SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the
Registrant
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Filed by a
Party other than the Registrant
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appropriate box:
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12
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Wolverine Bancorp, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
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Payment of Filing Fee (Check the appropriate box):
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x
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No fee required.
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$125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
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$500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3).
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:
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Proposed maximum aggregate value of transaction:
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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.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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April 16, 2012
Dear Stockholder:
We cordially invite you to attend the 2012 Annual Meeting of Stockholders (the
Annual Meeting) of Wolverine Bancorp, Inc. Our Annual Meeting will be held at The Midland Center for the Arts, Auditorium Lobby, located at 1801 West St. Andrews, Midland, Michigan 48640 at 3:00 p.m., Eastern time on Monday, May 21,
2012.
The enclosed Notice of Annual Meeting of Stockholders and Proxy Statement describe the formal business to be transacted. Also enclosed
for your review is our Annual Report to Stockholders, which contains detailed information concerning our activities and operating performance.
The Annual Meeting is being held so that stockholders may vote upon the election of directors, the ratification of the appointment of BKD, LLP as our
independent registered public accounting firm for the year ending December 31, 2012, the approval of the Companys 2012 Equity Incentive Plan and any other business that properly comes before the Annual Meeting.
Our Board of Directors has determined that approval of each of the matters to be considered at the Annual Meeting is in the best interests of Wolverine
Bancorp, Inc. and our stockholders. For the reasons set forth in the Proxy Statement, the Board of Directors unanimously recommends a vote FOR the election of directors, FOR the ratification of the appointment of BKD, LLP as
our independent registered public accounting firm for the year ending December 31, 2012 and FOR approval of the Companys 2012 Equity Incentive Plan.
On behalf of the Board of Directors, we urge you to sign, date and return the enclosed proxy card as soon as possible, even if you currently plan to attend the Annual Meeting. This will not prevent you
from voting in person, but will assure that your vote is counted if you are unable to attend the Annual Meeting. Your vote is important, regardless of the number of shares that you own.
Sincerely,
David H. Dunn
President and Chief Executive Officer
Wolverine Bancorp, Inc.
5710 Eastman Avenue
Midland, Michigan 48640
(989) 631-4280
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On Monday, May 21, 2012
Notice is hereby given that the
Annual Meeting of Stockholders (the Annual Meeting) of Wolverine Bancorp, Inc. (the Company) will be held at The Midland Center for the Arts, Auditorium Lobby, located at 1801 West St. Andrews, Midland Michigan 48640 at 3:00
p.m., Eastern time, on Monday, May 21, 2012.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is being held so that stockholders may vote on the following matters:
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1.
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The election of two directors of Wolverine Bancorp, Inc.;
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2.
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The ratification of the appointment of BKD, LLP as the Companys independent registered public accounting firm for the year ending December 31, 2012;
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3.
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The approval of the Companys 2012 Equity Incentive Plan; and
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such other matters as may properly come before the Annual Meeting, or any adjournments thereof. The Board of Directors is not aware of any other business to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual Meeting on the date specified above, or on any date or dates to which
the Annual Meeting may be adjourned. Stockholders of record at the close of business on March 31, 2012 are the stockholders entitled to vote at the Annual Meeting, and any adjournments thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
WITHOUT DELAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING WITH THE COMPANYS SECRETARY A WRITTEN REVOCATION OR A DULY EXECUTED
PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN
NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
The Companys proxy statement, Annual Report to Stockholders and proxy card are available on www.wolverinebank.com.
BY ORDER OF THE BOARD OF DIRECTORS
Joell C. Anthony
Corporate Secretary
Midland, Michigan
April 16, 2012
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE
US THE EXPENSE OF FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
Proxy Statement
of
Wolverine Bancorp, Inc.
5710 Eastman Avenue
Midland, Michigan 48640
(989) 631-4280
ANNUAL MEETING OF STOCKHOLDERS
To be Held on Monday, May 21, 2012
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of Wolverine Bancorp, Inc. (the Company) to be used at the Companys
Annual Meeting of Stockholders (the Annual Meeting), which will be held at The Midland Center for the Arts, Auditorium Lobby, located at 1801 West St. Andrews, Midland, Michigan 48640 at 3:00 p.m., Eastern time, on Monday, May 21,
2012, and all adjournments of the Annual Meeting. The accompanying Notice of Annual Meeting of Stockholders and this Proxy Statement are first being mailed to stockholders on or about April 16, 2012.
REVOCATION OF PROXIES
Stockholders who execute proxies in the form solicited hereby retain the right to revoke them in the manner described below. Unless so revoked, the shares represented by such proxies will be voted
at the Annual Meeting and all adjournments thereof. Proxies solicited on behalf of the Companys Board of Directors will be voted in accordance with the directions given thereon.
Where no instructions are indicated, validly executed proxies
will be voted FOR the proposals set forth in this Proxy Statement.
The Board of Directors knows of no
additional matters that will be presented for consideration at the Annual Meeting. Execution of a proxy, however, confers on the designated proxy holders discretionary authority to vote the shares in accordance with their best judgment on such
other business, if any, which may properly come before the Annual Meeting or any adjournments thereof.
Proxies may be revoked
by sending written notice of revocation to the Companys Secretary at the Companys address shown above, the submission of a later-dated proxy, or by voting in person at the Annual Meeting. The presence at the Annual Meeting of any
stockholder who had returned a proxy shall not revoke such proxy unless the stockholder delivers his or her ballot in person at the Annual Meeting or delivers a written revocation to the Companys Secretary prior to the voting of such proxy.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Holders of record of the Companys common stock, par value $0.01 per share, as of the close of business on March 31, 2012 (the
Record Date) are entitled to one vote for each share then held. As of the Record Date, the Company had 2,504,309 shares of common stock issued and outstanding. The presence in person or by proxy of a majority of the outstanding shares of
common stock entitled to vote is necessary to constitute a quorum at the Annual Meeting.
In accordance with the provisions of
the Companys Articles of Incorporation, record holders of common stock who beneficially own in excess of 10% of the outstanding shares of common stock (the Limit) are not entitled to any vote with respect to the shares held in
excess of the Limit. The Companys Articles of Incorporation authorize the Board of Directors (i) to make all determinations necessary to implement and apply the Limit, including determining whether persons or entities are acting in
concert, and (ii) to demand that any person who is reasonably believed to beneficially own stock in excess of the Limit supply information to the Company to enable the Board of Directors to implement and apply the Limit.
1
As to the election of directors, the proxy card being provided by the Board of Directors
enables a stockholder to vote FOR the election of the nominees proposed by the Board of Directors, to WITHHOLD AUTHORITY to vote for all the nominees being proposed or to vote FOR ALL EXCEPT one or more of the nominees being proposed. Directors are
elected by a plurality of votes cast, without regard to either broker non-votes or proxies as to which the authority to vote for the nominees being proposed is withheld. Plurality means that individuals who receive the largest number of votes cast
are elected, up to the maximum number of directors to be elected at the Meeting.
As to the ratification of the Companys
independent registered public accounting firm, the proxy card being provided by the Board of Directors enables a stockholder to: (i) vote FOR the proposal; (ii) vote AGAINST the proposal; or (iii) ABSTAIN from voting on the proposal.
The ratification of the Companys independent registered public accounting firm must be approved by the affirmative vote of a majority of the votes cast without regard to broker non-votes or proxies marked ABSTAIN.
As to the approval of the Wolverine Bancorp, Inc. 2012 Equity Incentive Plan, by checking the appropriate box, a stockholder may:
(i) vote FOR the approval; (ii) vote AGAINST the approval; or (iii) ABSTAIN from voting on such matter. The affirmative vote of a majority of the votes cast at the Annual Meeting, without regard to shares as to which the
ABSTAIN box has been selected on the proxy card, is required for the approval of the 2012 Equity Plan.
In the
event at the time of the Annual Meeting there are not sufficient votes for a quorum or to approve or ratify any matter being presented, the Annual Meeting may be adjourned in order to permit the further solicitation of proxies.
Proxies solicited hereby will be returned to us and will be tabulated by an Inspector of Election designated by the Companys Board
of Directors.
Participants in the ESOP or 401(k) Plan.
If you participate in the Wolverine Bank
Employee Stock Ownership Plan (the ESOP) or if you hold Wolverine Bancorp, Inc. common stock through the Wolverine Bank 401(k) Plan (the 401(k) Plan), you will receive a vote authorization form that reflects all shares you
may direct the trustees to vote on your behalf under the plans. Under the terms of the ESOP, the ESOP trustee votes all shares held by the ESOP, but each ESOP participant may direct the trustee how to vote the shares of common stock allocated to his
or her account. The ESOP trustee, subject to the exercise of its fiduciary responsibilities, will vote all unallocated shares of Wolverine Bancorp, Inc. common stock held by the ESOP and all allocated shares for which no voting instructions are
received in the same proportion as shares for which it has received timely voting instructions. Under the terms of the 401(k) Plan, a participant is entitled to provide voting instructions for all shares credited to his or her 401(k) Plan account
and held in the Wolverine Bancorp, Inc. Stock Fund. Shares for which no voting instructions are given or for which instructions were not timely received will be voted in the same proportion as shares for which voting instructions were received.
The deadline for returning your voting instructions is May 14, 2012.
2
Persons and groups who beneficially own in excess of five percent of the Companys
common stock are required to file certain reports with the Securities and Exchange Commission (the SEC) regarding such ownership. The following table sets forth, as of March 31, 2012, the Record Date, the shares of common stock
beneficially owned by the Companys named executive officers and directors individually, by executive officers and directors as a group, and by each person or group known by us to beneficially own in excess of five percent of the Companys
common stock.
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Name and Address of
Beneficial Owners
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Amount of Shares
Owned and
Nature
of Beneficial Ownership
(1)
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Percent of
Shares
of Common Stock
Outstanding
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Five Percent Stockholders:
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Stilwell Value Partners I, L.P.
111 Broadway, 12
th
Floor
New York, New York 10006
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231,200
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(2)
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9.2
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%
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Firefly Value Partners, LP
(3)
551 Fifth Avenue, 36th Floor
New York, New York
10176
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188,334
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(3)
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7.5
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Sandler ONeill Asset Management LLC
(4)
150 East 52
nd
Street, 30
th
Floor
New York, New York 10022
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172,500
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(4)
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6.9
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Wolverine Bank
Employee Stock Ownership Plan
5710 Eastman Avenue
Midland, Michigan 48640
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200,600
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8.0
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Directors and Executive Officers
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(5)
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Roberta N. Arnold
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5,000
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Eric P. Blackhurst
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3,500
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David H. Dunn
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48,722
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1.9
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James W. Fisher
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700
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Richard M. Reynolds
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35,000
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1.4
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Rick A. Rosinski
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11,726
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(7)
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*
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Ron R. Sexton
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8,000
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J. Donald Sheets
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10,000
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Jeffrey M. Southcott
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1,400
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Howard I. Ungerleider
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1,000
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Joseph M. VanderKelen
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25,000
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1.0
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All Directors and Executive Officers as a Group (11 persons)
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150,048
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6.0
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(1)
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In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table, of
any shares of Common Stock if he or she has shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the Record Date. As used herein, voting power is
the power to vote or direct the voting of shares, and investment power is the power to dispose or direct the disposition of shares. The shares set forth above for directors and executive officers include all shares held directly, as well
as by spouses and minor children, in trust and other indirect ownership, over which shares the named individuals effectively exercise sole or shared voting and investment power.
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Based on a Schedule 13D filed jointly on February 7, 2011 by Stilwell Value Partners I, L.P., a Delaware limited partnership; Stilwell Partners,
L.P., a Delaware limited partnership; Stilwell Associates Insurance Fund of the S.A.L.I. Multi-Series Fund L.P., a Delaware limited partnership; Stilwell Value LLC, a Delaware limited liability company, and the general partner of Stilwell Value
Partners I; Stilwell Advisors LLC, a Delaware limited liability company and the general partner of Stilwell SALI Fund; and Joseph Stilwell, the managing member of and owner of more than 99% of the equity in Stilwell Value LLC, the managing and sole
member of Stilwell Advisors, and the general partner of Stilwell Partners.
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Based on an amended Schedule 13G filed jointly on February 14, 2012 by FVP Master Fund, L.P., a Cayman Islands exempted limited partnership
(FVP Master Fund), (ii) Firefly Value Partners, LP, a Delaware limited partnership (Firefly Partners), which serves as the investment manager of FVP Master Fund, (iii) FVP GP, LLC, a Delaware limited liability
company (FVP GP), which serves as the general partner of FVP Master Fund, (iv) Firefly Management Company GP, LLC, a Delaware limited liability company (Firefly Management), which serves as the general partner of Firefly
Partners, and (v) Messrs. Ryan Heslop and Ariel Warszawski, the managing members of FVP GP and Firefly Management (all of the foregoing, collectively, Reporting Persons). FVP Master Fund is a private investment vehicle formed
for the purpose of investing and trading in a wide variety of securities and financial instruments. FVP Master Fund directly owns all of the shares reported in the Schedule 13D. Messrs. Heslop and Warszawski, Firefly Partners, Firefly
Management and FVP GP may be deemed to share with the Funds voting and dispositive power with respect to such shares. Each Reporting Person disclaims beneficial ownership with respect to any shares other than those owned directly by such
Reporting Person.
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Based on a Schedule 13G filed jointly on February 14, 2012 by Sandler ONeill Asset Management LLC, a New York limited liability company
(SOAM), (ii) SOAM Holdings, LLC, a Delaware limited liability company (Holdings), and (v) Terry Maltese, Managing Member of SOAM, (all of the foregoing, collectively, Reporting
Persons). Mr. Maltese, SOAM Holdings, and Sandler ONeill Asset Management may be deemed to share with the Funds voting and dispositive power with respect to such shares. Each Reporting Person disclaims beneficial ownership
with respect to any shares other than those owned directly by such Reporting Person.
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(5)
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The business address of each director and executive officer is 5710 Eastman Avenue, Midland, Michigan 48640.
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(6)
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Includes 1,222 shares allocated to Mr. Dunns ESOP account.
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(7)
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Includes 791 shares allocated to Mr. Rosinskis ESOP account.
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PROPOSAL I
ELECTION OF DIRECTORS
The Companys Board of Directors is comprised of nine members. Effective as of the date
of the Annual Meeting, the size of our Board will be reduced to eight members. The Companys bylaws provide, and the terms of the Companys Board of Directors are classified so that approximately one-third of the directors are to be
elected annually. The Companys directors are generally elected to serve for a three-year period and until their respective successors shall have been elected and shall qualify. Two directors will be elected at the Annual Meeting. The
Companys Nominating Committee has nominated Roberta N. Arnold and Eric P. Blackhurst, each to serve as directors for three-year terms. Ms. Arnold and Mr. Blackhurst are current members of the Board of Directors, and each of
Ms. Arnold and Mr. Blackhurst have agreed to serve, if elected.
The table below sets forth certain information
regarding the composition of the Companys Board of Directors, including the terms of office of each director. It is intended that the proxies solicited on behalf of the Board of Directors (other than proxies in which the vote is withheld as to
one or more nominees) will be voted at the Annual Meeting for the election of the nominees identified below. If the nominee is unable to serve, the shares represented by all such proxies will be voted for the election of such other substitute as the
Board of Directors may recommend. At this time, the Board of Directors knows of no reason why the nominees might be unable to serve, if elected. Except as indicated herein, there are no arrangements or understandings between any nominee and any
other person pursuant to which such nominee was selected.
The Board of Directors recommends a vote FOR each of
the nominees listed in this Proxy Statement.
4
The following table sets forth certain information regarding the Companys directors.
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Name
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Age at March 31,
2012
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Position
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Current Term
Expires
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Director
Since
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Nominees
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Roberta N. Arnold
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57
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Director
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2012
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2004
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Eric P. Blackhurst
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51
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Director
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2012
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2009
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Directors Continuing in Office
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David H. Dunn
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59
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President, Chief Executive
Officer and Director
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2014
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1987
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James W. Fisher
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54
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Director
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2014
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2011
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Richard M. Reynolds
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62
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Chairman of the Board
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2014
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1985
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J. Donald Sheets
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51
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Director
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2013
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2007
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Howard I. Ungerleider
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44
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Director
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2013
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2011
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Joseph M. VanderKelen
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50
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Director
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2013
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2004
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(1)
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Includes service on the Board of Directors of Wolverine Bank.
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The Business Background of the Companys Directors and Executive Officers
The business experience for the past five years of each of the Companys directors and executive officers is set forth below. With respect to directors, the biographies also contain information
regarding the persons experience, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and the Board of Directors to determine that the person should serve as a director. Each director is also a
director of Wolverine Bank (the Bank). Unless otherwise indicated, directors and executive officers have held their positions for the past five years.
