. Even if you expect to attend the meeting,
PLEASE SIGN AND RETURN YOUR PROXY PROMPTLY.
<PAGE> 3
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS OF
COMMERCIAL NATIONAL FINANCIAL CORPORATION
P.O. Box 280
101 North Pine River Street
Ithaca, Michigan 48847
This proxy statement is being furnished to holders of common stock,
with no par value ("Common Stock"), of Commercial National Financial Corporation
(the "Corporation") in connection with the solicitation of proxies by the
Corporation's board of directors for use at the annual meeting of shareholders
to be held on April 27, 1999, and at any adjournment of that meeting. The annual
meeting will be held at the Ithaca Community Center, 120 North Maple Street,
Ithaca, Michigan 48847, at 7:00 p.m. for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This proxy statement and
form of proxy are first being sent to shareholders on or about March 26, 1999.
If a proxy in the form distributed by the Corporation is properly
executed and returned to the Corporation, the shares represented by that proxy
will be voted at the annual meeting of shareholders and at any adjournment of
that meeting. Where a shareholder specified 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 to the board of directors and for the
approval of the amendment to the Corporation's Restated Articles of
Incorporation. Management does not know of any other matters to be presented at
the annual meeting. If other matters are presented, all proxies will be voted in
accordance with the judgment of the persons named as proxies, who will consider
management's recommendations.
A proxy may be revoked at any time prior to the closing of the polls by
written notice delivered to the President of the Corporation, by a subsequent
dated proxy, or by voting the shares represented by the proxy at the annual
meeting.
Solicitation of proxies will be made initially by mail. Officers,
directors and employees of the Corporation and its wholly owned subsidiary,
Commercial Bank (the "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 the Bank.
ELECTION OF DIRECTORS
---------------------
The board of directors of the Corporation has nominated the following
10 persons for election to the board of directors at the annual meeting:
<TABLE>
<S> <C> <C>
Richard F. Abbott David A. Ferguson Russell M. Simmet
Jefferson P. Arnold Kenneth R. Luneack Scott E. Sheldon
Jeffrey S. Barker Kim C. Newson
Don J. Dewey Howard D. Poindexter
</TABLE>
Mr. Joseph B. Simon is not standing for reelection in 1999. Mr. Simon
retired from the board of directors on August 8,1998. Mr. Simon began his
service on the board of directors in 1988.
Directors are to be elected at the annual meeting of shareholders to
serve until the next following annual meeting of shareholders. 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 now
contemplated, the incumbent
<PAGE> 4
Corporation 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 so 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 vote of shareholders holding a plurality of shares is required to
elect directors. For the purpose of counting votes on this proposal,
abstentions, broker non-votes, and other shares not voted will not be counted as
shares voted, and the number of votes 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
VOTING SECURITIES
- -----------------
Holders of record of Common Stock, at the close of business on March
12, 1999, will be entitled to vote at the annual meeting of shareholders on
April 27, 1999, and any adjournment of that meeting. As of March 12, 1999, there
were 997,739 shares of Common Stock issued and outstanding. Each share of Common
Stock entitles its holder to one vote upon each matter to be voted upon at the
meeting.
