UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 Section 240.14a-12
MERCANTILE BANK CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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:
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2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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5) Total fee paid:
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[ ] 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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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
(MERCANTILE BANK CORPORATION LOGO)
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 2005
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To our Shareholders:
The 2005 annual meeting of shareholders of Mercantile Bank Corporation will
be held at Cascade Hills Country Club, 3725 Cascade Road SE, Grand Rapids,
Michigan on Thursday, April 28, 2005, at 9:00 a.m. local time. The meeting is
being held for the purpose of considering and voting on the following matters:
1. Election of five Class II directors, each for a three year term, as
detailed in the accompanying proxy statement.
2. Such other business as may properly be brought before the meeting or any
adjournment or adjournments of the meeting.
All holders of record of shares of common stock of Mercantile at the close
of business on Tuesday, March 1, 2005, are entitled to notice of and to vote at
the meeting, and any postponements or adjournments of the meeting.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the meeting in person. We would appreciate
receiving your proxy by Monday, April 18, 2005.
By Order of the Board of Directors,
/s/ Gerald R. Johnson, Jr.
Gerald R. Johnson, Jr.
Chairman of the Board &
Chief Executive Officer
Dated: March 15, 2005
MERCANTILE BANK CORPORATION
5650 BYRON CENTER AVENUE SW
WYOMING, MICHIGAN 49519
MARCH 15, 2005
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished to shareholders of Mercantile Bank
Corporation ("Mercantile") in connection with the solicitation of proxies by its
Board of Directors for use at the annual meeting of its shareholders to be held
on Thursday, April 28, 2005, at 9:00 a.m. local time, at Cascade Hills Country
Club, 3725 Cascade Road SE, Grand Rapids, Michigan, and at any and all
adjournments of the meeting. It is expected that the proxy materials will be
mailed to shareholders on or about March 15, 2005.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its exercise. Unless the proxy is revoked, the
shares represented by the proxy will be voted at the annual meeting or any
adjournment of the meeting.
The entire cost of soliciting proxies will be borne by Mercantile. The
Altman Group, Inc., 1275 Valley Brook Avenue, Lyndhurst, New Jersey 07071, has
been retained by Mercantile to aid in the solicitation of proxies. For these
services, Mercantile has agreed to pay The Altman Group a fee of $3,500 and
reimburse it for certain out-of-pocket disbursements and expenses. Directors,
officers, or other employees of Mercantile or its subsidiary, Mercantile Bank of
West Michigan (the "Bank"), may, without compensation other than their regular
compensation, solicit proxies by further mailing or personal conversation, or by
telephone, facsimile or electronic means. Mercantile will reimburse brokerage
houses and other custodians, nominees and fiduciaries for their out-of-pocket
expenses for forwarding soliciting material to the beneficial owners of
Mercantile common stock.
The Board of Directors, in accordance with the Bylaws, has fixed the close
of business on March 1, 2005 as the record date for determining shareholders
entitled to notice of and to vote at the annual meeting and at any and all
adjournments of the meeting.
At the close of business on the record date, the outstanding number of
voting securities of Mercantile was 7,211,537 shares of common stock, each of
which is entitled to one vote.
ELECTION OF DIRECTORS
Mercantile's Articles of Incorporation and Bylaws provide that the number
of directors, as determined from time to time by the Board of Directors, shall
be no less than six and no more than fifteen. The Board of Directors has
presently fixed the number of directors at fifteen. The Articles of
Incorporation and Bylaws further provide that the directors shall be divided
into three classes, Class I, Class II and Class III, with each class serving a
staggered three year term and with the number of directors in each class being
as nearly equal as possible.
The Board of Directors has nominated Betty S. Burton, David M. Cassard,
Peter A. Cordes, David M. Hecht and Merle J. Prins as Class II directors for
three year terms expiring at the 2008 annual meeting and upon election and
qualification of their successors. Each of the nominees is presently a Class II
director whose term expires at the April 28, 2005 annual meeting of the
shareholders. The other members of the Board, who are Class I and Class III
directors, will continue in office in accordance with their previous elections
until the expiration of their terms at the 2006 or 2007 annual meetings.
It is the intention of the persons named in the enclosed proxy to vote the
proxy for the election of the five nominees. The proposed nominees for election
as directors are willing to be elected and serve; but in the event that any
nominee at the time of election is unable to serve or is otherwise unavailable
for election, the Board of
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Directors may select a substitute nominee, and in that event the persons named
in the enclosed proxy intend to vote the proxy for the person selected. If a
substitute nominee is not selected, the proxy will be voted for the election of
the remaining nominees. The affirmative vote of a plurality of the votes cast at
the meeting is required for the nominees to be elected. Votes withheld and
broker non-votes are not counted toward a nominee's total.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information regarding the beneficial ownership
of Mercantile common stock as of February 1, 2005, by the nominees for election
as directors of Mercantile, the directors of Mercantile whose terms of office
will continue after the annual meeting, the executive officers named in the
Summary Compensation Table, and all directors and executive officers of
Mercantile as a group.
AMOUNT PERCENT OF CLASS
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1) OWNED(13)
------------------------ ------------ ----------------
Betty S. Burton............................................. 1,232 *
David M. Cassard............................................ 8,146 *
Edward J. Clark............................................. 7,268(2) *
Peter A. Cordes............................................. 30,387 *
C. John Gill................................................ 50,650(3) *
Doyle A. Hayes.............................................. 1,387 *
David M. Hecht.............................................. 105,256(4) 1.5%
Gerald R. Johnson, Jr. ..................................... 129,967(5) 1.8%
Susan K. Jones.............................................. 1,031 *
Lawrence W. Larsen.......................................... 22,905(6) *
Calvin D. Murdock........................................... 20,562(7) *
Michael H. Price............................................ 57,638(8) *
Merle J. Prins.............................................. 3,000 *
Dale J. Visser.............................................. 228,416(9) 3.2%
Donald Williams, Sr. ....................................... 1,201 *
Robert B. Kaminski, Jr. .................................... 28,310(10) *
Charles E. Christmas........................................ 25,074(11) *
All directors and executive officers of Mercantile as a
group (17 Persons)........................................ 722,430(12) 9.9%
-------------------------
* Less than one percent.
(1) Some or all of the common stock listed may be held jointly with, or for the
benefit of, spouses and children or grandchildren of, or various trusts
established by, the person indicated.
(2) Includes 718 shares that Mr. Clark has the power to vote and dispose of as
custodian of three accounts, two of which are for a relative, and one of
which is for a friend.
(3) Includes 17,016 shares held by Mr. Gill's spouse.
(4) Includes 12,154 shares that Mr. Hecht has sole voting and investment power
over as President of the Charles W. Loosemore Foundation, which is the
record and beneficial owner of the shares. Mr. Hecht disclaims beneficial
ownership of these 12,154 shares.
(5) Includes 33,675 shares that Mr. Johnson has the right to acquire within 60
days of February 1, 2005 pursuant to Mercantile's stock option plans and
8,736 shares that Mr. Johnson owns under the Bank's 401(k) Plan.
(6) Includes 2,449 shares that Mr. Larsen has the power to vote and dispose of
as trustee of the Central Industrial Supply Profit Sharing Plan and 1,399
shares that Mr. Larsen has the power to vote and dispose of as trustee of
the Jet Products, Inc. Profit Sharing Plan #2. He disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest in
the shares.
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(7) Includes 10 shares that Mr. Murdock has the power to vote and dispose of as
custodian of an account for a friend's child.
(8) Includes 35,800 shares that Mr. Price has the right to acquire within 60
days of February 1, 2005 pursuant to Mercantile's stock option plans and
8,438 shares that Mr. Price owns under the Bank's 401(k) Plan.
(9) Includes 33,023 shares that Mr. Visser has the power to vote and dispose of
as trustee of a trust for family members. Mr. Visser disclaims beneficial
ownership of these 33,023 shares. Also includes 55,500 shares that Mr.