Directors and Nominees:
Roberta N. Arnold
is
President and Chief Executive Officer of the Charles J. Strosacker Foundation, a charitable foundation headquartered in Midland, Michigan, which grants to various entities in the mid-Michigan region. The foundation focuses on education, social
services, art, culture and community projects that improve the quality of life for its communities. Ms. Arnolds position with the Charles J. Strosacker Foundation, her knowledge of the region and her contacts with community leaders
provides the Board with insight to the many growth efforts being made in the Companys and the Banks market area.
Eric P. Blackhurst
is Assistant General Counsel for The Dow Chemical Company, a multinational science and technology
corporation headquartered in Midland, Michigan. Mr. Blackhurst has held his current position since 2009 and has held positions of increasing importance with Dow since 1990. Mr. Blackhursts extensive corporate, legal and international
experience, including experience serving as legal counsel to executives at a major corporation, provides the Board with general business acumen and critical insights into legal matters involving the Company and the Bank.
David H. Dunn
is the Companys President and Chief Executive Officer. He has been employed with the Bank since 1981
and has served as the Banks President and Chief Executive Officer since 1987. Mr. Dunns significant local banking experience and continued participation in the financial industry trade associations provides the Board with a
perspective on the day to day operations of the Bank and assists the Board in assessing the trends and developments in the financial institutions industry on a local and national basis. Additionally, Mr. Dunn is active in civic and charitable
organizations in Michigan, and has extensive ties to the community that support business generation by the Company and the Bank.
5
James W. Fisher
is President of Fisher Contracting, a civil contracting firm
headquartered in Midland, Michigan, which performs work for a variety of Federal, State, Municipal and private clients throughout Michigan and surrounding states. Mr. Fisher has been employed by Fisher Contracting since 1980 and has served as
President since 1995. Mr. Fishers extensive experience in the construction industry, experience in managing the operations of a business enterprise, and knowledge of the region and involvement with community organizations provides the
Board with general business acumen and insight in assessing strategic transactions involving the Company and the Bank.
Richard M. Reynolds
has served since July 2008 as President and Chief Executive Officer of MidMichigan Health, a
not-for-profit health system with more than 6,000 employees, physicians and volunteers, headquartered in Midland, Michigan. MidMichigan Health provides comprehensive health care, including hospitals, urgent care centers, home care, nursing homes,
physicians, medical offices and other specialty health services throughout a 12-county region in central Michigan. Prior to his appointment as President and Chief Executive Officer of MidMichigan Health, from July 2004 until July 2008,
Mr. Reynolds served as Executive Vice President of MidMichigan Health and President of MidMichigan Medical Center-Midland, and from 1980 until 2004, Mr. Reynolds served as Senior Vice President and Treasurer and Chief Financial Officer.
Mr. Reynolds executive management experience provides the Board with general business acumen. Additionally, his extensive contacts with not-for-profit entities and his knowledge of the communities and leaders in the Companys market
provides the Board with insight into with the needs of such communities, and assists the Board in assessing local government actions which may affect the Company and the Bank.
J. Donald Sheets
is Executive Vice President and Chief Financial Officer of Dow Corning Corporation, positions he has held since 2003. Mr. Sheets broad financial and commercial
experience provides the Board with general business acumen. Additionally, his experience in financial reporting, including auditing and accounting, economic evaluation and corporate transactions, provides the Board and the Audit Committee of the
Board insight into the accounting and reporting issues faced by the Company and by the Bank, and assists the Board with strategic transactions involving the Company and the Bank.
Howard Ungerleider
is a Senior Vice President of The Dow Chemical Company, is the President of Dows Performance
Plastics Division and is a member of Dows Executive Leadership Committee. Mr.Ungerleider joined Dow in 1990 and his career has spanned a wide variety of commercial, financial, geographic, functional and enterprise-level leadership roles both
in the United States and in Europe. Mr.Ungerleider served as Vice President of Investor Relations for The Dow Chemical Company, where he was responsible for facilitating dialogue between Dows stockholders and executive leadership. He was also
a member of the Finance Leadership Team, providing counsel and support to Dows Chief Financial Officer. Mr. Ungerleider comes to the Board bringing with him a vast knowledge in both the commercial and financial business sectors.
Joseph M. VanderKelen
is the President and Owner of Snow Machines, Inc., a global supplier of snow machines and
snowmaking equipment, and of construction and engineering services, located in Midland, Michigan. Mr. VanderKelens experience in managing the operations of a business enterprise provides the Board with general business acumen and insight
in assessing strategic transactions involving the Company and the Bank.
Executive Officers Who Are Not Directors:
Rick A. Rosinski
has been employed with the Bank since 1982, including as the Assistant Treasurer from 1985 to 1993,
Treasurer from 1993 to 2005, and most recently since 2005, as the Chief Operating Officer and Treasurer. Mr. Rosinski has over 29 years of experience in the financial services industry, and his responsibilities include supervision and oversight
of the following departments and functional areas: Accounting; Information Systems; Deposit and Loan Operations; Human Resources; Credit Analysis; Compliance; and Asset/Liability Management.
6
Jeffrey M. Southcott
joined Wolverine Bank in June 2011 as the Executive
Vice President. His responsibilities include overseeing and directing the Banks overall business development efforts and the supervision and oversight of the deposit and loan sales teams. Mr. Southcott has over 24 years of experience
in the financial services industry. Prior to his employment at Wolverine Bank, Mr. Southcott served as a Senior Vice President, Regional Executive. Under this position he held responsibility for 14 branches including branch employees,
operations, customer service, sales, and regional profit and loss.
Meetings and Committees of the Board of Directors
The Company conducts business through meetings of the Companys Board of Directors and its committees. During the year ended
December 31, 2011, the Board of Directors of Wolverine Bancorp, Inc. had twelve regular meetings, one special meeting and one annual meeting. The Board of Directors of Wolverine Bancorp, Inc. has established the following standing committees:
the Compensation Committee, the Nominating and Corporate Governance Committee and the Audit Committee. Each of these committees operates under a written charter, which governs their composition, responsibilities and operations.
Executive sessions of the independent directors of the board are held on a regular basis.
Board Independence
The
Board of Directors has determined that each of the Companys directors, with the exception of President and Chief Executive Officer David H. Dunn and Richard M. Reynolds, is independent as defined in the listing standards of the
Nasdaq Stock Market. Mr. Dunn is not independent because he is one of the Companys executive officers. Mr. Reynolds is not independent because Mr. Dunn was previously a member of the compensation committee of MidMichigan Health
where Mr. Reynolds serves as President and Chief Executive Officer. Mr. Dunn previously resigned from this committee. There were no transactions required to be reported under Transactions With Certain Related Persons, below
that were considered in determining the independence of the Companys directors.
Board Leadership Structure
At Wolverine Bancorp, Inc. the positions of Chairman of the Board and Chief Executive Officer are held by different individuals. The
Chairman of the Board provides guidance to the Chief Executive Officer, is active in setting the agenda for Board meetings, and presides over meetings of the full Board and the Executive Committee. The Chief Executive Officer is responsible for
setting the strategic direction for the Company and the day to day leadership and performance of the Company. Pursuant to Nasdaq listing rules, the Audit Committee, Compensation Committee and the Nominating and Corporate Governance Committee are
comprised and chaired solely by independent directors.
Boards Role in Risk Oversight
The Boards role in the Companys risk oversight process includes receiving regular reports from members of senior management on
areas of material risk to the Company, including operational, financial, legal and regulatory, strategic and reputational risks. The full Board (or the appropriate committee in the case of risks that are reviewed and discussed at committee meetings)
receives these reports from the appropriate risk owner within the organization to enable the Board or appropriate committee to understand the Companys risk identification, risk management and risk mitigation strategies. When a
committee receives the report, the Chairman of the relevant committee will report on the discussion to the full Board at the next Board meeting. This enables the Board and its committees to coordinate the risk oversight role, particularly with
respect to risk interrelationships.
7
The Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee consists of directors Eric P. Blackhurst (Chairman), Roberta N. Arnold, Howard I.
Ungerleider, and Joseph M. VanderKelen each of whom is considered independent as defined in the Nasdaq corporate governance listing standards. The Board of Directors has adopted a written charter for the Committee. The Nominating and
Corporate Governance Committee charter is posted on the Company website:
www.wolverinebank.com
. The Nominating and Corporate Governance Committee met two times during 2011.
The functions of the Nominating and Corporate Governance Committee include the following:
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to lead the search for individuals qualified to become members of the Board and to select director nominees to be presented for stockholder approval;
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to review and monitor compliance with the requirements for board independence;
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to review the committee structure and make recommendations to the Board regarding committee membership; and.
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to develop and recommend corporate governance guidelines to the Board of Directors for its approval.
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The Nominating and Corporate Governance Committee identifies nominees by first evaluating the current members of the Board of Directors
willing to continue in service. Current members of the Board with skills and experience that are relevant to the Companys business and who are willing to continue in service are first considered for re-nomination, balancing the value of
continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of the Board does not wish to continue in service, or if the Committee or the Board decides not to re-nominate a member for re-election,
or if the size of the Board is increased, the Committee would solicit suggestions for director candidates from all Board members. In addition, the Committee is authorized by its charter to engage a third party to assist in the identification of
director nominees. The Nominating and Corporate Governance Committee would seek to identify a candidate who at a minimum satisfies the following criteria:
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has personal and professional ethics and integrity;
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has had experiences and achievements that have given him or her the ability to exercise and develop good business judgment;
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is willing to devote the necessary time to the work of the Board and its committees, which includes being available for Board and committee meetings;
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is familiar with the communities in which the Company operates and/or is actively engaged in community activities;
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is involved in other activities or interests that do not create a conflict with his or her responsibilities to us and the Companys stockholders;
and
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has the capacity and desire to represent the balanced, best interests of the Companys stockholders as a group, and not primarily a special
interest group or constituency.
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In addition, the Nominating and Corporate Governance Committee will also
take into account whether a candidate satisfies the criteria for independence under the Nasdaq corporate governance listing standards and, if a nominee is sought for service on the Audit Committee, whether the candidate would satisfy the
SECs independence standards applicable to members of the Companys audit committee, the financial and accounting expertise of a candidate, including whether an individual qualifies as an audit committee financial expert.
The Company does not maintain a specific diversity policy, but diversity is considered in the Companys review of candidates.
Diversity includes not only gender and ethnicity, but the various perspectives that come from having differing viewpoints, geographic and cultural backgrounds, and life experiences.
8
Procedures for the Recommendation of Director Nominees by Stockholders
The Nominating and Corporate Governance Committee has adopted procedures for the submission of recommendations for director nominees by
stockholders. Stockholders may submit the names of qualified candidates for director by writing to the Corporate Secretary, at 5710 Eastman Avenue, Midland, Michigan 48640. To be timely, the submission of a candidate for director by a stockholder
must be received by the Corporate Secretary not less than 80 days nor more than 90 days prior to the date of any such meeting; provided, that if less than 90 days notice or prior public disclosure of the date of the meeting is given to
stockholders, such written notice must be received by the Secretary of the Company not later than the tenth day following the day on which notice of the meeting was mailed to stockholders or such public disclosure was made.
The submission must include the following information:
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the name and address of the stockholder as he or she appears on the Companys books, and number of shares of the Companys common stock that
are owned beneficially by such stockholder (if the stockholder is not a holder of record, appropriate evidence of the stockholders ownership will be required);
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the name, address and contact information for the candidate, and the number of shares of the Companys common stock that are owned by the
candidate (if the candidate is not a holder of record, appropriate evidence of the stockholders ownership will be required);
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a statement of the candidates business and educational experience;
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such other information regarding the candidate as would be required to be included in the proxy statement pursuant to SEC Regulation 14A;
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a statement detailing any relationship between the candidate and us;
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a statement detailing any relationship between the candidate and any of the Companys customers, suppliers or competitors;
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detailed information about any relationship or understanding between the proposing stockholder and the candidate; and
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a statement that the candidate is willing to be considered and willing to serve as a director if nominated and elected.
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A nomination submitted by a stockholder for presentation by the stockholder at an annual meeting of stockholders must comply with the
procedural and informational requirements described in Advance Notice of Business to be Conducted at Annual Meeting.
The committee did not receive any stockholder-recommended nominees for inclusion in this Proxy Statement.
Stockholder Communications with the Board
Any of the Companys
stockholders who want to communicate with the Board of Directors or with any individual director can write to the Companys Corporate Secretary, at 5710 Eastman Avenue, Midland, Michigan 48640. The letter should indicate that the author is a
stockholder and if shares are not held of record, should include appropriate evidence of stock ownership. Depending on the subject matter, management will:
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forward the communication to the director or directors to whom it is addressed;
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attempt to handle the inquiry directly, for example, where it is a request for information about us or it is a stock-related matter; or
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not forward the communication if it is primarily commercial in nature, relates to an improper or irrelevant topic, or is unduly hostile, threatening,
illegal or otherwise inappropriate.
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9
At each Board meeting, management shall present a summary of all communications received
since the last meeting that were not previously forwarded and make those communications available to the directors.
Code of Ethics
The Company has adopted a Code of Ethics that is applicable to the Companys principal executive officer,
principal financial officer, principal accounting officer or controller, and persons performing similar functions. This Code is designed to deter wrongdoing and to promote honest and ethical conduct, the avoidance of conflicts of interest, full and
accurate disclosure and compliance with all applicable laws, rules and regulations. There were no amendments made to or waivers from the Companys Code of Ethics in 2011. A copy of the Companys Code of Ethics is posted on the
Companys website, www.wolverinebank.com.
Attendance at Annual Meetings of Stockholders
The Company does not have a policy regarding director attendance at annual meetings of stockholders, although directors are requested to
attend these meetings absent unavoidable conflicts. All of our directors attended our 2011 Annual Meeting of Stockholders.
Compensation
Committee
The members of the Compensation Committee are directors Joseph M. VanderKelen, who serves as chairman, Roberta
N. Arnold and J. Donald Sheets, each of whom is considered independent as defined in the Nasdaq corporate governance listings standards. The committee is responsible for reviewing all compensation matters related to the Companys
employees. The Compensation Committee operates under a written charter which is available at the Companys website, www.wolverinebank.com. The Compensation Committee met four times during 2011.
Pursuant to the Companys Compensation Committee Charter, the Compensation Committee approves the compensation objectives for the
Company and the Bank and establishes the compensation for the Chief Executive Officer and other executives. The Companys President and Chief Executive Officer provides recommendations to the Compensation Committee on matters of compensation
philosophy, plan design and the general guidelines for employee compensation. However, Mr. Dunn does not vote on and is not present for any discussion of his own compensation. These recommendations are then considered by the Compensation
Committee. The Compensation Committee, which is comprised solely of non-employee directors, all of whom the Board of Directors has determined are independent in accordance with the Nasdaq listing standards, reviews all compensation components for
the Companys Chief Executive Officer and other highly compensated executive officers compensation including base salary, annual incentive, long-term incentives and other perquisites. In addition to reviewing competitive market values,
the committee also examines the total compensation mix, pay-for-performance relationship, and how all elements, in the aggregate, comprise the executives total compensation package. Decisions by the Compensation Committee with respect to the
compensation of executive officers are approved by the full Board of Directors.
Audit Committee
The Companys Audit Committee consists of directors J. Donald Sheets (Chairman), Eric P. Blackhurst, James W. Fisher, and Ron R.
Sexton each of whom is independent under the Nasdaq corporate governance listing standards and SEC Rule 10A-3. The Board has determined that Mr. Sheets and Mr. Sexton qualify as an audit committee financial expert
as that term is used in the rules and regulations of the SEC.
10
The Audit Committee reviews the contents of and conclusions in audit reports prepared by the
Companys independent registered public accounting firm, reviews and approves the annual engagement of the Companys independent registered public accounting firm, the Companys audit and compliance related policies, and reviews with
management and the Companys independent registered public accounting firm, the Companys financial statements and internal controls. The Board of Directors has adopted a written charter for the Audit Committee, which is posted on the
Company website at www.wolverinebank.com. The Audit Committee met six times during the year ended December 31, 2011.
Audit Committee
Report
As part of its ongoing activities, the Audit Committee has:
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Reviewed and discussed with management our audited consolidated financial statements for the year ended December 31, 2011;
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Discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61,
Communications with
Audit
Committees, as amended (AICPA, Professional
Standards,
Vol. 1. AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and
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Received the written disclosures and the letter from the independent auditor required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent auditors communications with the Audit Committee concerning independence, and discussed with the independent auditor the independent auditors independence.
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Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Companys
audited consolidated financial statements be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2011.
This report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such acts.
The Audit Committee:
J. Donald Sheets (Chairman)
Eric P. Blackhurst
James W. Fisher
Ron R. Sexton
Section 16(a) Beneficial Ownership Reporting Compliance
The Companys common stock is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934. The Companys executive officers and directors and beneficial owners of greater
than 10% of the Companys common stock (10% beneficial owners) are required to file reports with the SEC disclosing beneficial ownership and changes in beneficial ownership of the Companys common stock. SEC rules require
disclosure in the Companys Proxy Statement and Annual Report on Form 10-K of the failure of an executive officer, director or 10% beneficial owner to file such forms on a timely basis. Based on the Companys review of ownership reports
and management questionnaires, the Company believes that none of the Companys executive officers or directors failed to file these reports on a timely basis for 2011.
