UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

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		þ		Definitive Proxy Statement
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		o		Soliciting Material Pursuant to §240.14a-12

CHEMICAL FINANCIAL CORPORATION

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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No fee required.

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March 6, 2009

 

CHEMICAL
FINANCIAL CORPORATIONSM

 

333 East Main Street
Midland, Michigan 48640

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held April 20, 2009

 

 

You are invited to attend the annual meeting of shareholders of Chemical Financial Corporation at the Midland Center for the Arts, 1801 W. St. Andrews Drive, Midland, Michigan, on Monday, April 20, 2009, at 2:00 p.m. local time. At the meeting, we will:

 

1. Elect thirteen directors;

 

 

3. Conduct any other business that may properly come before the meeting.

 

You may vote at the meeting and any adjournment of the meeting if you were a shareholder of record at the close of business on February 20, 2009.

 

Our 2008 Annual Report to Shareholders is enclosed with this Notice. Our proxy statement and enclosed proxy card are being sent to shareholders on and after March 6, 2009.

 

 

We look forward to seeing you at the meeting.

 

 

By Order of the Board of Directors,

 

 

David B. Ramaker

Chairman, Chief Executive Officer and President

 

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON APRIL 20, 2009.

Our Proxy Statement and Annual Report are available at www.edocumentview.com/chfc.

 

 

CHEMICAL FINANCIAL CORPORATION
333 East Main Street
Midland, Michigan 48640

 

ANNUAL MEETING OF SHAREHOLDERS

April 20, 2009

 

PROXY STATEMENT

 

Meeting Information

 

Time and Place of Meeting

 

You are invited to attend the annual meeting of shareholders of Chemical Financial Corporation (“Chemical Financial” or the “Corporation”) that will be held on Monday, April 20, 2009, at the Midland Center for the Arts, 1801 W. St. Andrews Drive, Midland, Michigan, at 2:00 p.m. local time.

 

This proxy statement and the enclosed proxy card are being furnished to you on and after March 6, 2009, in connection with the solicitation of proxies by Chemical Financial’s board of directors for use at the annual meeting. In this proxy statement, “we,” “us” and “our” refer to Chemical Financial, “you” and “your” refer to Chemical Financial shareholders, and “Chemical Bank” refers to Chemical Bank, Chemical Financial’s sole banking subsidiary.

 

Purpose of Meeting

 

The purpose of the annual meeting is to consider and vote upon the election of thirteen directors and vote on the proposed amendment to the Restated Articles of Incorporation to authorize the issuance of up to 200,000 shares of preferred stock.

 

Your board of directors recommends that you vote FOR each of the nominees discussed in this proxy statement and FOR approval of the proposed amendment to the Restated Articles of Incorporation to authorize the issuance of up to 200,000 shares of preferred stock.

 

How to Vote Your Shares

 

You may vote at the meeting or by proxy, telephone or the Internet if you were a shareholder of record of Chemical Financial common stock on February 20, 2009. You are entitled to one vote per share of Chemical Financial common stock that you own on each matter presented at the annual meeting.

 

As of February 20, 2009, there were 23,889,766 shares of Chemical Financial common stock issued and outstanding.

 

Your shares will be voted at the annual meeting if you properly sign and return to us the enclosed proxy. Chemical Financial Corporation also offers voting by telephone or the Internet. See the enclosed proxy for voting instructions. If you specify a choice, your shares will be voted as specified. If you do not specify a choice, your shares will be voted for the election of each nominee for director named in this proxy statement and for approval of the proposed amendment to the Restated Articles of Incorporation. If other matters are presented at the annual meeting, the individuals named in the enclosed proxy will vote your shares on those matters in their discretion. As of the date of this proxy statement, we do not know of any other matters to be considered at the annual meeting.