Visser has the power to vote and dispose of as trustee of a charitable
remainder trust. Mr. Visser disclaims beneficial ownership of these shares,
except to the extent of his and his wife's interest in the trust.
(10) Includes 22,909 shares that Mr. Kaminski has the right to acquire within 60
days of February 1, 2005 pursuant to Mercantile's stock option plans and
2,785 shares that Mr. Kaminski owns under the Bank's 401(k) Plan.
(11) Includes 13,157 shares that Mr. Christmas has the right to acquire within
60 days of February 1, 2005 pursuant to Mercantile's stock option plans and
7,466 shares that Mr. Christmas owns under the Bank's 401(k) Plan. Also
includes 1,274 shares that Mr. Christmas' spouse, who is also an employee
of the Bank, has the right to acquire within 60 days of February 1, 2005
pursuant to Mercantile's stock option plans and 1,229 shares that she owns
under the Bank's 401(k) Plan.
(12) Includes 106,815 shares that such persons have the right to acquire within
60 days of February 1, 2005 pursuant to Mercantile's stock option plans and
28,654 shares that such persons own under the Bank's 401(k) Plan.
(13) The percentages shown are based on the 7,210,704 shares of Mercantile
common stock outstanding as of February 1, 2005, plus the number of shares
that the named person or group has the right to acquire within 60 days of
February 1, 2005.
The following table presents information regarding the beneficial ownership
of Mercantile common stock by each person known to Mercantile to own
beneficially more than 5% of the outstanding shares of common stock as of
February 1, 2005.
AMOUNT PERCENT OF CLASS
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED
------------------------------------ ------------ ----------------
JPMorgan Chase & Co.(1)
270 Park Avenue
New York, New York 10017.................................. 371,745 5.2%
-------------------------
(1) This information is based on a Schedule 13G dated February 11, 2005 filed by
JPMorgan Chase & Co. on behalf of itself and its wholly-owned subsidiaries,
JPMorgan Chase Bank, National Association, J.P. Morgan Investment Management
Inc., Bank One Trust Co., N.A., and Banc One Investment Advisors
Corporation. The Schedule 13G discloses that JPMorgan Chase & Co. and such
subsidiaries have sole voting power for 334,667 of these shares and sole
dispositive power for 364,180 of these shares.
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INFORMATION ABOUT DIRECTORS, NOMINEES, AND EXECUTIVE OFFICERS
The following information is furnished with respect to each continuing
director, nominee as a director, and executive officer of Mercantile. Each of
the continuing directors and nominees is currently a director of Mercantile as
well as a director of the Bank.
HAS SERVED
NAME, AGE, AND POSITION WITH AS YEAR WHEN TERM AS A
MERCANTILE AND THE BANK DIRECTOR SINCE DIRECTOR EXPIRES
---------------------------- -------------- -------------------
Betty S. Burton, 63, Director............................... 1998 2005
David M. Cassard, 51, Director.............................. 2001 2005
Edward J. Clark, 60, Director............................... 1998 2007
Peter A. Cordes, 64, Director............................... 1997 2005
C. John Gill, 71, Director.................................. 1997 2007
Doyle A. Hayes, 54, Director................................ 2001 2006
David M. Hecht, 67, Director................................ 1997 2005
Gerald R. Johnson, Jr., 58, Chairman of the Board and Chief
Executive Officer of Mercantile, Chairman of the Board of
the Bank; and Director.................................... 1997 2007
Susan K. Jones, 55, Director................................ 1998 2006
Lawrence W. Larsen, 65, Director............................ 1997 2006
Calvin D. Murdock, 65, Director............................. 1997 2007
Michael H. Price, 48, President and Chief Operating Officer
of Mercantile, President and Chief Executive Officer of
the Bank; and Director.................................... 1997 2006
Merle J. Prins, 65, Director................................ 2004 2005
Dale J. Visser, 68, Director................................ 1997 2006
Donald Williams, Sr., 68, Director.......................... 1998 2007
Robert B. Kaminski, Jr., 43, Executive Vice President and
Secretary of Mercantile, and Executive Vice President,
Chief Operating Officer and Secretary of the Bank.........
Charles E. Christmas, 39, Senior Vice President, Chief
Financial Officer and Treasurer of Mercantile and the
Bank......................................................
Mercantile's executive officers are generally elected each year at the
annual meeting of the Board of Directors that follows the annual meeting of the
shareholders. Their terms of office are at the discretion of the Board of
Directors.
The business experience of each of the directors, nominees and executive
officers of Mercantile for at least the past five years is summarized below:
BETTY S. BURTON (Director) Mrs. Burton is the former owner of a business
forms and print solutions distribution company. She was a member of the Board
and consultant to Wonderland Business Forms from 1999 to 2002, and its President
and Chief Executive Officer from 1995 to 1999. Prior to that, Mrs. Burton was a
teacher in the Grand Rapids Public School System for over 25 years. Mrs. Burton
is a trustee of both the Grand Valley State University Foundation and the
Western Michigan University Foundation. She is a graduate of both universities
and also of Dartmouth College Tuck School of Business Minority Executives
Program. She has previously served as a member of the Board of Directors of
First Michigan Bank-Grand Rapids ("FMB-Grand Rapids") and Butterworth Hospital.
Mrs. Burton is very involved in civic and community activities and serves on
several boards in the Grand Rapids area.
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DAVID M. CASSARD (Director) Mr. Cassard is President, Treasurer and a
member of the Board of Directors of Waters Corporation which owns and operates
commercial real estate properties in the Grand Rapids metropolitan area. He has
served in these capacities since January 1979. Prior to 1979 he worked for an
international firm of Certified Public Accountants. He is a graduate of the
University of Michigan (BBA) and Michigan State University (MBA), and he is a
Certified Public Accountant and Certified Property Manager. He currently serves
as Vice Chairperson of the City of Grand Rapids Downtown Development Authority
and is a member of the City of Grand Rapids Downtown Improvement District Board.
He also serves as Chairperson of the Grand Rapids Area Chamber of Commerce
Foundation. He previously served as a member of the Board of Directors of
FMB-Grand Rapids and was a member of the Board of Directors of First Michigan
Bank Corporation ("FMB") and Butterworth Hospital. He holds memberships in
several professional organizations and societies including the American
Institute of CPA's, the Michigan Association of CPA's, the Grand Rapids
Association of Realtors, the National Association of Realtors and the Institute
of Real Estate Management.
EDWARD J. CLARK (Director) Mr. Clark is the Chairman and Chief Executive of
The American Seating Company, and has held this position since 1986. American
Seating is headquartered in Grand Rapids, Michigan, and produces seating and
furniture for offices, as well as seating for buses, rail cars, auditoriums,
stadiums and performing arts centers. Mr. Clark is a member of the Boards of
Directors of the Metropolitan YMCA, The Blodgett/Butterworth Foundation, the
Grand Rapids Employers' Association and the Ohio State University Alumni
Association, and a member of the Board of Trustees of the Grand Valley State
University Foundation. He is Vice President of the Foundation Board of Trustees
and Chairman of the Development Committee of Grand Valley State University. From
1988 through 1997, he was a member of the Board of Directors and Executive
Committee of FMB-Grand Rapids. Mr. Clark has also previously served on the
Boards of Directors of the Grand Rapids Symphony Orchestra, Red Cross of Kent
County, St. Mary's Hospital and The Business and Institutional Furniture
Manufacturer's Association.
PETER A. CORDES (Director) Mr. Cordes has served as President and Chief
Executive Officer of GWI Engineering Inc. ("GWI") of Grand Rapids, Michigan,
since 1991. GWI is engaged in the manufacturing of industrial automation systems
for customers in a variety of industries in the Midwest. Mr. Cordes purchased
GWI in 1991 and is now its sole owner. Mr. Cordes graduated from St. Louis
University with a degree in aeronautics. He is a native of Traverse City,
Michigan and has spent the last twenty years in Western Michigan.