11
Executive Officer Compensation
Summary Compensation Table.
The table below summarizes for the years ended December 31, 2011 and 2010 the total
compensation paid to or earned by the Companys President and Chief Executive Officer, David H. Dunn, and the Companys two other most highly compensated executive officers. Each individual listed in the table below is referred to as a
named executive officer.
For a narrative description of information included in this table, please see the discussion in this
proxy statement below.
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Summary Compensation Table For the Year
Ended December 31, 2011 and 2010
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Name and principal
position
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Year
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Salary
($)
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Bonus
($)
(1)
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Nonqualified
deferred
compensation
earnings
($)
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All other
compensation
($)
(2)
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Total
($)
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David H. Dunn
President and Chief Executive Officer
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2011
2010
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197,693
186,122
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110,000
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47,545
35,767
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355,238
221,889
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Rick A. Rosinski
Chief Operating Officer and Treasurer
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2011
2010
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108,520
97,726
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50,000
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21,693
9,349
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180,213
107,075
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Jeffrey M. Southcott
(3)
Executive Vice President
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2011
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59,999
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20,000
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331
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80,330
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(1)
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The amounts in this column for Messr. Dunn and Rosinski represent both the cash profit sharing and a discretionary bonus. The amount for Mr. Southcott
represents cash profit sharing only.
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(2)
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The amounts in this column reflect what Wolverine Bank paid for, or reimbursed, the applicable named executive officer for the various benefits and perquisites
received. A break-down of the various elements of compensation in this column is set forth in the table provided below.
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(3)
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Mr. Southcott began his employment with Wolverine Bank on June 27, 2011 and 2011 compensation figures reflect compensation paid to Mr. Southcott
beginning on that date.
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All Other
Compensation
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Name
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Year
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Automobile
Expenses
($)
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Board
and
Other Fees
($)
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Employer
Contributions
to 401(k)
Plan
($)
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Employer
Allocation
to
ESOP
($)
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Life
Insurance
Premiums
Paid
($)
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Total All
Other
Compensation
($)
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David H. Dunn
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2011
2010
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4,721
8,327
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(1)
(1)
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15,000
19,500
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9,800
7,158
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17,230
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794
782
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47,545
35,767
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Rick A. Rosinski
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2011
2010
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3,500
4,750
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(2)
(2)
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6,340
3,909
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11,153
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700
690
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21,693
9,349
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Jeffrey M. Southcott
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2011
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331
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331
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(1)
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Represents amount taxed to Mr. Dunn for his use of an automobile provided by Wolverine Bank.
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(2)
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Represents fees paid to Mr. Rosinski for service as secretary to the Board of Directors.
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12
Benefit Plans and Agreements
Employment Agreements
. On July 1, 2011, Wolverine Bank entered into amended and restated employment agreements, effective as of July 1, 2011, with David H. Dunn, President and
Chief Executive Officer, and Rick A. Rosinski, Chief Operating Officer and Treasurer. The agreements provide for a three-year term for Mr. Dunn and a two-year term for Mr. Rosinski. The agreements may be extended on an annual basis,
unless written notice of non-renewal is given by the Board of Directors of Wolverine Bank.
Under the agreements, the 2012
base salary for Mr. Dunn is $210,000 and $120,000 for Mr. Rosinski. In addition to base salary, the agreements provide for, among other things, the executives right to participate in employee benefit plans and to receive fringe
benefits applicable to senior executives. Upon termination of the executives employment for cause, as defined in the agreements, the executives would have no right to receive compensation or other benefits for any period after
termination. The executives are entitled to severance payments and benefits in the event of their termination of employment under specified circumstances, including their termination by Wolverine Bank for reasons other than for cause,
disability or death, or in the event the executive resigns within 90 days following a good reason, as defined in the agreements.
In the event of the executives involuntary termination or resignation following a good reason, Mr. Dunn would be entitled to receive his base salary and the additional contributions that he
would have earned under the Wolverine Bank 401(k) plan and ESOP for a period of up to 36 months (24 months for Mr. Rosinski), provided, however, that the executives payments will be reduced by the salary received from another employer if
he becomes employed by a third party during such 36 month period (24 month period for Mr. Rosinski). In addition, the executive will continue to receive vesting credit under any outstanding stock option or equity grant during the term the
executive is receiving cash severance payments. Mr. Dunn would be entitled to the continuation of his life, medical, and dental coverage for 36 months (24 months for Mr. Rosinski) following his termination date, provided however that such
benefits will cease immediately upon the date on which Wolverine Bank is no longer obligated to provide the executive with his severance payments as described above. Section 409A of the Internal Revenue Code may require that a portion of the
above severance payments cannot be made until six months after termination of employment if the executive is a specified employee as defined under Section 409A of the Internal Revenue Code.
In the event of a change in control, followed within 12 months by the executives termination for a reason other than for cause or
if the executive terminates voluntarily under specified circumstances that constitute a good reason constructive termination (as defined in each of the agreements), Mr. Dunn will receive an amount equal to three times (two times for
Mr. Rosinski) his base salary and the amount of contributions that would have been earned under the Wolverine Bank 401(k) plan and ESOP for three years (two years for Mr. Rosinski), payable in a lump sum. Wolverine Bank will also
continue to pay for each executives life, health and dental coverage for up to three years (two years for Mr. Rosinski).
The executives right to receive the severance payments and benefits described above is conditioned upon: (i) the executive executing a separation and release agreement in the form approved by
the board; and (ii) the executives compliance with certain restrictions on his ability to compete, or solicit business or employees of the Bank during the period in which the executive is receiving severance payments and benefits from the
Bank.
Assuming the agreements were in effect and the executives had been terminated in connection with a change in control as
of December 31, 2011, based on the compensation information included in Executive Officer Compensation, Mr. Dunn and Mr. Rosinski would have received aggregate severance payments of approximately $706,891 and $271,906,
respectively, based upon each executives current level of compensation, and this does not take into account any potential reduction under Section 280G of the Internal Revenue Code.
Long Term Incentive Plans.
The Bank maintains three Long Term Incentive Plans. Mr. Dunn is the only participant
in the Bank Long Term Incentive Plan, effective as of January 1, 2002, and Messrs. Dunn and Rosinski are the only participants in the Bank Long Term Incentive Plans, effective as of January 1, 2006 (collectively, the Long Term
Incentive Plans). Prior to June 30, 2010, the Long Term Incentive Plans generally provided that a bonus could be earned during a three-year performance measurement period, depending on the satisfaction of various performance metrics of
the Bank, and that the amount of the bonus, if any, must be deferred for at least four years following the completion of the performance measurement period. Effective as of June 30, 2010, the Bank amended the Long Term Incentive Plans to
provide that no further bonuses may be earned under the plans and that interest will continue to be credited annually using an interest rate equal to the one year U.S. Treasury Note rate plus the average yield cost analysis spread rate earned by the
Bank.
13
In August 2010, the Board of Directors amended the Long Term Incentive Plans to permit the
amounts credited on behalf of Messrs. Dunn and Rosinski to be invested in the common stock of Wolverine Bancorp, Inc. In August 2010, the Board of Directors also adopted a rabbi trust to hold shares of common stock of Wolverine Bancorp, Inc. that
may be purchased with the amounts credited under the Long Term Incentive Plans. Shares of common stock of Wolverine Bancorp, Inc. purchased with amounts credited under the Long Term Incentive Plans will be distributed in the form of common stock of
Wolverine Bancorp, Inc.
401(k) Plan.
The Bank maintains the Wolverine Bank 401(k) Plan, a tax-qualified defined
contribution plan for eligible employees (the 401(k) Plan). Employees who have completed three consecutive months of service will be eligible to participate in the 401(k) Plan. However, employees will not be eligible to receive employer
contributions until they attain age 21 and have completed one year of service.
Under the 401(k) Plan a participant may elect
to defer, on a pre-tax basis, up to 100% of his or her salary in any plan year, subject to limits imposed by the Internal Revenue Code. For 2011, the salary deferral contribution limit was $16,500, provided, however, that a participant over age 50
may contribute an additional $5,500 to the 401(k) Plan. In addition to salary deferral contributions, the Bank will make a matching contribution equal to 100% of the participants salary deferral contributions for the plan year that is not in
excess of 3% of the participants annual salary, plus 50% of the participants salary deferral contributions in excess of 3% of his or her annual salary but not in excess of 5% of annual salary. A participant is always 100% vested in his
or her salary deferral contributions and employer matching contributions. In addition, the Bank may also provide a discretionary employer contribution, which is shared among all eligible participants and would be subject to vesting requirements.
Generally, unless the participant elects otherwise, the participants account balance will be distributed as a result of a participants termination of employment with the Bank.
Each participant has an individual account under the 401(k) Plan and may direct the investment of his or her account among a variety of
investment options. In connection with the conversion, the 401(k) Plan was amended to add another investment alternative, the Wolverine Bancorp, Inc. Stock Fund. The stock fund permits a participant to invest his or her 401(k) Plan funds in
Wolverine Bancorp, Inc. common stock.
Cash Profit Sharing and Discretionary Bonuses.
Historically, the Bank has
paid a discretionary cash profit sharing award to many of the Banks employees, including the named executive officers. Employees that are covered under the Banks incentive pay program are generally not eligible for this discretionary
cash profit sharing award. The discretionary cash profit sharing award is not paid pursuant to a written plan. In 2011, the Bank elected to award $200,400 as cash profit sharing and $120,000 as discretionary bonuses to eligible employees. The amount
of an employees cash profit sharing award depends on a number of factors, including his or her performance, full-time or part-time status and level of responsibility.
Defined Benefit Pension Plan.
The Bank participated in the Pentegra Defined Benefit Plan for Financial Institutions, a multi-employer pension plan (the Pension
Plan). Effective June 30, 2010, the annual benefit provided to employees under the Pension Plan was frozen. During the year ended December 31, 2010, the Bank recognized $3.1 million as pension expense. Included in this amount in
connection with the freezing and funding of the Pension Plan, the Bank recognized a $2.9 million expense, which it accrued in the fiscal quarter ending June 30, 2010 in accordance with generally accepted accounting principles.
Employee Stock Ownership Plan.
In connection with the conversion, the Bank adopted an employee stock ownership plan for
eligible employees. Eligible employees who have attained age 21 and were employed by us as of January 1, 2011 began participation in the employee stock ownership plan on the later of the effective date of the employee stock ownership plan or
upon the first entry date commencing on or after the eligible employees completion of 1,000 hours of service during a continuous 12-month period.
14
The employee stock ownership plan trustee purchased, on behalf of the employee stock
ownership plan, 200,600 which equals 8% of the total number of shares of the Companys common stock issued in the offering. The employee stock ownership plan funded its stock purchase with a loan from the Company equal to the aggregate purchase
price of the common stock. The loan will be repaid principally through the Banks contribution to the employee stock ownership plan and dividends payable on common stock held by the employee stock ownership plan over the anticipated 20-year
term of the loan. The interest rate for the employee stock ownership plan loan is expected to be an adjustable rate equal to the prime rate, as published in
The Wall Street Journal
, on the closing date of the offering. Thereafter the interest
rate will adjust annually and will be the prime rate on the first business day of the calendar year, retroactive to January 1 of such year.
The trustee will hold the shares purchased by the employee stock ownership plan in an unallocated suspense account, and shares will be released from the suspense account on a pro-rata basis as the Company
repays the loan. The trustee will allocate the shares released among participants on the basis of each participants proportional share of compensation relative to all participants. A participant will become vested in his or her account balance
at a rate of 20% per year over a six-year period, beginning in the second year. Participants who were employed by the Bank immediately prior to the offering will receive credit for vesting purposes for years of service prior to adoption of the
employee stock ownership plan. Participants also will become fully vested automatically upon normal retirement, death or disability, a change in control, or termination of the employee stock ownership plan. Generally, participants will receive
distributions from the employee stock ownership plan upon separation from service. The employee stock ownership plan reallocates any unvested shares forfeited upon termination of employment among the remaining participants.
The employee stock ownership plan permits participants to direct the trustee as to how to vote the shares of common stock allocated to
their accounts. The trustee votes unallocated shares and allocated shares for which participants do not provide instructions on any matter in the same ratio as those shares for which participants provide instructions, subject to fulfillment of the
trustees fiduciary responsibilities.
Under applicable accounting requirements, the Bank will record a compensation
expense for the employee stock ownership plan at the fair market value of the shares as they are committed to be released from the unallocated suspense account to participants accounts, which may be more or less than the original issue price.
The compensation expense resulting from the release of the common stock from the suspense account and allocation to plan participants will result in a corresponding reduction in the Companys earnings.
Other than our employee stock ownership plan, the Company has no equity-based benefit plans that were not approved by stockholders.
15
Director Compensation
The following table sets forth for the year ended December 31, 2011 certain information as to the total remuneration the Company paid to the Companys directors other than Mr. Dunn.
Information with respect to director fees paid to Mr. Dunn is included above in Executive Officer Compensation Summary Compensation Table.
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Directors Compensation Table For the Year Ended December 31, 2011
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Name
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|
Fees earned
or paid
in
cash
($)
|
|
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Nonqualified
deferred
compensation
earnings
($)(1)
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All Other
Compensation
($)
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Total
($)
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Roberta N. Arnold
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16,000
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16,000
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Eric P. Blackhurst
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20,500
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20,500
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Herbert L. Camp
(2)
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4,000
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4,000
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James W. Fisher
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10,500
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10,500
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Richard M. Reynolds
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32,000
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32,000
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Ron R. Sexton
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19,500
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19,500
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J. Donald Sheets
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20,000
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20,000
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Howard I. Ungerleider
(3)
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3,000
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3,000
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Joseph M. VanderKelen
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18,500
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18,500
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(1)
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No above-market earnings were paid to the directors under the Wolverine Bank Directors Deferral Plan.
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(2)
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Dr. Camp retired from the board effective the date of the 2011 Annual Meeting, May 23, 2011.
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(3)
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Mr. Ungerleider was appointed to the Board effective September 12, 2011.
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Director Fees
Each individual who serves as a director of the Bank earns
annual attendance and committee fees. For the year ended December 31, 2011, the chairman of the board was paid a fee of $2,000 from January through June of 2011 and $2,500 thereafter, and each director was paid a fee of $1,000, for each board
meeting attended. Additionally, for each committee meeting attended, each director was paid a fee of $1,000 if the director served as chairperson of the committee or $500 if the director served as a member of the committee.
Each person who serves as a director of the Company also serves as a director of the Bank and earns director and committee fees only in
his or her capacity as a board or committee member of the Bank.
Director Plans
Directors Deferral Plan
.
The Bank adopted the Wolverine Bank Directors Deferral Plan, effective January 1, 2005.
Each director who has not reached age 70 is eligible to participate in the plan. The plan allows for a participant to elect to defer all or a portion of his or her director fees to the plan for each plan year. All amounts contributed to the plan are
credited to a bookkeeping account established on behalf of each participant. The participants account balance will be credited with earnings on the last day of each plan year based on an applicable rate of return determined by the Compensation
Committee of the Board, which has been a rate equal to the five-year U.S. Treasury Rate. Each participant will have the right to elect a specified date for the payment of his or her account balance, with the payment to be made or commence on
January 1 of the calendar year immediately following the specified date. Additionally, each participant can elect for his or her account balance to be paid in a lump sum or in periodic installment payments payable annually over a period of
five, ten or 15 years, or another elected period of time. As of January 2012 deferred compensation owed to the one participating director in the plan was paid, and thereafter the plan was terminated.
16
Transactions With Certain Related Persons
In the ordinary course of business, the Bank makes loans available to its directors, officers and employees. These loans are made in the
ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans to other borrowers not related to the Bank. Management believes that these loans neither
involve more than the normal risk of collectibility nor present other unfavorable features.
The Sarbanes-Oxley Act of 2002
generally prohibits us from making loans to the Companys executive officers and directors, but it contains a specific exemption from such prohibition for loans made by the Bank to the Companys executive officers and directors in
compliance with federal banking regulations. At December 31, 2011, all of the Banks loans to directors and executive officers were made in the ordinary course of business, were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable loans to persons not related to the Bank, and did not involve more than the normal risk of collectability or present other unfavorable features.
PROPOSAL II RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Companys Board of Directors has approved the engagement of BKD, LLP to serve as the Companys
independent registered public accounting firm for the year ending December 31, 2012. Auditors are not deemed independent unless the Audit Committee has approved the engagement, or alternatively, the engagement is entered into pursuant to
detailed pre-approval policies and procedures established by the Audit Committee which sets forth each specific service to be performed by the auditor.
At the Annual Meeting, stockholders will consider and vote on the ratification of the engagement of BKD, LLP for the year ending December 31, 2012. A representative of BKD, LLP is expected to attend
the Meeting to respond to appropriate questions and to make a statement if he or she so desires.
