<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
SKY FINANCIAL GROUP, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[SKY COVER]
<PAGE> 3
[SKY FINANCIAL GROUP LOGO]
221 South Church Street
Bowling Green, Ohio 43402
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Sky Financial Group, Inc.: March 19, 1999
The Annual Meeting of Shareholders of Sky Financial Group, Inc. (the "Company")
will be held at the Renaissance Cleveland Hotel, Tower City Center, 24 Public
Square, Cleveland, Ohio, on April 21, 1999 at 9:30 a.m. for the purpose of
considering and voting upon the following matters:
1. The election of eight Class I Directors to serve until the annual
meeting of shareholders in 2002; and
2. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on February 20, 1999, are
entitled to notice of and to vote at the Annual Meeting of Shareholders. The
Annual Report of the Company, the Proxy Statement and Annual Report Supplement,
including financial statements for the year ended December 31, 1998, have been
mailed to all shareholders with this Notice of Annual Meeting.
By Order of the Board of Directors
/S/W. GRANGER SOUDER, JR.
W. GRANGER SOUDER, JR.
Secretary
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
<PAGE> 4
Sky Financial Group, Inc.
221 South Church Street
Bowling Green, Ohio 43402
PROXY STATEMENT
GENERAL INFORMATION
The Board of Directors of Sky Financial Group, Inc. (the "Company") is
soliciting proxies to be voted at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on April 21, 1999, and any adjournments thereof.
The Company was formed as a result of the merger of equals (the "Merger")
of Mid Am, Inc. ("Mid Am") with and into Citizens Bancshares, Inc.
("Bancshares") pursuant to an Amended and Restated Agreement and Plan of Merger
dated as of August 5, 1998 (the "Merger Agreement"). The Merger was consummated
on October 2, 1998 (the "Effective Time").
Each of the 45,079,113 shares of common stock of the Company, without par
value ("Common Stock") outstanding on February 20, 1999 will be entitled to one
vote on matters acted upon at the Annual Meeting, either in person or by proxy.
The shares represented by all properly executed proxies sent to the Company or
its designee will be voted as designated, and in the absence of instructions
will be voted in the manner recommended by the Board of Directors of the
Company. Any shareholder executing a proxy has the right to revoke it prior to
its exercise, by written notice delivered to the Secretary of the Company, by
subsequently dated proxy, or by voting in person at the Annual Meeting any time
prior to its exercise.
All costs associated with the solicitation of proxies will be paid for by
the Company. Proxies will be solicited primarily by mail, but certain officers
and employees of the Company or its subsidiaries may personally solicit proxies
without additional compensation. Banks, brokers and other record holders will be
asked to send proxies and proxy materials to the beneficial owners of Common
Stock to obtain necessary voting instructions, and the Company will reimburse
them for their reasonable expenses.
The proxy materials are first being mailed to shareholders on or about
March 19, 1999.
ELECTION OF DIRECTORS
Under the Code of Regulations of the Company, the Board of Directors is
divided into three classes, designated as Class I, Class II and Class III. Each
class consists of approximately one-third of the total number of directors, as
fixed from time to time by the Board of Directors. Directors serve staggered
three-year terms so that directors of only one class are elected at each annual
meeting of shareholders. As of the date of this Proxy Statement, no vacancies
exist on the Company's Board of Directors.
At the Annual Meeting, shareholders will be asked to elect as Class I
Directors the eight persons listed below, all of whom are presently serving as
Class I Directors of the Company. If any of the Company's nominees are unable to
serve, which is not now contemplated, the proxies will be voted for such
substitute nominee(s) as the Board of Directors recommends or the number of
directors constituting the full Board of Directors may be reduced. In accordance
with the Company's Code of Regulations and Ohio law, if a quorum is present at
the Annual Meeting, the nominees for director who receive the greatest number of
votes cast by the shares present in person or by proxy and entitled to vote at
the Annual Meeting will be elected to serve as Class I Directors. Proxies will
be voted in favor of the nominees named below or any substitutes unless
otherwise instructed by the shareholder. Abstentions and shares not voted by
brokers and other entities holding shares on behalf of beneficial owners will
not affect the election of directors, because such shares are not considered
present for voting purposes.
<PAGE> 5
INFORMATION AS TO NOMINEES
The following information is provided with respect to each Class I
Director, all of whom are nominees for re-election at the Annual Meeting.
CLASS I DIRECTORS -- TERM EXPIRES 2002
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name, Age and Certain Biographical Information Period of Service as a Director
- -----------------------------------------------------------------------------------------------
<S> <C>
Gerald D. Aller, 61......................................... Director since 1998;
President, Aller's Pharmacy, Inc., a retail pharmacy Director of Mid Am since 1988
Willard L. Davis, 69........................................ 1991
President, SPM Fleet Services, Inc., an auto leasing
company; Vice President, State Park Motors, Inc., an auto
dealership; and Co-owner, Cardinal Motors, Inc., an auto
dealership
Kenneth E. McConnell, 62.................................... 1973
Owner/Operator, McConnell's Farm Market, a wholesale and
retail meat processing company
Edward J. Reiter, 59........................................ Director since 1998;
Senior Chairman, Sky Financial Group, Inc.; formerly Director of Mid Am since 1988
Chairman and CEO, Mid Am, Inc.
Patrick W. Rooney, 63....................................... Director since 1998;
Chairman, President and CEO, Cooper Tire & Rubber Company, a Director of The Ohio Bank since
manufacturer of engineered rubber products supplied to the 1991
automotive industry. Mr. Rooney is also a director of Cooper
Tire & Rubber Company, Alltrista Corporation and Huffy
Corporation
C. Gregory Spangler, 58..................................... Director since 1998;
Chairman and CEO, Spangler Candy Company, a manufacturer of Director of Mid Am since 1993
candy products
Robert E. Stearns, 59....................................... Director since 1998;
Dentist, Drs. Stearns, Zouhary & Fisher, Inc. Director of Mid Am since 1988
Glenn F. Thorne, 70......................................... 1994
President and CEO, Thorne Management, Inc., which owns and
operates supermarkets and is a leasing company
- -----------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 6
INFORMATION AS TO DIRECTORS WHOSE TERM OF OFFICE CONTINUES
The following information is provided with respect to incumbent Class II
and Class III Directors who are not nominees for election at the Annual Meeting.
CLASS II DIRECTORS -- TERM EXPIRES 2000
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Name, Age and Certain Biographical Information Period of Service as a Director
- ---------------------------------------------------------------------------------------------
<S> <C>
David A. Bryan, 51.......................................... Director since 1998;
Partner in the law firm of Wasserman, Bryan, Landry & Honold Director of Mid Am since 1991
Keith D. Burgett, 56........................................ 1988
Veterinarian and owner, Carrollton Animal Hospital; Owner,
Burgett Angus Farm
George N. Chandler, II, 61.................................. Director since 1998;
Vice President, Reduced Iron, Cleveland-Cliffs, Inc., a Director of The Ohio Bank since
producer of iron ore pellets and iron ore. Mr. Chandler is 1997
the brother-in-law of Richard Hollington, Jr., a Class III
Director of the Company
David R. Francisco, 52...................................... Director since 1998;
Chairman and CEO, Sky Financial Group, Inc.; formerly Director of Mid Am since 1988
President and COO, Mid Am, Inc.