C. JOHN GILL (Director) Mr. Gill is the retired Chairman of the Board and
one of the owners of Gill Industries of Grand Rapids, Michigan. Mr. Gill served
as Chairman of Gill Industries from 1994 through 1997, and served as President
of Gill Industries from 1983 through 1993. Gill Industries is a manufacturing
company involved with sheet metal stampings and assemblies for the automotive
and appliance industries.
DOYLE A. HAYES (Director) Mr. Hayes has over 30 years experience in the
automotive industry and has held various positions within that industry.
Currently, he is President and CEO of Pyper Products Corporation, a plastic
injection molding company that supplies the auto and furniture industries. Mr.
Hayes has been the President and CEO of Pyper Products Corporation since 1994.
He has served on several non-profit boards in the Grand Rapids community and is
currently Board Chair at Metropolitan Hospital and a member of the Borgess
Hospital of Kalamazoo Board of Directors. Mr. Hayes is a member of the Board of
Directors of the Davenport Educational System (DES), Grand Valley State
University Foundation, VanAndel Global Trade Center, Seidman Advisory Board,
Battle Creek Chamber of Commerce, Small Business Association of Michigan (SBAM),
Grand Valley Metro Council and the Governor's Workforce Commission. Mr. Hayes
was formerly a Corporate Director of FMB.
DAVID M. HECHT (Director) Mr. Hecht is an attorney and has practiced law
for 43 years, including the past 31 years in Grand Rapids. From 1993 through
2001, he was the Chairman of the Grand Rapids law firm of Hecht & Lentz, and was
a founder of the firm. Mr. Hecht is a native of Grand Rapids and a graduate of
the University of Michigan and the University of Wisconsin. He is the President
of the Charles W. Loosemore Foundation, a Trustee of the Grand Valley University
Foundation, and Past Chair of the Board of Trustees of Hospice of Michigan.
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GERALD R. JOHNSON, JR. (Chairman of the Board, Chief Executive Officer and
Director of Mercantile, and Chairman of the Board and Director of the Bank) Mr.
Johnson has over 35 years experience in the financial service industry,
including 33 years of commercial banking experience. Mr. Johnson was appointed
President and Chief Executive Officer of FMB-Grand Rapids in 1986, and served as
Chairman, President and Chief Executive Officer from 1988 to May of 1997, when
he resigned to organize Mercantile. Mr. Johnson served as Chairman of the Board
and Chief Executive Officer of Mercantile and the Bank from their inception
through 1998, and since the beginning of 1999 has served as Chairman of the
Board and Chief Executive Officer of Mercantile and Chairman of the Board of the
Bank. In the Grand Rapids market, prior to joining FMB-Grand Rapids, Mr. Johnson
was employed in various lending capacities by Union Bank (now part of JPMorgan
Chase & Co.), Pacesetter Bank-Grand Rapids (now part of Fifth Third Bancorp) and
Manufacturers Bank (now part of Comerica Bank). He currently serves as Chairman
of Hope Network Behavioral Health Services and H.H.S. Health Options, Inc. and
Vice Chairman of Epilepsy Foundation of Michigan. He is a member of the Boards
of Directors of Life Guidance Services, Project Rehab, Project Rehab Foundation,
YMCA of Greater Grand Rapids, Girl Scouts of Michigan Trails, American Diabetes
Association, Grand Rapids Symphony, Hanover College Board of Trustees, and Grand
Valley University Foundation Board of Trustees. He is affiliated with Grand
Rapids Opportunity for Women, Grand Rapids Rotary Club and the Economic
Development Foundation.
SUSAN K. JONES (Director) Ms. Jones is both a partner of The Callahan
Group, LLC, a marketing consulting firm, and a tenured, full-time Professor of
Marketing at Ferris State University in Big Rapids, Michigan. She has been a
partner of The Callahan Group since 1998, and has worked at her own marketing
consulting firm, Susan K. Jones & Associates, since 1980. Ms. Jones has been a
Professor of Marketing at Ferris State since 1990. She enjoys an active
volunteer career, currently serving as a member of the Board of Directors of the
Arts Council of Greater Grand Rapids, Council of 100 at Northwestern University,
Board member of the Northwestern Alumni Association, Treasurer of the
Northwestern Club of West Michigan, and on the West Michigan Alumni Admissions
Council for Northwestern University. She is a past-president of the Junior
League of Grand Rapids, a graduate of Leadership Grand Rapids, and currently
serves as a trustee of the Chicago Association of Direct Marketing Educational
Foundation.
LAWRENCE W. LARSEN (Director) Mr. Larsen is Chief Executive Officer,
President, and owner of Central Industrial Corporation of Grand Rapids,
Michigan. He began his employment with Central Industrial Corporation in 1967,
and purchased it in 1975. Central Industrial Corporation is a wholesale
distributor of fluid power components. Mr. Larsen is also an owner and director
of Jet Products, Inc., of West Carrollton, Ohio. Jet Products, Inc. designs,
manufactures and sells hose reels and related hydraulic products. Mr. Larsen is
a native of Wisconsin. He has spent the last 35 years in the Grand Rapids area.
Mr. Larsen served as a director of FMB-Grand Rapids from 1980 until June of
1997, and was a member of the Executive Loan Committee and the Audit Committee.
CALVIN D. MURDOCK (Director) Mr. Murdock is President of SF Supply ("SF")
of Grand Rapids, Michigan. He has held this position since 1994. From 1992 to
1994, he served as the General Manager of SF, and in 1991, served as SF's
Controller. SF is a wholesale distributor of commercial and industrial
electronic, electrical and automation parts, supplies and services. Mr. Murdock
is a Michigan native and a graduate of Ferris State University with a degree in
accounting. Prior to joining SF, Mr. Murdock owned and operated businesses in
the manufacturing and supply of automobile wash equipment. Mr. Murdock serves on
the Sparta Township Planning Commission.
MICHAEL H. PRICE (President, Chief Operating Officer and Director of
Mercantile, President, Chief Executive Officer and Director of the Bank) Mr.
Price has over 20 years of commercial banking experience, most of which was with
FMB and its subsidiary, FMB-Grand Rapids. Spending most of his banking career in
commercial lending, Mr. Price was the Senior Lending Officer from 1992 to 1997,
and President of FMB-Grand Rapids for several months in 1997 before joining the
Bank in late 1997. Mr. Price served as President and Chief Operating Officer of
Mercantile and the Bank from December of 1997 through 1998, and has served as
President and Chief Operating Officer of Mercantile and President and Chief
Executive Officer of the Bank since January of 1999. Mr. Price has been and
continues to be very active in the Grand Rapids community. He currently serves
as Vice Chair of the Board of Directors of Kent County Community Mental
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Health. In addition, he continues to serve on the Finance Committee of Habitat
for Humanity of Kent County, and is a past Board President of that organization.
Effective January 1, 2005, Mr. Price was elected to a three year term as a
Director of the Federal Home Loan Bank of Indianapolis.
MERLE J. PRINS (Director) Mr. Prins retired from his positions as Executive
Vice President and a member of the Board of Directors of FMB in 1998, after 30
years of service as an officer of FMB and nine years of service on its Board of
Directors. Mr. Prins is a member of the Board of Directors of Bethany Christian
Services and Chairman of the Endowment and Pension Committee of Bethany, and
Vice President and a member of the Board of Directors of Benefit Services of the
Reformed Church of America. Mr. Prins is also a Trustee of the Holland
Historical Trust, a member of the Riverview Group, a community advisory group in
Holland, Michigan, and a member of the Brownfield Development Authority for the
City of Holland.
DALE J. VISSER (Director) Mr. Visser is Chairman and one of the owners of
Visser Brothers Inc. of Grand Rapids, Michigan. He has served Visser Brothers in
various officer positions since 1960. Visser Brothers is a construction general
contractor specializing in commercial buildings. Mr. Visser also has an
ownership interest in several real estate projects in the Grand Rapids area. Mr.