 

You may revoke your proxy at any time before it is exercised by:

 

 

Who Will Solicit Proxies

 

Directors, officers and employees of Chemical Financial and its affiliates will initially solicit proxies by mail. They also may solicit proxies in person, by telephone or by other means, but they will not receive any additional compensation for these efforts. Nominees, trustees and other fiduciaries who hold stock on behalf of beneficial owners of Chemical Financial common stock may communicate with the beneficial owners by mail or otherwise and may forward proxy materials to and solicit proxies from the beneficial owners. Chemical Financial will pay all costs of solicitation of proxies. Chemical Financial has engaged Georgeson Shareholder Communications, Inc. at an estimated cost of $800, plus expenses, to assist in the distribution of these materials. Chemical Financial Corporation is also soliciting proxies by telephone and the Internet. See the enclosed proxy for instructions.

 

Required Vote and Quorum

 

A plurality of the shares voting at the annual meeting is required to elect directors. This means that if there are more nominees than director positions to be filled, the nominees for whom the most votes are cast will be elected. In counting votes on the election of directors, abstentions, broker non-votes and other shares not voted will not be counted as voted, and the number of shares of which a plurality is required will be reduced by the number of shares not voted.

 

A majority of the votes cast by shareholders entitled to vote is required to approve the proposed amendment to the Restated Articles of Incorporation to authorize the issuance of up to 200,000 shares of preferred stock. In counting votes for approval of the proposal, abstentions, broker non-votes and other shares not voted will not be counted as voted, and the number of shares of which a majority is required will be reduced by the number of shares not voted.

 

A majority of the shares entitled to vote at the annual meeting must be present or represented at the meeting to constitute a quorum. If you submit a proxy or attend the meeting in person, your shares will be counted towards the quorum, even if you abstain from voting on some or all of the matters introduced at the meeting. Broker non-votes also count for quorum purposes.

 

Election of Directors

 

The board of directors presently consists of thirteen individuals. The term of office for each of the directors expires at the annual meeting each year.

 

Following a review and recommendation from the Corporate Governance and Nominating Committee, the board of directors proposes that the following nominees be elected as directors for terms expiring at the annual meeting of shareholders to be held in 2010:

 

Nominees

 

Gary E. Anderson
J. Daniel Bernson
Nancy Bowman
James A. Currie
Thomas T. Huff
Michael T. Laethem
Geoffery E. Merszei
Terence F. Moore
Aloysius J. Oliver
David B. Ramaker
Larry D. Stauffer
William S. Stavropoulos
Franklin C. Wheatlake

 

Each proposed nominee currently serves as a director of Chemical Financial for a term that will expire at this year’s annual meeting. The persons named in the enclosed proxy card intend to vote for the election of the thirteen nominees listed above. The proposed nominees are willing to be elected and serve as directors. If a nominee is unable to serve or is otherwise unavailable for election, which we do not anticipate, the incumbent board of directors may or may not select a substitute nominee. If a substitute nominee is selected, your proxy will be voted for the person selected. If a substitute nominee is not selected, your proxy will be voted for the election of the remaining nominees. No proxy will be voted for a greater number of persons than the number of nominees named above.

 

Biographical information is presented below concerning the current directors and nominees for director of Chemical Financial. All current directors and nominees for director, except David B. Ramaker, qualified as independent directors as defined by the Sarbanes-Oxley Act of 2002 and applicable Nasdaq Stock Market^® listing standards, including such definitions applicable to each committee of the board of directors upon which he or she serves or served. In making this determination, the board of directors considered all ordinary course loan and other business transactions between directors and Chemical Bank. Except as otherwise indicated, each nominee has had the same principal occupation and employment during the past five years.

Chemical Financial’s Board of Directors and Nominees for Election as Directors

 

Gary E. Anderson, age 63, has served as a director of Chemical Financial since January 2005 and is a member of the Audit Committee and Chairman of both the Compensation and Pension and Corporate Governance and Nominating Committees. Mr. Anderson has been a director of Chemical Bank since January 2001. Mr. Anderson was appointed as Lead Independent Director of the Corporation in April 2006. Mr. Anderson is retired Chairman of the board of the Dow Corning Corporation. Mr. Anderson joined the Dow Corning Corporation, a diversified company specializing in the development, manufacture and marketing of silicones and related silicon-based products, in 1967 and served in various executive capacities for over 25 years, including Chairman, President and Chief Executive Officer, retiring as Chairman on December 31, 2005. Mr. Anderson is a director of Eastman Chemical Company.