Del E. Goedeker, 59......................................... 1998
Retired; formerly Vice President/Corporate Development,
Tuscarora, Inc., a manufacturer of plastic shipping
containers and materials; formerly President and Treasurer,
Vesuvius/ McDanel, a manufacturer of ceramic tableware;
formerly Chairman of the Board, Century National Bank, which
was acquired by Bancshares in May, 1998
H. Lee Kinney, 59........................................... 1998
Officer, The Citizens Banking Company, a subsidiary of the
Company; Partner in H. M. & L. Realty, a real estate holding
company; formerly Chairman and CEO of UniBank, which was
acquired by Bancshares in March, 1998
Thomas S. Noneman, 58....................................... Director since 1998;
President, Tomco Plastic, Inc., a custom plastic injection Director of Mid Am since 1988
molding manufacturer
Emerson J. Ross, Jr., 56.................................... Director since 1998;
Manager of Corporate Community Relations, Owens Corning, a Director of Mid Am since 1988
manufacturer of building materials and composite products
Douglas J. Shierson, 57..................................... Director since 1998;
Retired; Private Investor Director of Mid Am since 1995
- ---------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 7
CLASS III DIRECTORS -- TERM EXPIRES 2001
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Name, Age and Certain Biographical Information Period of Service as a Director
- -----------------------------------------------------------------------------------------------
<S> <C>
Marty E. Adams, 46.......................................... 1984
President and COO, Sky Financial Group, Inc.; formerly Vice
Chairman of the Board, President and CEO of Bancshares and
The Citizens Banking Company, a subsidiary of the Company
D. James Hilliker, 51....................................... Director since 1998;
Vice President, Better Food Systems, Inc., a company which Director of Mid Am since 1995
owns and operates Wendy's Restaurant franchises
Richard R. Hollington, Jr., 66.............................. Director since 1998;
Senior Partner in the law firm of Baker & Hostetler, LLP. Director of The Ohio Bank since
Mr. Hollington is the brother-in-law of George N. Chandler, 1958
II, a Class II Director of the Company
Fred H. Johnson, III, 37.................................... 1988
President, Summitcrest, Inc., a company which operates Angus
cattle farms
Marilyn O. McAlear, 63...................................... Director since 1998;
Chief Financial Officer, Service Spring Corp., a Director of Mid Am since 1988
manufacturer of spring products
James C. McBane, 59......................................... 1964
Vice Chairman of the Board, Sky Financial Group, Inc.;
Chairman of the Board, The Citizens Banking Company, a
subsidiary of the Company; Agent and Principal, McBane
Insurance Agency, Inc.; formerly Chairman of the Board of
Bancshares
Gerard P. Mastroianni, 43................................... 1996
President, Buckeye Village Market, Inc., a grocery store
chain; President, Alliance Venture, a real estate holding
company
Joseph N. Tosh, II, 57...................................... 1998
Officer, The Citizens Banking Company, a subsidiary of the
Company; formerly President and CEO, Century Financial
Corporation and Century National Bank & Trust Company, which
were acquired by Bancshares in May, 1998
- -----------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 8
BOARD OF DIRECTORS
MEETINGS, COMMITTEES, FUNCTIONS, AND COMPENSATION
The Board of Directors of the Company held one meeting in 1998 after the
Merger, at which all directors of the Company were present. The Board of
Directors of Bancshares met eleven times during 1998 and Mid Am's Board of
Directors met ten times in 1998 before the Merger. Each director with the
exception of Fred H. Johnson, III attended at least 75% of the total meetings of
the Boards of Directors of either Bancshares or Mid Am and its respective
committees held in 1998 prior to the Merger. To assist in carrying out its
responsibilities, the Board of Directors has established four standing
committees which are described below.
EXECUTIVE COMMITTEE
The members of the Executive Committee of the Board of Directors are Marty
E. Adams, Keith D. Burgett, David R. Francisco, Richard R. Hollington, Jr.,
Thomas S. Noneman, Edward J. Reiter, C. Gregory Spangler, Joseph N. Tosh, II and
James C. McBane, who serves as Chairperson. The Executive Committee, which met
two times in 1998 after the Merger, is a newly formed committee of the Board of
Directors. The Executive Committee exercises all powers of the Board of
Directors in the management of the business and affairs of the Company while the
Board of Directors is not in session. In addition, the Executive Committee
serves as the Company's nominating committee, selecting individuals for election
to the Board of Directors and considering incumbent directors for nomination for
re-election. For a period of three years after the Effective Time of the Merger,
the Executive Committee will not consider nominees for director recommended by
the security holders.
AUDIT COMMITTEE
The members of the Audit Committee of the Board of Directors are David A.
Bryan, George N. Chandler, II, Kenneth E. McConnell, Emerson J. Ross, Jr., Glenn
F. Thorne and Fred H. Johnson, III, who serves as Chairperson. The Audit
Committee, which met one time in 1998 after the Merger, is the successor to The
Citizens Banking Company Audit Committee, which met two times in 1998 before the
Merger, and Mid Am's Audit Committee, which met three times in 1998 before the
Merger.
Included among the functions of the Audit Committee are (i) the appointment
of the Company's independent auditors; (ii) review of the external audit plan
and the results of the auditing engagement; (iii) review of the internal audit
plan and results of the internal audits; and (iv) review of the adequacy of the
Company's system of internal audit controls.
RISK MANAGEMENT COMMITTEE
The members of the Risk Management Committee of the Board of Directors are
Gerald D. Aller, Willard L. Davis, H. Lee Kinney, Robert E. Stearns and Douglas
J. Shierson, who serves as Chairperson. The Risk Management Committee, which met
one time in 1998 after the Merger, is the successor to The Citizens Banking
Company Loan Review Committee which met three times in 1998 before the Merger
and Mid Am's Risk Management Committee which met four times in 1998 before the
Merger. The Risk Management Committee is responsible for reviewing the adequacy
of systems and procedures controlling risk throughout the Company and its
subsidiaries, including credit risk, interest rate/ liquidity risk,
legal/compliance risk, strategic/reputation risk and transaction risk.
COMPENSATION COMMITTEE
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors, which met two times
in 1998 after the Merger, is the successor to Bancshares' Personnel and
Compensation Committee, which did not meet in 1998 before the Merger, and Mid
Am's Special Projects Committee, which did not meet in 1998
5
<PAGE> 9
before the Merger. The members of the Compensation Committee are Del E.
Goedeker, Gerard P. Mastroianni, Marilyn O. McAlear, Patrick W. Rooney and D.
James Hilliker, who serves as Chairperson. Prior to the Merger, the members of
Bancshares' Personnel and Compensation Committee were Willard L. Davis, Fred H.