Visser served as a director of FMB-Grand Rapids from 1972 until June of 1997. He
is a Grand Rapids native and a graduate of the University of Michigan with a
degree in civil engineering. Mr. Visser is active in the community and serves on
the Board of Directors of Westminster Theological Seminary Foundation. He has
previously served on the Boards of the Grand Rapids YMCA, Christian Rest Home,
and West Side Christian School.
DONALD WILLIAMS, SR. (Director) Mr. Williams is Dean Emeritus of Grand
Valley State University. During 2002, he was the Coordinator of the minority
students teacher preparation program for the Grand Rapids Public Schools
(secondary schools). Mr. Williams has over 30 years experience in administration
of educational programs with special emphasis on political sensitivity and
equality. From 1989 to 2001, he was the Dean of Minority Affairs and Director of
the Multicultural Center of Grand Valley State University. Mr. Williams also
serves as President of the Concerned Citizens Council and past President of the
Rotary Club of Grand Rapids. He previously served as President of the Coalition
for Representative Government (CRG), as a member of the Board of Directors of
FMB-Grand Rapids and the Grand Rapids Advisory Board of Michigan National Bank,
as Treasurer and President of the Minority Affairs Council of Michigan
Universities (MACMU), and as a member of the Board of Directors of the Grand
Rapids Area Chamber of Commerce. Mr. Williams has been the recipient of numerous
awards in the Grand Rapids and Michigan area for community service and job
performance, and his work has been cited in the Congressional Record of the
United States by the late Representative Paul Henry.
ROBERT B. KAMINSKI, JR. (Executive Vice President and Secretary of
Mercantile, and Executive Vice President, Chief Operating Officer and Secretary
of the Bank) Mr. Kaminski joined the Bank in June 1997 and has over 19 years of
commercial banking experience. From 1984 to 1993, Mr. Kaminski worked for FMB-
Grand Rapids in various capacities in the areas of credit administration and
bank compliance. In 1993, Mr. Kaminski was appointed Vice President in charge of
loan review and served as Vice President and Manager of the commercial credit
department for three of FMB's subsidiaries. He has served as Executive Vice
President of Mercantile and the Bank since November of 2003, Secretary of
Mercantile and the Bank since their inception in 1997, and Chief Operating
Officer of the Bank since 2000. From 1997 through November of 2003, Mr.
Kaminski's vice president position was as Senior Vice President of Mercantile
and the Bank. Mr. Kaminski serves on the Board of Directors and the Human
Resources Committee for the Grand Rapids Youth Commonwealth, and is a career
mentor for Aquinas College of Grand Rapids.
CHARLES E. CHRISTMAS (Senior Vice President, Chief Financial Officer, and
Treasurer of Mercantile and the Bank) Mr. Christmas joined the Bank in April
1998 and served as Vice President of Finance, Treasurer and Compliance Officer
of Mercantile and the Bank in 1998. In 1999, Mr. Christmas was elected Chief
Financial Officer, Treasurer and Compliance Officer of Mercantile and the Bank.
In 2000, Mr. Christmas was elected Senior Vice President, Chief Financial
Officer and Treasurer of Mercantile, and Senior Vice President and Chief
Financial Officer of the Bank. Prior to joining Mercantile, he examined various
financial institutions for over ten years while serving as a bank examiner with
the Federal Deposit Insurance Corporation ("FDIC"). He began his tenure with the
FDIC upon his graduation from Ferris State University.
7
Mr. Christmas holds a Bachelor of Science degree in Accountancy. Mr. Christmas
serves on the Michigan Banker Association Funds Management Committee, as a
fundraising volunteer for the Make-A-Wish Foundation of Michigan and the
American Cancer Society, and as a volunteer for Habitat for Humanity.
INDEPENDENCE OF DIRECTORS
Rules of the Nasdaq Stock Market require that a majority of the Board of
Directors be independent directors, as defined in Nasdaq Rule 4200(a)(15). In
January of 2005, Mercantile reviewed the independence of its directors. During
this review, the Board of Directors considered transactions and relationships
between each director or any member of his or her family, and Mercantile and its
subsidiaries. As a result of this review, the Board of Directors has determined
that each of the directors, including those nominated for election at the annual
meeting, are independent under Nasdaq Rule 4200(a)(15), except Mr. Johnson and
Mr. Price who are not considered independent because of their employment as
executive officers of Mercantile, and Mr. Visser.
COMMUNICATIONS WITH DIRECTORS AND ATTENDANCE AT ANNUAL MEETINGS
Shareholders and other persons may send communications to members of the
Board of Directors who serve on the Audit Committee by utilizing the webpage on
Mercantile's website (www.mercbank.com) designated for that purpose.
Communications received through the webpage are reviewed by a member of
Mercantile's internal audit staff and the Chairman of the Audit Committee.
Communications that relate to functions of the Board of Directors or its
committees, or that either of them believe requires the attention of members of
the Board of Directors are provided to the entire Audit Committee, and reported
to the Board of Directors by a member of the Audit Committee. Directors may
review a log of these communications, and request copies of any of the
communications.
The Board of Directors has a policy of encouraging members of the Board of
Directors to attend the annual meetings of the shareholders. All of the
directors attended last year's annual meeting.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
Mercantile has standing Audit, Compensation, and Nominating Committees of
the Board of Directors.
AUDIT COMMITTEE. The members of the Audit Committee consist of Betty S.
Burton, David M. Cassard, C. John Gill, David M. Hecht, Calvin D. Murdock and
Merle J. Prins. The functions of the Audit Committee are described below under
the heading "Audit Committee Report". The Board of Directors has determined that
Mr. Cassard, a member of the Audit Committee, is qualified as an audit committee
financial expert as that term is defined in the rules of the Securities and
Exchange Commission. Mr. Cassard is independent, as independence for audit
committee members is defined in the listing standards of the Nasdaq Stock Market
and the rules of the Securities and Exchange Commission.
COMPENSATION COMMITTEE. The members of the Compensation Committee consist
of David M. Cassard, Peter A. Cordes, Lawrence W. Larsen, and Calvin D. Murdock.
Each member of the Compensation Committee is independent, as independence for
compensation committee members is defined in the listing standards of the Nasdaq
Stock Market. The Compensation Committee's responsibilities include considering
and recommending to the Board of Directors compensation and benefits for
officers of Mercantile, and administering Mercantile's Independent Director
Stock Option Plan and Employee Stock Purchase Plan of 2002. At present, all
officers of Mercantile are also officers of the Bank, and although they receive
compensation from the Bank in their capacity as officers of the Bank, they
presently receive no separate cash compensation from Mercantile. The Bank also
has a compensation committee whose members are the same as that of Mercantile's
Compensation Committee.
NOMINATING COMMITTEE. The members of the Nominating Committee consist of
Betty S. Burton, Edward J. Clark, Peter A. Cordes, Doyle A. Hayes, David M.
Hecht, Lawrence W. Larsen and Donald Williams, Sr. The Nominating Committee is
responsible for making recommendations to the Board of Directors as to its size
and composition, and evaluating and recommending to the Board of Directors
8
candidates for election as directors at Mercantile's annual meetings. The
Nominating Committee has a charter, which is available on Mercantile's website
(www.mercbank.com). Each member of the Nominating Committee is independent, as
independence for nominating committee members is defined in the listing
standards of the Nasdaq Stock Market.
The Nominating Committee will consider as potential nominees persons
recommended by shareholders. Recommendations should be submitted to the
Nominating Committee in care of the Secretary of Mercantile, 5650 Byron Center
Avenue SW, Wyoming, Michigan 49519. Each recommendation should include a
personal biography of the suggested nominee, an indication of the background or
experience that qualifies the person for consideration, and a statement that the
person has agreed to serve if nominated and elected.