 

J. Daniel Bernson, age 67, has served as a director of Chemical Financial since January 2001 and is a member of the Audit, Compensation and Pension and Corporate Governance and Nominating Committees. Mr. Bernson served as a director of Chemical Bank Shoreline (merged into Chemical Bank on December 31, 2005) from July 1999 through December 31, 2005. Mr. Bernson became a director of Chemical Bank on January 1, 2006. Mr. Bernson is Vice Chairman of The Hanson Group, St. Joseph, Michigan, a holding company with diversified business interests in southwest Michigan, including Hanson Mold, Hanson Logistics, Eagle Technologies Group, Pure Fact, Inc., Hanson Xpress and Hanson Transportation Management Services. Mr. Bernson was President of The Hanson Group from 1988 until December 2006 and Chief Executive Officer from April 2004 until December 2006. Mr. Bernson became Vice Chairman of The Hanson Group upon his retirement as President and Chief Executive Officer in December 2006.

 

Nancy Bowman, age 57, has served as a director of Chemical Financial since January 2003 and is a member of the Audit and Compensation and Pension Committees. Ms. Bowman served as a director of Chemical Bank West (merged into Chemical Bank on December 31, 2005) from 1982 through December 31, 2005. Ms. Bowman became a director of Chemical Bank on January 1, 2006. Ms. Bowman is also a community advisory board member. Ms. Bowman is a certified public accountant and co-owner of Bowman & Rogers, PC, an accounting and tax services company located in Lake City, Michigan.

 

James A. Currie, age 50, has been a director of Chemical Financial since August 1993 and is a member of the Compensation and Pension and Corporate Governance and Nominating Committees. Mr. Currie has served as a director of Chemical Bank since February 1992. Mr. Currie is an investor.

 

Thomas T. Huff, age 66, has served as a director of Chemical Financial since January 2004 and is a member of the Audit and Compensation and Pension Committees. Mr. Huff served as a director of Chemical Bank Shoreline (merged into Chemical Bank on December 31, 2005) from 1986 through December 31, 2005. Mr. Huff became a director of Chemical Bank on January 1, 2006 and is also a community advisory board member. From 1987 to 2002, Mr. Huff was a senior partner with the Varnum, Riddering, Schmidt and Howlett law firm. Mr. Huff is owner of Peregrine Realty LLC (a real estate development company) and Peregrine Restaurant Group LLC (owner of London Grill restaurants), and continues to practice law in Kalamazoo, Michigan.

 

Michael T. Laethem, age 50, has served as a director of Chemical Financial since January 1, 2006. Mr. Laethem has served as a director of Chemical Bank since January 2001 and is also a community advisory board member. Mr. Laethem has served on various subsidiary and advisory boards of Chemical Financial since 1993. Mr. Laethem is a certified public accountant and is also President of Farm Depot, Ltd, a company that purchases, sells and leases farm equipment, in Caro, Michigan.

 

Geoffery E. Merszei, age 57, has served as a director of Chemical Financial and Chemical Bank since January 1, 2006 and is a member of the Audit and Corporate Governance and Nominating Committees. Mr. Merszei is Executive Vice President and Chief Financial Officer and a director of The Dow Chemical Company (Dow), a diversified science and technology company that manufactures chemical, plastic and agricultural products. Mr. Merszei joined Dow in 1977 as a credit manager and progressed through various roles in the finance organization of the company, becoming Vice President and Treasurer in 1996. Mr. Merszei left Dow in 2001 and became Executive Vice President and Chief Financial Officer of Alcan Inc., a diversified company specializing in the production of aluminum, a provider of packaging, and metal trading. Mr. Merszei left Alcan Inc. and returned to Dow in July 2005 and became Executive Vice President and Chief Financial Officer of Dow and a member of its board of directors.