Change in Accountants
Prior to the Companys conversion and stock offering, the financial statements of the Bank were audited by Doeren Mayhew. At the time
Doeren Mayhew performed audit services for the Bank, Wolverine Bank was not a public company and was not subject to Securities and Exchange Commission regulations. In connection with the stock offering and the filing of the Companys
registration statement, on June 3, 2010, the Bank engaged BKD, LLP, an independent registered public accounting firm, to audit its consolidated financial statements as of and for the years ended December 31, 2009 and December 31,
2008. These financial statements, including BKD, LLPs Audit Report thereon, were included in the Companys prospectus and in the registration statement. The Bank had no relationship with BKD, LLP in any way during the years ended
December 31, 2009 or 2008 or during any period subsequent to December 31, 2009 prior to engaging BKD, LLP.
In
connection with the Banks decision to conduct the conversion and stock offering, on May 7, 2010, Doeren Mayhew, the Banks former independent registered public accounting firm, declined to stand for re-election as the independent
public accounting firm for the Bank. This decision was approved by the Audit and Compliance Committee of the Banks Board of Directors.
During the prior two years, there was not any disagreement between Doeren Mayhew and the Bank whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure,
auditing scope or procedure, which, if not resolved to the satisfaction of Doeren Mayhew, would have caused Doeren Mayhew to make a reference to the subject matter of the disagreement in connection with its reports.
Doeren Mayhews reports on the financial statements of the Bank for the past two years have not contained an adverse opinion or
disclaimer of opinion, or been modified as to uncertainty, audit scope or accounting principles.
17
The Company provided Doeren Mayhew with a copy of the disclosure contained in the prospectus
(reproduced in this proxy statement), which was received by Doeren Mayhew on September 7, 2010. Doeren Mayhew has issued a letter stating that it agrees with the Companys disclosure on this matter. This letter was included as an exhibit
to the Companys registration statement filed with the Securities and Exchange Commission.
Audit
Fees
. The aggregate fees billed for professional services rendered by BKD, LLP for the audit of the Companys annual financial statements and for the review of the Companys Forms 10-Q and 10-K were $88,900 and $91,991 for
2011 and 2010, respectively. Of the $91,991 for 2010, $40,000 was attributable to a re-audit of the Banks 2009 and 2008 annual financial statements by BKD, LLP.
Audit-Related Fees
. The aggregate fees billed for professional services rendered by BKD, LLP that were reasonably related to the performance of the audits described above were
$0 and $107,000 for 2011 and 2010, respectively. The audit-related fees for 2010 include fees incurred in connection with the Companys initial stock offering and review of the SEC registration statement filed in connection therewith.
Tax Fees
. The aggregate fees billed for professional services by BKD, LLP for tax services were $12,975 and
$0 for 2011 and 2010 respectively. The aggregate fees billed for professional services by Doeren Mayhew for tax services were $4,884 for 2010.
All Other Fees
. There were no fees billed for professional services rendered for the Company by BKD, LLP for service other than those listed above for the years 2011 and 2010, respectively.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Auditor
The Audit Committees policy is to pre-approve all audit and non-audit services provided by independent auditors. These services may
include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to particular service or category of services and is generally subject to a
specific budget. The independent auditors and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the
services performed to date. The Audit Committee pre-approved 100% of the tax fees and the other non-audit fees described above during 2011 and 2010.
The Audit Committee has considered whether the provision of non-audit services by BKD, LLP, relating primarily to tax services, is compatible with maintaining the independence of BKD, LLP. The Audit
Committee concluded that performing such services would not affect the independence of BKD, LLP in performing its function as auditor of the Company.
In order to ratify the selection of BKD, LLP as the independent registered public accounting firm for 2012, the proposal must receive a majority of the votes cast, either in person or by proxy, in favor
of such ratification. The Board of Directors recommends a vote FOR the ratification of BKD, LLP as independent registered public accounting firm for 2012.
PROPOSAL III APPROVAL OF THE WOLVERINE BANCORP, INC. 2012
EQUITY
INCENTIVE PLAN
The Board of Directors has adopted, subject to stockholder approval, the Wolverine Bancorp, Inc. 2012
Equity Incentive Plan (the Equity Incentive Plan), to provide officers, employees and directors of Wolverine Bancorp, Inc. and Wolverine Bank with additional incentives to promote the growth and performance of Wolverine Bancorp, Inc.
Most of the companies that we compete with for directors and management-level employees are public companies that offer equity compensation as part of their overall director and officer compensation programs. By approving the Equity Incentive Plan,
our stockholders will give us the flexibility we need to continue to retain and attract highly qualified officers and directors by offering a competitive compensation program that is linked to the performance of our common stock.
18
The following is a summary of the material features of the Equity Incentive Plan, which is
qualified in its entirety by reference to the provisions of the Equity Incentive Plan, attached hereto as Appendix A.
General
Subject to permitted adjustments for certain corporate transactions, the Equity Incentive Plan authorizes the issuance or
delivery to participants of up to 351,050 shares of Wolverine Bancorp, Inc. common stock pursuant to grants of restricted stock awards, incentive stock options and non-qualified stock options, provided that the maximum number of shares of stock that
may be delivered pursuant to the exercise of stock options (all of which may be granted as incentive stock options) is 250,750 and the maximum number of shares of stock that may be issued as restricted stock awards is 100,300.
The Equity Incentive Plan will be administered by the members of Wolverine Bancorp, Inc.s Compensation Committee (the
Committee) who are Disinterested Board Members, as defined in the Equity Incentive Plan. The Committee has the authority and discretion to select the persons who will receive awards; establish the terms and conditions
relating to each award; adopt rules and regulations relating to the Equity Incentive Plan; and interpret the Equity Incentive Plan. The Equity Incentive Plan also permits the Committee to delegate all or any portion of its responsibilities and
powers.
The Committee may grant an award under the Equity Incentive Plan as an alternative to or replacement of an existing
award under the Equity Incentive Plan or any other plan of Wolverine Bancorp, Inc. or a subsidiary of Wolverine Bancorp, Inc., or as the form of payment for grants or rights earned or due under any other plan or arrangement of Wolverine Bancorp,
Inc. or a subsidiary of Wolverine Bancorp, Inc., including the plan of any entity acquired by Wolverine Bancorp, Inc. or a subsidiary of Wolverine Bancorp, Inc.
Eligibility
Employees and directors of Wolverine Bancorp, Inc. or its
subsidiaries are eligible to receive awards under the Equity Incentive Plan, except that non-employees may not be granted incentive stock options.
Types of Awards
The Committee may determine the type and terms and
conditions of awards under the Equity Incentive Plan, which shall be set forth in an award agreement delivered to each participant. Each award shall be subject to conditions established by the Committee that are set forth in the recipients
award agreement, and shall be subject to vesting conditions and restrictions as determined by the Committee; provided, however, that unless the Committee specifies a different vesting rate, no awards shall vest more rapidly than 20% per year
over a five-year period commencing one year from the date of grant. The Committee may grant Awards in a combination of incentive and non-qualified stock options or restricted stock.
Stock Options
.
A stock option is the right to purchase shares of common stock at a specified price for a specified
period of time. Under the Equity Incentive Plan, the exercise price may not be less than the fair market value of a share of our common stock on the date the stock option is granted. Fair market value for purposes of the Equity Incentive Plan means
(i) the final sales price of Wolverine Bancorp, Inc.s common stock as reported on the principal United States securities exchange on which the shares are listed or admitted to trading on the date in question, or if Wolverine Bancorp,
Inc.s common stock was not traded on such date, then on the last preceding date on which any reported sale of Wolverine Bancorp, Inc. common stock occurred, and without regard to after-hours trading activity in New York City, or (ii) if
the shares of our common stock are not listed or admitted to trading on any such exchange, then the closing bid quotation with respect to a share of our common stock on such date, as of the close of the market and without regard to after-hours
trading activity. The Committee will determine the fair market value of the common stock, in accordance with Section 422 of the Internal Revenue Code and applicable requirements of Section 409A of the Internal Revenue Code, if it cannot be
determined in the manner described above. Further, the Committee may not grant a stock option with a term that is longer than 10 years.
19
Stock options are either incentive stock options or non-qualified
stock options. Incentive stock options have certain tax advantages that are not available to non-qualified stock options, and must comply with the requirements of Section 422 of the Internal Revenue Code. Only officers and employees are
eligible to receive incentive stock options. Outside directors may only receive non-qualified stock options under the Equity Incentive Plan. Shares of common stock purchased upon the exercise of a stock option must be paid for at the time of
exercise in cash or by such other means as the Committee may from time to time permit, including: (i) by personal, certified or cashiers check, (ii) by tendering stock of Wolverine Bancorp, Inc. owned by the participant in
satisfaction of the exercise price, (iii) by a cashless exercise through a third party, or (iv) by a combination of the foregoing. The total number of shares that may be acquired upon the exercise of a stock option will be
rounded down to the nearest whole share.
Restricted Stock
.
A restricted stock award is a grant of common
stock, subject to vesting requirements, to a participant for no consideration or such minimum consideration as may be required by applicable law. Restricted stock awards may be granted only in whole shares of common stock and are subject to vesting
conditions and other restrictions established by the Committee as set forth in the Equity Incentive Plan or the award agreement. Prior to their vesting, unless otherwise determined by the Committee, the recipient of a restricted stock award may
exercise any voting rights with respect to common stock subject to an award and receive any dividends and distributions with respect to the common stock.
Prohibition Against Repricing of Options
.
The Equity Incentive Plan provides that neither the Committee nor the Board is authorized to make any adjustment or amendment that reduces or
would have the effect of reducing the exercise price of a stock option previously granted.
Limitation on Awards Under the Equity Incentive
Plan
The maximum number of shares of stock that may be available for awards under the Equity Incentive Plan is 351,050,
provided that the maximum number of shares of stock that may be delivered pursuant to the exercise of stock options (all of which may be granted as incentive stock options) is 250,750 and the maximum number of shares of stock that may be issued as
restricted stock awards is 100,300. Awards under the Plan may be made in any combination of shares of restricted stock or stock options.
To the extent any shares of stock covered by an award (including restricted stock awards) under the Equity Incentive Plan are not delivered to a participant or beneficiary because the award is forfeited
or canceled or because a stock option is not exercised, then such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of stock available for delivery under the Plan.
In the event of a corporate transaction involving the stock of Wolverine Bancorp, Inc. (including, without limitation, any stock
dividend, stock split or other special and nonrecurring dividend or distribution, recapitalization, reorganization, merger, consolidation, spin-off, combination or exchange of shares), the Committee will, in an equitable manner, adjust any or all of
the number and kind of securities deemed to be available for grants of stock options and restricted stock, the number and kind of securities that may be delivered or deliverable in respect of outstanding stock options and restricted stock and the
exercise price of stock options. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, stock options and restricted stock.
Performance Features
General.
A federal income tax deduction
for Wolverine Bancorp, Inc. will generally be unavailable for annual compensation in excess of $1.0 million paid to its chief executive officer or three other most highly compensated officers (other than its chief financial officer). However,
amounts that constitute performance-based compensation (as that term is used in section 162(m) of the Internal Revenue Code) are not counted toward the $1.0 million limit. The Equity Incentive Plan is designed so that stock options will
be considered performance-based compensation. The Committee may designate whether any restricted stock awards granted to any participant are intended to be performance-based compensation.
Performance Measures.
The performance measures that may be used for such awards will be based on any one or more
performance measures, as selected by the Committee, including: book value; tangible book value per share; return on equity; basic cash earnings per share; diluted earnings per share; net income or net income before taxes; cash earnings; net interest
income; non-interest income; general and administrative expense to average assets ratio; cash general and administrative expense to average assets ratio; efficiency ratio; cash efficiency ratio; return
20
on average assets; cash return on average assets; return on average stockholders equity; cash return on average stockholders equity; return on average tangible stockholders
equity; cash return on average tangible stockholders equity; core earnings; operating income; operating efficiency ratio; net interest rate margin or net interest rate spread; growth in assets, loans, or deposits; loan production volume;
non-performing loans; cash flow; strategic business objectives consisting of one or more objectives based upon meeting specified cost targets, business expansion goals, and goals relating to acquisitions or divestitures, or goals relating to capital
raising and capital management; or any combination of the foregoing. Performance measures may be based on the performance of Wolverine Bancorp, Inc. as a whole or of any one or more subsidiaries or business units of Wolverine Bancorp, Inc. or a
subsidiary and may be measured relative to a peer group, an index or a business plan. The Committee may adjust performance measures in certain circumstances; provided, however, no adjustment may be made with respect to an award that is intended to
be performance-based compensation within the meaning of section 162(m) of the Internal Revenue Code, except to the extent the Committee exercises negative discretion as permitted under applicable law for purposes of an exception under section
162(m) of the internal Revenue Code. In establishing the performance measures, the Committee may provide for the inclusion or exclusion of certain events, factors or items, at the sole discretion of the Committee.
Vesting of Awards
The
Committee may specify vesting requirements on any award. If the vesting of an award under the Equity Incentive Plan is conditioned on the completion of a specified period of service with Wolverine Bancorp, Inc. or its subsidiaries, without the
achievement of performance measures or objectives, then the required period of service for full vesting shall be determined by the Committee and evidenced in an award agreement. Unless the Committee specifies otherwise, awards may not vest at a rate
exceeding 20% per year, commencing one year from the date of grant, subject to acceleration of vesting, to the extent permitted by the Committee, in the event of death, disability, retirement, or involuntary termination of employment or service
following a change in control.
Change in Control
Unless otherwise stated in an award agreement, upon the occurrence of an involuntary termination of employment or service following a change in control of Wolverine Bancorp, Inc., all outstanding options
then held by a participant will become fully exercisable and all restricted stock awards shall be fully earned and vested. For the purposes of the Equity Incentive Plan, a change in control occurs when (a) Wolverine Bancorp, Inc. or Wolverine
Bank merges into or consolidates with another entity or merges another bank or corporation into Wolverine Bancorp, Inc. or Wolverine Bank, and as a result, less than a majority of the combined voting power of the resulting corporation is held by
persons who were stockholders of the Company or the Bank before the merger or consolidation; (b) a person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of Wolverine Bancorp, Inc.s or
Wolverine Banks voting securities; (c) during any period of two consecutive years, individuals who constitute Wolverine Bancorp, Inc.s or Wolverine Bank Board of Directors at the beginning of the two-year period cease for any
reason to constitute at least a majority of Wolverine Bancorp, Inc.s or Wolverine Bank Board of Directors, provided that each director who is first elected by the Board by a vote of at least two-thirds of the directors who were directors
at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; (d) Wolverine Bancorp, Inc. or Wolverine Bank sells to a third party all or substantially all of its assets.
In the event of a change in control, any performance measure attached to an award under the Equity Incentive Plan shall be deemed
satisfied in full as of the date of the change in control.
Forfeiture
The Committee may specify in an award agreement that rights and benefits with respect to an award may be subject to reduction,
cancellation, forfeiture or recoupment upon termination of employment for cause; termination of services with Wolverine Bancorp, Inc. or its affiliate or subsidiary; any material violation of one or more of Wolverine Bancorp, Inc.s policies;
breach of noncompetition, confidentiality or other restrictive covenants that apply to the employee or director; or any other conduct that is detrimental to Wolverine Bancorp, Inc.s business or reputation, its affiliates and/or its
subsidiaries.
21
If Wolverine Bancorp, Inc. is required to prepare an accounting restatement due to the
material noncompliance of Wolverine Bancorp, Inc., as a result of misconduct, with any financial reporting requirement under the Federal securities laws, any participant who is subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 shall reimburse Wolverine Bancorp, Inc. the amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities
and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement. In addition, in the event of an accounting restatement, the Committee, in its sole and exclusive discretion, may require
that any participant reimburse Wolverine Bancorp, Inc. for all or any part of the amount of any payment in settlement of any award granted hereunder.
Amendment and Termination
The Board of Directors may, at any time, amend
or terminate the Equity Incentive Plan or any award granted under the Equity Incentive Plan, provided that, except as provided in the Equity Incentive Plan, no amendment or termination may adversely impair the rights of a Participant or beneficiary
under an award without the participants (or affected beneficiarys) written consent. The Board of Directors may not amend the Equity Incentive Plan to materially increase the benefits accruing to participants under the plan, materially
increase the aggregate number of securities that may be issued under the Equity Incentive Plan (other than as provided in the Equity Incentive Plan), or materially modify the requirements for participation in the Equity Incentive Plan, without
approval of stockholders. Notwithstanding the foregoing, the Committee may amend the Equity Incentive Plan or any award agreement, to take effect retroactively or otherwise, to conform the Equity Incentive Plan or the award agreement to current or
future law or to avoid an accounting treatment resulting from an accounting pronouncement or interpretation issued by the Securities and Exchange Commission or Financial Accounting Standards Board subsequent to the adoption of the Equity Incentive
Plan or the making of the award affected thereby, which, in the sole discretion of the Committee, may materially and adversely affect the financial condition or results of operations of Wolverine Bancorp, Inc.