The following table shows certain information concerning the number of
shares of Common Stock held as of March 12, 1999, by shareholders known to
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 (1)
------------------------
SOLE VOTING OR SHARED VOTING OR PERCENT
NAME AND ADDRESS OF BENEFICIAL INVESTMENT POWER INVESTMENT TOTAL BENEFICIAL OF CLASS
OWNER POWER(2) OWNERSHIP
- ------------------------------------------------------------------------------------------- ----------
<S> <C> <C> <C> <C>
Kenneth R. Luneack 63,486 2,276 65,762 6.59%
9333 N. Union Road
St. Louis, Michigan 48880
Robert M. Sheldon 50,890 833 51,723 5.18%
1055 Riverview
Alma, Michigan 48801
</TABLE>
2
<PAGE> 5
The following table sets forth information concerning the number of
shares of Common Stock held as of December 31, 1998, by each of the
Corporation's directors and nominees, the named executive officers of the
Corporation, and by all directors and executive officers of the Corporation as a
group:
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership (1)
---------------------------------------------
Sole Shared
Voting and Voting or Total Percent
Investment Investment Stock Beneficial of Class
Power Power(2) Options(3) Ownership
================================================================================================================
<S> <C> <C> <C> <C> <C>
Richard F. Abbott - 27,044 253 27,297 2.74%
Jefferson P. Arnold 10,781 16,105 621 27,507 2.76%
Jeffrey S. Barker(4) 9,150 1,369 5,806 16,325 1.64%
Don J. Dewey 4,070 - 611 4,681 .47%
Patrick G. Duffy(4) 348 888 826 2,062 .21%
David F. Ferguson 6,590 7,725 618 14,933 1.50%
Kenneth R. Luneack 63,486 2,276 - 65,762 6.59%
Kim C. Newson 2,432 2,422 601 5,455 .55%
Howard D. Poindexter 18,820 16,866 369 36,055 3.61%
Scott E. Sheldon 10,008 - 619 10,627 1.07%
Russell M. Simmet - 19,646 242 19,888 1.99%
================================================================================================================
All Directors and Executive
Officers as a Group 125,685 94,341 10,566 230,592 23.13%
================================================================================================================
</TABLE>
(1) The number of shares stated is based on information furnished by the
officers and directors and includes shares personally owned of record
by each person and shares which under applicable regulations are
deemed to be otherwise beneficially owned by each 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
investment power with respect to the security. Voting power includes
the power to vote or to direct the voting of the security. Investment
power includes the power to dispose or to direct the disposition of
the security. A person is also considered to be the beneficial owner
of a security if the person has a right to acquire beneficial
ownership of the security within sixty days.
(2) These numbers include shares as to which the indicated person is
legally entitled to share voting or investment power by reason of
joint ownership, trust or other contract or property right, and shares
held by a family member over whom the indicated person may have
substantial influence by reason of relationship.
(3) These numbers include vested stock options, granted under the
Corporation's 1989 and 1991 Stock Option Plans, which entitle the
holder to acquire beneficial ownership of such shares within sixty
days.
(4) These numbers include shares that are allocated to the member's
individual account under the Commercial Bank Employee Savings and
Stock Ownership Plan.
3
<PAGE> 6
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
Biographical information concerning executive officers and directors
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 5 years and have held
their positions with the Corporation since January, 1994. All ten nominees are
incumbent directors. All ten nominees were last elected to the Corporation's
board of directors at the last annual meeting of shareholders that was held on
April 28, 1998.
Richard F. Abbott (age 64) has been a director of the Corporation and
the Bank since 1989. He had been interim president and chief executive
officer of the Bank from September 15, 1993, until March 16, 1994, and
of the Corporation from September 15, 1993 until May 18, 1994. From
May, 1990 to September 15, 1993, and from March 16, 1994 until
December 31, 1996, Mr. Abbott served as executive vice president of
the Bank and of the Corporation.
Jefferson P. Arnold (age 59) has been a director of the Corporation
since May 18, 1994. Mr. Arnold is an attorney at law and has practiced
law with the Arnold Law Offices for over 30 years.
Jeffrey S. Barker (age 50) is president and chief executive officer of
the Corporation and the Bank. He has been a director of the
Corporation and the Bank since November 12, 1997. He has been
president and chief executive officer of the Bank and the Corporation
since November 12, 1997. Prior to becoming the president of the
Corporation, he was Senior Vice President-Lending of the Bank from
July, 1995 to November, 1997. From May 1990 to July 1995 he served as
Vice President-Lending of the Bank.
Don J. Dewey (age 61) has been a director of the Corporation since
1988 and a director of the Bank since 1987. He is a funeral director
and the owner and president of Dewey Funeral Homes, Inc.
David A. Ferguson (age 49) has been a director of the Corporation
since 1988 and a director of the Bank since 1985. He is a member of
Chodoka LLC. He previously served as vice president of Ashcraft's
Market, Inc., a regional retail grocery store chain.
Kenneth R. Luneack (age 67) has been a director of the Corporation and
of the Bank since May, 1991. He is owner and operator of Ken Luneack
Construction, Inc., a building materials manufacturer.
Kim C. Newson (age 48) has been director of the Corporation since 1988
and a director of the Bank since 1987. He is president of Alma
Hardware Company and general manager of Alma True Value Hardware, both
of which are in the retail hardware business.
Howard D. Poindexter (age 63) has been chairman of the board of the
Corporation since February of 1993. He has been a director of the
Corporation since 1988 and a director of the Bank since 1973. He is
manager of Poindexter Farms, an independent farming business. From
1954 until his retirement in 1992, he was a soil conservationist for
the U.S. Department of Agriculture.
