-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dj8gj/SVx/po9P1BPnCVQCZhDCcJwI551S61Dqnm+OoBBZyB6wCyoFYGst1vHd11 MuzcF7kaCEvJbLSEv9lT+w== 0000905729-99-000050.txt : 19990308 0000905729-99-000050.hdr.sgml : 19990308 ACCESSION NUMBER: 0000905729-99-000050 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990419 FILED AS OF DATE: 19990305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEMICAL FINANCIAL CORP CENTRAL INDEX KEY: 0000019612 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 382022454 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-08185 FILM NUMBER: 99558146 BUSINESS ADDRESS: STREET 1: 333 E MAIN ST CITY: MIDLAND STATE: MI ZIP: 48640 BUSINESS PHONE: 5176313310 DEF 14A 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 [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12 [ ] Confidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2)) CHEMICAL 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: -------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: -------------------------------------------------------------------- (3) Filing party: -------------------------------------------------------------------- (4) Date filed: -------------------------------------------------------------------- MARCH 5, 1999 [CHEMICAL FINANCIAL CORPORATION LOGO] 333 EAST MAIN STREET MIDLAND, MICHIGAN 48640 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 19, 1999 TO THE HOLDERS OF COMMON STOCK: The annual meeting of shareholders of CHEMICAL FINANCIAL CORPORATION ("Chemical") will be held on MONDAY, APRIL 19, 1999 at 2:00 p.m. (local time) at the Midland Center for the Arts, 1801 W. St. Andrews Drive, Midland, Michigan, at which meeting the shareholders will (i) elect a board of eight directors; and (ii) transact any other business that may properly be brought before the meeting. You are invited to attend the meeting and, even though you sign and return the enclosed proxy, you may vote your shares in person if you are present at the meeting. The Board of Directors has fixed the close of business on February 19, 1999 as the record date for the determination of holders of Common Stock entitled to notice of and to vote at the meeting and any adjournment of the meeting. The following Proxy Statement and enclosed form of proxy are being furnished to holders of Chemical Common Stock on and after March 5, 1999. By Order of the Board of Directors /s/ David B. Ramaker David B. Ramaker Secretary IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. EVEN IF YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY. PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS CHEMICAL FINANCIAL CORPORATION APRIL 19, 1999 The enclosed proxy is being solicited by the Board of Directors of Chemical Financial Corporation ("Chemical" or the "Corporation"). This Proxy Statement and the enclosed proxy are being furnished to holders of Chemical Common Stock, $1 par value ("Common Stock"), on and after March 5, 1999, for use at the annual meeting of Chemical shareholders to be held on April 19, 1999 and any adjournment of that meeting. The annual meeting will be held at the Midland Center for the Arts, 1801 W. St. Andrews Drive, Midland, Michigan at 2:00 p.m. (local time). Solicitation of proxies will be made initially by mail. Directors, officers and employees of Chemical and its subsidiaries may also solicit proxies in person, by telephone or by electronic communication, without additional compensation. Proxies may be solicited by nominees and other fiduciaries who may mail materials to, or otherwise communicate with, the beneficial owners of Common Stock held by them. All expenses of solicitation of proxies will be paid by Chemical. Shareholders of record of the Corporation's Common Stock at the close of business on February 19, 1999 will be entitled to notice of and to vote at the annual meeting of shareholders on April 19, 1999 and any adjournment of that meeting. As of February 19, 1999, there were 13,506,385 shares of Common Stock issued and outstanding. Representation of the holders of a majority of the shares of Common Stock outstanding at the record date is necessary to constitute a quorum at the annual meeting. Abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum for the transaction of business. Each share of Common Stock is entitled to one vote on each matter presented for shareholder action. The shares represented by the enclosed proxy will be voted at the annual meeting and any adjournment of that meeting if the proxy is properly signed and returned to Chemical prior to the meeting. A proxy may be revoked at any time prior to its exercise by written notice delivered to the Secretary of the Corporation or by attending and voting at the annual meeting. The shares represented by each proxy will be voted in accordance with the specifications of the shareholder. If the shareholder does not specify a choice, the shares represented by the proxy will be voted "FOR" the election of all nominees listed in this Proxy Statement as directors. Chemical's management is not aware of any other matters intended to be presented for action at the meeting. If other matters are presented, the shares represented by the proxy will be voted in accordance with the judgement of the persons named as proxies on such other matters that may come before the meeting. -1- The 1998 Annual Report of the Corporation, including financial statements, is enclosed with this Proxy Statement. A COPY OF THE CORPORATION'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K FOR THE YEAR 1998, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, WILL BE