Duration of Plan
The
Equity Incentive Plan will become effective upon approval by the stockholders at the annual meeting. The Equity Incentive Plan will remain in effect as long as any awards under it are outstanding; however, no awards may be granted under the Equity
Incentive Plan on or after the 10-year anniversary of the effective date of the Equity Incentive Plan. At any time, the Board of Directors may terminate the Equity Incentive Plan. However, any termination of the Equity Incentive Plan will not affect
outstanding awards.
Federal Income Tax Considerations
The following is a summary of the federal income tax consequences that may arise in conjunction with participation in the Equity Incentive Plan.
Non-Qualified Stock Options.
The grant of a non-qualified option will not result in taxable income to the participant.
Except as described below, the participant will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the shares acquired over the exercise price for those shares, and Wolverine Bancorp, Inc.
will be entitled to a corresponding deduction for tax purposes. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of
the shares at the time of exercise.
Incentive Stock Options.
The grant of an incentive stock option will not
result in taxable income to the participant. The exercise of an incentive stock option will not result in taxable income to the participant provided the participant was, without a break in service, an employee of Wolverine Bancorp, Inc. or a
subsidiary during the period beginning on the date of the grant of the option and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant is disabled, as that term is defined in the
Internal Revenue Code).
22
The excess of the fair market value of the shares at the time of the exercise of an
incentive stock option over the exercise price is an adjustment that is included in the calculation of the participants alternative minimum taxable income for the tax year in which the incentive stock option is exercised. For purposes of
determining the participants alternative minimum tax liability for the year of disposition of the shares acquired pursuant to the incentive stock option exercise, the participant will have a basis in those shares equal to the fair market value
of the shares at the time of exercise.
If the participant does not sell or otherwise dispose of the shares within two years
from the date of the grant of the incentive stock option or within one year after the exercise of such stock option, then, upon disposition of such shares, any amount realized in excess of the exercise price will be taxed as a capital gain. A
capital loss will be recognized to the extent that the amount realized is less than the exercise price.
If the foregoing
holding period requirements are not met, the participant will generally realize ordinary income at the time of the disposition of the shares, in an amount equal to the lesser of (i) the excess of the fair market value of the shares on the date
of exercise over the exercise price, or (ii) the excess, if any, of the amount realized upon disposition of the shares over the exercise price, and Wolverine Bancorp, Inc. will be entitled to a corresponding deduction. If the amount realized
exceeds the value of the shares on the date of exercise, any additional amount will be a capital gain. If the amount realized is less than the exercise price, the participant will recognize no income, and a capital loss will be recognized equal to
the excess of the exercise price over the amount realized upon the disposition of the shares.
Restricted Stock.
A participant who has been granted a restricted stock award will not realize taxable income at the time of grant, provided that the stock subject to the award is not delivered at the time of grant, or if the stock is delivered, it is subject
to restrictions that constitute a substantial risk of forfeiture for federal income tax purposes. Upon the later of delivery or vesting of shares subject to an award, the holder will realize ordinary income in an amount equal to the then
fair market value of those shares and Wolverine Bancorp, Inc. will be entitled to a corresponding deduction for tax purposes. Gains or losses realized by the participant upon disposition of such shares will be treated as capital gains and losses,
with the basis in such shares equal to the fair market value of the shares at the time of delivery or vesting. Dividends paid to the holder during the restriction period, if so provided, will also be compensation income to the participant, and
Wolverine Bancorp, Inc. will be entitled to a corresponding deduction for tax purposes. A participant who makes an election under Section 83(b) of the Internal Revenue Code will include the full fair market value of the restricted stock award
in taxable income in the year of grant at the grant date fair market value.
Withholding of Taxes.
Wolverine
Bancorp, Inc. may withhold amounts from participants to satisfy withholding tax requirements. Except as otherwise provided by the Committee, participants may have shares withheld from awards to satisfy the minimum tax withholding requirements.
Change in Control.
Any acceleration of the vesting or payment of awards under the Equity Incentive Plan in the
event of a change in control or termination of service following a change in control may cause part or all of the consideration involved to be treated as an excess parachute payment under the Internal Revenue Code, which may subject the
participant to a 20% excise tax and preclude deduction by Wolverine Bancorp, Inc.
Deduction Limits
.
Section 162(m) of the Internal Revenue Code generally limits Wolverine Bancorp, Inc.s ability to deduct for tax purposes compensation in excess of $1.0 million per year for its chief executive officer and the three other most highly
compensated executives (excluding the chief financial officer) named in the summary compensation table (covered employees). Restricted stock awards and other awards that are not subject to performance goals may be subject to this
deduction limit if income recognized on the awards plus other compensation of the executive that is subject to the limit exceeds $1.0 million. Performance-based compensation that meets the requirements of Section 162(m) (Qualified
performance-based compensation) is not subject to this limit and is fully deductible by Wolverine Bancorp, Inc. Qualified performance-based compensation is compensation that is subject to a number of requirements such as
stockholder approval of possible performance goals, and objective quantification of those goals in advance. Stock options available for award under the Equity Incentive Plan will be considered Qualified performance-based compensation
even if such awards vest solely due to the passage of time during the performance of services. Restricted stock awards that vest upon the attainment of performance measurements may also qualify as Qualified performance-based compensation.
Accordingly, if an award is not exempt from Section 162(m), income recognized on such award by a covered employee will be subject to the $1.0 million deduction limit on compensation.
23
In the case of performance-based awards granted to a covered employee that are not
distributed until after the covered employees retirement or other termination of employment, the $1.0 million deduction limit will not apply and the award will be fully deductible. Performance awards may provide for accelerated vesting upon
death, disability, or a change in control and still be considered exempt from the $1.0 million deduction limit. The Equity Incentive Plan is designed so that stock options and performance-based restricted stock awards that are subject to performance
goals may qualify as Qualified Performance-Based Compensation that is not subject to the $1.0 million deduction limit. Wolverine Bancorp, Inc. expects that the Committee will take these deduction limits into account in setting the size and the terms
and conditions of awards. However, the Committee may decide to grant awards that result in executive compensation that exceeds the deduction limit.
Tax Advice.
The preceding discussion is based on federal tax laws and regulations presently in effect, which are subject to change, and the discussion does not purport to be a complete
description of the federal income tax aspects of the Equity Incentive Plan. A participant may also be subject to state and local taxes in connection with the grant of awards under the Equity Incentive Plan. Wolverine Bancorp, Inc. suggests that
participants consult with their individual tax advisors to determine the applicability of the tax rules to the awards granted to them in their personal circumstances.
Accounting Treatment
Under Financial Accounting Standards Board Accounting
Standards Codification Topic 718, Wolverine Bancorp, Inc. is required to recognize compensation expense on its income statement over the requisite service period or performance period based on the grant date fair value of stock options and other
equity-based compensation (such as restricted stock).
Awards to be Granted
The Board of Directors adopted the Equity Incentive Plan, and the Compensation Committee intends to meet promptly after stockholder
approval to determine the specific terms of the awards, including the allocation of awards to executive officers, employees and non-employee directors. At the present time, no specific determination has been made as to the grant or allocation of
awards.
Required Vote and Recommendation of the Board
In order to approve the Equity Incentive Plan, the proposal must receive the affirmative vote of a majority of the votes cast at the
annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2012 EQUITY INCENTIVE PLAN.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Companys proxy materials for the Companys 2013 Annual Meeting of Stockholders, any stockholder proposal to take action at such meeting must be
received at the Companys executive office, 5710 Eastman Avenue, Midland, Michigan, no later than December 17, 2012. If the date of the 2013 Annual Meeting of Stockholders is changed by more than 30 days, any stockholder proposal must be
received at a reasonable time before the Company prints or mails proxy materials for such meeting. Any such proposal will be subject to the requirements of the proxy rules adopted under the Securities Exchange Act of 1934, as amended, and as with
any stockholder proposal (regardless of whether included in the Companys proxy materials), the Companys articles of incorporation and Bylaws and Maryland corporation law.
ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED AT ANNUAL MEETING
The Companys Bylaws generally provides that any stockholder desiring to make a proposal for new business at an annual meeting of
stockholders or to nominate one or more candidates for election as directors must submit written notice filed with the Secretary of the Company not less than 80 days nor more than 90 days prior to any such annual meeting; provided, however, that if
less than 90 days notice or prior public disclosure of the date of
24
the annual meeting is given to stockholders, such written notice shall be delivered or mailed to and received by the Secretary of the Company at the principal executive office of the Company not
later than the tenth day following the day on which notice of the meeting was mailed to stockholders or such public disclosure was made. The notice must include the stockholders name, record address, and number of shares owned, describe
briefly the proposed business, the reasons for bringing the business before the annual meeting, and any material interest of the stockholder in the proposed business. In the case of nominations to the Board of Directors, certain information
regarding the nominee must be provided. Nothing in this paragraph shall be deemed to require the Company to include in the proxy statement and proxy relating to an annual meeting any stockholder proposal that does not meet all of the requirements
for inclusion established by the SEC in effect at the time such proposal is received.
The 2013 annual meeting of stockholders
is expected to be held on May 20, 2013. For the 2013 annual meeting of stockholders, the notice would have to be received between February 19, 2013 and March 1, 2013.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the Annual Meeting other than the matters described above in this Proxy Statement. However, if any matters should properly come before
the Annual Meeting, it is intended that holders of the proxies will act as directed by a majority of the Board of Directors, except for matters related to the conduct of the Annual Meeting, as to which they shall act in accordance with their best
judgment.
MISCELLANEOUS
The Company will bear the cost of solicitation of proxies and the Company will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy materials to the beneficial owners of common stock. In addition to solicitations by mail, the Companys directors, officers and regular employees may solicit proxies personally, by telephone or by other forms of communication without
additional compensation. We have retained Phoenix Advisory Partners, LLC to assist us in soliciting proxies, and have agreed to pay Phoenix Advisory Partners, LLC a fee of $5,000 plus reasonable expenses for these services.
The Companys proxy statement, Annual Report to Shareholders and proxy card are available on www.wolverinebank.com.
25
THE COMPANYS 2011 ANNUAL REPORT TO STOCKHOLDERS IS BEING FURNISHED TO STOCKHOLDERS.
COPIES OF ALL OF THE COMPANYS FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION ARE AVAILABLE WITHOUT CHARGE BY WRITING TO THE COMPANY AT 5710 EASTMAN AVENUE, MIDLAND, MICHIGAN 48640, ATTENTION: CORPORATE SECRETARY.
BY ORDER OF THE BOARD OF DIRECTORS
Joell C. Anthony
Corporate Secretary
Midland, Michigan
April 16, 2012
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Appendix A
WOLVERINE BANCORP, INC.
2012 EQUITY INCENTIVE PLAN
ARTICLE 1GENERAL
Section 1.1
Purpose, Effective Date and Term
. The purpose of the Wolverine Bancorp, Inc. 2012 Equity Incentive Plan (the Plan) is to promote the long-term financial
success of Wolverine Bancorp, Inc. (the Company), and its Subsidiaries, including Wolverine Bank (the Bank), by providing a means to attract, retain and reward individuals who contribute to such success and to further align
their interests with those of the Companys stockholders. The Effective Date of the Plan shall be the date the Plan is implemented by the Board subsequent to the satisfaction of the applicable shareholder approval
requirements. The Plan shall remain in effect as long as any Awards are outstanding;
provided, however,
that no Awards may be granted under the Plan after the ten-year anniversary of the Effective Date.
Section 1.2
Administration
. The Plan shall be administered by the Compensation Committee of the Companys
Board of Directors (the Committee), in accordance with Section 5.1.
Section 1.3
Participation
. Each Employee or Director of the Company or any Subsidiary of the Company who is granted an Award in accordance with the terms of the Plan shall be a Participant in the Plan. Awards shall be limited to
Employees and Directors of the Company or any Subsidiary.
Section 1.4
Definitions
. Capitalized terms
used in this Plan are defined in Article 8 and elsewhere in this Plan.
ARTICLE 2AWARDS
Section 2.1
General
. Any Award under the Plan may be granted singularly or in combination with another Award (or
Awards). Each Award under the Plan shall be subject to the terms and conditions of the Plan and such additional terms, conditions, limitations and restrictions as the Committee shall provide with respect to such Award and as evidenced in the
Award Agreement. Subject to the provisions of Section 2.8, an Award may be granted as an alternative to or replacement of an existing Award under the Plan or any other plan of the Company or any Subsidiary or as the form of payment for
grants or rights earned or due under any other compensation plan or arrangement of the Company or its Subsidiaries, including without limitation the plan of any entity acquired by the Company or any Subsidiary. The types of Awards that may be
granted under the Plan include:
(a)
Stock Options
. A Stock Option means a grant under Section 2.2 that
represents the right to purchase shares of Stock at an Exercise Price established by the Committee. Any Stock Option may be either an Incentive Stock Option (an ISO) that is intended to satisfy the requirements applicable to an
Incentive Stock Option described in Code Section 422(b), or a Non-Qualified Stock Option (a Non-Qualified Option) that is not intended to be an ISO; provided, however, that no ISOs may be granted: (i) after the
ten-year anniversary of the Effective Date; or (ii) to a non-Employee. Unless otherwise specifically provided by its terms, any Stock Option granted to an Employee under this Plan shall be an ISO. Any ISO granted under this Plan that does
not qualify as an ISO for any reason (whether at the time of grant or as the result of a subsequent event) shall be deemed to be a Non-Qualified Option. In addition, any ISO granted under this Plan may be unilaterally modified by the Committee to
disqualify such Stock Option from ISO treatment such that it shall become a Non-Qualified Option; provided, however, that any such modification shall be ineffective if it causes the Award to be subject to Code Section 409A (unless, as modified,
the Award complies with Code Section 409A).
(b)
Restricted Stock.
Restricted Stock means a grant of shares
of Stock under Section 2.3 for no consideration or such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan, subject to a vesting schedule or the satisfaction of market
conditions or performance conditions.
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Section 2.2
Stock Options
.
(a)
Grant of Stock Options
. Each Stock Option shall be evidenced by an Award Agreement that shall: (i) specify the number of
Stock Options covered by the Award; (ii) specify the date of grant of the Stock Option; (iii) specify the vesting period or conditions to vesting; and (iv) contain such other terms and conditions not inconsistent with the Plan,
including the effect of termination of a Participants employment or Service with the Company as the Committee may, in its discretion, prescribe.
(b)
Terms and Conditions
. A Stock Option shall be exercisable in accordance with such terms and conditions and during such periods as may be established by the Committee. In no event, however,
shall a Stock Option expire later than ten years after the date of its grant (or five years with respect to ISOs granted to an Employee who is a 10% Stockholder). The Exercise Price of each Stock Option shall not be less than 100%
of the Fair Market Value of a share of Stock on the date of grant (or, if greater, the par value of a share of Stock);
provided, however,
that the Exercise Price of an ISO shall not be less than 110% of Fair Market Value of a share of Stock
on the date of grant if granted to a 10% Stockholder;
provided further,
that the Exercise Price may be higher or lower in the case of Stock Options granted or exchanged in replacement of existing Awards held by an Employee or Director of an
acquired entity. The payment of the Exercise Price of a Stock Option shall be by cash or, subject to limitations imposed by applicable law, by such other means as the Committee may from time to time permit, including: (i) by tendering,
either actually or constructively by attestation, shares of Stock valued at Fair Market Value as of the day of exercise; (ii) by irrevocably authorizing a third party, acceptable to the Committee, to sell shares of Stock (or a sufficient
portion of the shares) acquired upon exercise of the Stock Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise; (iii) by a net
settlement of the Stock Option, using a portion of the shares obtained on exercise in payment of the Exercise Price of the Stock Option; (iv) by personal, certified or cashiers check; (v) by other property deemed acceptable by the
Committee; or (vi) by any combination thereof. The total number of shares that may be acquired upon the exercise of a Stock Option shall be rounded down to the nearest whole share.
Section 2.3
Restricted Stock
.