Scott E. Sheldon (age 41) has served as Chairman of Board of the Bank
since July of 1997. He has been a director of the Corporation since
1988 and a director of the Bank since 1985. He is the owner of
Kernen-Sheldon Agency, Shepherd Insurance Agency and Ladu-Brundage
Agency, which are insurance agencies.
4
<PAGE> 7
Russell M. Simmet (age 64) has been a director of the Corporation
since 1988 and a director of the Bank since 1976. He is the owner of
Simmet Insurance Agency, an insurance agency.
Jeffrey S. Barker and Patrick G. Duffy serve as the executive officers
of the Corporation. Biographical information for Mr. Barker is presented above.
Biographical information for Mr. Duffy is presented below:
Patrick G. Duffy (age 35) is vice president and chief financial
officer of the Corporation and the Bank. He has been vice president
and chief financial officer of the Bank and the Corporation since
February 19, 1997. Prior to joining the Corporation, he served as
assistant controller and compliance officer for Shoreline Financial
Corporation from January 1996 through February 1997. He previously
served in the following positions with Shoreline Financial
Corporation: compliance officer from January 1995 through January
1996, branch administration from June 1993 through January 1995.
The Corporation's executive officers serve in their capacity without
receiving specific compensation for their services from the Corporation. The
Corporation's executive officers continue to serve as executive officers of the
Bank. All officers serve at the pleasure of the boards of directors of the
Corporation and the Bank respectively.
The Corporation's board has two standing committees, the human
resources committee and the audit committee. The human resources committee
includes Messrs. Ferguson, Arnold, Luneack, Poindexter and Sheldon. The
human resources committee makes compensation recommendations. The human
resources committee met 4 times in 1998. A sub-committee of the human resources
committee consisting of Messrs. Ferguson, Luneack, and Poindexter administers
the 1989 and 1991 Stock Option Plans.
The audit committee recommends to the board the employment of
independent certified public accountants to examine the financial statements of
the Corporation and its subsidiary, makes such additional examinations as the
committee deems advisable, reviews reports of examination of the Corporation and
its subsidiary received from regulatory authorities, reports to the board at
least once each calendar year on the results of examinations made and offers
such conclusions and recommendations as the committee deems appropriate. Messrs.
Dewey, Newson, Simmet, Poindexter, Sheldon and Abbott serve on the audit
committee. The audit committee met 4 times during 1998.
The Corporation's entire board of directors performs the functions of
nominating and compensation committees.
The Corporation's board of directors will consider the nomination of
candidates for election as directors of the Corporation at any meeting of
shareholders called for the purpose of electing directors submitted by any
shareholder entitled to vote at that meeting. Any shareholder desiring to
nominate a candidate for director must deliver a notice to the Secretary of the
Corporation, not less than 14 nor more than 50 days prior to the meeting,
setting forth: the name, age, business address and residence address of the
nominee; the principal occupation or employment of the nominee; the number of
shares of Common Stock beneficially owned by the nominee; the total number of
shares of Common Stock that will be voted for each nominee; the name, business
address and residence address of the nominating shareholder; the number of
shares of Common Stock owned by the nominating shareholder; a statement that the
nominee is willing to be nominated; and such other information regarding the
nominee as would be required under the rules of the Securities and Exchange
Commission to be included in proxy statement soliciting proxies for the election
of the nominee.
5
<PAGE> 8
The board of directors of the Corporation held 13 meetings during
1998. All incumbent directors attended at least 75% of the aggregate number of
meetings of the board of directors and meetings of committees on which they
served while they served in such capacities.
COMPENSATION OF EXECUTIVE OFFICERS
- ----------------------------------
The following table shows certain information concerning the
compensation of the named executive officers of the Corporation and the Bank for
the three years ended December 31, 1998. For the same period, the annual salary
and bonus of no other executive officer of the Corporation or Bank exceeded
$100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
SECURITIES
UNDERLYING
ANNUAL COMPENSATION(1) OPTIONS ALL OTHER
----------------------
YEAR SALARY BONUS (NO. SHARES)(2) COMPENSATION(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jeffrey S. Barker* 1998 $ 99,415 $ 55,043 3,163 $ 8,505
President and 1997 89,769 24,000 3,149 5,005
Chief Executive Officer
of the Corporation and
Bank
</TABLE>
* Not a named executive officer prior to 1997
(1) Includes compensation deferred under the Commercial Bank Employee
Savings and Stock Ownership Plan and directors' fees.