PROVIDED, WITHOUT CHARGE, TO ANY SHAREHOLDER UPON WRITTEN REQUEST. REQUESTS SHOULD BE MADE IN WRITING ADDRESSED TO LORI A. GWIZDALA, CHIEF FINANCIAL OFFICER, CHEMICAL FINANCIAL CORPORATION, 333 EAST MAIN STREET, MIDLAND, MICHIGAN 48640. ELECTION OF DIRECTORS The Board of Directors has nominated the individuals listed below for election as directors of the Corporation to serve until the next annual meeting of shareholders or until their successors are elected and qualified. The proposed nominees are willing to be elected and to serve. If any nominee is unable to serve or is otherwise unavailable for election, which is not contemplated, the incumbent Chemical Board of Directors may or may not select a substitute nominee. If a substitute nominee is selected, all proxies will be voted for the person so selected. If a substitute nominee is not selected, all proxies will be voted for the election of the remaining nominees. Proxies will not be voted for a greater number of persons than the number of nominees named in this Proxy Statement. A plurality of the shares represented and voted at the meeting is required to elect directors. For the purpose of counting votes on the election of directors, abstentions, broker non-votes and other shares not voted will not be counted as shares voted, and the number of votes of which a plurality is required will be reduced by the number of shares not voted. Each nominee is currently a member of the Board of Directors who was elected at the Corporation's prior annual meeting of shareholders. YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS Biographical information concerning each nominee for election to the Board of Directors is presented below. Unless otherwise indicated, each nominee has had the same principal occupation for more than five years. In this Proxy Statement, "Chemical Bank" means Chemical Bank and Trust Company in Midland, Michigan, the Corporation's principal banking subsidiary. -2- NOMINEES FOR ELECTION TO SERVE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2000 JAMES A. CURRIE, age 40, has been a director of the Corporation since August 1993 and is a member of the Audit and Compensation Committees. Mr. Currie is an investor and a certified teacher with a Masters Degree in Special Education from Michigan State University in East Lansing, Michigan. Mr. Currie has served as a director and member of various committees of Chemical Bank since February 1992. MICHAEL L. DOW, age 64, has served as a director of the Corporation since April 1985 and is Chairman of the Audit and a member of the Pension and Compensation Committees. Mr. Dow is Chairman of the Board and owner of General Aviation, Inc. in Lansing, Michigan, a provider of aviation related services. Mr. Dow has served as a director and member of various committees of Chemical Bank since February 1982. TERENCE F. MOORE, age 55, has served as a director of the Corporation since January 20, 1998 and is a member of the Audit and Compensation Committees. Mr. Moore has been President and Chief Executive Officer of MidMichigan Health in Midland, Michigan since 1982. MidMichigan Health is a health care organization operating three hospitals, two nursing homes and nine other health care subsidiaries in central and northern Michigan. Mr. Moore is also a director of the Michigan Molecular Institute. Mr. Moore has served as a director and member of various committees of Chemical Bank since February 1991 and as a director of CFC Data Corp, the Corporation's data processing subsidiary, since June 1995. ALOYSIUS J. OLIVER, age 58, has served as President, Chief Executive Officer and a director of the Corporation since January 1997 and as Executive Vice President and Secretary from January 1985 to December 1996. Mr. Oliver joined the Corporation from Chemical Bank in January 1985. Mr. Oliver joined Chemical Bank in 1957 and served in various management capacities. Mr. Oliver became Vice President and Cashier of Chemical Bank in 1975, Secretary of the Board of Directors in 1979 and Senior Vice President in 1981. Mr. Oliver was elected to the Board of Directors of Chemical Bank in August 1996. During the last five years, Mr. Oliver has served as a director and member of various committees of the Corporation's subsidiaries, as follows: Chemical Bank Michigan (also Chairman), Chemical Bank Thumb Area, Chemical Bank Key State (also Chairman), Chemical Bank South and CFC Data Corp (also President and Treasurer), all of which are wholly-owned subsidiaries of the Corporation. ALAN W. OTT, age 67, has served as Chairman of the Board since April 1994 and a director of the Corporation since October 1973. Mr. Ott was Chief Executive Officer and President from October 1973 until his retirement on December 31, 1996. Mr. Ott was Treasurer from May 1987 through April 1994. Mr. Ott is a member of the Pension Committee. Mr. Ott is also Chairman of the Board of Directors of Chemical Bank. Mr. Ott joined Chemical Bank as Cashier in 1962, became a Vice President in 1964, President and Chief Executive Officer in 1972 and Chairman of the Board and Chief Executive Officer in 1986. He has served as a director of Chemical Bank since 1969. Mr. Ott retired as Chief Executive Officer of Chemical Bank on December 31, 1996. During the last five years, Mr. Ott has also served as a director and member of various committees of all of the Corporation's other subsidiaries. Mr. Ott is a director of the Michigan Molecular Institute. -3- FRANK P. POPOFF, age 63, has served as a director of the Corporation since February 1989 and is a member of the Audit and Chairman of the Pension and Compensation