The Nominating Committee has used an informal process to identify potential
candidates for nomination as directors. Candidates for nomination have been
recommended by an executive officer or director, and considered by the
Nominating Committee and the Board of Directors. Generally, candidates have been
members of the West Michigan community who have been known to one or more of the
Board members. The Nominating Committee has not adopted specific minimum
qualifications that it believes must be met by a person it recommends for
nomination as a director. In evaluating candidates for nomination, the
Nominating Committee will consider the factors it believes to be appropriate,
which would generally include the candidate's personal and professional
integrity, business judgment, relevant experience and skills, and potential to
be an effective director in conjunction with the rest of the Board of Directors
in collectively serving the long-term interests of Mercantile's shareholders.
Although the Nominating Committee has the authority to retain a search firm to
assist it in identifying director candidates, there has to date been no need to
employ a search firm. The Nominating Committee does not evaluate potential
nominees for director differently based on whether they are recommended to the
Nominating Committee by a shareholder.
Shareholders who themselves wish to effectively nominate a person for
election to the Board of Directors, as contrasted with recommending a potential
nominee to the Nominating Committee for its consideration, are required to
comply with the advance notice and other requirements set forth in Mercantile's
Articles of Incorporation.
During 2004, there were a total of 16 meetings of the Board of Directors of
Mercantile. In addition, there were five meetings of the Audit Committee, three
meetings of the Compensation Committee and two meetings of the Nominating
Committee during 2004. Each director attended at least 75% of the total number
of meetings of the Board of Directors and committees of the Board of which he or
she was a member, held during 2004.
DIRECTOR COMPENSATION
For 2004, non-employee directors of the Bank were paid an annual retainer
of $7,500, and a fee of $400 for each meeting of the Board of Directors or a
committee of the Board of Directors of the Bank that they attended. In addition,
non-employee directors of Mercantile were paid $400 for each meeting of the
Board of Directors or a committee of the Board of Directors of Mercantile that
they attended, when for Board meetings, there was not also a meeting of the
Board of Directors of the Bank on the same day, and for committee meetings,
there was not also a meeting of a committee of the Board of Directors of the
Bank having the same name or designated function on the same day.
Beginning January 2, 2005, the Board of Directors increased the annual
retainer for non-employee directors of the Bank to $12,000, and increased the
fee for each meeting of the Board of Directors of the Bank that a director
attends to $700. Beginning the same date, meeting fees were established at $600
for each meeting of the Audit Committee, $500 for each meeting of the
Compensation Committee, and $400 for each meeting of other committees of the
Board of Directors of the Bank. Fees of the same amount have been established
for meetings of Mercantile's Board of Directors and its committees, when for
Board meetings there is not also a meeting of the Board of Directors of the Bank
on the same day, and for committee meetings there is not also a meeting of a
committee of the Board of Directors of the Bank having the same name or function
on the same day. For meetings that are held by telephone or other remote
communications equipment, the meeting fees are half the amount described above.
Beginning January 2, 2005, annual retainer
9
fees were established for the Chairmen of three of the committees of
Mercantile's Board of Directors. The annual retainers are, for the Chairman of
the Audit Committee -- $4,000, for the Chairman of the Compensation
Committee -- $2,000, and for the Chairman of the Nominating Committee -- $1,000.
The same persons currently serve on the Boards of Directors of Mercantile and
the Bank. Under the Bank's deferred compensation plan for non-employee
directors, directors may elect to defer the receipt of the annual retainer and
meeting fees until they are no longer serving on the Board.
On October 18, 2001, the Board of Directors adopted an Independent Director
Stock Option Plan that was approved by the shareholders at the April 18, 2002
annual meeting. In each of 2001, 2002, 2003 and 2004, options were granted to
the non-employee directors of Mercantile under the plan. In October of 2004,
options for 500 shares were granted under the plan to each of Ms. Burton, Ms.
Jones, and Messrs. Cassard, Clark, Cordes, Gill, Hayes, Hecht, Larsen, Murdock,
Prins, Visser, and Williams. The options are first exercisable five years after
their date of grant, subject to accelerated vesting as provided in the plan. The
exercise price is $46.625 per share for the 2004 options. The exercise price is
125 percent of the fair market value per share on the day the options were
granted.
AUDIT COMMITTEE REPORT
The following Audit Committee Report does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Mercantile filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent Mercantile specifically incorporates
this report by reference.
Each member of the Audit Committee is independent, as independence for
audit committee members is defined in the listing standards of the Nasdaq Stock
Market and the rules of the Securities and Exchange Commission. The Audit
Committee's primary purpose is to assist the Board of Directors in overseeing:
- the accounting and financial reporting process;
- audits of financial statements;
- internal accounting and disclosure controls; and
- the internal audit functions.
In carrying out its responsibilities, the Audit Committee supervises the
relationship between Mercantile and its independent auditors, including having
direct responsibility for their appointment, compensation and retention, and
reviewing the scope of their audit services, and approving audit and permissible
non-audit services. The Audit Committee reviews and discusses the annual and
quarterly financial statements, as well as the internal audit plan.
The Board of Directors has adopted a charter for the Audit Committee. A
copy of the charter is available on Mercantile's website (www.mercbank.com).
Management has the primary responsibility for the financial statements and
the reporting process, including Mercantile's systems of internal controls. In
fulfilling its oversight responsibilities, the Audit Committee reviewed the
audited financial statements for the year ended December 31, 2004 with
management, including a discussion of the quality and the acceptability of
Mercantile's financial reporting and controls.
The Audit Committee reviewed with the independent auditors, Crowe Chizek
and Company LLC ("Crowe Chizek"), who are responsible for expressing an opinion
on the conformity of those audited financial statements with generally accepted
accounting principles, their judgments as to the quality and the acceptability
of Mercantile's financial reporting and such other matters as are required to be
discussed with the Audit Committee under generally accepted auditing standards,
including the matters required to be discussed pursuant to Statement on Auditing
Standards No. 61 (Communications with Audit Committees). In addition, the Audit
Committee has discussed with Crowe Chizek the auditors' independence from
management and Mercantile, including the matters in the auditors' written
disclosures required by the
10
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees). The Audit Committee has considered the compatibility of the
provision of non-audit services with maintaining the auditors' independence.
The Audit Committee also discussed with Mercantile's internal and
independent auditors the overall scope and plans for their respective audits.
The Audit Committee meets periodically with the internal and independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of Mercantile's internal controls, and the
overall quality of Mercantile's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2004 for filing with the Securities and Exchange Commission. The
Audit Committee also evaluated and reappointed Mercantile's independent auditors
for fiscal 2005.
Audit Committee
Betty S. Burton
David M. Cassard
C. John Gill
David M. Hecht
Calvin D. Murdock
Merle J. Prins
COMPENSATION COMMITTEE REPORT
The following Compensation Committee Report and the shareholder return
performance graph included elsewhere in this proxy statement do not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Mercantile filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent Mercantile specifically
incorporates this report or the performance graph by reference.
The compensation of the executive officers of Mercantile is determined by
the Board of Directors based on recommendations of the Compensation Committee.
Mercantile seeks to establish compensation at a level that will attract,
motivate and retain experienced executive officers who can increase shareholder
value, deliver competitive products and services to customers, and provide
leadership for employees. Salaries are intended to be competitive, and reflect
factors such as individual performance, level of responsibility, and prior
experience. Incentive compensation and stock option awards are intended to align
the interests of executive officers with that of the shareholders and reward
performance that increases shareholder value.
Executive compensation is comprised of the following:
1. Salary.
2. Incentive compensation payable in the form of a cash bonus based on the
attainment by Mercantile of annual performance criteria recommended by
the Compensation Committee and approved by the Board of Directors.
3. Performance based discretionary cash awards made by the Compensation
Committee from a bonus pool.
4. Discretionary awards of stock options.
5. Participation in other benefit plans offered to all employees including
401(k), health insurance, disability insurance and life insurance.