Johnson, III, Kenneth E. McConnell, Glenn F. Thorne and Gerard P. Mastroianni,
who served as Chairperson and the members of Mid Am's Special Projects Committee
were Gerald D. Aller, James F. Bostdorff, David A. Bryan, Wayne E. Carlin,
Walter L. Lamb, Jr., Thomas S. Noneman, C. Gregory Spangler and Jerry L. Staley
who served as Chairperson.
Members of the Compensation Committee, or their associates, were customers
of or had transactions with the Company or the Company's banking or other
subsidiaries in the ordinary course of business during 1998, and additional
transactions may be expected to take place in the future. All outstanding loans
to directors and their associates, and purchases and placements of investment
securities and other financial instruments included in such transactions, were
made in the ordinary course of business, on substantially the same terms,
including interest rates and collateral where applicable, as those prevailing at
the time for comparable transactions with other persons, and did not involve
more than normal risk of collectibility or present other unfavorable features.
COMMITTEE RESPONSIBILITIES
The Compensation Committee is responsible for the oversight and
administration of the compensation and benefit plans of the Company and its
subsidiaries. The Compensation Committee oversees (i) the Company's compensation
strategy, policies and programs; (ii) the compensation levels of directors and
executive management; (iii) management development and succession planning; and
(iv) administration of the Company's employee benefit plans.
COMPENSATION OF DIRECTORS
Effective as of October 2, 1998, each director of the Company receives an
annual cash retainer of $12,000; in addition, non-employee directors receive a
fee of $1,000 for each Board of Directors meeting attended and a fee of $500 for
each committee meeting attended. Committee chairpersons receive an additional
committee meeting fee of $250 for each committee meeting attended. Each
non-employee director received a grant of an option to purchase 1,500 shares of
the Company's Common Stock pursuant to the Amended and Restated 1998 Stock
Option Plan for Nonemployee Directors.
In 1998, each director who served on both the Bancshares and The Citizens
Banking Company Boards of Directors was paid an annual retainer of $14,800 and
the directors of Bancshares only were paid an annual retainer of $9,800.
Directors were also paid an attendance fee of $450 for meetings of the Boards of
Directors and of $150 for meetings of their respective committees. For his
service as Chairman of the Board of Bancshares and Chairman of the Board of The
Citizens Banking Company during 1998, Mr. McBane was paid $17,500 and $22,500,
respectively. In 1998, non-employee directors of Mid Am received an annual
retainer of $13,300, a fee of $450 for each Board of Directors meeting attended
and a fee of $250 for each committee meeting attended. Directors who were
employees of Mid Am were not compensated for their service on the Board of
Directors.
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
Pursuant to the Merger Agreement, at the time of the Merger each
outstanding share of Mid Am common stock was converted into the right to receive
.77 share of the Company's Common Stock (the "Exchange Rate"). For consistency
of presentation, all references in this Proxy Statement to shares of Mid Am
common stock prior to the Merger are adjusted for the .77 Exchange Rate, unless
otherwise noted. Because each share of Bancshares common stock outstanding prior
to the Merger equals one share of the Company's Common Stock, all references to
shares of Bancshares common stock prior to the Merger reflect the original
number of shares.
6
<PAGE> 10
Generally, under the rules of the Securities and Exchange Commission, a
person is deemed to be the beneficial owner of a security with respect to which
such person, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power (which includes power to vote, or direct
the voting of, such security) or investment power (which includes power to
dispose of, or direct the disposition of, such security). In addition, a person
is deemed to be the beneficial owner of a security if he or she has the right to
acquire such voting or investment power over the security within sixty days, for
example, through the exercise of a stock option.
The following table shows the beneficial ownership of the Company's Common
Stock as of December 31, 1998 by (i) each person who is the beneficial owner of
more than five percent of the outstanding shares Common Stock; (ii) each
director of the Company; (iii) each executive officer named in the Summary
Compensation Table on page 12; and (iv) all directors and executive officers as
a group.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Amount and Nature of
Beneficial Ownership as
of December 31, 1998 Percent of Class
Name (1), (2) (if 1% or Greater)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sky Financial Group.................................. 2,930,600(3) 6.51%
Marty E. Adams....................................... 143,540
Gerald D. Aller...................................... 85,224
David A. Bryan....................................... 21,614
Keith D. Burgett..................................... 33,821
James F. Burwell..................................... 66,248
George N. Chandler................................... 649,474(4) 1.44%
Willard L. Davis..................................... 120,991
Jack W. Donaldson.................................... 45,757
David R. Francisco................................... 128,020
Del E. Goedeker...................................... 48,110
D. James Hilliker.................................... 76,549
Richard R. Hollington, Jr. .......................... 500,422 1.11%
Fred H. Johnson, III................................. 144,940
Patrick A. Kennedy................................... 64,568
H. Lee Kinney........................................ 34,278
Frank J. Koch........................................ 23,753
Marilyn O. McAlear................................... 49,197
James C. McBane...................................... 175,125
Kenneth E. McConnell................................. 148,899(5)
Gerard P. Mastroianni................................ 22,078
Thomas S. Noneman.................................... 55,900
Edward J. Reiter..................................... 217,420
Patrick W. Rooney.................................... 8,610
Emerson J. Ross, Jr. ................................ 33,328
Douglas J. Shierson.................................. 164,355
W. Granger Souder, Jr. .............................. 31,499
C. Gregory Spangler.................................. 32,725
Robert E. Stearns.................................... 44,562
Glenn F. Thorne...................................... 132,035
Joseph N. Tosh, II................................... 217,921
All Directors and Executive Officers as a group...... 3,530,802(6) 7.83%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares held in the name of spouses, minor children, certain
relatives, trusts, estates and certain affiliated companies as to which
beneficial ownership may be disclaimed.
7
<PAGE> 11
(2) The amounts shown represent the total shares owned outright by such
individuals together with shares issuable upon the exercise of currently
vested, but unexercised stock options. Specifically, the following
individuals have the right to acquire the shares indicated after their
names, upon the exercise of such stock options: Mr. Adams, 11,694; Mr.
Aller, 29,747; Mr. Bryan, 16,090; Mr. Burgett, 7,190; Mr. Burwell, 35,357;
Mr. Chandler, 5,075; Mr. Davis, 6,186; Mr. Donaldson, 3,735; Mr. Francisco,
89,197; Mr. Goedeker, 6,796; Mr. Hilliker, 19,380; Mr. Hollington, 6,910;
Mr. Johnson, 3,819; Mr. Kennedy, 34,588; Mr. Kinney, 3,819; Mr. Koch, 4,077;
Mrs. McAlear, 22,531; Mr. McBane, 7,393; Mr. McConnell, 3,963; Mr.
Mastroianni, 6,553; Mr. Noneman, 27,885; Mr. Reiter, 106,261; Mr. Rooney,
4,785; Mr. Ross, 21,184; Mr. Shierson, 20,995; Mr. Souder, 25,607; Mr.
Spangler, 26,973; Mr. Stearns, 22,620; Mr. Thorne, 6,283; Mr. Tosh, 73,448;
and all directors and executive officers as a group, 667,774.