(a)
Grant of Restricted Stock
. Each Restricted Stock Award shall be evidenced by an Award Agreement that shall: (i) specify the number of shares of Stock covered by the Restricted Stock Award;
(ii) specify the date of grant of the Restricted Stock Award; (iii) specify the vesting period; and (iv) contain such other terms and conditions not inconsistent with the Plan, including the effect of termination of a
Participants employment or Service with the Company, as the Committee may, in its discretion, prescribe. All Restricted Stock Awards shall be in the form of issued and outstanding shares of Stock that shall be either: (x) registered in
the name of the Participant and held by the Company, together with a stock power executed by the Participant in favor of the Company, pending the vesting or forfeiture of the Restricted Stock; or (y) registered in the name of, and delivered to,
the Participant. In any event, the certificates evidencing the Restricted Stock Award shall at all times prior to the applicable vesting date bear the following legend:
The Stock evidenced hereby is subject to the terms of an Award Agreement with Wolverine Bancorp, Inc. dated [Date], made pursuant to the terms of the Wolverine Bancorp, Inc. 2012 Equity Incentive Plan,
copies of which are on file at the executive offices of Wolverine Bancorp, Inc., and may not be sold, encumbered, hypothecated or otherwise transferred except in accordance with the terms of such Plan and Award Agreement,
or such other restrictive legend as the Committee, in its discretion, may specify. Notwithstanding the foregoing, the Company may in its sole discretion
issue Restricted Stock in any other approved format (
e.g., electronically
) in order to facilitate the paperless transfer of such Awards. In the event Restricted Stock is not issued in certificate form, the Company and the transfer agent shall
maintain appropriate bookkeeping entries that evidence Participants ownership of such Awards. Restricted Stock that is not issued in certificate form shall be subject to the same terms and conditions of the Plan as certificated shares,
including the restrictions on transferability and the provision of a stock power executed by the Participant in favor of the Company, until the satisfaction of the conditions to which the Restricted Stock Award is subject.
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(b)
Terms and Conditions.
Each Restricted Stock Award shall be subject to the
following terms and conditions:
(i)
Dividends.
Unless the Committee determines otherwise with respect
to any Restricted Stock Award and specifies such determination in the relevant Award Agreement, any dividends or distributions declared and paid with respect to shares of Stock subject to the Restricted Stock Award, other than a stock dividend
consisting of shares of Stock, shall be immediately distributed to the Participant. If the Committee determines to delay the distribution of dividends to a Participant until the vesting of an Award of Restricted Stock, the Committee shall cause the
dividend (and any earnings thereon) to be distributed to the Participant no later than two and one-half months following the date on which the Restricted Stock vests.
(ii)
Voting Rights.
Unless the Committee determines otherwise with respect to any Restricted Stock Award and
specifies such determination in the relevant Award Agreement, voting rights with respect to the shares of Restricted Stock shall be exercised by the Participant in his or her discretion.
(iii) Tender Offers and Merger Elections. Each Participant to whom a Restricted Stock Award is granted shall have the
right to respond, or to direct the response, with respect to the related shares of Restricted Stock, to any tender offer, exchange offer, cash/stock merger consideration election or other offer made to, or elections made by, the holders of shares of
Stock. Such a direction for any such shares of Restricted Stock shall be given by proxy or ballot (if the Participant is the beneficial owner of the shares of Restricted Stock for voting purposes) or by completing and filing, with the inspector of
elections, the trustee or such other person who shall be independent of the Company as the Committee shall designate in the direction (if the Participant is not such a beneficial owner), a written direction in the form and manner prescribed by the
Committee. If no such direction is given, then the shares of Restricted Stock shall not be tendered.
Section 2.4
Performance-Based Compensation
. Any Award under the Plan that is intended to be performance-based compensation within the meaning of Code Section 162(m) shall be conditioned on the achievement of one or more objective
performance measures, to the extent required by Code Section 162(m), as may be determined by the Committee. The grant of any Award and the establishment of performance measures that are intended to be performance-based compensation shall be
made during the period required under Code Section 162(m) and shall comply with all applicable requirements of Code Section 162(m).
(a)
Performance Measures
. Such performance measures may be based on any one or more of the following:
(i) book value or tangible book value per share;
(ii) basic cash
earnings per share;
(iii) diluted earnings per share;
(iv) return on equity;
(v) net income or net income before taxes;
(vi) cash earnings;
(vii) net interest income;
(viii) non-interest income;
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(ix) general and administrative expense to average assets ratio;
(x) cash general and administrative expense to average assets ratio;
(xi) efficiency ratio;
(xii) cash efficiency ratio;
(xiii) return on average assets;
(xiv) cash return on average assets;
(xv) return on average stockholders equity;
(xvi) cash return on average stockholders equity;
(xvii) return on average tangible stockholders equity;
(xviii) cash return on average tangible stockholders equity;
(xix) core earnings;
(xx) operating income;
(xxi) operating efficiency ratio;
(xxii) net interest rate margin or net interest rate spread;
(xxiii) growth in assets, loans, or deposits;
(xxiv) loan production volume;
(xxv) non-performing loans;
(xxvi) cash flow;
(xxvii) strategic business objectives, consisting of one or more objectives based upon meeting specified cost targets,
business expansion goals, and goals relating to acquisitions or divestitures, or goals relating to capital raising and capital management; or
(xxviii) any combination of the foregoing.
Performance measures may be based on
the performance of the Company as a whole or on any one or more Subsidiaries or business units of the Company or a Subsidiary and may be measured relative to a peer group, an index or a business plan and may be considered as absolute measures or
changes in measures. The Committee may elect to use different performance measures and shall have sole discretion in determining how performance measures are calculated. In establishing any performance measures, the Committee may provide for the
exclusion of the effects of the following items, to the extent identified in the audited financial statements of the Company, including footnotes, or in the Managements Discussion and Analysis section of the Companys annual report or in
the Compensation Discussion and Analysis Section, if any, of the Companys annual proxy statement: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business;
(iii) changes in tax or accounting principles, regulations or laws; or (iv) mergers or acquisitions. To the extent not specifically excluded, such effects shall be included in any applicable performance measure. The Committee also may
exclude other items in its sole discretion in establishing and calculating performance measures, which may include, but not limited to, the effect of dividends and the expense of Restricted Stock Awards.
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(b)
Adjustments
. Pursuant to this Section 2.4, in certain circumstances the
Committee may adjust performance measures;
provided, however,
no adjustment may be made with respect to an Award that is intended to be performance-based compensation within the meaning of Code Section 162(m), except to the extent the
Committee exercises such negative discretion as is permitted under applicable law for purposes of an exception under Code Section 162(m). If the Committee determines that a change in the business, operations, corporate structure or capital
structure of the Company or the manner in which the Company or its Subsidiaries conducts its business or other events or circumstances render current performance measures to be unsuitable, the Committee may modify such performance measures, in whole
or in part, as the Committee deems appropriate. If a Participant is promoted, demoted or transferred to a different business unit during a performance period, the Committee may determine that the selected performance measures or applicable
performance period are no longer appropriate, in which case, the Committee, in its sole discretion, may: (i) adjust, change or eliminate the performance measures or change the applicable performance period; or (ii) cause to be made a cash
payment to the Participant in an amount determined by the Committee.
Section 2.5
Vesting of
Awards
.
(a) The Committee shall specify the vesting schedule or conditions of each Award. Unless otherwise specified by the Committee and set forth in an Award Agreement between the Company and the Participant or as set
forth in an employment agreement entered into by and between the Company and/or the Bank and an Employee, Awards under the Plan shall be granted with a vesting rate not exceeding 20% per year, with the first installment vesting one year after
the date of grant. If the right to become vested in an Award under the Plan (including the right to exercise a Stock Option) is conditioned on the completion of a specified period of Service with the Company or its Subsidiaries, without achievement
of performance measures or other performance objectives being required as a condition of vesting, and without it being granted in lieu of, or in exchange for, other compensation, then the required period of Service for full vesting shall be
determined by the Committee and evidenced in the Award Agreement (subject to acceleration of vesting, to the extent permitted by the Committee, including in the event of the Participants death, Disability, Retirement or Involuntary Termination
of Employment following a Change in Control). Unless otherwise provided by the Committee, Service as a director emeritus or advisory director shall constitute Service for purposes of vesting.
(b) Notwithstanding Section 2.8 and Article 4 hereof, to the extent permitted by applicable law or regulations, or pursuant to an
applicable regulatory waiver, the Committee may determine that all Stock Options then held by the Participant shall become fully exercisable (subject to the expiration provisions otherwise applicable to the Stock Option) and all Restricted Stock
Awards described in Section 2.1(b) shall be fully earned and vested immediately.
Section 2.6
Deferred
Compensation
. If any Award would be considered deferred compensation as defined under Code Section 409A (Deferred Compensation), the Committee reserves the absolute right (including the right to delegate such
right) to unilaterally amend the Plan or the Award Agreement, without the consent of the Participant, to maintain exemption from, or to comply with, Code Section 409A. Any amendment by the Committee to the Plan or an Award Agreement pursuant to
this Section 2.6 shall maintain, to the extent practicable, the original intent of the applicable provision without violating Code Section 409A. A Participants acceptance of any Award under the Plan constitutes acknowledgement and
consent to such rights of the Committee, without further consideration or action. Any discretionary authority retained by the Committee pursuant to the terms of this Plan or pursuant to an Award Agreement shall not be applicable to an Award which is
determined to constitute Deferred Compensation, if such discretionary authority would contravene Code Section 409A.
Section 2.7
Prohibition Against Option Repricing
. Except for adjustments pursuant to Section 3.3, and
reductions of the Exercise Price approved by the Companys stockholders, neither the Committee nor the Board shall have the right or authority to make any adjustment or amendment that reduces or would have the effect of reducing the Exercise
Price of a Stock Option previously granted under the Plan, whether through amendment, cancellation (including cancellation in exchange for a cash payment in excess of the Stock Options in-the-money value) or replacement grants, or other means.
Section 2.8.
Effect of Termination of Service on Awards.
The Committee shall establish the effect of a
Termination of Service on the continuation of rights and benefits available under an Award or the Plan and, in so doing, may make distinctions based upon, among other things, the cause of Termination of Service and type of Award. Unless otherwise
specified by the Committee and set forth in an Award Agreement between the Company and the Participant or as set forth in an employment agreement entered into by and between the Company and/or the Bank and an Employee, the following provisions shall
apply to each Award granted under this Plan:
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(a) Upon a Participants Termination of Service for any reason other than Disability,
death, Retirement or termination for Cause, Stock Options shall be exercisable only as to those shares that were immediately exercisable by such Participant at the date of termination, and Stock Options may be exercised only for a period of three
months following termination and any Restricted Stock that has not vested as of the date of Termination of Service shall expire and be forfeited.
(b) In the event of a Termination of Service for Cause, all Stock Options granted to a Participant that have not been exercised and all Restricted Stock granted to a Participant that has not vested shall
expire and be forfeited.
(c) Upon Termination of Service for reason of Disability, death, or to the extent permitted by the
Committee, all Stock Options shall be exercisable as to all shares subject to an outstanding Award, whether or not then exercisable, and all Restricted Stock shall vest as to all shares subject to an outstanding Award, whether or not otherwise
immediately vested, at the date of Termination of Service. Stock Options may be exercised for a period of one year following Termination of Service due to death, Disability or Retirement;
provided, however
, that no Stock Option shall be
eligible for treatment as an ISO in the event such Stock Option is exercised more than three months following Termination of Service due to Retirement or one year following Termination of Service due to Disability and
provided, further
, in
order to obtain ISO treatment for Stock Options exercised by heirs or devisees of an optionee, the optionees death must have occurred while employed or within three months of Termination of Service.
(d) Notwithstanding anything herein to the contrary, no Stock Option shall be exercisable beyond the last day of the original term of
such Stock Option.
(e) Notwithstanding the provisions of this Section 2.8, the effect of a Change in Control on the
vesting/exercisability of Stock Options and Restricted Stock is as set forth in Article 4.
ARTICLE 3SHARES SUBJECT
TO PLAN
Section 3.1
Available Shares
. The shares of Stock with respect to which Awards may be
made under the Plan shall be shares currently authorized but unissued, currently held or, to the extent permitted by applicable law, subsequently acquired by the Company as treasury shares, including shares purchased in the open market or in private
transactions.
Section 3.2
Share Limitations
.
(a)
Share Reserve
. Subject to the following provisions of this Section 3.2, the maximum number of shares of Stock that may be
delivered to Participants and their beneficiaries under the Plan shall be equal to Three Hundred Fifty-One Thousand Fifty (351,050) shares of Stock. The maximum number of shares of Stock that may be delivered pursuant to the exercise of Stock
Options (all of which may be granted as ISOs) is Two Hundred Fifty Thousand Seven Hundred Fifty (250,750) shares of Stock. The maximum number of shares of Stock that may be issued as Restricted Stock Awards is One Hundred Thousand Three Hundred
(100,300) shares of Stock. The aggregate number of shares available for grant under this Plan and the number of shares of Stock subject to outstanding awards shall be subject to adjustment as provided in Section 3.3.
(b)
Computation of Shares Available.
For purposes of this Section 3.2, the number of shares of Stock available for the
granting of additional Stock Options and Restricted Stock shall be reduced by the number of shares of Stock granted. To the extent any shares of Stock covered by an Award (including Restricted Stock) under the Plan are not delivered to a Participant
or beneficiary for any reason, including because the Award is forfeited or canceled or because a Stock Option is not exercised, then such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of
Stock available for delivery under the Plan. To the extent (i) a Stock Option is exercised by using an actual or constructive exchange of shares of Stock to pay the Exercise Price, or (ii) shares of Stock are withheld to satisfy
withholding taxes upon exercise or vesting of an Award granted hereunder, the number of shares of Stock available shall be reduced by the gross number of Stock Options exercised rather than by the net number of shares of Stock issued.
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Section 3.3
Corporate Transactions
.
(a)
General.
In the event any recapitalization, forward or reverse stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, or exchange of shares of Stock or other securities, stock dividend or other special and nonrecurring dividend or distribution (whether in the form of cash, securities or other property), liquidation, dissolution, or other
similar corporate transaction or event, affects the shares of Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan and/or under any Award granted under the Plan, then
the Committee shall, in an equitable manner, adjust any or all of (i) the number and kind of securities deemed to be available thereafter for grants of Stock Options and Restricted Stock in the aggregate to all Participants and individually to
any one Participant, (ii) the number and kind of securities that may be delivered or deliverable in respect of outstanding Stock Options and Restricted Stock, and (iii) the Exercise Price of Stock Options. In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria included in, Stock Options and Restricted Stock (including, without limitation, cancellation of Stock Options and Restricted Stock in exchange for the in-the-money
value, if any, of the vested portion thereof, or substitution or exchange of Stock Options and Restricted Stock using stock of a successor or other entity) in recognition of unusual or nonrecurring events (including, without limitation, events
described in the preceding sentence) affecting the Company or any parent or Subsidiary or the financial statements of the Company or any parent or Subsidiary, or in response to changes in applicable laws, regulations, or accounting principles.
Unless otherwise determined by the Committee, any such adjustment to an Award intended to qualify as performance-based compensation shall conform to the requirements of Code Section 162(m) and the regulations thereunder then in
effect.
(b)
Merger in which Company is Not Surviving Entity.
In the event of any merger, consolidation, or other
business reorganization (including, but not limited to, a Change in Control) in which the Company is not the surviving entity, unless otherwise determined by the Committee at any time at or after grant and prior to the consummation of such merger,
consolidation or other business reorganization, any Stock Options granted under the Plan which remain outstanding shall be converted into Stock Options to purchase voting common equity securities of the business entity which survives such merger,
consolidation or other business reorganization having substantially the same terms and conditions as the outstanding Stock Options under this Plan and reflecting the same economic benefit (as measured by the difference between the aggregate Exercise
Price and the value exchanged for outstanding shares of Stock in such merger, consolidation or other business reorganization), all as determined by the Committee prior to the consummation of such merger; provided, however, that the Committee may, at
any time prior to the consummation of such merger, consolidation or other business reorganization, direct that all, but not less than all, outstanding Stock Options be canceled as of the effective date of such merger, consolidation or other business
reorganization in exchange for a cash payment per share of Stock equal to the excess (if any) of the value exchanged for an outstanding share of Stock in such merger, consolidation or other business reorganization over the Exercise Price of the
Stock Option being canceled.
Section 3.4
Delivery of Shares
. Delivery of shares of Stock or other
amounts under the Plan shall be subject to the following:
(a)
Compliance with Applicable Laws.
Notwithstanding
any other provision of the Plan, the Company shall have no obligation to deliver any shares of Stock or make any other distribution of benefits under the Plan unless such delivery or distribution complies with all applicable laws (including, the
requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity.
(b)
Certificates.
To the extent that the Plan provides for the issuance of shares of Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock
exchange.
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ARTICLE 4CHANGE IN CONTROL
Section 4.1
Consequence of a Change in Control
. Subject to the provisions of Section 2.5 (relating to vesting and
acceleration) and Section 3.3 (relating to the adjustment of shares), and except as otherwise provided in the Plan or as determined by the Committee and set forth in the terms of any Award Agreement or as set forth in an employment agreement
entered into by and between the Company and/or the Bank and an Employee:
(a) At the time of an Involuntary Termination of
Employment (as defined in Section 8.1) (or, as to a Director, Termination of Service as a Director) following a Change in Control, all Stock Options then held by the Participant shall become fully exercisable (subject to the expiration
provisions otherwise applicable to the Stock Option).
(b) At the time of an Involuntary Termination of Employment (as defined
in Section 8.1) (or, as to a Director, Termination of Service as a Director) following a Change in Control, all Awards of Restricted Stock described in Section 2.1(b) shall be fully earned and vested immediately. Notwithstanding the above,
any Awards the vesting of which are based on satisfaction of performance-based conditions will be vested as specified in subsection (c) hereof.