Annual salaries for Mercantile's Chairman and Chief Executive Officer and
President and Chief Operating Officer increased in 2004. Since Mercantile
commenced business in 1997, growth in earnings per
11
share and asset levels has been significant, including in each of the more
recent years. The salary increase granted these two executive officers during
2004 recognizes the contribution these individuals have made to the success of
the organization. Executive salaries and incentive compensation are also based
in part on information derived from industry compensation studies performed by
Mercantile's auditors, from surveys conducted by the Michigan Bankers
Association and the Bank Administration Institute, and from the SNL Executive
Compensation Review for Banks and Thrifts. Compensation information is also
taken from proxy materials filed with the Securities and Exchange Commission by
other comparable financial institutions. This information is analyzed by
Mercantile's Director of Human Resources and presented to the Compensation
Committee for the formulation of a salary recommendation to be approved by the
Board of Directors.
Executive bonuses are also determined by the Board of Directors as the
result of a recommendation by the Compensation Committee and are based on the
same criteria as is the incentive compensation for all non-lender employees.
Compensation Committee
David M. Cassard
Peter A. Cordes
Lawrence W. Larsen
Calvin D. Murdock
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of Mercantile's Compensation Committee during 2004 were David
M. Cassard, Peter A. Cordes, Lawrence W. Larsen and Calvin D. Murdock. None of
the members of the Compensation Committee is or has been an officer or employee
of Mercantile.
12
SUMMARY COMPENSATION TABLE
The following table details the compensation earned by the named executives
for the three years ended December 31, 2004:
ANNUAL COMPENSATION LONG TERM
-------------------- COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
--------------------------- ---- ------ ----- ------------ ---------------
Gerald R. Johnson, Jr. ................................... 2004 $370,000 $215,000 3,250 13,020
Chairman of the Board and 2003 335,000 192,500 3,150 12,728
Chief Executive Officer of 2002 302,500 136,125 4,409 12,683
Mercantile, and Chairman of the Board of the Bank
Michael H. Price.......................................... 2004 325,000 192,500 3,250 11,259
President and Chief Operating Officer 2003 295,000 172,500 3,150 10,976
of Mercantile, and President and Chief 2002 266,200 119,790 3,307 10,350
Executive Officer of the Bank
Robert B. Kaminski, Jr. .................................. 2004 190,000 110,500 2,750 9,659
Executive Vice President and Secretary of 2003 165,290 94,380 2,352 8,008
Mercantile, and Executive Vice President, 2002 133,000 46,550 3,307 6,785
Chief Operating Officer and Secretary of the Bank
Charles E. Christmas...................................... 2004 170,000 101,500 2,500 8,620
Senior Vice President, Chief Financial 2003 150,700 87,815 2,352 7,251
Officer and Treasurer of Mercantile 2002 118,000 41,300 3,307 5,695
and the Bank
-------------------------
(1) Includes for 2004, matching contributions by the Bank to the 401(k) plan
accounts of Messrs. Johnson, Price, Kaminski and Christmas in the amounts of
$10,250, $10,250, $9,500, and $8,500. Also includes for 2004, life and
disability insurance premiums paid by the Bank on policies insuring Mr.
Johnson of $516 and $2,254, and Mr. Price of $219 and $790; and life
insurance premiums on policies insuring Mr. Kaminski of $159 and Mr.
Christmas of $120. These policies are in addition to the Bank's group
insurance plans that are generally available to salaried employees.
OPTION GRANTS IN 2004
The Board of Directors of Mercantile is responsible for awarding stock
options and administering Mercantile's employee stock option plans. The
following table provides information on options granted to the named executives
during the year ended December 31, 2004:
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NO. OF SHARES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED 2004 SHARE(5) DATE 5% 10%
---- ------------- --------------- --------- ---------- -- ---
Gerald R. Johnson, Jr. ... 3,250(1) 7.73% $38.98 10/27/2014 $81,101 $204,179
Michael H. Price.......... 3,250(2) 7.73% $38.98 10/27/2014 $81,101 $204,179
Robert B. Kaminski,
Jr. .................... 2,750(3) 6.54% $38.98 10/27/2014 $68,624 $172,767
Charles E. Christmas...... 2,500(4) 5.95% $38.98 10/27/2014 $62,385 $157,061
-------------------------
(1) Becomes exercisable for 2,000 of the shares on October 28, 2005, and for the
remaining 1,250 shares on January 1, 2006.
(2) Becomes exercisable for 2,500 of the shares on October 28, 2005, and for the
remaining 750 shares on January 1, 2006.
13
(3) Becomes exercisable for 2,500 of the shares on October 28, 2005, and for the
remaining 250 shares on January 1, 2006.
(4) Becomes exercisable on October 28, 2005.
(5) The exercise price for each of the options has been the market price of the
common stock at the time the option was granted. The exercise price may be
paid in cash, by the delivery of previously owned shares, or by a
combination of cash and shares.
AGGREGATED STOCK OPTION EXERCISES IN 2004 AND YEAR-END OPTION VALUES
The following table provides information on the exercise of stock options
during the year ended December 31, 2004 by the named executives and the value of
unexercised options at December 31, 2004:
NUMBER OF SHARES VALUE OF
SHARES UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
ACQUIRED ON VALUE OPTIONS AT 12/31/04 OPTIONS AT 12/31/04
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ----------- -------- ------------------------- ----------------------------
Gerald R. Johnson, Jr. .... 15,000 $442,770 48,045/3,880 $1,388,350/$11,281
Michael H. Price........... 10,395 266,653 35,800/3,250 991,719/ 5,135
Robert B. Kaminski, Jr. ... 2,000 59,056 22,909/2,750 606,657/ 4,345
Charles E. Christmas....... 1,050 25,892 14,157/2,500 342,167/ 3,950
-------------------------
(1) In accordance with the SEC's rules, values are calculated by subtracting the
exercise price from the fair market value of the underlying common stock.
For purposes of this table, fair market value is deemed to be $40.56 per
share, the average of the highest and lowest sales prices reported on the
Nasdaq Stock Market on December 31, 2004.
EMPLOYMENT AGREEMENTS
GERALD R. JOHNSON, JR. AND MICHAEL H. PRICE. Effective December 1, 1998,
the Bank and Mercantile entered into Employment Agreements with Mr. Johnson and
Mr. Price providing for their employment from December 1, 1998 through December
31, 2001, and certain severance, confidentiality and non-compete arrangements
that would continue after the employment period. Effective December 31, 1999,
the Employment Agreements were amended and restated. The amendments extended the
employment period an additional year to December 31, 2002, and provide for the
employment period to extend an additional year, each December 31, starting
December 31, 2000, so that as of each December 31, there will be three years
remaining in the employment period. The annual extension of the employment
period can be avoided by the Bank, Mercantile, or the officer giving notice to
the others that the employment period is not to be extended. Effective October
12, 2000, and October 18, 2001, the Employment Agreements were further amended
and restated, primarily to establish the base salaries for 2001 and 2002 for Mr.
Johnson and Mr. Price.
The Employment Agreements with Mr. Johnson and Mr. Price provide them with
annual base salaries for each year in the amounts established from year to year
by the Board of Directors of the Bank. The annual base salary for each year may
not be less than the amount established for the immediately preceding year. The
Board of Directors established Mr. Johnson's annual base salary at $370,000 for
2004, and at $420,000 for 2005. The Board of Directors established Mr. Price's
annual base salary at $325,000 for 2004, and at $365,000 for 2005.
In addition to the annual base salary, the Employment Agreements provide
that Mr. Johnson and Mr. Price are entitled to participate in any employee
benefit and incentive compensation plans of Mercantile and the Bank, including
health insurance, life and disability insurance, stock option, profit sharing
and retirement plans. Under a profit sharing plan in effect for 2004, Messrs.