(3) Various bank subsidiaries of the Company were deemed beneficial owners of
portions of the referenced number of shares based upon their sole or shared
voting or investment power over the shares. The bank subsidiaries hold the
shares solely in a fiduciary or custodial capacity under numerous trust
relationships, none of which represents more than five percent of the
Company's outstanding shares. In their fiduciary capacities, the bank
subsidiaries held 2,930,600 shares of the Company's Common Stock on December
31, 1998. The Company disclaims beneficial ownership of the shares which may
be deemed to be beneficially owned by its bank subsidiaries.
(4) Mr. Chandler disclaims beneficial ownership of the reported shares of Common
Stock, all of which are owned by his wife.
(5) The number of shares of Common Stock shown as beneficially owned by Mr.
McConnell includes 44,880 shares held in trust for Mr. McConnell's wife and
862 shares owned jointly by Mr. McConnell's wife and son. Mr. McConnell
disclaims beneficial ownership of these shares.
(6) For purposes of this table, the term "executive officers" includes all
persons who were executive officers of the Company on December 31, 1998.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company was
responsible for the Company's executive compensation program as of the Merger.
Subsequent to the Merger, the Committee did not have an opportunity in 1998 to
establish compensation policies, address peer group composition, finalize
executive compensation program design or make any specific compensation
decisions. The Committee will address these matters and implement new executive
compensation programs for the Company during 1999.
The sections of the report describing 1998 executive compensation for
Bancshares and Mid Am executive officers who were executive officers of the
Company on December 31, 1998 are based on the decisions of each organization's
predecessor committee.
CITIZENS BANCSHARES, INC.
The compensation of executive officers of Bancshares for 1998 was reviewed
and established by the Bancshares Personnel and Compensation Committee, which
made the following report with respect to executive officer compensation
policies of Bancshares:
The compensation of executive officers of Bancshares and its subsidiaries
was based, subject to the provisions of applicable employment agreements, upon a
number of factors relating to achievement of individual goals and objectives;
corporate performance (including, but not limited to, return on shareholders'
equity); stock price performance; a review of compensation data of other
entities within Bancshares' peer group with similar financial results and of
similar size; and prevailing economic conditions.
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<PAGE> 12
With respect to the issuance of stock options to Bancshares executive
officers under the stock option plan in effect prior to the Merger, annual
targets were established based upon achieving specified earnings per share
goals. Stock option awards equal to 10% of base compensation were made to
executive officers if these goals were achieved.
Mr. Adams was elected President and Chief Operating Officer of the Company
as of October 2, 1998. From November, 1987 until the date of the Merger, Mr.
Adams served as the President and Chief Executive Officer of Bancshares and The
Citizens Banking Company.
The 1998 compensation of Mr. Adams was based upon the same factors outlined
above, subject to the provisions of his employment agreement. Because Bancshares
achieved its earnings per share goals, Mr. Adams was awarded stock options equal
to 10% of his base compensation. All 1998 compensation decisions with respect to
Bancshares' executive officers were made during November of 1997.
MID AM, INC.
The compensation of executive officers of Mid Am and the presidents and
chief executive officers of each of its subsidiaries for 1998 was reviewed and
established by the Special Projects Committee of the Mid Am Board of Directors
(the "Committee"), which was comprised entirely of non-employee directors. The
1998 compensation of executive officers of the subsidiaries, with the exception
of each of their presidents and chief executive officers, was established by the
Boards of Directors of the subsidiaries.
Towers Perrin, a nationally recognized compensation and employee benefits
consulting firm, assisted the Committee in analyzing the competitiveness of Mid
Am's 1998 executive compensation package as compared with similar organizations,
to ensure that compensation arrangements effectively supported Mid Am's
long-term business strategy. Mid Am's compensation philosophy applicable to
executive officers, as implemented under the supervision of the Committee, was
to enable the company to attract and retain qualified executives through
competitive cash compensation, to reward quality performance through incentive
compensation, and to encourage executives to manage Mid Am in a manner that
maximized long term shareholder value through stock option grants and
contributions to the Mid Am, Inc. Profit Sharing Plan (the "Profit Sharing
Plan").
The peer group used by the Committee for its executive compensation
analysis was comprised of Mid Am's most direct competitors for executive talent,
and did not include all of the companies in the peer group established for
comparison of shareholder returns. Therefore, while certain members of the
compensation peer group were included in the Nasdaq Bank Index, the compensation
peer group was not identical to the peer group index in the Comparison of Five
Year Cumulative Total Return graph included in this Proxy Statement.
BASE SALARY
Base salaries for executive officers were set at levels competitive with
peer banking institutions and general industries, as applicable, and were
adjusted for individual performance. To develop peer groups for Mid Am and its
subsidiaries, Towers Perrin collected market pay data from surveys covering the
banking industry and applicable general industries. Towers Perrin then analyzed
the compensation of Mid Am's executive officers as compared with compensation
packages offered by U.S. companies of similar asset or revenue size, as
applicable.
ANNUAL INCENTIVE COMPENSATION
Corporate-wide incentive compensation awards played a key role in
implementing Mid Am's strategy of attracting and retaining qualified executive
officers by rewarding quality performance. Mid Am's annual cash incentive
compensation was based on short-term performance, including (i) achievement of
corporate or subsidiary annual return on equity ("ROE") and return on assets
goals
9
<PAGE> 13
established by the Boards of Directors of Mid Am and its subsidiaries; (ii)
achievement of work group or departmental goals; and (iii) individual
performance. These criteria were weighted on the basis of the participant's job
responsibilities and ability to affect the financial performance of Mid Am or
the participant's subsidiary. For example, awards to executive officers who were
senior vice presidents were comprised of 70% corporate performance and 30%
individual and/or workgroup performance, while a bank teller's criteria was
weighted 80% on individual and banking center performance and 20% on corporate
performance. Incentive compensation for Mr. Francisco and Mr. Souder was awarded
solely on the basis of the consolidated financial performance of Mid Am while
Mr. Kennedy and Mr. Burwell were awarded incentive compensation based upon the
financial performance of their respective subsidiaries (75%) and the
consolidated financial performance of Mid Am (25%). Each individual's total
award was then modified upward based upon the consolidated financial performance
of Mid Am.
Awards under the incentive plan were paid on a matrix, with the payout
corresponding to varying levels of achievement in the financial, work group and
individual performance perspectives. Target and maximum bonus percentages for
Mr. Francisco were 40% and 80% of base salary, respectively. Target and maximum
bonus percentages for Mr. Kennedy, Mr. Burwell and Mr. Souder were 30% and 60%
of base salary, respectively. No incentive awards would be payable to an
executive officer if Mid Am or the individual's subsidiary, as applicable,
failed to meet minimum levels of financial performance established by their
respective Boards of Directors.
LONG-TERM INCENTIVE COMPENSATION
Based upon information provided by Towers Perrin, the Committee determined
that total direct compensation levels for Mid Am's executive officers were below
competitive benchmark levels. The Committee, therefore, used long-term
compensation (stock option grants and contributions to the Profit Sharing Plan)
to incrementally move executive officers' total direct compensation in line with
Mid Am's peer group.