(c) In the event of a Change in Control, any performance measure attached to an Award under the Plan shall be deemed satisfied as of the date of the Change in Control.
Section 4.2
Definition of Change in Control
. For purposes of the Plan, unless otherwise provided in an Award
Agreement, a Change in Control shall be deemed to have occurred upon the earliest to occur of the following:
(a)
Merger
: The Company or the Bank merges into or consolidates with another entity, or merges another bank or corporation into the Company or the Bank, and as a result, less than a majority of the combined voting power of the resulting
corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation;
(b)
Acquisition of Significant Share Ownership
: There is filed, or is required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Companys or the
Banks voting securities; provided, however, this clause (b) shall not apply to beneficial ownership of the Companys or the Banks voting shares held in a fiduciary capacity by an entity of which the Company directly or
indirectly beneficially owns 50% or more of its outstanding voting securities;
(c)
Change in Board Composition
: During
any period of two consecutive years, individuals who constitute the Companys or the Banks Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Companys or the
Banks Board of Directors; provided, however, that for purposes of this clause (c), each director who is first elected by the board (or first nominated by the board for election by the stockholders or corporators) by a vote of at least
two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or
(d)
Sale of Assets
: The Company or the Bank sells to a third party all or substantially all of its assets.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the Subject
Person) acquired beneficial ownership of more than the permitted amount of the then outstanding common stock or Voting Securities as a result of a change in the number of shares of Stock or Voting Securities then outstanding, which thereby
increases the proportional number of shares beneficially owned by the Subject Person;
provided, however
, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Stock or Voting
Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the beneficial owner of any additional Stock or Voting Securities which
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increases the percentage of the then outstanding Stock or Voting Securities beneficially owned by the Subject Person, then a Change in Control shall occur. In the event that an Award constitutes
Deferred Compensation, and the settlement of, or distribution of benefits under, such Award is to be triggered solely by a Change in Control, then with respect to such Award, a Change in Control shall be defined as required under Code
Section 409A, as in effect at the time of such transaction.
ARTICLE 5COMMITTEE
Section 5.1
Administration
. The Plan shall be administered by the members of the Compensation Committee of the
Company who are Disinterested Board Members. If the Committee consists of fewer than three Disinterested Board Members, then the Board shall appoint to the Committee such additional Disinterested Board Members as shall be necessary to provide for a
Committee consisting of at least three Disinterested Board Members. Any members of the Committee who do not qualify as Disinterested Board Members shall abstain from participating in any discussion to make or administer Awards that are made to
Participants who at the time of consideration for such Award: (i) are persons subject to the short-swing profit rules of Section 16 of the Exchange Act, or (ii) are reasonably anticipated to be Covered Employees during the term of the
Award. The Board (or those members of the Board who are independent directors under the corporate governance statutes or rules of any national securities exchange on which the Company lists its securities) may, in its discretion, take
any action and exercise any power, privilege or discretion conferred on the Committee under the Plan with the same force and effect under the Plan as if done or exercised by the Committee.
Section 5.2
Powers of Committee
. The administration of the Plan by the Committee shall be subject to the
following:
(a) the Committee will have the authority and discretion to select from among the Companys and its
Subsidiaries Employees and Directors those persons who shall receive Awards, to determine the time or times of receipt, to determine the types of Awards and the number of shares covered by the Awards, to establish the terms, conditions,
performance criteria, restrictions (including without limitation, provisions relating to non-competition, non-solicitation and confidentiality), and other provisions of such Awards (subject to the restrictions imposed by Article 6) to cancel or
suspend Awards and to reduce, eliminate or accelerate any restrictions or vesting requirements applicable to an Award at any time after the grant of the Award.
(b) The Committee will have the authority and discretion to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations that
may be necessary or advisable for the administration of the Plan.
(c) The Committee will have the authority to define terms
not otherwise defined herein.
(d) Any interpretation of the Plan by the Committee and any decision made by it under the Plan
is final and binding on all persons.
(e) In controlling and managing the operation and administration of the Plan, the
Committee shall take action in a manner that conforms to the charter and bylaws of the Company and applicable corporate law.
Section 5.3
Delegation by Committee
. Except to the extent prohibited by applicable law, the applicable rules of a
stock exchange or the Plan, or as necessary to comply with the exemptive provisions of Rule 16b-3 promulgated under the Exchange Act or Code Section 162(m), the Committee may allocate all or any portion of its responsibilities and powers to any
one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it, including: (a) delegating to a committee of one or more members of the Board who are not outside
directors within the meaning of Code Section 162(m), the authority to grant Awards under the Plan to eligible persons who are not persons with respect to whom the Company wishes to comply with Code Section 162(m); and/or
(b) delegating to a committee of one or more members of the Board who are not non-employee directors, within the meaning of Rule 16b-3, the authority to grant Awards under the Plan to eligible persons who are not then subject to
Section 16 of the Exchange Act. The acts of such delegates shall be treated hereunder as acts of the Committee and such delegates shall report regularly to the Committee regarding the delegated duties and responsibilities and any Awards so
granted. Any such allocation or delegation may be revoked by the Committee at any time.
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Section 5.4
Information to be Furnished to Committee
. As may be
permitted by applicable law, the Company and its Subsidiaries shall furnish the Committee with such data and information as it determines may be required for it to discharge its duties. The records of the Company and its Subsidiaries as to a
Participants employment, termination of employment, leave of absence, reemployment and compensation shall be conclusive on all persons unless determined by the Committee to be manifestly incorrect. Subject to applicable law, Participants
and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the terms of the Plan.
Section 5.5
Committee Action
.
The Committee shall hold such meetings, and may make such administrative rules and
regulations, as it may deem proper. A majority of the members of the Committee shall constitute a quorum, and the action of a majority of the members of the Committee present at a meeting at which a quorum is present, as well as actions taken
pursuant to the unanimous written consent of all of the members of the Committee without holding a meeting, shall be deemed to be actions of the Committee. Subject to Section 5.1, all actions of the Committee shall be final and conclusive and
shall be binding upon the Company, Participants and all other interested parties. Any person dealing with the Committee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by a member of
the Committee or by a representative of the Committee authorized to sign the same in its behalf.
ARTICLE
6AMENDMENT AND TERMINATION
Section 6.1
General
. The Board may, as permitted by law, at
any time, amend or terminate the Plan, and may amend any Award Agreement, provided that no amendment or termination (except as provided in Section 2.6, Section 3.3 and Section 6.2) may cause the Award to violate Code
Section 409A, or, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely impair the rights of any Participant or beneficiary under any Award
granted under the Plan prior to the date such amendment is adopted by the Board;
provided, however
, that, no amendment may (a) materially increase the benefits accruing to Participants under the Plan, (b) materially increase the
aggregate number of securities which may be issued under the Plan, other than pursuant to Section 3.3, or (c) materially modify the requirements for participation in the Plan, unless the amendment under (a), (b) or (c) above is
approved by the Companys stockholders.
Section 6.2
Amendment to Conform to Law and Accounting
Changes
. Notwithstanding any provision in this Plan or any Award Agreement to the contrary, the Committee may amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the
purpose of (i) conforming the Plan or the Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), or (ii) avoiding an accounting treatment resulting
from an accounting pronouncement or interpretation thereof issued by the SEC or Financial Accounting Standards Board subsequent to the adoption of the Plan or the making of the Award affected thereby, which, in the sole discretion of the Committee,
may materially and adversely affect the financial condition or results of operations of the Company. By accepting an Award under this Plan, each Participant agrees and consents to any amendment made pursuant to this Section 6.2 or
Section 2.6 to any Award granted under the Plan without further consideration or action.
ARTICLE 7GENERAL
TERMS
Section 7.1
No Implied Rights
.
(a)
No Rights to Specific Assets.
Neither a Participant nor any other person shall by reason of participation in the Plan
acquire any right in or title to any assets, funds or property of the Company or any Subsidiary whatsoever, including any specific funds, assets, or other property which the Company or any Subsidiary, in its sole discretion, may set aside in
anticipation of a liability under the Plan. A Participant shall have only a contractual right to the shares of Stock or amounts, if any, payable or distributable under the Plan, unsecured by any assets of the Company or any Subsidiary, and
nothing contained in the Plan shall constitute a guarantee that the assets of the Company or any Subsidiary shall be sufficient to pay any benefits to any person.
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(b)
No Contractual Right to Employment or Future Awards.
The Plan does not
constitute a contract of employment, and selection as a Participant will not give any participating Employee the right to be retained in the employ of the Company or any Subsidiary or any right or claim to any benefit under the Plan, unless such
right or claim has specifically accrued under the terms of the Plan. No individual shall have the right to be selected to receive an Award under the Plan, or, having been so selected, to receive a future Award under the Plan.
(c)
No Rights as a Stockholder
. Except as otherwise provided in the Plan, no Award under the Plan shall confer upon the holder
thereof any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.
Section 7.2
Transferability
. Except as otherwise so provided by the Committee, ISOs under the Plan are not transferable except (i) as designated by the Participant by will or
by the laws of descent and distribution, (ii) to a trust established by the Participant, if under Code Section 671 and applicable state law, the Participant is considered the sole beneficial owner of the Stock Option while held in trust,
or (iii) between spouses incident to a divorce or pursuant to a domestic relations order, provided, however, in the case of a transfer within the meaning of this Section 7.2(iii), the Stock Option shall not qualify as an ISO as of the day
of such transfer. The Committee shall have the discretion to permit the transfer of Stock Options (other than ISOs) under the Plan;
provided, however,
that such transfers shall be limited to Immediate Family Members of Participants, trusts
and partnerships established for the primary benefit of such family members or to charitable organizations, and;
provided, further,
that such transfers are not made for consideration to the Participant.
Awards of Restricted Stock shall not be transferable prior to the time that such Awards vest in the Participant.
Section 7.3
Designation of Beneficiaries
. A Participant hereunder may file with the Company a written designation
of a beneficiary or beneficiaries under this Plan and may from time to time revoke or amend any such designation (Beneficiary Designation). Any designation of beneficiary under this Plan shall be controlling over any other disposition,
testamentary or otherwise (unless such disposition is pursuant to a domestic relations order);
provided, however,
that if the Committee is in doubt as to the entitlement of any such beneficiary to any Award, the Committee may determine to
recognize only the legal representative of the Participant, in which case the Company, the Committee and the members thereof shall not be under any further liability to anyone.
Section 7.4
Non-Exclusivity
. Neither the adoption of this Plan by the Board nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or the Committee to adopt such other incentive arrangements as either may deem desirable, including, without limitation, the granting
of Restricted Stock or Stock Options otherwise than under the Plan or an arrangement that is or is not intended to qualify under Code Section 162(m), and such arrangements may be either generally applicable or applicable only in specific cases.
Section 7.5
Award Agreement
. Each Award granted under the Plan shall be evidenced by an Award
Agreement signed by the Participant. A copy of the Award Agreement, in any medium chosen by the Committee, shall be provided (or made available electronically) to the Participant.
Section 7.6
Form and Time of Elections
. Unless otherwise specified herein, each election required or permitted to
be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be filed with the Company at such times, in such form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall require.
Section 7.7
Evidence
. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information upon which the person is acting considers pertinent and reliable, and signed, made or presented by the proper party
or parties.
Section 7.8
Tax Withholding
. Where a Participant is entitled to receive shares of Stock
upon the vesting or exercise of an Award, the Company shall have the right to require such Participant to pay to the Company the amount of any tax that the Company is required to withhold with respect to such vesting or
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exercise, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of shares of Stock to cover the minimum amount required to be withheld. To the extent determined by the
Committee and specified in an Award Agreement, a Participant shall have the right to direct the Company to satisfy the minimum required federal, state and local tax withholding by: (i) with respect to a Stock Option settled in stock, reducing
the number of shares of Stock subject to the Stock Option (without issuance of such shares of Stock to the Stock Option holder) by a number equal to the quotient of (a) the total minimum amount of required tax withholding divided by
(b) the excess of the Fair Market Value of a share of Stock on the exercise date over the Exercise Price per share of Stock; and (ii) with respect to Restricted Stock, withholding a number of shares (based on the Fair Market Value on the
vesting date) otherwise vesting that would satisfy the minimum amount of required tax withholding. Provided there are no adverse accounting consequences to the Company (a requirement to have liability classification of an award under Financial
Accounting Standards Board Accounting Standards Codification (ASC) Topic 718 (formerly, FAS 123R) is an adverse consequence), a Participant who is not required to have taxes withheld may require the Company to withhold in accordance with the
preceding sentence as if the Award were subject to minimum tax withholding requirements.
Section 7.9
Action by
Company or Subsidiary
. Any action required or permitted to be taken by the Company or any Subsidiary shall be by resolution of its board of directors, or by action of one or more members of the Board (including a committee of the Board)
who are duly authorized to act for the Board, or (except to the extent prohibited by applicable law or applicable rules of any stock exchange) by a duly authorized officer of the Company or such Subsidiary.
Section 7.10
Successors
. All obligations of the Company under the Plan shall be binding upon and inure to the
benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business, stock, and/or assets of the Company.
Section 7.11
Indemnification
. To the fullest extent permitted by law and the Companys governing
documents, each person who is or shall have been a member of the Committee, or of the Board, or an officer of the Company to whom authority was delegated in accordance with Section 5.3, or an Employee of the Company, shall be indemnified and
held harmless by the Company against and from any loss (including amounts paid in settlement), cost, liability or expense (including reasonable attorneys fees) that may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her
in settlement thereof, with the Companys approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute or
regulation. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Companys charter or bylaws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.
Section 7.12
No Fractional
Shares
. Unless otherwise permitted by the Committee, no fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash or other property shall be issued or paid in
lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
Section 7.13
Governing Law
. The Plan, all Awards granted hereunder, and all actions taken in connection herewith
shall be governed by and construed in accordance with the laws of the State of Michigan without reference to principles of conflict of laws, except as superseded by applicable federal law. The federal and state courts located in the State of
Michigan, shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan. By accepting any award under this Plan, each Participant and any other person claiming any rights under the Plan agrees to
submit himself and any legal action that the Participant brings under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.
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Section 7.14
Benefits Under Other Plans
. Except as otherwise
provided by the Committee or as set forth in a Qualified Retirement Plan, Awards to a Participant (including the grant and the receipt of benefits) under the Plan shall be disregarded for purposes of determining the Participants benefits
under, or contributions to, any Qualified Retirement Plan, non-qualified plan and any other benefit plans maintained by the Participants employer. The term Qualified Retirement Plan means any plan of the Company or a Subsidiary
that is intended to be qualified under Code Section 401(a).
Section 7.15
Validity
. If any
provision of this Plan is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision has never
been included herein.
Section 7.16
Notice
. Unless otherwise provided in an Award Agreement, all
written notices and all other written communications to the Company provided for in the Plan or in any Award Agreement, shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that
international mail shall be sent via overnight or two-day delivery), or sent by facsimile, email or prepaid overnight courier to the Company at its principal executive office. Such notices, demands, claims and other communications shall be deemed
given:
(a) in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated
for delivery;
(b) in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or
(c) in the case of facsimile or email, the date upon which the transmitting party received confirmation of receipt;
provided, however,
that in no event shall any such communications be deemed to be given later than the date they are actually received, provided they are actually received.
In the event a communication is not received, it shall only be deemed received upon the showing of an original of the applicable receipt, registration or confirmation from the applicable delivery service.
Communications that are to be delivered by U.S. mail or by overnight service to the Company shall be directed to the attention of the Companys Chief Operating Officer and to the Corporate Secretary.
Section 7.17
Forfeiture Events
.
(a) The Committee may specify in an Award Agreement that the Participants rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or
recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events include, but are not limited to, termination of employment for cause, termination of the
Participants provisions of Services to the Company or any Subsidiary, violation of material Company or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other
conduct of the Participant that is detrimental to the business or reputation of the Company or any Subsidiary.
(b) If the
Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the federal securities laws, any Participant who is subject to
automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve month period following the first public issuance or
filing with the SEC (whichever first occurred) of the financial document embodying such financial reporting requirement.
In
addition, in the event of an accounting restatement, the Committee, in its sole and exclusive discretion, may require that any Participant reimburse the Company for all or any part of the amount of any payment in settlement of any Award granted
hereunder.
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ARTICLE 8DEFINED TERMS; CONSTRUCTION
Section 8.1
In addition to the other definitions contained herein, unless otherwise specifically provided in an Award
Agreement, the following definitions shall apply:
(a) 10% Stockholder means an individual who, at the time of
grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company.
(b)
Award means any Stock Option, Restricted Stock or any or all of them, or any other right or interest relating to stock or cash, granted to a Participant under the Plan.
(c) Award Agreement means the document (in whatever medium prescribed by the Committee) which evidences the terms and
conditions of an Award under the Plan. Such document is referred to as an agreement, regardless of whether a Participants signature is required.