(2) Shares have been adjusted for 5% stock dividend paid in November of
1998.
(3) All other compensation for Mr. Barker includes Corporation matching and
base contributions under the Commercial Bank Employee Savings and Stock
Ownership Plan ($4,214 for 1997 and $7,252 for 1998) and the amount
paid by the Corporation for his life insurance ($791 for 1997 and
$1,253 for 1998). All other compensation for Mr. Duffy includes
Corporation matching and base contributions under the Commercial Bank
Employee Savings and Stock Ownership Plan ($4,890 for 1998) and the
amount paid by the Corporation for his life insurance ($793 for 1998).
6
<PAGE> 9
It is the Corporation's practice to award stock options annually to key
policy making members of management. Stock options have been an important
component of the Corporation's executive compensation program for several years.
Stock options are believed to help align the interests of senior management with
the interests of shareholders by promoting stock ownership by senior executive
officers and by rewarding them for appreciation in the price of the
Corporation's Common Stock. Stock options which were granted, exercised, or
outstanding during 1998 were granted under either the 1989 Stock Option Plan or
the 1991 Stock Option Plan. Both Stock Option Plans have been approved by the
Corporation's shareholders.
The Corporation's 1989 and 1991 Stock Option Plans provide that stock
options, stock appreciation rights, and tax benefit rights may be issued to
directors, officers, and key employees. Stock options entitle a participant to
buy shares of Common Stock of the Corporation during a specified time period at
a specified price. Subject to restrictions imposed by the Plans, the stock
option committee in its discretion determines who will be granted options, how
many shares will be subject to options, and the form of consideration that may
be paid upon exercise of an option. As of December 31, 1998, a maximum of 22,728
authorized shares are subject to the exercise of options under the plans. As of
December 31, 1998, no stock appreciation rights had been granted under either
plan. By its terms, the 1989 Stock Option Plan will terminate on April 26, 1999.
The 1991 Stock Option Plan will terminate by its terms on April 22, 2001.
The following tables set forth information concerning stock options
granted to and exercised or retained by the named executive officers of the
Corporation and Bank during 1998. In 1998, the Corporation granted options only
under the 1991 Stock Option Plan. As indicated in the following table, some
options awarded in 1998 are exercisable for two years while the remaining
options are exercisable for five years.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR (1)
No. of Percent of Potential Realizable Value at Assumed
Securities Total Options Annual Rates of Stock Price
Underlying Granted to Appreciation for Option Term
Options Employees in Exercise Expiration
Granted Fiscal Year Price ($/Shr) DATE 0% 5% 10%
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jeffrey S. Barker 3,150 31.73% $ 36.49 6/01/2005 $ 0 $ 46,794 $109,049
13 .13 36.49 6/01/2000 0 193 450
</TABLE>
(1) The per share exercise price of each option is equal to the market
value of the Common Stock on the date each option was granted. The
option information has been adjusted to reflect the 5% stock dividend
paid in November of 1998. All outstanding options were granted for a
term of ten or fewer years. Options terminate, subject to certain
limited exercise provisions, in the event of death, retirement, or
other termination of employment. In the event of a change in control of
the Corporation, a participant may exercise tax benefit rights granted
in tandem with the options. Such tax benefit rights would entitle an
optionee to cash payments at the time of exercise to partially
reimburse the optionee for tax liability.
7
<PAGE> 10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Shares Number of Unexercised In-the-Money Options at
Acquired on Options at Year End Year End
Exercise Value Realized Exercisable/Unexercisable Excercisable/Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jeffrey S. Barker 0 0 5,806/3,150 $79,049/$3,182
</TABLE>
CHANGE OF CONTROL ARRANGEMENT
- -----------------------------
The Bank has entered into a Change of Control Arrangement with Jeffrey
S. Barker and certain other officers providing that if certain "employment
changes" occur within 24 months after a "change of control" of the Corporation,
then they shall receive a lump sum severance payment equal to 1 1/2 times their
yearly salary and bonus.
The Arrangement generally defines employment changes as follows:
termination of employment for reasons other than good cause; a significant
change in the nature or scope of their authority or in the overall working
environment; their assignment to duties materially inconsistent with their
present duties, responsibilities and status; or a material reduction in their
monthly rate of base salary. A change of control occurs for purposes of the
Arrangement when more than 50% of the Corporation's common stock is acquired by
an entity, person or group.