Options to purchase Mid Am common stock were granted to executive officers
under the Amended and Restated Mid Am, Inc. 1997 Stock Option Plan to encourage
these individuals to manage the company in a manner that would increase
long-term shareholder value. Grants were made at an option price of 100% of the
common stock's market value on the grant date, vested in 20% increments over
five years, and will expire 10 years from the date of grant unless the optionee
no longer serves as an employee or director of the Company or a subsidiary.
Options were granted by the Committee using the Black-Scholes option valuation
model, and were adjusted based upon considerations such as dilution, the number
of shares of Mid Am common stock outstanding, and Mid Am, subsidiary and
individual performance.
Profit Sharing Plan contributions were made by Mid Am if corporate ROE
targets set by the Board of Directors were achieved. Contributions qualified as
employee stock ownership contributions and were invested primarily in Mid Am,
Inc. common stock.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mr. Francisco was elected Chairman and Chief Executive Officer of the
Company as of October 2, 1998. From March, 1988 until the date of the Merger,
Mr. Francisco served as the President and Chief Operating Officer of Mid Am.
The compensation of Mr. Francisco was reviewed by the Committee in
November, 1997 to establish Mr. Francisco's total compensation for 1998. In
determining Mr. Francisco's compensation, the Committee considered Mid Am's 1997
financial performance, Mr. Francisco's contribution to the short- and long-term
objectives of Mid Am and the competitive total direct compensation data for Mid
Am's peer group, as developed by Towers Perrin.
10
<PAGE> 14
The Committee considered Mid Am's financial performance in 1997 to be
strong, with record earnings of $31 million, basic earnings per share of $1.27
representing a 22% increase from the prior year, return on average common equity
of 17.58% and return on average assets of 1.42%. Total return to shareholders in
1997 was 69%.
Based upon this performance and market pay data supplied by Towers Perrin,
the Committee established Mr. Francisco's base salary for 1998 at $406,850,
compared with his previous year's base salary of $325,000 and placing Mr.
Francisco's base salary slightly above the seventy-fifth percentile of Mid Am's
peer group. Because Mr. Francisco's target bonus opportunity was below the
market competitive fiftieth percentile, the Committee increased the short-term
cash bonus target from 35% to 40% of base salary, to $162,740. Finally, because
Mr. Francisco's total direct compensation was significantly below the fiftieth
percentile of market competitive pay for long term incentives, the Committee
granted Mr. Francisco options to acquire 33,880 shares of Mid Am common stock.
Respectfully submitted,
The Compensation Committee
D. James Hilliker, Chairperson
Del E. Goedeker
Gerard P. Mastroianni
Marilyn O. McAlear
Patrick W. Rooney
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
returns for the Company, the Standard & Poor's 500 Stock Index and the Nasdaq
Bank Index for the five-year period ended December 31, 1998. The total
shareholder return assumes a $100 investment in Bancshares common stock and each
index on December 31, 1993, and that all dividends were reinvested.
[Performance Graph]
<TABLE>
<CAPTION>
SKY FINANCIAL GROUP S&P 500 INDEX NASDAQ BANK INDEX
------------------- ------------- -----------------
<S> <C> <C> <C>
'1993' 100.00 100.00 100.00
'1994' 117.00 101.00 101.00
'1995' 146.00 139.00 146.00
'1996' 169.00 170.00 185.00
'1997' 377.00 226.00 302.00
'1998' 307.00 291.00 267.00
</TABLE>
11
<PAGE> 15
EXECUTIVE COMPENSATION
The following table is a summary of certain compensation awarded, paid to,
or earned by the Company's Chief Executive Officer and its other six most highly
compensated executive officers (the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
- -----------------------------------------------------------------------------------------------------------
Other Securities
Annual Underlying All Other
Name/Title Year Salary Bonus Compensation Options/SARs (1) Compensation (2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David R. Francisco........ 1998 $406,850 $346,493 44,000 $ 81,601
Chairman and CEO 1997 325,000 229,618 53,375(3) 64,432
Sky Financial Group, Inc. 1996 300,000 202,524 11,646 51,860
Marty E. Adams............ 1998 $346,154 $265,000 45,282 $ 82,956
President and COO 1997 250,000 170,000 2,409 45,500
Sky Financial Group, Inc. 1996 236,000 120,000 2,032 42,690
Patrick A. Kennedy........ 1998 $219,646 $139,079 11,000 $ 44,336
President and CEO 1997 199,073 120,194 14,197(3) 39,381
Mid American National 1996 190,500 95,659 3,726 34,136
Bank and Trust Company
James F. Burwell.......... 1998 $214,550 $138,542 11,000 $ 43,738
Chief Operating Officer 1997 201,792 122,357 14,197(3) 40,086
The Ohio Bank 1996 193,100 90,346 3,726 33,640
Jack W. Donaldson......... 1998 $150,000 $145,667 $32,995(4) 750 $719,560(5)
President and CEO 1997 200,000 100,000 9,744
The Ohio Bank 1996 200,000 100,000 10,145
W. Granger Souder, Jr. ... 1998 $151,660 $102,100 $28,811 11,000 $ 31,608
EVP and General Counsel 1997 140,233 86,210 14,197(3) 27,023
Sky Financial Group, Inc. 1996 118,000 67,244 3,726 19,422
Frank J. Koch............. 1998 $131,730 $ 75,000 17,078 $ 30,340
EVP 1997 115,500 69,000 1,181 22,200
Sky Financial Group, Inc. 1996 110,000 59,000 985 18,190
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options granted have been adjusted for the stock splits, stock dividends and
similar occurrences affecting all outstanding shares.
(2) In 1998, All Other Compensation for Messrs. Francisco, Kennedy, Burwell and
Souder consists of contributions under the Mid Am 401(k) plan, Profit
Sharing Plan and pension plan of $4,800, $4,800 and $9,600, respectively;
contributions under the Bancshares retirement plans of $24,000 for Mr. Adams
and Mr. Koch; and a contribution of $7,271 to The Ohio Bank retirement plan
for Mr. Donaldson. Also included are amounts accrued under the Company's
supplemental employee retirement plan (Mr. Francisco, $60,328; Mr. Adams,
$58,137; Mr. Kennedy, $23,930; Mr. Burwell, $23,359; Mr. Souder, $11,575;
and Mr. Koch, $5,608); and group term life insurance premiums paid by the
Company (Mr. Francisco, $2,073; Mr. Adams, $819; Mr. Kennedy, $1,206; Mr.
Burwell, $1,179; Mr. Donaldson, $2,289; Mr. Souder, $833; and Mr. Koch,
$732).
(3) Reflected in 1997 are the following make-up option grants awarded to Named
Executives as a supplement to their 1996 option grants (Mr. Francisco,
19,495; Mr. Kennedy, 7,167; Mr. Burwell, 7,167; and Mr. Souder, 7,167).