(d) Board means the Board of Directors of the Company.
(e) If the
Participant is subject to a written employment agreement (or other similar written agreement) with the Company or a Subsidiary that provides a definition of termination for Cause, then, for purposes of this Plan, the term
Cause shall have meaning set forth in such agreement. In the absence of such a definition, Cause means (i) the conviction of the Participant of a felony or of any lesser criminal offense involving moral turpitude;
(ii) the commission by the Participant of a criminal or other act that, in the judgment of the Board, will likely cause substantial economic damage to the Company or any Subsidiary or substantial injury to the business reputation of the Company
or any Subsidiary; (iii) the commission by the Participant of an act of fraud in the performance of his duties on behalf of the Company or any Subsidiary; (iv) the continuing willful failure of the Participant to perform his duties to the
Company or any Subsidiary (other than any such failure resulting from the Participants incapacity due to physical or mental illness) after written notice thereof; or (v) an order of a federal or state regulatory agency or a court of
competent jurisdiction requiring the termination of the Participants Service with the Company.
(f) Change in
Control has the meaning ascribed to it in Section 4.2.
(g) Code means the Internal Revenue Code of
1986, as amended, and any rules, regulations and guidance promulgated thereunder, as modified from time to time.
(h)
Code Section 409A means the provisions of Section 409A of the Code and any rules, regulations and guidance promulgated thereunder, as modified from time to time.
(i) Committee means the Committee acting under Article 5.
(j) Covered Employee has the meaning given the term in Code Section 162(m), and shall also include any other Employee who
may become a Covered Employee before an Award vests, as the Committee may determine in its sole discretion.
(k)
Director means a member of the Board of Directors of the Company or a Subsidiary.
(l) If the Participant is
subject to a written employment agreement (or other similar written agreement) with the Company or a Subsidiary that provides a definition of Disability or Disabled, then, for purposes of this Plan, the terms
Disability or Disabled shall have meaning set forth in such agreement. In the absence of such a definition, Disability shall be defined in accordance with the Banks long-term disability plan. To the extent
that an Award hereunder is subject to Code Section 409A, Disability or Disabled shall mean that a Participant: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve months; or (ii) is, by reason of any medically determinable physical or mental impairment which
can be expected to result in death or can be expected to last for a continuous period of not less
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than twelve months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering the Companys Employees. Except to the extent
prohibited under Code Section 409A, if applicable, the Committee shall have discretion to determine if a termination due to Disability has occurred.
(m) Disinterested Board Member means a member of the Board who: (a) is not a current Employee of the Company or a Subsidiary; (b) is not a former employee of the Company who receives
compensation for prior Services (other than benefits under a tax-qualified retirement plan) during the taxable year; (c) has not been an officer of the Company; (d) does not receive remuneration from the Company or a Subsidiary, either
directly or indirectly, in any capacity other than as a Director except in an amount for which disclosure would not be required pursuant to Item 404 of SEC Regulation S-K in accordance with the proxy solicitation rules of the SEC, as amended or
any successor provision thereto; and (e) does not possess an interest in any other transaction, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(a) of SEC Regulation S-K under the
proxy solicitation rules of the SEC, as amended or any successor provision thereto. The term Disinterested Board Member shall be interpreted in such manner as shall be necessary to conform to the requirements of section 162(m) of the Code, Rule
16b-3 promulgated under the Exchange Act and the corporate governance standards imposed on compensation committees under the listing requirements imposed by any national securities exchange on which the Company lists or seeks to list its securities.
(n) Employee means any person employed by the Company or any Subsidiary. Directors who are also employed by the
Company or a Subsidiary shall be considered Employees under the Plan.
(o) Exchange Act means the Securities
Exchange Act of 1934, as amended from time to time.
(p) Excluded Transaction means a plan of reorganization,
merger, consolidation or similar transaction that would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the
surviving corporation or any parent thereof) at least 50% of the combined voting power of the Voting Securities of the entity surviving the plan of reorganization, merger, consolidation or similar transaction (or the parent of such surviving entity)
immediately after such plan of reorganization, merger, consolidation or similar transaction.
(q) Exercise Price
means the price established with respect to a Stock Option pursuant to Section 2.2.
(r) Fair Market Value
means, with respect to a share of Stock on a specified date:
(I) the final reported sales price on the date in
question (or if there is no reported sale on such date, on the last preceding date on which any reported sale occurred) as reported in the principal consolidated reporting system with respect to securities listed or admitted to trading on the
principal United States securities exchange on which the shares of Stock are listed or admitted to trading, as of the close of the market in New York City and without regard to after-hours trading activity; or
(II) if the shares of Stock are not listed or admitted to trading on any such exchange, the closing bid quotation with
respect to a share of Stock on such date, as of the close of the market in New York City and without regard to after-hours trading activity, or, if no such quotation is provided, on another similar system, selected by the Committee, then in use; or
(III) if (I) and (II) are not applicable, the Fair Market Value of a share of Stock as the Committee may
determine in good faith and in accordance with Code Section 422 and the applicable requirements of Code Section 409A and the regulations promulgated thereunder. For purposes of the exercise of a Stock Option, Fair Market Value on such date
shall be the date a notice of exercise is received by the Company, or if not a day on which the market is open, the next day that it is open.
(s) A termination of employment by an Employee Participant shall be deemed a termination of employment for Good Reason as a result of the Participants resignation from the employ of the
Company or any Subsidiary upon the occurrence of any of the following events following a Change in Control: (a) the failure
A-15
of the Company or Subsidiary to appoint or re-appoint or elect or re-elect the Employee Participant to the position(s) with the Company or Subsidiary held immediately prior to the Change in
Control; (b) a material change in the functions, duties or responsibilities of the Employee Participant compared to those functions, duties or responsibilities in effect immediately prior to the Change in Control; (c) any reduction of the
rate of the Employee Participants base salary in effect immediately prior to the Change in Control; (d) any failure (other than due to reasonable administrative error that is cured promptly upon notice) to pay any portion of the Employee
Participants compensation as and when due; (e) any change in the terms and conditions of any compensation or benefit program in which the Employee Participant participated immediately prior to the Change in Control which, either
individually or together with other changes, has a material adverse effect on the aggregate value of his total compensation package; or (f) a change in the Employee Participants principal place of employment, without his consent, to a
place that is at least 30 miles further away from the Employee Participants principal residence prior to the Change in Control.
(t) Immediate Family Member means with respect to any Participant: (a) any of the Participants children, stepchildren, grandchildren, parents, stepparents, grandparents, spouses,
former spouses, siblings, nieces, nephews, mothers-in-law, fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law or sisters-in-law, including relationships created by adoption; (b) any natural person sharing the Participants
household (other than as a tenant or employee, directly or indirectly, of the Participant); (c) a trust in which any combination of the Participant and persons described in section (a) and (b) above own more than 50% of the beneficial
interests; (d) a foundation in which any combination of the Participant and persons described in sections (a) and (b) above control management of the assets; or (e) any other corporation, partnership, limited liability company or
other entity in which any combination of the Participant and persons described in sections (a) and (b) above control more than 50% of the voting interests.
(u) Incumbent Directors means:
(I) the individuals
who, on the date hereof, constitute the Board; and
(II) any new Director whose appointment or election by the
Board or nomination for election by the Companys stockholders was approved or recommended: (a) by the vote of at least two-thirds of the Whole Board, with at least two-thirds of the Incumbent Directors then in office voting in favor of
such approval or recommendation; or (b) by a Nominating Committee of the Board whose members were appointed by the vote of at least two-thirds of the Whole Board, with at least two-thirds of the Incumbent Directors then in office voting in
favor of such appointments
(v) Involuntary Termination of Employment means the Termination of Service by the
Company or Subsidiary (other than a termination for Cause) or termination of employment by a Participant Employee for Good Reason.
(w) ISO has the meaning ascribed to it in Section 2.1(a).
(x)
Non-Qualified Option means the right to purchase shares of Stock that is either (i) granted to a Participant who is not an Employee, or (ii) granted to an Employee and either is not designated by the Committee to be an ISO or
does not satisfy the requirements of Section 422 of the Code.
(y) Participant means any individual who has
received, and currently holds, an outstanding Award under the Plan.
(z) Restricted Stock has the meaning ascribed
to it in Section 2.3.
(aa) Retirement means, unless otherwise specified in an Award Agreement, retirement from
employment as an Employee on or after the attainment of age 65, or Termination of Service as a Director on or after the attainment of age 70,
provided, however
, that unless otherwise specified in an Award Agreement, an Employee who is also a
Director shall not be deemed to have terminated due to Retirement until both Service as an Employee and Service as a Director has ceased. A non-Employee Director will be deemed to have terminated due to
A-16
Retirement under the provisions of this Plan only if the non-Employee Director has terminated Service on the Board(s) of Directors of the Company and any Subsidiary or affiliate in accordance
with applicable Company policy, following the provision of written notice to such Board(s) of Directors of the non-Employee Directors intention to retire.
(bb) SEC means the United States Securities and Exchange Commission.
(cc) Securities Act means the Securities Act of 1933, as amended from time to time.
(dd) Service means service as an Employee, service provider, or non-employee Director of the Company or a Subsidiary, as the
case may be, and shall include service as a director emeritus or advisory director.
(ee) Stock means the common
stock of the Company, $0.01 par value per share.
(ff) Stock Option means an ISO or a Non-Qualified Option.
(gg) Subsidiary means any corporation, affiliate, bank or other entity which would be a subsidiary corporation
with respect to the Company as defined in Code Section 424(f) and, other than with respect to an ISO, shall also mean any partnership or joint venture in which the Company and/or other Subsidiary owns more than 50% of the capital or profits
interests.
(hh) Termination of Service means the first day occurring on or after a grant date on which the
Participant ceases to be an Employee or Director of, or service provider to, the Company or any Subsidiary, regardless of the reason for such cessation, subject to the following:
(I) The Participants cessation as an Employee or service provider shall not be deemed to occur by reason of the
transfer of the Participant between the Company and a Subsidiary or between two Subsidiaries.
(II) The
Participants cessation as an Employee or service provider shall not be deemed to occur by reason of the Participants being on a bona fide leave of absence from the Company or a Subsidiary approved by the Company or Subsidiary otherwise
receiving the Participants Services, provided such leave of absence does not exceed six months, or if longer, so long as the Employee retains a right to reemployment with the Company or Subsidiary under an applicable statute or by contract.
For these purposes, a leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Employee will return to perform Services for the Company or Subsidiary. If the period of leave exceeds six months and
the Employee does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first day immediately following such six month period. For purposes of this sub-section (II),
to the extent applicable, an Employees leave of absence shall be interpreted by the Committee in a manner consistent with Treasury Regulation Section 1.409A-1(h)(1).
(III) If, as a result of a sale or other transaction, the Subsidiary for whom Participant is employed (or to whom the
Participant is providing Services) ceases to be a Subsidiary, and the Participant is not, following the transaction, an Employee of the Company or an entity that is then a Subsidiary, then the occurrence of such transaction shall be treated as the
Participants Termination of Service caused by the Participant being discharged by the entity for whom the Participant is employed or to whom the Participant is providing Services.
(IV) A service provider whose Services to the Company or a Subsidiary are governed by a written agreement with the service
provider will cease to be a service provider at the time the term of such written agreement ends (without renewal); and a service provider whose Services to the Company or a Subsidiary are not governed by a written agreement with the service
provider will cease to be a service provider on the date that is 90 days after the date the service provider last provides Services requested by the Company or any Subsidiary (as determined by the Committee).
A-17
(V) Except to the extent Section 409A of the Code may be applicable to
an Award, and subject to the foregoing paragraphs of this sub-section (hh), the Committee shall have discretion to determine if a Termination of Service has occurred and the date on which it occurred. In the event that any Award under the Plan
constitutes Deferred Compensation (as defined in Section 2.6 hereof), the term Termination of Service shall be interpreted by the Committee in a manner consistent with the definition of Separation from Service as defined under Code
Section 409A and under Treasury Regulation Section 1.409A-1(h)(ii). For purposes of this Plan, a Separation from Service shall have occurred if the Bank and Participant reasonably anticipate that no further Services will be
performed by the Participant after the date of the Termination of Service (whether as an employee or as an independent contractor) or the level of further Services performed will be less than 50% of the average level of bona fide Services in the 36
months immediately preceding the Termination of Service. If a Participant is a Specified Employee, as defined in Code Section 409A and any payment to be made hereunder shall be determined to be subject to Code Section 409A,
then if required by Code Section 409A, such payment or a portion of such payment (to the minimum extent possible) shall be delayed and shall be paid on the first day of the seventh month following Participants Separation from Service.
(VI) With respect to a Participant who is a director, cessation as a Director will not be deemed to have
occurred if the Participant continues as a director emeritus or advisory director.
(ii) Voting Securities means
any securities which ordinarily possess the power to vote in the election of directors without the happening of any pre-condition or contingency.
(jj) Whole Board means the total number of Directors that the Company would have if there were no vacancies on the Board at the time the relevant action or matter is presented to the Board for
approval.
Section 8.2
In this Plan, unless otherwise stated or the context otherwise requires, the following uses
apply:
(a) actions permitted under this Plan may be taken at any time and from time to time in the actors reasonable
discretion;
(b) references to a statute shall refer to the statute and any successor statute, and to all regulations
promulgated under or implementing the statute or its successor, as in effect at the relevant time;
(c) in computing periods
from a specified date to a later specified date, the words from and commencing on (and the like) mean from and including, and the words to, until and ending on (and the like)
mean to, but excluding;
(d) references to a governmental or quasi-governmental agency, authority or
instrumentality shall also refer to a regulatory body that succeeds to the functions of the agency, authority or instrumentality;
(e) indications of time of day mean Eastern time;
(f) including means
including, but not limited to;
(g) all references to sections, schedules and exhibits are to sections, schedules
and exhibits in or to this Plan unless otherwise specified;
(h) all words used in this Plan will be construed to be of such
gender or number as the circumstances and context require;
(i) the captions and headings of articles, sections, schedules and
exhibits appearing in or attached to this Plan have been inserted solely for convenience of reference and shall not be considered a part of this Plan nor shall any of them affect the meaning or interpretation of this Plan or any of its provisions;
A-18
(j) any reference to a document or set of documents in this Plan, and the rights and
obligations of the parties under any such documents, shall mean such document or documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions or replacements thereof; and
(k) all accounting terms not specifically defined herein shall be construed in accordance with GAAP.
A-19
REVOCABLE PROXY
WOLVERINE BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 21, 2012
The undersigned hereby appoints the official proxy committee consisting of the Board of Directors of Wolverine Bancorp, Inc. (the Company)
with full powers of substitution to act as attorneys and proxies for the undersigned to vote all shares of Common Stock of the Company which the undersigned is entitled to vote at the Annual Meeting of Stockholders (the Annual Meeting)
to be held at The Midland Center for the Arts, Auditorium Lobby, located at 1801 West St. Andrews, Midland, Michigan 48640 at 3:00 p.m., Eastern time on Monday, May 21, 2012 The official proxy committee is authorized to cast all votes to which
the undersigned is entitled as follows:
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FOR ALL
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FOR
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WITHHELD
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EXCEPT
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1.
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The election as Directors of the nominees listed
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below each to serve for a three-year term.
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Roberta N. Arnold
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Eric P. Blackhurst
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INSTRUCTION: To withhold your vote for
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one or more nominees, mark For all Except
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and write the name(s) of the nominee(s) on the
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line(s) below.
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FOR
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AGAINST
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ABSTAIN
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2.
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The ratification of the appointment of BKD,
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LLP as the Companys independent registered
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public accounting firm for the year ending
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December 31, 2012.
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FOR
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AGAINST
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ABSTAIN
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3.
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The approval of the Companys 2012 Equity
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Incentive Plan.
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The Board of Directors recommends a vote FOR each of the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED
ABOVE. IF ANY OTHER BUSINESS IS PROPERLY PRESENTED AT SUCH ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THE MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL
MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting or at any adjournment thereof and after notification to the
Secretary of the Company at the Annual Meeting of the shareholders decision to terminate this proxy, then the power of said attorneys and proxies shall be deemed terminated and of no further force and effect. This proxy may also be revoked by
sending written notice to the Secretary of the Company at the address set forth on the Notice of Annual Meeting of Stockholders, or by the filing of a later proxy prior to a vote being taken on a particular proposal at the Annual Meeting.
The undersigned acknowledges receipt from the Company prior to the execution of this proxy of a Notice of Annual Meeting of
Stockholders and proxy statement, both dated April 16, 2012 and audited financial statements.
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Dated:
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Check Box if You Plan
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to Attend Annual Meeting
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PRINT NAME OF SHAREHOLDER
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PRINT NAME OF SHAREHOLDER
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SIGNATURE OF SHAREHOLDER
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SIGNATURE OF SHAREHOLDER
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Please sign exactly as your name appears on this card. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title.
Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
Westbank (NASDAQ:WBKC)
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