The Bank's purpose in entering into the Arrangement with Mr. Barker and
the other officers is to provide these individuals with financial security
following a change of control and to provide an additional inducement for them
to remain employed by the Bank. With continuation of their employment reasonably
assured, the Corporation and its shareholders should be more assured that they
will act, with respect to a possible change of control, for the benefit of the
Corporation and its shareholders and without concern for their own financial
security.
COMPENSATION OF DIRECTORS
- -------------------------
The board of directors of the Bank holds regular monthly meetings. The
Bank compensates its directors at the rate of $550 per month. The Chairman of
the board is paid $1,000 per month. Directors of the Bank who are not executive
officers are paid $150 for each committee meeting attended. The Corporation's
board of directors meetings customarily coincide with Bank board of directors
meetings. No separate cash compensation is paid to directors for Corporation
board of directors meetings.
The directors of the Corporation and Bank may receive stock options
under the Corporation's 1991 Stock Option Plan. The number of shares of Common
Stock covered by each option equals the number of shares the director could
purchase if he had purchased shares with the directors fees that the director
earned during the year. The options awarded to the directors are exercisable
after six months from the date of grant and expire two years from the date of
grant.
CERTAIN RELATIONSHIPS
- ---------------------
Directors and officers of the Corporation and members of their
immediate families and businesses controlled by them were customers of and had
certain transactions with the Bank in the ordinary course of business since
January 1, 1998. 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
8
<PAGE> 11
terms, including interest rates, fees, and collateral, as those prevailing at
the time for comparable transactions with other persons and did not involve more
than normal risk of collectibility or present any unfavorable features.
Russell M. Simmet, a director of the Corporation, is owner of Simmet
Insurance Agency, Inc. The Corporation purchases fleet coverage, and property
and casualty insurance through Simmet Insurance Agency, Inc. The premiums paid
for these policies are comparable to premiums that would have been paid to
nonaffiliate persons for similar policies.
During 1998, the Bank retained the services of Mr. Arnold, an attorney,
for routine legal matters. These fees were billed at the regular rates charged
by Mr. Arnold for services rendered to all of his firm's clients. The fees paid
by the Bank did not exceed 5% of the firm's gross revenues for its last fiscal
year.
AMENDMENT OF RESTATED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
-------------------------------------------------------------------------
AUTHORIZED SHARES OF COMMON STOCK FROM 1,750,000 TO 5,000,000
-------------------------------------------------------------
The Board of Directors has unanimously approved an amendment to the
Commercial National Financial Corporation Restated Articles of Incorporation to
increase the number of authorized shares of Commercial National Financial
Corporation common stock ("Common Stock") and unanimously recommends to the
shareholders that they approve such amendment.
The Corporation's Restated Articles of Incorporation provide that the
authorized number of shares of Common Stock is 1,750,000. As of March 12, 1999
there were 997,739 common shares outstanding and 54,201 common shares, 49,413
common shares, and 57,574 common shares reserved for issuance under the 1991
Stock Option Plan, the Employee Savings and Stock Ownership Plan, and the
Dividend Reinvestment Plan, respectively.
The Board of Directors considers it advisable to increase the
authorized number of shares of Common Stock to 5,000,000. The additional
authorized common shares will be available for any purpose for which shares of
common stock may be issued under the Michigan Business Corporation Act. For
example, this could include, among other things, possible issuance from time to
time pursuant to employee benefit plans, the dividend reinvestment plan,
exercise of stock options, acquisitions, private placements, public offerings
for cash and stock dividends or stock splits. The Corporation currently has no
plans, arrangements, understandings or commitments for the issuance of the
additional common shares. It is considered advisable, however, to have the
authorization to issue such shares in order to enable the Corporation, as the
need may arise, to move promptly to take advantage of market conditions and the
availability of other favorable opportunities without the delay and expense
involved in calling a shareholders' meeting for such purpose.
There are no preemptive rights with respect to the authorization or
issuance of the additional authorized common shares and those common shares may
be issued without further action by shareholders. Any issuance of Common Stock
must be for proper business purposes and for proper consideration from the
recipient. Issuance of additional common shares could, under some circumstances,
dilute the voting rights, equity and earnings per share of existing common
shareholders. Nevertheless, the Corporation anticipates that it would receive
value for any additional common shares issued, thereby reducing or eliminating
the economic effect of such dilution to shareholders.