Johnson and Price each received a bonus for 2004 of 50% of their annual base
salary for that year. In addition, for 2004, each of them received a $30,000
discretionary merit award. Under a profit sharing plan expected to be in effect
for 2005, Messrs. Johnson and Price may each receive a bonus of up to 50% of
their annual base salary for 2005. It is anticipated that the bonuses for 2005,
for Mr. Johnson, Mr. Price and the other non-lending officers of the
14
Bank, will be payable only to the extent that after taking into account the
payment, the after tax net operating income of Mercantile for 2005 would exceed
120% of the prior year's after tax net income.
In the event that either of the officers becomes disabled or dies during
the employment period he is entitled to benefits under his Employment Agreement.
In the event of disability, the officer continues to receive his then current
annual base salary through the end of the employment period, and any disability
benefits payable under disability plans provided by the Bank or Mercantile. The
officer also continues to participate in life, disability, and health insurance
plans of the Bank or Mercantile, through age 65, to the extent permitted under
such plans. If the officer dies during the employment period, the Bank is
obligated to pay the officer's legal representative a death benefit of $250,000,
and if the Bank or Mercantile owns any life insurance insuring the life of the
officer, the proceeds of the policies are payable to the named beneficiaries.
The Employment Agreements provide severance benefits in the event that the
officer's employment is terminated by Mercantile and the Bank without "Cause" or
the officer elects to terminate his employment for "Good Reason" during the
employment period. In such event, the officer is entitled to receive the greater
of (i) his annual base salary through the end of the employment period or (ii)
$500,000; in either case payable over 18 months in equal monthly installments.
In addition, in the case of such a termination of employment, the officer is
entitled to continue his participation in life, disability and health insurance
plans provided by the Bank or Mercantile for 18 months, to the extent permitted
under such plans, to an assignment of any assignable term life insurance
policies owned by the Bank or Mercantile insuring his life, and to $10,000 for
out-placement, interim office and related expenses. The Employment Agreements
also provide severance benefits in the event that after the employment period
and prior to the officer reaching the age of 65, the officer's employment is
terminated by the Bank and Mercantile without "Cause" or the officer's annual
base salary is reduced without "Cause". In such event, the officer receives the
same benefits as are described above for a termination during the employment
period, except that when determining the cash severance payable to him over the
18 months following his termination, the alternative of receiving his annual
base salary through the end of the employment period does not apply, and instead
he receives the stated dollar amount of $500,000. In the event that an officer's
employment is terminated for "Cause" during the employment period, the officer
is not entitled to any accrued rights that he may then have under any stock
option plan of Mercantile.
Under the Employment Agreements, Mr. Johnson and Mr. Price agree not to
disclose, except as required by law, any confidential information relating to
the business or customers of the Bank or Mercantile, or use any confidential
information in any manner adverse to the Bank or Mercantile. In addition, each
has agreed that for 18 months following his employment with the Bank and
Mercantile, he will not be employed by, or act as a director or officer of, any
business engaged in banking within a 50 mile radius of Grand Rapids, Michigan
that solicits customers of the Bank.
ROBERT B. KAMINSKI, JR. The Bank and Mercantile entered into an Employment
Agreement with Mr. Kaminski for his services as an officer of Mercantile and the
Bank beginning January 1, 2001, on substantially the same terms as the
Employment Agreements described for Mr. Johnson and Mr. Price above, except that
the compensation and severance amounts are different. Effective October 18,
2001, the Employment Agreement was amended and restated primarily to establish
the base salary for Mr. Kaminski for 2002. The Employment Agreement provides Mr.
Kaminski with an annual base salary for each year in the amount established from
year to year by the Board of Directors of the Bank. The annual base salary for
each year may not be less than the amount established for the immediately
preceding year. The Board of Directors established Mr. Kaminski's annual base
salary at $190,000 for 2004, and at $215,000 for 2005. Under a profit sharing
plan in effect for 2004, Mr. Kaminski received a bonus for 2004 of 45% of his
annual base salary for that year. In addition, for 2004, Mr. Kaminski received a
$25,000 discretionary merit award. Under a profit sharing plan expected to be in
effect for 2005, Mr. Kaminski may receive a bonus of up to 45% of his annual
base salary for 2005. The Employment Agreement also establishes a death benefit
of $100,000, and a minimum severance benefit of $250,000 during his employment
period and $125,000 after the employment period.
15
CHARLES E. CHRISTMAS. The Bank and Mercantile entered into an Employment
Agreement with Mr. Christmas for his services as an officer of Mercantile and
the Bank beginning January 1, 2001, on substantially the same terms as the
Employment Agreements described for Mr. Johnson and Mr. Price above, except that
the compensation and severance amounts are different. Effective October 18,
2001, the Employment Agreement was amended and restated primarily to establish
the base salary for Mr. Christmas for 2002. The Employment Agreement provides
Mr. Christmas with an annual base salary for each year in the amount established
from year to year by the Board of Directors of the Bank. The annual base salary
for each year may not be less than the amount established for the immediately
preceding year. The Board of Directors established Mr. Christmas' annual base
salary at $170,000 for 2004, and at $180,000 for 2005. Under a profit sharing
plan in effect for 2004, Mr. Christmas received a bonus for 2004 of 45% of his
annual base salary for that year. In addition, for 2004, Mr. Christmas received
a $25,000 discretionary merit award. Under a profit sharing plan expected to be
in effect for 2005, Mr. Christmas may receive a bonus of up to 45% of his annual
base salary for 2005. The Employment Agreement also establishes a death benefit
of $100,000, and a minimum severance benefit of $250,000 during his employment
period and $125,000 after the employment period.
16
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on Mercantile common stock (based on the
last reported sales price of the respective year) with the cumulative total
return of the Nasdaq Composite Index, the Nasdaq Bank Index and the SNL Nasdaq
Bank Index from December 31, 1999 through December 31, 2004. The following
information is based on an investment of $100 on December 31, 1999, in
Mercantile common stock, the Nasdaq Composite Index, the Nasdaq Bank Index, and
the SNL Nasdaq Bank Index, with dividends reinvested where applicable. Because
of cost considerations, Mercantile expects to discontinue the use of the Nasdaq
Bank Index after this year, and to replace it with the SNL Nasdaq Bank Index.
MERCANTILE BANK CORPORATION
[PERFORMANCE GRAPH]
MERCANTILE BANK NASDAQ BANK SNL NASDAQ BANK
CORPORATION NASDAQ COMPOSITE INDEX* INDEX
--------------- ---------------- ----------- ---------------
12/31/99 100.00 100.00 100.00 100.00
12/31/00 93.14 60.82 114.23 115.45
12/31/01 146.18 48.16 123.68 125.66
12/31/02 204.50 33.11 126.65 129.25
12/31/03 335.14 49.93 162.92 166.83
12/31/04 384.67 54.49 186.45 191.21
PERIOD ENDING
--------------------------------------------------------------------
INDEX 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
---------------------------------------------------------------------------------------------------------------
Mercantile Bank Corporation............ 100.00 93.14 146.18 204.50 335.14 384.67
NASDAQ Composite....................... 100.00 60.82 48.16 33.11 49.93 54.49
NASDAQ Bank Index*..................... 100.00 114.23 123.68 126.65 162.92 186.45
SNL NASDAQ Bank Index.................. 100.00 115.45 125.66 129.25 166.83 191.21
* Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago 2005. Used with permission. All rights
reserved. crsp.com
17
CERTAIN TRANSACTIONS
The Bank has had, and expects in the future to have, loan and other
financial transactions in the ordinary course of business with Mercantile's
directors, executive officers, and principal shareholders (and their associates)
on substantially the same terms as those prevailing for comparable transactions
with others. All such transactions (i) were made in the ordinary course of
business, (ii) were made on substantially the same terms, including interest
rates and collateral on loans, as those prevailing at the time for comparable
transactions with other persons, and (iii) in the opinion of management did not
involve more than the normal risk of collectibility or present other unfavorable
features.
As of December 31, 2004, the Bank had outstanding 65 loans to the directors
or executive officers of Mercantile, or their associates, totaling approximately
$10.2 million in aggregate amount, under commitments totaling approximately
$14.2 million.