Committees. Mr. Popoff is Chairman of the Board of Directors of The Dow Chemical Company in Midland, Michigan, a diversified manufacturer of chemicals and performance products, plastics, and hydrocarbons and energy. Mr. Popoff joined The Dow Chemical Company in 1959 and has served in senior positions in sales, marketing, operations and business management, including responsibilities for international areas of the company. Mr. Popoff was named President of Dow Europe in 1981, became a Vice President in 1984, Executive Vice President in 1985, President and Chief Executive Officer in 1987 and Chairman of the Board of Directors in December 1992. He was elected to the Board of Directors of The Dow Chemical Company in 1982. Mr. Popoff is also a director of the Michigan Molecular Institute, American Express Company, US WEST, Inc. and United Technologies Corporation. Mr. Popoff has served as a director and member of various committees of Chemical Bank since July 1985. LAWRENCE A. REED, age 59, has served as a director of the Corporation since December 1986 and is a member of the Audit and Compensation Committees. Mr. Reed retired in 1992 after serving as President of Dow Corning Corporation, a diversified company specializing in the development, manufacture and marketing of silicones and related silicon-based products. Mr. Reed joined Dow Corning Corporation in 1964 and served in various senior management positions, including Vice President and Chief Financial Officer and President and Chief Executive Officer. Mr. Reed has served as a director and member of various committees of Chemical Bank since December 1981. WILLIAM S. STAVROPOULOS, age 59, has been a director of the Corporation since August 1993 and is a member of the Audit, Pension and Compensation Committees. Mr. Stavropoulos is President and Chief Executive Officer of The Dow Chemical Company, a diversified manufacturer of chemicals and performance products, plastics, and hydrocarbons and energy. Mr. Stavropoulos joined The Dow Chemical Company in 1967 and has served in various senior management positions. Mr. Stavropoulos was named President of Dow Latin America in 1984, Group Vice President in 1987, Vice President in 1990, President of Dow U.S.A. in 1990, Senior Vice President in 1991, President and Chief Operating Officer in 1993 and Chief Executive Officer in November 1995. He was elected to the Board of Directors of The Dow Chemical Company in 1990. Mr. Stavropoulos is also a director of Dow Corning Corporation, NCR Corporation and BellSouth Corporation. Mr. Stavropoulos has served as a director and member of various committees of Chemical Bank since April 1992. -4- VOTING SECURITIES Listed below is the only shareholder of the Corporation known by management to have been the beneficial owner of 5% or more of the outstanding shares of Common Stock as of January 31, 1999:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP --------------------------------------------- NAME AND ADDRESS SOLE VOTING SHARED VOTING TOTAL OF BENEFICIAL AND DISPOSITIVE OR DISPOSITIVE BENEFICIAL PERCENT OF OWNER OF COMMON STOCK POWER POWER OWNERSHIP CLASS --------------------- --------------- -------------- --------- ---------- Chemical Bank and Trust Company 979,991 303,404 1,283,395 9.45% Trust Department 333 E. Main Street Midland, MI 48640
The following table sets forth information regarding beneficial ownership of Common Stock by each director and nominee for director, each named executive officer and all directors and executive officers as a group as of January 31, 1999:
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP --------------------------------------------- SOLE VOTING SHARED VOTING TOTAL NAME OF BENEFICIAL AND DISPOSITIVE OR DISPOSITIVE BENEFICIAL PERCENT OF OWNER OF COMMON STOCK POWER POWER OWNERSHIP CLASS --------------------- --------------- -------------- --------- ---------- J. A. Currie 93,830 13,902 107,732 M. L. Dow 75,778 66,985 142,763 1.05% B. M. Groom 26,386 12,624 39,010 L. A. Gwizdala 29,868 16,512 46,380 T. F. Moore 3,671 3,625 7,296 A. J. Oliver 97,336 97,336 A. W. Ott 73,715 377,833 451,548 3.32 F. P. Popoff 13,811 13,811 D. B. Ramaker 9,718 9,718 L. A. Reed 3,188 14,585 17,773 W. S. Stavropoulos 4,457 287,687 292,144 2.15 All directors and executive officers as a group 463,872 506,615 970,487 7.14 - -------------------- Less than 1% -5- The numbers of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that, under applicable regulations, are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person will also be considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in various fiduciary capacities through the trust department of Chemical Bank are not included unless otherwise indicated. The Corporation and the directors and officers of the Corporation and of Chemical Bank disclaim beneficial ownership of shares held by the trust department in fiduciary capacities. These numbers include shares over which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust, or other contract or property right, and shares held by spouses and children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by the trust department of Chemical Bank are not included unless otherwise indicated. The directors and officers of the Corporation may, by reason of their positions, be in a position to influence the voting or disposition of shares held in trust by Chemical Bank to some degree, but disclaim beneficial ownership of these shares. These numbers consist of certain shares held in various fiduciary capacities through the trust department of Chemical Bank. Although Chemical Bank has