 

Terence F. Moore, age 65, has served as a director of Chemical Financial since January 1998 and is Chairman of the Audit Committee and a member of the Compensation and Pension and Corporate Governance and Nominating Committees. Mr. Moore has served as a director of Chemical Bank since February 1991. Mr. Moore is President Emeritus of MidMichigan Health. Mr. Moore served as President and Chief Executive Officer of MidMichigan Health in Midland, Michigan from 1982 until his retirement in June 2008. MidMichigan Health is a health care organization operating in central and northern Michigan. From 1977 to 1984, Mr. Moore was President and Chief Executive Officer of MidMichigan Medical Center in Midland, which is MidMichigan Health’s largest subsidiary.

Aloysius J. Oliver, age 68, has served as a director of Chemical Financial since January 1997 and served as Chairman of its board of directors from January 2002 until May 1, 2004. Mr. Oliver is a member of the Audit, Compensation and Pension and Corporate Governance and Nominating Committees. Mr. Oliver previously served as President and Chief Executive Officer of Chemical Financial from January 1997 until his retirement on December 31, 2001. Before being appointed President and Chief Executive Officer of Chemical Financial, Mr. Oliver served as Executive Vice President and Secretary from January 1985 to December 1996. Mr. Oliver joined Chemical Financial from Chemical Bank in January 1985. Mr. Oliver joined Chemical Bank in 1957 and served in various management capacities. Mr. Oliver became Vice President and Cashier of Chemical Bank in 1975, Secretary to the board of directors in 1979 and Senior Vice President in 1981. Mr. Oliver became a director of Chemical Bank in August 1996.

 

David B. Ramaker, age 53, is Chairman, Chief Executive Officer and President of Chemical Financial. Mr. Ramaker was appointed Chief Executive Officer and President in January 2002 and Chairman in April 2006. Mr. Ramaker has been a director of Chemical Financial since October 2001. Mr. Ramaker also serves as Chairman, Chief Executive Officer and President of Chemical Bank. Mr. Ramaker joined Chemical Bank as Vice President on November 29, 1989. Mr. Ramaker became President of Chemical Bank Key State (consolidated into Chemical Bank) in October 1993. Mr. Ramaker became President and a member of the board of directors of Chemical Bank in September 1996 and Executive Vice President and Secretary to the board of Chemical Financial and Chief Executive Officer of Chemical Bank on January 1, 1997. Mr. Ramaker served as Chief Executive Officer and President of Chemical Bank until December 31, 2001. He resumed these positions on January 1, 2006. Mr. Ramaker became Chairman of the board of Chemical Bank in January 2002. During the last five years, Mr. Ramaker has served as a director of all of the Corporation’s subsidiaries. Mr. Ramaker is also a member of the Executive Management Committee of Chemical Financial.

 

Larry D. Stauffer, age 63, has served as a director of Chemical Financial and Chemical Bank since January 1, 2006. Mr. Stauffer served as a director of Chemical Bank West (merged into Chemical Bank on December 31, 2005) from May 2004 through December 31, 2005. Mr. Stauffer is also a community advisory board member. Mr. Stauffer served from 1984 to November 2007 as President of Auto Paint, Inc. and Auto Wares Tool Company, both divisions of Auto Wares Inc., an automotive parts distribution company that serves the Midwest section of the United States, headquartered in Grand Rapids, Michigan. In November 2007, Mr. Stauffer became an employee consultant of Auto Wares Inc.