(4) Benefits classified as Other Annual Compensation that did not exceed the
lesser of $50,000 or 10% of the Named Executive's annual salary and bonus
are not reported. In 1998, Other Annual Compensation for Mr. Donaldson and
Mr. Souder includes the values of their respective company automobiles
($27,865 and $15,200, respectively), which were transferred to them in
connection with the Company's termination of this benefit.
(5) This amount includes $710,000 to be paid to Mr. Donaldson from 1999 through
2001 in connection with his retirement. See "Retirement of Mr. Donaldson"
below.
12
<PAGE> 16
STOCK OPTIONS
The following table sets forth information concerning 1998 grants to the
Named Executives of options to purchase Common Stock under the Company's 1998
Stock Option Plan for Employees.
OPTION GRANTS TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year Potential Realizable
--------------------------------------- Value at Assumed
Rates
of Stock Price
Appreciation for
Option Term (1)
- -----------------------------------------------------------------------------------------------------------
Number of % of
Securities Total
Underlying Options Exercise
Options Granted Price Expiration
Name Granted to Employees Per Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
David R. Francisco...... 44,000(2) 5.43% $ 28.64 11/18/08 $792,508 $2,008,370
11,594(3) 5.00 25.875 12/30/08 188,665 478,114
Marty E. Adams.......... 1,282(4) 7.66 32.73 01/01/08 26,388 66,873
44,000(2) 5.43 28.64 11/18/08 792,508 2,008,370
9,662(3) 4.17 25.875 12/30/08 157,226 398,442
Patrick A. Kennedy...... 11,000(2) 1.36 28.64 11/18/08 198,127 502,093
4,251(3) 1.83 25.875 12/30/08 69,175 175,303
James F. Burwell........ 11,000(2) 1.36 28.64 11/18/08 198,127 502,093
4,478(3) 1.93 25.875 12/30/08 72,869 184,664
Jack W. Donaldson....... 750(2) .09 28.64 11/18/08 13,509 34,234
3,735(3) 1.61 25.875 12/30/08 60,778 154,024
W. Granger Souder,
Jr.................... 11,000(2) 1.36 28.64 11/18/08 198,127 502,093
3,055(3) 1.32 25.875 12/30/08 49,713 125,982
Frank J. Koch 578(4) 3.46 32.73 01/18/08 11,897 30,150
16,500(2) 2.04 28.64 11/18/08 297,190 753,139
3,092(3) 1.33 25.875 12/30/08 50,315 127,508
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and are not
intended to forecast possible future appreciation, if any, in the market
value of the Common Stock.
(2) Grant Options -- Options were granted under the Company's 1998 Stock Option
Plan for Employees ("Employee Option Plan") on November 18, 1998 and vest
over five years in the following increments: 40% on the second anniversary
of the grant date and an additional 20% on each successive anniversary of
the grant date. The option exercise price is not adjustable except for stock
splits, stock dividends and similar occurrences affecting all outstanding
shares.
(3) Elective Options -- Options were granted under the Employee Option Plan on
December 30, 1998 in exchange for the individual's voluntary forfeiture of a
portion of 1999 salary. Elective options are fully vested on the grant date.
The option exercise price is not adjustable except for stock splits, stock
dividends and similar occurrences affecting all outstanding shares.
(4) Bancshares Options -- Options were granted under the Bancshares
Non-Statutory Stock Option and Stock Appreciation Rights Plan on January 1,
1998, in tandem with an equal number of Stock Appreciation Rights ("SARs").
Options and SARs become exercisable on January 2001. The exercise price is
not adjustable except for stock splits, stock dividends and similar
occurrences affecting all outstanding shares.
13
<PAGE> 17
FISCAL YEAR-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying In-the-Money
Unexercised Options/SARs Options/SARs
at 12/31/98 at 12/31/98
- --------------------------------------------------------------------------------------------------------------
Shares Value
Acquired on Realized Exercisable Unexercisable Exercisable Unexercisable
Name Exercise(#) ($) (#) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David R. Francisco...... 0 0 89,197 86,700 $857,025 $174,521
Marty E. Adams.......... 0 0 11,694 47,692 32,374 28,107
Patrick A. Kennedy...... 0 0 34,588 22,359 359,689 57,005
James F. Burwell........ 0 0 35,357 22,358 369,263 57,005
Jack W. Donaldson....... 0 0 3,735 750 2,101 0
W. Granger Souder,
Jr. .................. 0 0 25,607 22,357 258,072 57,005
Frank J. Koch........... 14,025 $569,415 4,077 18,261 14,798 13,779
- --------------------------------------------------------------------------------------------------------------
</TABLE>
PENSION PLANS
Prior to the Merger, Bancshares had established the Bancshares Pension Plan
("Pension Plan") for the benefit of its employees. Benefit accruals under the
Pension Plan were frozen effective December 31, 1998. Accordingly, no additional
pension credits will be awarded to employees who participated in the Pension
Plan on that date, nor will new employees become eligible to participate in the
Pension Plan after December 31, 1998.
PENSION PLAN TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefit Upon Retirement at Age 65 (Before Adjustments) (1)
--------------------------------------------------------------------------------------
1998
Remuneration (2) Years of Service (3)
- ------------------------------------------------------------------------------------------------------
15 20 25 30 35
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
125,000.................................... $19,098 $ 25,464 $ 31,831 $ 38,197 $ 44,563
150,000.................................... 22,918 30,557 38,197 45,836 53,475
175,000.................................... 26,738 35,650 44,563 53,475 62,388
200,000.................................... 30,557 40,743 50,929 61,115 71,300
225,000.................................... 34,377 45,836 57,295 68,754 80,213
250,000.................................... 38,197 50,929 63,661 76,393 89,125
300,000.................................... 45,836 61,115 76,393 91,672 106,951
350,000.................................... 53,475 71,300 89,125 106,951 124,776
400,000.................................... 61,115 81,486 101,858 122,229 142,601
450,000.................................... 68,754 91,672 114,590 137,508 160,426
500,000.................................... 76,393 101,858 127,322 152,787 178,251
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annual pension benefits shown are payable upon retirement at age 65 assuming
election of a retirement benefit payable as a straight life annuity with
retirement on January 1, 1999.
(2) Section 401(a)(17) of the Internal Revenue Code limits the amount of annual
compensation that may be used to determine benefit amounts under pension
plans such as the Bancshares Pension Plan. This limit was $160,000 for 1998.
The benefit amounts shown in the table have been calculated without regard
to this limit, since it is subject to future adjustments. The Pension Plan
bases annual pension benefits on a participant's five year average pay (with
five year averages calculated on the assumption that each participant's pay
increased 4% annually) and years of service. The current compensation for
Mr. Adams and Mr. Koch for purposes of determining the annual pension
benefits payable is the same as the total salary and bonus as disclosed in
the Summary
14
<PAGE> 18
Compensation Table, but not more that the $160,000 limit. Annual benefits
payable are not subject to any deduction for Social Security or other offset
amounts.
(3) Mr. Adams and Mr. Koch are the only Named Executives who are Bancshares
Pension Plan participants, and became plan participants on January 1, 1994
when executive officers were covered by the Bancshares Pension Plan. Mr.