voting or dispositive powers with respect to these shares, it is the trust department's policy to transfer voting rights by proxy to the beneficiaries whenever possible. Chemical Bank also holds in various fiduciary capacities a total of 1,389,062 shares of Common Stock over which it does not have voting or dispositive power and which are not included in these numbers. Although Messrs. Groom and Ramaker are members of Chemical Bank's Trust Investment Committee, they disclaim beneficial ownership of shares held by the trust department in a fiduciary capacity. The Corporation and the directors and officers of the Corporation and Chemical Bank also disclaim beneficial ownership of shares held by the trust department in a fiduciary capacity. These numbers include 60,292 shares owned by two trusts as of January 31, 1999, of which Mr. Dow is a trustee. Mr. Dow disclaims beneficial ownership of these shares. These numbers include shares that executive officers of the Corporation have the right to acquire through the exercise of stock options within 60 days from January 31, 1999 as follows: Mr. Groom - 19,616 shares, Ms. Gwizdala - 29,313 shares, Mr. Oliver - 15,870 shares and Mr. Ramaker - 6,337 shares. These numbers include 287,687 shares owned by the Rollin M. Gerstacker Foundation and 50,771 shares owned by the Elsa U. Pardee Foundation for both of which Mr. Ott served as a trustee and treasurer as of January 31, 1999. Mr. Ott has no beneficial interest in the shares owned by the foundations and disclaims beneficial ownership of these shares. -6- These numbers include 287,687 shares owned by the Rollin M. Gerstacker Foundation as of January 31, 1999. Mr. Stavropoulos is a trustee of that foundation. Mr. Stavropoulos has no beneficial interest in the shares owned by the foundation and disclaims beneficial ownership of these shares. These numbers include 80,250 shares that the executive officers of the Corporation have the right to acquire presently or within 60 days from January 31, 1999, through the exercise of stock options granted by the Corporation.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS The Corporation has standing Audit, Pension and Compensation Committees of the Board of Directors. The Corporation does not have a nominating committee. The Audit Committee, composed of Mr. Dow, Chairman, and Messrs. Currie, Moore, Popoff, Reed and Stavropoulos, met two times during 1998. This committee recommends a firm of independent public accountants to be appointed by the Board; consults with the independent public accountants and the Corporation's internal auditors with regard to the adequacy of internal controls and the quality of ongoing operations; reviews with the independent public accountants significant accounting matters and policies, the proposed plan of audit and the results of their audit; and submits a formal annual report to the Board of Directors covering the adequacy, effectiveness and efficiency of the internal systems of control and the quality of ongoing operations. The Pension Committee, composed of Mr. Popoff, Chairman, and Messrs. Dow, Ott and Stavropoulos, met once during 1998. This committee oversees the administration of the Corporation's employees' pension plan. The Compensation Committee, composed of Mr. Popoff, Chairman, and Messrs. Currie, Dow, Moore, Reed and Stavropoulos, met once during 1998. This committee reviews salaries, bonuses and other compensation of all officers of the Corporation, administers the Corporation's stock option plans and makes recommendations to the Board regarding the awards of stock options under these plans. The Board of Directors meets regularly each month for approximately two hours. There were a total of twelve meetings in 1998. All directors attended 75% or more of the aggregate meetings of the Board and applicable committees of which they were members during 1998, except for Mr. Stavropoulos. -7- COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS The following table provides information concerning the compensation earned during each of the three years in the period ended December 31, 1998, by the Chief Executive Officer and each of the Corporation's other executive officers whose total annual salary and bonus for 1998 exceeded $100,000: SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION --------------------------------- ANNUAL COMPENSATION AWARDS PAYOUTS -------------------------------------------- ----------------------- ------- NUMBER OF NAME AND OTHER RESTRICTED SHARES PRINCIPAL ANNUAL STOCK UNDERLYING LTIP ALL OTHER POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION -------- ---- ------ ----- ------------ ------ ------- ------- ---------------- Aloysius J. Oliver 1998 $160,000 $40,150 2,500 $ 60 President and Chief 1997 140,000 35,150 2,625 60 Executive Officer 1996 94,000 25,150 5,512 60 of the Corporation David B. Ramaker 1998 $150,000 $35,150 2,500 $ 408 President and Chief 1997 130,000 30,150 2,625 468 Executive Officer of 1996 90,000 16,150 5,512 417 Chemical Bank and Executive Vice President and Secretary of the Corporation Bruce M. Groom 1998 $101,250 $28,150 1,875 $1,053 Senior Vice President 1997 97,500 24,150 1,203 and Senior Trust Officer 1996 94,000 21,150 2,756 1,275 of Chemical Bank Lori A. Gwizdala 1998 $ 96,000 $30,150 2,375 $ 377 Senior Vice President, 1997 90,000 28,150 2,625 294 Chief Financial Officer 1996 76,000 23,150 2,756 247 and Treasurer of the Corporation - ----------------------- Includes compensation deferred under the Corporation's 401(k) savings plan. Dollar value of term life insurance premiums paid by the Corporation.