 

William S. Stavropoulos, age 69, has been a director of Chemical Financial since August 1993 and a director of Chemical Bank since April 1992. Mr. Stavropoulos is a member of the Audit, Compensation and Pension and Corporate Governance and Nominating Committees. Mr. Stavropoulos is retired Chairman of the board of directors of The Dow Chemical Company (Dow), a diversified science and technology company that manufactures chemical, plastic and agricultural products. Mr. Stavropoulos joined Dow in 1967 and served in various senior management positions. Mr. Stavropoulos was named President of Dow Latin America in 1984, Group Vice President in 1987, Vice President in 1990, President of Dow U.S.A. in 1990, Senior Vice President in 1991, President and Chief Operating Officer in 1993, Chief Executive Officer in November 1995 and Chairman of the board of directors in November 2000. Mr. Stavropoulos was a member of the board of directors of Dow from July 1990 to March 2006. Mr. Stavropoulos served as President and Chief Executive Officer of Dow from 1995 to 2000 and was reappointed to that position in December 2002. In November 2003, Mr. Stavropoulos relinquished the position as President, in November 2004 he relinquished the position as Chief Executive Officer and he retired as Chairman of Dow on April 1, 2006. Mr. Stavropoulos is Chairman Emeritus of Dow. Mr. Stavropoulos is also a director of Maersk Inc., Teradata Corporation and Tyco International, Inc. and a trustee of the Fidelity Group of Funds.

 

Franklin C. Wheatlake, age 61, has served as a director of Chemical Financial and Chemical Bank since January 1, 2006 and is a member of the Audit and Compensation and Pension Committees. Mr. Wheatlake served as a director of Chemical Bank West (merged into Chemical Bank on December 31, 2005) from 2001 through December 31, 2005. Mr. Wheatlake is Chairman of Utility Supply and Construction Company, a company that provides supply chain, material distribution, logistics support and construction services to the electric and gas utility industry, and a dealer/principal of Reed City GMC Truck (d.b.a. Crossroads Chevrolet), an automobile/light truck dealership, both located in Reed City, Michigan.

 

Your Board of Directors Recommends that You Vote
FOR the Election of All Nominees as Directors

 

Committees of the Board of Directors

 

Among others, the board of directors has established the following three standing committees:

 

 

Audit Committee. The Audit Committee of the Corporation serves in a dual capacity as the Audit Committee of the Corporation and Chemical Bank. The Audit Committee was established in accordance with section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee oversees the accounting and financial reporting processes on behalf of the boards of directors of the Corporation and Chemical Bank. The Audit Committee oversees the audit of the financial statements and is directly responsible for the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm engaged by the Corporation. The Audit Committee operates pursuant to a written charter, a current copy of which is available on Chemical Financial’s corporate website at www.chemicalbankmi.com under “Investor Information.” The Audit Committee is comprised solely of independent directors as defined by the Sarbanes-Oxley Act of 2002 and the Nasdaq Stock Market listing standards. The Audit Committee has a Pre-Approval Policy to pre-approve the audit and non-audit services performed by the independent registered public accounting firm. All services provided by the independent registered public accounting firm are either within general pre-approved limits or specifically approved by the Audit Committee. The general pre-approval limits are detailed as to each particular service and are limited by a specific dollar amount for each type of service per project. Subject to certain limitations, the authority to grant pre-approvals may be delegated to one or more members of the Audit Committee. The Pre-Approval Policy requires the Audit Committee to be informed of the services provided under the pre-approval guidelines at the next regularly scheduled Audit Committee meeting. The Audit Committee met seven times during 2008. During 2008, the Audit Committee was composed of Mr. Moore, Chairman, Ms. Bowman and Messrs. Anderson, Bernson, Huff, Merszei, Oliver, Stavropoulos and Wheatlake. Messrs. Anderson, Bernson, Merszei, Moore, Oliver and Stavropoulos are considered “audit committee financial experts” as defined by the Securities and Exchange Commission (SEC).