Adams and Mr. Koch had five years of credited service under the Bancshares
Pension Plan as of the December 31, 1998 plan freeze date and are fully
vested in their benefits.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Employment agreements are in effect between the Company and certain key
executives (including Mr. Francisco, Mr. Adams and Mr. Koch). The employment
agreements with Mr. Francisco and Mr. Adams are for initial five year terms and
automatically renew for an additional one year upon each anniversary of the
Effective Time commencing with the third such anniversary, unless prior notice
not to renew is given. Pursuant to the agreements, Mr. Francisco serves
initially as Chairman and Chief Executive Officer of the Company and Mr. Adams
serves as President and Chief Operating Officer, each until the fifth
anniversary of the Effective Time, after which time (unless otherwise determined
by a majority of the Board of Directors of the Company) Mr. Francisco will serve
as Chairman of the Company and Mr. Adams will succeed Mr. Francisco as Chief
Executive Officer. The agreements provide for initial base salaries of $600,000
for Mr. Francisco and $500,000 for Mr. Adams, which may not be reduced during
the term of the agreements. Both Mr. Francisco and Mr. Adams are eligible to
receive an annual target bonus equal to at least 40% of such base salary.
Each agreement provides for payments upon the executive's termination
without "cause" or for "good reason" (as defined below), or if the agreement is
not renewed by the Company, equal to the greater of (i) the sum of the
executive's annual base salary plus targeted annual bonus ("Annual Cash
Compensation") multiplied by the number of whole and partial years remaining in
the employment term as it existed immediately preceding the executive's
termination and (ii) three times Annual Cash Compensation (two times for Mr.
Francisco if he is then serving solely as Chairman of the Board). Welfare
benefit continuation will be provided for the remainder of the term. If such
termination occurs during the two-year period following a "Change in Control,"
the executive would receive the greater of the termination payment described
above, or three times the sum of his highest annual rate of base salary and his
highest annual bonus during the three year period immediately prior to the date
of termination, and continued welfare benefits for the longer of three years or
the remaining period of the term as it existed immediately prior to termination.
Upon any such termination all stock options granted after the Effective Time
shall vest and become immediately exercisable in full. For purposes of the
agreements, "cause" means (a) the willful and continued failure by the executive
to substantially perform his duties which is detrimental to the Company after a
written demand for substantial performance is made by the Board, or (b) the
willful engagement by the executive in gross misconduct materially and
demonstrably injurious to the Company. For purposes of the agreements, "good
reason" means (1) for the period prior to or more than two years after a change
in control: removal of, or failure to reappoint the executive to his initial
position; removal of, or failure to appoint or reappoint the executive to his
subsequent position after the fifth anniversary of the Effective Time; reduction
in base salary, bonus or benefits; change in responsibilities; or relocation of
the executive's office base of more than 30 miles; and (2) for the period two
years after a change in control: the events described in (1) above; requiring
the executive to travel on Company business to a substantially greater extent
than he did immediately prior to the change in control; refusal to permit the
executive to engage in non-business activities which he was permitted to engage
in prior to the change in control; termination which does not comply with notice
provisions under the agreement; or failure of the Company to cause its successor
or transferee to assume the agreement. In addition, the executives may
voluntarily terminate their employment with the Company during the thirty day
period commencing one year
15
<PAGE> 19
after a change in control, and such voluntary termination will be considered
"good reason" under the agreements.
If any payments pursuant to the agreements or otherwise would be subject to
any excise tax under the Internal Revenue Code, the Company will provide an
additional payment such that the executive retains a net amount equal to the
payments he would have retained if such excise tax had not applied.
In November, 1993, Bancshares entered into an employment agreement with
Frank J. Koch, Executive Vice President, which contains change in control
provisions which were triggered as a result of the Merger. The agreement
provides that upon a change in control of Bancshares, Mr. Koch shall continue to
be employed by the Company in an executive position until the earlier of: (i)
normal retirement; or (ii) twenty-four months, during which time he shall
receive (a) his annual salary, for the first twelve-months, at least equal to
his highest base salary for any month during the twelve-month period preceding
the change in control, and for the second twelve months, at least equal to his
salary of the subsequent year plus a pay increase calculated in a manner at
least as favorable as the manner in which the pay increases for other Company
executives are calculated; (b) an annual bonus calculated in a manner at least
as favorable as the manner in which the last annual bonus paid to the him prior
to the change in control was calculated, or the annual bonus paid to him by the
Company in the immediately preceding year, whichever is greater; (c) continued
insurance and health benefits; and (d) continued participation in the Bancshares
Profit Sharing Plan and Trust (the "Profit Sharing Plan"). Following a change in
control, if Mr. Koch's employment with the Company is terminated by the Company
for any reason, including death or disability (but excluding misconduct) or by
Mr. Koch for cause (as that term is defined in the agreement), Mr. Koch shall
receive, for a twenty-four month period from the date of the change in control
an amount equal to: (1) monthly salary at the level of the highest monthly
salary received during the twelve months immediately preceding the change in
control; (2) a contribution to the Profit Sharing Plan, if possible; and (3) the
greater of the average of the annual bonuses received by Mr. Koch from
Bancshares during the three calendar years immediately preceding (A) the change
in control or (B) his termination; reduced by any amount received during such
year pursuant to the Company's long-term disability policy. Mr. Koch may elect
to receive this amount in equal monthly installments, or if elected within sixty
days following his termination, in a single lump sum payment. In addition, Mr.
Koch will be entitled to receive continued welfare benefits. In the event Mr.
Koch terminates his employment within six months of a change in control, he
shall be entitled to receive one year's salary plus a bonus prorated to the date
of termination of employment.
RETIREMENT OF MR. DONALDSON
Mr. Donaldson will retire as President and CEO of The Ohio Bank on May 31,
1999, at which time Mr. Burwell will become President and CEO. In connection
with Mr. Donaldson's retirement, the Company's Board of Directors authorized a
$110,000 cash payment which will be paid on or before June 30, 1999. In
addition, the Company will provide continued health benefits to Mr. Donaldson
and his spouse. For a period of two years following his retirement, Mr.
Donaldson will provide consulting services to the Company and will be paid an
aggregate of $600,000 for such services over the two year period.
CHANGE IN CONTROL ARRANGEMENTS
Change in control agreements are in effect between the Company and certain
key executives. The change in control agreements between the Company and Messrs.
Kennedy, Burwell and Souder (the "Change in Control Agreements") were in place
prior to the Merger and continue to be in effect as described below.
Pursuant to the Change in Control Agreements, the Company and its
subsidiaries may terminate an executive officer's employment for any reason or
for no reason, with or without notice. The Change in Control Agreements do not
change the individual's status as employees at will under the laws of the State
of Ohio. In the event of an involuntary termination or diminution of status
without cause after a
16
<PAGE> 20
change in control (as defined below), the executive officers are entitled to
compensation payable in a lump sum or monthly installments equal to the
following multiples of the individual's average total compensation for the
immediately preceding two years: (i) two times for Mr. Kennedy and Mr. Burwell;
and (ii) two and one-half times for Mr. Souder. The Company and its subsidiaries
are not obligated to pay any amount which is in excess of the then maximum
amount which is deductible for federal income tax purposes.