Mercantile Bank Real Estate Co., L.L.C., a subsidiary of the Bank,
contracted with Visser Brothers Inc. in November, 2003 to be the general
contractor for the construction of the Bank's new main office in the City of
Grand Rapids. This project was awarded after being submitted for competitive
bids. Construction began in November, 2003 and the current completion date is
projected to be in the second quarter of 2005. The contracted amount for this
project, including change orders, is $7,685,371. Dale J. Visser is a member of
the Board of Directors of Mercantile and the Bank, and Chairman and one of the
owners of Visser Brothers Inc.
The Bank has a number of relationships with affiliates of JPMorgan Chase &
Co. ("JPMorgan"). JPMorgan reported this year that it and several of its wholly
owned subsidiaries beneficially own in aggregate more than 5% of Mercantile's
outstanding common stock. JPMorgan Chase Bank, N.A., a wholly owned subsidiary
of JPMorgan, including banks acquired by it, have since 1997 been the Bank's
primary correspondent bank. The Bank obtains check clearing, wire transfer,
securities safekeeping, and many other services from JPMorgan Chase Bank. During
2004, the Bank's correspondent bank checking account with JPMorgan Chase Bank
had balances ranging from approximately $2.6 million to $47.5 million. During
2004, the Bank had an unsecured federal funds purchase line of credit with
JPMorgan Chase Bank which was increased from $35 million to $50 million in
November of 2004, and currently remains in effect. In 2004, the Bank paid
JPMorgan Chase Bank approximately $108,000 for correspondent banking services,
and approximately $96,000 in interest under the federal funds purchase line of
credit. For 2004, the Bank received from JPMorgan Chase Bank approximately
$75,000 in interest for federal funds purchased from the Bank. During 2004, the
Bank purchased from JPMorgan Securities, Inc., a wholly owned subsidiary of
JPMorgan, approximately $19.9 million of securities for the Bank's own account.
The Bank expects to continue its relationships with JPMorgan and its
subsidiaries in 2005, and to have transactions with them in 2005 that are
similar in nature and size to those that occurred in 2004, though varying with
the needs and best interests of the Bank.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Mercantile's
officers and directors, and persons who own more than 10% of Mercantile common
stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Based on a review of filings, Mercantile believes that
all reports required to be filed under Section 16(a) for 2004 were timely filed,
except that Mercantile's director, David M. Cassard, filed one report on Form 4
late relating to two sales on the same day, as trustee of a family trust,
involving in aggregate 524 shares.
18
INDEPENDENT AUDITORS
SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected Crowe Chizek as
Mercantile's principal independent auditors for the year ending December 31,
2005. Representatives of Crowe Chizek plan to attend the annual meeting of
shareholders, will have the opportunity to make a statement if they desire to do
so, and will respond to appropriate questions by shareholders.
FEES TO INDEPENDENT AUDITORS FOR 2004 AND 2003
The following table shows the fees for professional services of Crowe
Chizek for audit and other services they provided to Mercantile for 2004 and
2003.
2004 2003
---- ----
Audit Fees(1)............................................... $129,000 $89,500
Audit-Related Fees(2)....................................... 47,275 56,000
Tax Fees(3)................................................. 56,200 50,500
All other fees(4)........................................... 0 6,000
-------------------------
(1) Includes the aggregate fees billed for professional services rendered by
Crowe Chizek for 2004 and 2003 for the audit of Mercantile's annual
financial statements and review of financial statements included in
Mercantile's quarterly reports on Form 10-Q. For 2004, also includes the
audit of Mercantile's internal control over financial reporting.
(2) Principally audits of employee benefit plan and Mercantile BIDCO, Inc. in
both years. For 2004, also includes consultation regarding management's
internal control assertion approach, including the licensing fees for the
software product and tools used by management to document the approach. For
2003, also includes services with respect to a public offering of stock.
(3) Principally tax compliance services (including U.S. federal and state tax
returns), cost segregation studies, review of quarterly tax computations and
consultations regarding various tax strategies.
(4) Principally services for web-site hosting in 2003.
The Audit Committee's policy is to pre-approve all audit services and
non-audit services that are to be performed for Mercantile by its independent
auditors. Under the Audit Committee's policy, authority to pre-approve permitted
services has been delegated to two members of the Audit Committee, either of
whom can act alone, for circumstances when pre-approval is not obtained from the
full Audit Committee. Any pre-approval by the delegated authority is required to
be reported to the Audit Committee at its next meeting. All of the services
described in the table above were pre-approved by the Audit Committee.
19
SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING
A proposal submitted by a shareholder for the 2006 annual meeting of
shareholders must be sent to the Secretary of Mercantile, 5650 Byron Center
Avenue SW, Wyoming, Michigan 49519 and received by November 15, 2005 in order to
be eligible to be included in Mercantile's proxy statement for that meeting.
A shareholder who intends to present a proposal for the 2006 annual meeting
of shareholders, other than pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934, must provide Mercantile with notice of such intention by at least
January 29, 2006, or the persons named in the proxy to vote the proxies will
have discretionary voting authority at the 2006 annual meeting with respect to
any such proposal without discussion of the matter in Mercantile's proxy
statement.
OTHER MATTERS
The Board of Directors does not know of any other matters to be brought
before the annual meeting. If other matters are presented upon which a vote may
properly be taken it is the intention of the persons named in the proxy to vote
the proxies in accordance with their best judgment.
20
2135-PS-05
MERCANTILE BANK CORPORATION
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
DETACH HERE ZMBC32
|X| PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
MERCANTILE BANK CORPORATION
1. Election of Directors. 2. In their discretion, the Proxies are authorized to vote upon
Nominees as Directors: such other matters as may properly come before the meeting,
or at any adjournment of the meeting.
(01) BETTY S. BURTON (04) DAVID M. HECHT
(02) DAVID M. CASSARD (05) MERLE J. PRINS
(03) PETER A. CORDES
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ] ----------------------------------------
For all nominees except as noted above
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE ELECTION OF ALL NOMINEES.
Mark box at right if you plan to attend the meeting. [ ]
Mark box at right if an address change or comment [ ]
has been noted on the reverse side of this card.
Signature: __________________ Date: ______________________ Signature: ________________ Date: ____________________
MERCANTILE BANK CORPORATION
Dear Shareholder,
Enclosed with this proxy is your Notice of Annual Meeting and Proxy Statement,
and 2004 Annual Report. We encourage you to carefully read these materials and
exercise your right to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted, then sign and date the proxy, detach it, and promptly return your proxy
vote in the enclosed postage paid envelope, or return it to Mercantile Bank
Corporation, c/o EquiServe Trust Company, N.A., P.O. Box 8694, Edison, NJ
08818-8694. If you plan to attend the meeting, please mark the appropriate box
on the proxy.
Your proxy card must be received prior to the annual meeting of shareholders on
April 28, 2005.
Sincerely,
Mercantile Bank Corporation
DETACH HERE ZMBC32
MERCANTILE BANK CORPORATION
5650 BYRON CENTER AVENUE, SW, WYOMING, MICHIGAN 49519
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - TO BE HELD APRIL 28, 2005
The undersigned hereby appoints Doyle A. Hayes and Susan K. Jones, or either of
them, with power of substitution in each, proxies of the undersigned to vote all
common stock of the undersigned in Mercantile Bank Corporation, at the annual
meeting of shareholders to be held on April 28, 2005, and at all adjournments of
the meeting.
This proxy will be voted as specified by the undersigned. If no choice is
specified, this proxy will be voted as to all shares of the undersigned, FOR the
election of all nominees for directors and according to the discretion of the
Proxies on any other matters that may properly come before the meeting or any
adjournment of the meeting.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please date and sign exactly as your name(s) appear(s) on this proxy and mail it
promptly. When signing as an attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held jointly, each joint
owner should sign. If a corporation or other entity, the signature should be
that of an authorized person who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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