-8- The following table sets forth information concerning stock options granted to the specified individuals during the last fiscal year: OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS - ------------------------------------------------------------------------------------ NUMBER OF PERCENT OF TOTAL SHARES OPTIONS UNDERLYING GRANTED TO EXERCISE OPTIONS EMPLOYEES IN PRICE EXPIRATION GRANT DATE NAME GRANTED FISCAL YEAR PER SHARE DATE PRESENT VALUE - ------------------ ----------- ------------- ------------- ---------- ----------------- Aloysius J. Oliver 2,500 2.0% $33.25 11/16/2008 $17,400 David B. Ramaker 2,500 2.0 33.25 11/16/2008 17,400 Bruce M. Groom 1,875 1.5 33.25 11/16/2008 13,050 Lori A. Gwizdala 2,375 1.9 33.25 11/16/2008 16,530 - ------------------ The per share exercise price of each option is equal to the market value of Common Stock on the date each option was granted. The outstanding options were granted for a term of 10 years. Options terminate, subject to certain limited exercise provisions, in the event of death, retirement or other termination of employment. All options become exercisable one year after the date of grant, except for Mr. Ramaker's, which become exercisable three years after the date of grant. All options permit the option price to be paid by delivery of cash or other shares of Common Stock owned by the option holder, including shares acquired through the exercise of other options. The number of shares underlying options and the exercise price have been adjusted to reflect a 5 for 4 stock split paid by the Corporation on December 16, 1998. The dollar amounts in this column are the result of calculations made using the Black-Scholes model, a theoretical method for estimating the present value of stock options based on complex assumptions about the stock's price volatility and dividend rate as well as interest rates. Because of the unpredictability of the assumptions required, the Black-Scholes model, or any other valuation model, is incapable of accurately predicting the Corporation's stock price or of placing an accurate present value on options to purchase its stock. In performing the calculations it was assumed that: the options had an estimated average life of 6.5 years; the volatility of the stock price was equal to 16.9%, which was the volatility calculated on a natural logarithmic basis of the Corporation's stock price for the eighty-four month period preceding the date of grant; the risk-free rate of return was equal to the United States Treasury Note Rate with a remaining term of 6.5 years effective the week of the grant, to correspond to the estimated average life of the options; and the dividend yield was 2.2%, approximately equal to the Corporation's annualized dividend yield at the end of the third calendar quarter of 1998. No adjustments were made for vesting requirements, non-transferability, or risk of forfeiture. In spite of any theoretical value which may be placed on a stock option grant, no increase of the stock option's value is possible without an increase in the market value of the underlying stock.
-9- The following table provides information concerning options exercised during 1998 and unexercised options held as of December 31, 1998, by the listed individuals: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY SHARES ACQUIRED OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END ON -------------------------- ------------------------------ NAME EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ------------ -------------- ----------- ------------- ----------- ------------- Aloysius J. Oliver 2,500 $56,786 15,870 2,500 $155,637 $ 625 David B. Ramaker 1,312 31,971 6,337 12,704 106,379 75,482 Bruce M. Groom 1,500 36,141 19,616 1,875 362,518 469 Lori A. Gwizdala 3,528 91,632 29,313 2,375 494,160 594 - ------------------ The number of shares shown is the gross number of shares covered by options exercised. Officers may deliver other shares owned in payment of the option price and shares may be withheld for tax withholding purposes, resulting in a smaller net increase in their share holdings. The values reported are based on a fair market value of $33.50 per share, the closing bid price of Common Stock on The NASDAQ Stock Market on December 31, 1998.
STOCK OPTION PLANS. The Chemical Financial Corporation 1987 Award and Stock Option Plan ("1987 Plan") and the Stock Incentive Plan of 1997 ("1997 Plan") provide for awards of nonqualified stock options, incentive stock options, stock appreciation rights, or a combination thereof. The 1997 Plan was approved by the shareholders at the April 21, 1997 annual meeting of shareholders. At the April 20, 1992 annual meeting of shareholders, the shareholders voted to increase the authorized shares issuable under the 1987 Plan by 100,000 shares and extend the Plan to April 20, 1997. As of December 31, 1998, there were options outstanding to purchase 491,867 shares of the Corporation's Common Stock under the 1997 and 1987 Plans, and 522,391 shares available for future awards under the 1997 Plan. Key employees of the Corporation and its subsidiaries, as the Compensation Committee of the Board of Directors may select from time to time, are eligible to receive awards under the 1997 Plan. No employee of the Corporation may receive any awards under the 1997 Plan while the employee is a member of the Compensation Committee. -10- The plans provide that the option price of incentive stock options awarded shall not be less than the fair market value of Common Stock on the date of grant. Historically, options granted under the plans are first exercisable from one to five years from the date of grant, at the discretion of the Compensation Committee, and expire not later than ten years and one day after the date of grant. Options granted may be designated nonqualified stock options or incentive stock options. Options granted may include stock appreciation rights that entitle the recipient to receive cash or a number of shares of Common Stock without payment to the Corporation that have a market value equal to the difference between the option price and the market price of the total number of shares awarded under the option at the time of exercise of the stock appreciation right. The plans provide, at the discretion of the Compensation Committee, that payment for exercise of an option may be made in the form of shares of stock of the Corporation having a fair market value equal to the exercise price of the option at the time of exercise, or in cash. The plans also provide for the payment of the required tax withholding generated upon the exercise of