For purposes of the Change in Control Agreements, a change in control is
defined, among other occurrences, as a merger, consolidation or sale of
substantially all of the assets of the Company with or into any other
corporation where shareholders of the Company receive less than 50% of the
shares of the resulting corporation; certain situations involving the issuance,
ownership, or control of in excess of 24.99% of the outstanding Common Stock or
assets of the Company; or the removal, termination or retirement of more than
49% of the members of the Board of Directors.
CERTAIN TRANSACTIONS
Directors and executive officers of the Company and their associates were
customers of, or had transactions with, the Company or the Company's banking or
other subsidiaries in the ordinary course of business during 1998. Additional
transactions may be expected to take place in the future. All outstanding loans
to directors and executive officers and their associates, commitments and sales,
purchases and placements of investment securities and other financial
instruments included in such transactions were made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral where applicable, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than normal risk of
collectibility or present other unfavorable features.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of the Securities Exchange Act of 1934, members of the
Board of Directors and certain executive officers of the Company and its
subsidiaries file periodic reports with the Securities and Exchange Commission
disclosing their beneficial ownership of Common Stock. During 1998, and based
solely upon a review of such reports, the Company believes that all filing
requirements under Section 16 were complied with on a timely basis with the
exception of delinquent transaction reports of Messrs. Davis, McConnell,
Burgett, Adams and Koch, each relating to a single transaction, and the
delinquent initial reporting forms of Messrs. Goedeker, Kinney, Tosh, Burwell
and Donaldson. The reports were corrected and promptly filed on behalf of these
individuals upon learning of the error.
AUDITORS
During 1998, the Company engaged Crowe, Chizek and Company LLP to provide
audit services for the Company and its subsidiaries and to provide certain
non-audit services including advice on accounting, tax and reporting matters.
Pursuant to the recommendation of the Audit Committee, the Board of Directors
has retained Crowe, Chizek and Company LLP as its independent auditors for 1999.
A representative of Crowe, Chizek and Company LLP will be at the Annual Meeting
of Shareholders and such representative will have an opportunity to make a
statement if (s)he desires to do so, and will be available to respond to
appropriate questions.
2000 SHAREHOLDER PROPOSALS
To be considered eligible for inclusion in the Company's Proxy Statement
for the 2000 Annual Meeting of Shareholders, a proposal must be made by a
qualified shareholder and received by the Company at its principal office in
Bowling Green, Ohio, prior to November 20, 1999. Any shareholder who intends to
propose any other matter to be acted upon at the 2000 Annual Meeting of
Shareholders
17
<PAGE> 21
must inform the Company not less than sixty nor more than ninety days prior to
the meeting; provided, however, that if less than seventy-five days' notice or
prior public disclosure of the date of the meeting is given to shareholders,
notice by the shareholder must be received not later than the close of business
on the fifteenth day following the earlier of the day on which such notice of
the date of the meeting was mailed or such public disclosure was made. If notice
is not provided by that date, the persons named in the Company's proxy for the
2000 Annual Meeting will be allowed to exercise their discretionary authority to
vote upon any such proposal without the matter having been discussed in the
proxy statement for the 2000 Annual Meeting.
OTHER BUSINESS
The Board of Directors of the Company is not aware of any other matters
that may come before the Annual Meeting. However, the enclosed proxy will confer
discretionary authority with respect to matters which are not now known to the
Board of Directors and which may properly come before the meeting.
March 19, 1999 By Order of the Board of Directors
/S/W. GRANGER SOUDER, JR.
W. GRANGER SOUDER, JR.
Secretary
18
<PAGE> 22
[SKY FINANCIAL GROUP LOGO]
Dear Shareholder,
Enclosed is your Notice of Annual Meeting of Shareholders and related
Proxy Statement for our 1999 Annual Meeting.
The business of the 1999 Annual Meeting, including the matters to be voted
upon as described in the Notice and Proxy Statement, will be conducted on
April 21, 1999 at 9:30 a.m. at the Renaissance Cleveland Hotel, Tower City
Center, 24 Public Square, Cleveland, Ohio. You are welcome to attend this
Annual Meeting of Shareholders.
The matters to be acted upon at the meeting are important to you as a
shareholder. Therefore, whether or not you plan to attend, we urge you to
complete and return the proxy card at your earliest convenience.
We look forward to seeing you at our Annual Meeting.
Sincerely,
/s/ David R. Francisco /s/ Marty E. Adams
David R. Francisco Marty E. Adams
Chairman and CEO President and COO
PLEASE DETACH PROXY CARD HERE
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<TABLE>
<CAPTION>
<S><C>
DIRECTORS RECOMMEND A VOTE FOR PROPOSAL 1.
1. Election of all Nominees FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
for Director in Class I. listed below for all nominees listed below
Nominees for Director in Class I: Gerald D. Aller, Willard L. Davis, Kenneth E. McConnell, Edward J. Reiter, Patrick W. Rooney, C.
Gregory Spangler, Robert E. Stearns, and Glenn F. Thorne.
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.)
Exceptions ________________________________________________________________________________________________________________________
Please check the box to the right if [ ]
you wish to attend the Annual Meeting.
PLEASE SEE LETTER ABOVE FOR DETAILS.
Address Change and/or [ ]
Comments Mark Here
Please be sure to sign and date this Proxy Voting
Instruction Card. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such. If more than one owner, all should sign.
Dated: ______________________________________, 1999
______________________________________________________
Signature(s)
______________________________________________________
Signature(s)
PLEASE DATE, SIGN AND MAIL YOUR PROXY VOTING VOTES MUST BE INDICATED
INSTRUCTION CARD PROMPTLY IN THE ENCLOSED ENVELOPE. (X) IN BLACK OR BLUE INK. [ ]
</TABLE>
PLEASE DETACH HERE
YOU MUST DETACH THIS PORTION OF THE PROXY CARD
BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE.
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<PAGE> 23
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SKY FINANCIAL GROUP, INC.
PROXY VOTING INSTRUCTION CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON APRIL 21, 1999
The undersigned hereby appoints James C. McBane and Douglas J.
Shierson, and each of them, proxies, with the powers the undersigned would
possess if present and with full power of substitution, to vote all common
shares of the undersigned in Sky Financial Group, Inc., at the Annual Meeting
and at any adjournments or postponements thereof, upon all subjects that may
properly come before the Annual Meeting, including the matters described in the
Proxy Statement furnished herewith, subject to any directions indicated on this
card. If no directions are given, the proxies will vote for the election of all
listed nominees and, at their discretion, on any other matter that may properly
come before the Annual Meeting.
(Continued, and to be signed and dated, on the reverse side.)
SKY FINANCIAL GROUP, INC.
P.O. BOX 11486
NEW YORK, N.Y. 10203-0486