Although the decision of the Board of Directors to propose an increase
in the number of shares of Common Stock authorized for issuance did not result
from any effort, known to the Corporation, by any person to accumulate Common
Stock or to affect a change in control of the Corporation, one effect of an
increase in authorized common shares may be to make more difficult certain types
of attempts to obtain control of the Corporation not approved by the Board of
Directors.
9
<PAGE> 12
The affirmative vote of a majority of the outstanding shares of Common
Stock is required to approve the amendment.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- ----------------------------------------
The Board of Directors appointed Crowe, Chizek and Company LLP as
independent auditors for the Corporation for the year ending December 31, 1998.
Crowe, Chizek and Company LLP has also been appointed to serve as the
Corporation's independent auditors for the year ending December 31, 1999.
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
will be available to respond to appropriate questions.
PROPOSALS OF SHAREHOLDERS
- -------------------------
Proposals of shareholders intended to be presented at the annual
meeting scheduled to be held April 25, 2000, must be received by the Corporation
for inclusion in its proxy statement and form of proxy relating to that meeting
by November 27, 1999. Proposals of shareholders should be made in accordance
with Securities and Exchange Commission Rule 14a-8.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and certain officers and persons who own more than ten
percent of the Corporation's common stock, to file with the SEC initial reports
of ownership and reports of changes in ownership of the Corporation's common
stock. These officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Corporation with copies of these
reports.
To the Corporation's knowledge, based solely on review of the copies of
such reports furnished to the Corporation during the fiscal year ended December
31, 1998, all Section 16(a) filing requirements were satisfied, with respect to
the applicable officers, directors and greater than ten percent beneficial
owners.
10
<PAGE> 13
PROXY COMMERCIAL NATIONAL FINANCIAL CORPORATION PROXY
ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1999
The undersigned acknowledges receipt of notice of and a proxy statement
for the annual meeting of shareholders of Commercial National Financial
Corporation to be held on April 27, 1999, and hereby appoints Edward Hooper and
Richard S. Prestage, and each of them, proxies of the undersigned, each with
full power of substitution, to vote all shares of the undersigned in Commercial
National Financial Corporation at the annual meeting of its shareholders to be
held on April 27, 1999, and at any adjournment thereof, with all powers which
the undersigned would have if personally present. The undersigned hereby
instructs Commercial National Financial Corporation to vote any and all shares
held for the account of the undersigned under the Commercial National Financial
Corporation Dividend Reinvestment Plan in accordance with the specifications, if
any, made in this proxy.
<TABLE>
<CAPTION>
1. Election of Directors:
<S> <C>
[ ] VOTE FOR all nominees (except as [ ] WITHHOLD AUTHORITY to vote
marked to the contrary). for all nominees listed below.
Richard F. Abbott, Jefferson P. Arnold, Jeffrey S. Barker, Don J. Dewey, David A. Ferguson, Kenneth R.
Luneack, Kim C. Newson, Howard D. Poindexter, Scott E. Sheldon and Russell M. Simmet.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES.
(INSTRUCTION: To withhold authority to vote for any individual nominee write that nominee's name in the space
below.)
2. Amendment to the Restated Articles of Incorporation of Commercial National
Financial Corporation:
[ ] VOTE FOR Amendment [ ] VOTE AGAINST Amendment [ ] ABSTAIN
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
RESTATED ARTICLES OF INCORPORATION.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COMMERCIAL NATIONAL FINANCIAL CORPORATION. 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 THE AMENDMENT TO THE RESTATED ARTICLES OF
INCORPORATION. 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.
Number of Shares: Dated: , 1999
-------------------------------- ---------------------------
X
------------------------------
Signature
X
------------------------------
Signature, if held jointly
Please sign exactly as
your name(s) appear(s). Joint
owners should each sign
personally. Executors,
administrators, trustees and
persons signing for
corporations or partnerships
should give their title as
such. If a corporation, please
sign in full corporate name by
president or authorized
officer. If partnership,
please sign in partnership
name by properly authorized
person.
</TABLE>
PLEASE SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE TO:
COMMERCIAL NATIONAL FINANCIAL CORPORATION
P.O. BOX 280
101 NORTH PINE RIVER STREET
ITHACA, MICHIGAN 48847