a nonqualified stock option in the form of shares of stock of the Corporation having a fair market value equal to the amount of the required tax withholding at the time of exercise, upon prior approval and at the discretion of the Compensation Committee. PENSION PLAN. The Corporation and its subsidiaries make annual contributions up to the maximum amount deductible for federal income tax purposes to the Chemical Financial Corporation Employees' Pension Plan ("Pension Plan"), which is a defined benefit plan qualified under the Internal Revenue Code of 1986, as amended (the "Code"). The Corporation has the authority to terminate the Pension Plan at any time. Sections 401(a)(17) and 415 of the Code limit the annual benefits that may be paid from a tax-qualified retirement plan. As permitted by the Employee Retirement Income Security Act of 1974, the Corporation has established a supplemental pension plan that provides for the payment to certain executive officers of the Corporation, as determined by the Compensation Committee, benefits to which they would have been entitled, calculated under the provisions of the Pension Plan, as if the limits imposed by the Code did not apply. The following table shows the estimated combined annual pension benefits that would be payable under the Pension Plan and supplemental pension plan to salaried employees, including the named executive officers, at the various salary levels with the number of years of credited service under the Pension Plan listed in the table upon normal retirement in 1999. The "Average Remuneration" is the average annual base salary, excluding any bonus, for the five highest consecutive years during the ten years preceding the date of retirement. -11- PENSION PLAN TABLE
YEARS OF SERVICE --------------------------------------------------------- 30 OR AVERAGE REMUNERATION 10 15 20 25 MORE -------------------- ------- ------- ------- ------- -------- $ 75,000 $12,994 $19,491 $25,987 $32,484 $ 38,981 100,000 17,744 26,616 35,488 44,360 53,232 125,000 22,493 33,740 44,987 46,233 67,480 150,000 27,244 40,866 54,487 68,109 81,731 175,000 31,994 47,991 63,988 79,985 95,982 200,000 36,743 55,115 73,487 91,858 110,230
The Pension Plan covers the annual base salary of all salaried employees as of January 1 of each year. Upon retirement at age 65, a retiree will receive an annual benefit of 1.52% of his or her average annual base salary for the five highest consecutive years during the ten years preceding his or her date of retirement, plus .38% of average annual pay in excess of covered compensation, multiplied by the retiree's number of years of credited service (subject to a maximum of 30 years). Benefits at retirement ages under 65 are also determined based upon length of service and pay, as adjusted in accordance with the Pension Plan. The Pension Plan provides for vesting of benefits after attaining five years of service, for disability and death benefits, and for optional joint and survivor benefits for the employee and his or her spouse. The amount shown under the caption "Salary," excluding the amount shown under the caption "Bonus," in the Summary Compensation Table in this Proxy Statement is representative of the most recent calendar year compensation used in calculating average remuneration under the Pension Plan. As of December 31, 1998, Mr. Oliver had 30 years of credited service (the maximum) under the Pension Plan, Mr. Ramaker had 9.2 years, Mr. Groom had 13.7 years and Ms. Gwizdala had 14 years of credited service under the Pension Plan. The retirement benefits shown in the preceding Pension Plan Table are based on the assumption that an employee retires in 1999 at normal retirement age and will elect a benefit for his or her life with 120 monthly payments guaranteed. If the employee were to elect a benefit payable to a surviving spouse of 50% or more of the employees' retirement benefit or for the employees' life only, the retirement benefit for the employee would be adjusted. The benefits listed in the Pension Plan Table are not subject to a deduction for Social Security or any other offset amount. DIRECTOR COMPENSATION. During 1998, the Corporation paid director fees of $800 per meeting attended and committee fees of $400 per meeting attended to all of its directors who were not regular salaried employees of the Corporation. Regular salaried employees of the Corporation or its subsidiaries do not receive fees for serving on, or attending meetings of, the Board of Directors of the Corporation or its subsidiaries or meetings of any of their committees. -12- Effective December 31, 1997, the Corporation entered into a Retirement Agreement with Mr. Ott. Under that agreement, the Corporation agreed to pay Mr. Ott annual compensation of $50,000 and provide group health benefits consistent with those available under Chemical's retiree medical plan. Mr. Ott agreed to continue to serve as Chairman of the Board of Directors of the Corporation and Chemical Bank through December 31, 1998. Mr. Ott also agreed to a covenant not to compete with the Corporation as long as payments were being made to him under the agreement. The Corporation has renewed this agreement with Mr. Ott for the 1999 fiscal year. The Board of Directors has adopted the Chemical Financial Corporation Plan for Deferral of Directors' Fees. This plan is available to all directors of the Corporation and its subsidiaries who receive fees. Under the plan, directors must elect before December 31 of each year to defer either 50% or 100% of fees to be earned in the following year. These fees will be paid out in any number of calendar years from one to ten commencing during or following the year the director ceases to be a director or the year after the director attains age 70. During the deferral period, the plan provides that the Corporation shall accrue to the directors' credit interest on the accumulated amount of deferred fees at the rate paid by Chemical Bank on a variable rate money market savings account. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee of the Corporation's Board of Directors reviews and determines the Corporation's compensation programs, including individual salaries of executive and senior officers. The Compensation Committee is composed of Messrs. Currie, Dow, Moore, Popoff, Reed and Stavropoulos. All members are non- employee directors of the Corporation. Under the supervision of the Compensation Committee, the Corporation has developed and implemented compensation plans which seek to align the financial interests of the Corporation's senior officers with those of its shareholders. The Corporation's executive compensation program is comprised of three primary components: base salary, annual cash incentive bonus opportunities and longer-term incentive opportunities in the form of stock option awards. To attract and retain officers with exceptional abilities and talent, annual base salaries are set to provide competitive levels of compensation recognizing individual performance and achievements. Annual cash incentive bonuses are used to reward senior officers for individual performance, accomplishments and achievement of annual business targets. A significant portion of potential career compensation is linked to corporate performance through stock option awards. The Compensation Committee determines the annual base salary, incentive bonus and stock option awards for the Chief Executive Officer. Annual base salary, incentive bonus and stock option awards with respect to the Corporation's other senior officers are recommended by the Chief Executive Officer to, and ultimately determined by, the Compensation Committee. All other senior executives of the Corporation are eligible to participate in the same executive compensation plans that are available to the Chief Executive Officer. -13- In evaluating the performance of and determining the annual base salary, incentive bonus and stock option awards for the Chief Executive Officer and other senior management, the Compensation Committee takes into account management's contribution to the long- term success of the Corporation. The Compensation Committee considers return to shareholders to be primary in measuring financial performance. The philosophy of the Corporation is to maximize long- term return to shareholders consistent with its commitments to maintain the safety and soundness of the institution and provide the highest possible level of service at a fair price to the customers and communities that it serves. The Compensation Committee has taken these subjective and qualitative factors into account, along with quantitative measures of corporate performance, in establishing the annual salary, incentive bonus and stock option awards for the Chief Executive Officer and the Corporation's other senior management, giving at least equal weight to the subjective and qualitative factors and no particular weight to any given factor. The determination of the size of stock option awards is based upon a subjective analysis of each recipient's position within the organization, his or her individual performance and his or her growth potential within the organization. The number of stock option awards previously granted to a recipient is not a factor considered in the determination of the grant of a new stock option award. The Compensation Committee primarily considers five quantitative measures of corporate performance in establishing the compensation to be paid to the Chief Executive Officer and the Corporation's other senior management. These measures of performance are: (i) earnings per share and earnings per share growth; (ii) the level of net loan losses; (iii) capital position; (iv) targeted as compared to actual annual operating performance; and (v) the Corporation's annual performance and financial condition as compared to that of its Federal Reserve Bank peer group. These measures were considered by the Compensation Committee in determining each component of executive compensation, although no particular weight was given to any specific factor. Mr. Oliver's base salary for 1998 was established at the beginning of the year to provide a competitive level of compensation and took into account corporate performance through December 31, 1997. The Corporation's performance during 1997 exceeded both its targeted goals and that of its Federal Reserve Bank peer group. Mr. Oliver's 1998 incentive bonus was established at the end of the year based upon performance of the Corporation during 1998. The Corporation's net income in 1998 exceeded targeted performance for 1998. The Corporation achieved record operating earnings in 1998. In 1998, the Corporation's earnings per share increased 8.5% over 1997 earnings per share. Return on assets increased to 1.44% in 1998, compared to 1.38% in 1997. Nonperforming loans represented .35% of total loans outstanding as of December 31, 1998. During 1998, the named executive officers were granted stock options to purchase the following numbers of shares of Common Stock (adjusted for the 5 for 4 stock split paid on December 16, 1998): Mr. Oliver - 2,500 shares, Mr. Ramaker - 2,500 shares, Mr. Groom - 1,875 shares and Ms. Gwizdala - 2,375 shares. The Compensation Committee granted stock options to purchase a total of 125,000 shares of Common Stock to executive and other officers of the Corporation and its subsidiaries during 1998. -14- In 1993, Congress amended the Code to add Section 162(m). Section 162(m) provides that publicly held corporations may not deduct compensation paid to certain executive officers in excess of $1 million annually, with certain exemptions. The Compensation Committee has examined the Corporation's executive compensation policies in light of Section 162(m) and the regulations that have been adopted to implement that section. It is not expected that any portion of the Corporation's deduction for employee remuneration will be disallowed in 1999 or in future years by reason of actions expected to be taken in 1999. During 1998, all recommendations of the Compensation Committee were unanimously approved by the Board of Directors without modification. Submitted by the Compensation Committee of the Board of Directors: Frank P. Popoff, Chairman Michael L. Dow Lawrence A. Reed James A. Currie Terence F. Moore William S. Stavropoulos -15- FIVE-YEAR SHAREHOLDER RETURN COMPARISON The following line graph compares the Corporation's cumulative total shareholder return on its Common Stock over the last five years, assuming the reinvestment of dividends, to the Standard and Poor's ("S&P") 500 Stock Index and the KBW 50 Index. Both of these indices are also based upon total return (including reinvestment of dividends) and are market-capitalization-weighted indices. The S&P 500 Stock Index is a broad equity market index published by Standard and Poor's. The KBW 50 Index is published by Keefe, Bruyette & Woods, Inc., an investment banking firm that specializes in the banking industry. The KBW 50 Index is composed of 50 money center and regional bank holding companies. The line graph assumes $100 was invested on December 31, 1993. [GRAPH] The dollar values for total shareholder return plotted in the graph above are shown in the table below:
CHEMICAL S&P FINANCIAL KBW 50 500 DECEMBER 31 CORPORATION INDEX INDEX ----------- ----------- ----- ----- 1993 $100.0 $100.0 $100.0 1994 99.6 94.9 101.3 1995 146.8 152.0 139.4 1996 161.6 215.0 171.4 1997 196.8 314.3 228.6 1998 190.9 340.3 293.9
-16- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Directors, officers, principal shareholders and their associates were customers of, and had transactions (including loans and loan commitments) with, the Corporation's banking subsidiaries in the ordinary course of business during 1998. All such loans and commitments were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than a normal risk of collectibility or present other unfavorable features. Similar transactions may be expected to take place in the ordinary course of business in the future. None of these loan relationships presently in effect are in default as of the date of this Proxy Statement. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires directors, officers and persons who beneficially own more than 10% of the Corporation's Common Stock to file reports of ownership and changes in ownership of shares of Common Stock with the Securities and Exchange Commission. Directors, officers and greater than 10% beneficial owners are required by Securities and Exchange Commission regulations to furnish the Corporation with copies of all Section 16(a) reports they file. Based upon its review of copies of Section 16(a) reports provided to it, or written representations from certain reporting persons that no Form 5 reports were required, the Corporation believes that from January 1 through December 31, 1998, all applicable filing requirements were satisfied, except that Mr. Moore inadvertently filed late two reports concerning shares of the Corporation's Common Stock. DIVIDEND REINVESTMENT PROGRAM SHARES If a shareholder is enrolled in the Corporation's Dividend Reinvestment Program, the enclosed proxy card covers: (1) all shares of Common Stock owned directly by the shareholder at the record date, and (2) all shares of Common Stock held for the shareholder in the Dividend Reinvestment Program at that time. Harris Trust and Savings Bank, as the shareholder's agent under the Dividend Reinvestment Program, will vote any Common Stock held by it under the program in accordance with the shareholder's written direction as indicated on the proxy card. All such shares will be voted the way the shareholder directs. If no specific instruction is given on a returned proxy, Harris Trust and Savings Bank will vote as recommended by the Board of Directors. SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING Proposals of shareholders that are intended to be presented at the 2000 annual meeting of shareholders of the Corporation and that the proponent would like included in the Corporation's proxy statement and form of proxy relating to that meeting must be made in accordance with Securities and Exchange Commission Rule 14a-8 and must be received by the Corporation by November 5, 1999, to be considered for inclusion in the proxy statement and form of proxy relating to that meeting. To be considered timely, all other proposals of shareholders intended to be presented at the 2000 annual meeting of shareholders of the Corporation must similarly be received by the Corporation by November 5, 1999. -17- INDEPENDENT PUBLIC ACCOUNTANTS Ernst & Young LLP served as the independent public accountants for the Corporation for 1998 and, pursuant to the recommendation of the Audit Committee, the Board of Directors reappointed them for the 1999 fiscal year. In accordance with prior practice, representatives of Ernst & Young LLP are expected to be present at the annual meeting of shareholders, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions. OTHER MATTERS Management does not intend to present to the meeting any business other than the election of directors. If any matter not known to management at the time this Proxy Statement was being prepared should be presented for action at the meeting, the enclosed proxy will be voted in accordance with the judgement of the persons named as proxies with respect to that matter. By Order of the Board of Directors /s/ David B. Ramaker David B. Ramaker Secretary March 5, 1999 -18- PROXY NO. NO. OF SHARES CHEMICAL The undersigned hereby appoints Michael L. FINANCIAL CORPORATION Dow, Alan W. Ott and Frank P. Popoff, PROXY FOR jointly and severally, proxies, with full ANNUAL power of substitution, to vote all the shares MEETING of capital stock of CHEMICAL FINANCIAL CORPORATION APRIL 19, 1999 which the undersigned may be entitled to vote, including dividend reinvestment plan shares, if any, held of record by the undersigned on February 19, 1999, at the Annual Meeting of Shareholders of Chemical Financial Corporation to be held at the Midland Center for the Arts, 1801 W. St. Andrews, Midland, MI, on Monday, April 19, 1999, and at any adjournments thereof, such proxies being directed to vote as specified on the reverse side of this card or, if no specification is made, FOR the election of all nominees listed for directors and in accordance with their discretion on such other matters that may come before the meeting. Please date this Proxy and sign exactly as your name or names appear on the card. If you are acting in a representative capacity as attorney, executor, administrator, trustee, or guardian, please sign name and title. Dated: ____________________ 1999 ________________________________ Signature CONTINUED ON ________________________________ REVERSE SIDE Signature [CHEMICAL FINANCIAL CORPORATION LOGO] THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION FOR THE ANNUAL MEETING - APRIL 19, 1999 TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN THE REVERSE SIDE; NO BOXES NEED BE CHECKED. TO WITHHOLD AUTHORITY TO VOTE OR TO OTHERWISE VOTE DIFFERENTLY, PLEASE INDICATE YOUR SPECIFICATIONS BELOW. ====================================================================== [ ] FOR all nominees listed below [ ] AUTHORITY WITHHELD JAMES A. CURRIE ALOYSIUS J. OLIVER LAWRENCE A. REED MICHAEL L. DOW ALAN W. OTT WILLIAM S. STAVROPOULOS TERENCE F. MOORE FRANK P. POPOFF (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE) ====================================================================== WHERE A VOTE IS NOT SPECIFIED, THE PROXIES WILL [ ] Please place VOTE THE SHARES REPRESENTED BY THIS PROXY FOR a check here THE ELECTION OF ALL NOMINEES LISTED FOR if you plan DIRECTORS AND IN ACCORDANCE WITH THEIR DISCRETION to attend the ON SUCH OTHER MATTERS THAT MAY COME BEFORE THE Annual Meeting. MEETING. -----END PRIVACY-ENHANCED MESSAGE-----