 

Compensation and Pension Committee.  The Compensation and Pension Committee reviews salaries, bonuses and other compensation of all officers of Chemical Financial and Chemical Bank, administers Chemical Financial’s share-based compensation plans, makes recommendations to the board of directors regarding the grants of share-based compensation awards under these plans, and annually reviews the Corporation’s benefit programs, including the pension, supplemental pension, nonqualified deferred compensation and 401(k) savings plans. All share-based compensation plans outstanding have been approved by the Corporation’s shareholders. The Compensation and Pension Committee operates pursuant to a written charter, a current copy of which is available on Chemical Financial’s corporate website at www.chemicalbankmi.com under “Investor Information.” The Compensation and Pension Committee is comprised solely of independent directors as defined by the Nasdaq Stock Market listing standards. The Compensation and Pension Committee met two times during 2008. During 2008, the Compensation and Pension Committee was composed of Mr. Anderson, Chairman, Ms. Bowman and Messrs. Bernson, Currie, Huff, Moore, Oliver, Stavropoulos and Wheatlake.

 

Corporate Governance and Nominating Committee.  The Corporate Governance and Nominating Committee oversees the Corporation’s corporate governance responsibilities on behalf of the board of directors and is responsible for the identification and recommendation of individuals qualified to become members of the board of directors for each vacancy that occurs and for each election of directors at an annual meeting of shareholders. The Corporate Governance and Nominating Committee operates pursuant to a written charter, a current copy of which is available on Chemical Financial’s corporate website at www.chemicalbankmi.com under “Investor Information.” The Corporate Governance and Nominating Committee met once during 2008. All members of the Corporate Governance and Nominating Committee are independent as defined by the Nasdaq Stock Market listing standards. During 2008, the Corporate Governance and Nominating Committee was composed of Mr. Anderson, Chairman, and Messrs. Bernson, Currie, Merszei, Moore, Oliver and Stavropoulos.

 

Board and Annual Meeting Attendance

 

During 2008, the Chemical Financial board of directors held five regular meetings and two special meetings. Twelve out of thirteen directors attended at least 75% of the aggregate number of meetings of the board of directors and meetings of committees on which they served during the year (during the periods that they served). The Corporation has a policy that requires all members of and nominees to the board of directors to attend the annual meeting each year. Twelve out of thirteen directors serving at April 21, 2008 attended the Corporation’s 2008 annual meeting held on that date.

 

Shareholder Nominations

 

The Corporate Governance and Nominating Committee will consider director candidates recommended by shareholders, directors, officers, third-party search firms and other sources. Shareholders may recommend individual nominees for consideration by the Corporate Governance and Nominating Committee by communicating with the committee as described under the heading “Communicating with the Board.” The Corporate Governance and Nominating Committee will ultimately determine whether a shareholder recommendation will result in a nomination under this process. In considering potential nominees, the committee will review all candidates in the same manner, regardless of the source of the recommendation. In evaluating the skills and characteristics required of board members, the committee considers factors such as experience, diversity, potentials for conflicts of interest, independence, character and integrity, ability to devote sufficient time to board service, and capacity to represent the balanced, best interests of the shareholders as a group. Direct shareholder nominations may only be made by sending a notice to the Secretary of Chemical Financial that sets forth:

 

 

You must send this notice to the Secretary of Chemical Financial not less than 120 days before the date of an annual meeting and not more than seven days following the date of notice of a special meeting called for election of directors. The Committee will evaluate and consider every nominee so proposed by a shareholder and report each such nomination and the Committee’s recommendation to the full board of directors. The Committee may also, in its discretion, consider shareholders’ informal recommendations of possible nominees. In considering possible candidates for election as a director, the Committee and the other directors will be guided by applicable rules and regulations, any specific criteria established by the Committee and the following criteria:

 

Each candidate should:

 

 

Communicating with the Board

 

Shareholders and interested parties may communicate with members of Chemical Financial’s board of directors by sending correspondence addressed to the board as a whole, a specific committee, or a specific board member c/o Joseph Torrence, Senior Vice President, Director of Human Resources, Chemical Financial Corporation, 333 E. Main Street, Midland, Michigan 48640. All correspondence will be forwarded directly to the applicable members of the board of directors.

 

Approval of the Proposed Amendment to the Restated Articles of Incorporation
to Authorize the Issuance of Up to 200,000 Shares of Preferred Stock

 

The board of directors has unanimously approved, and recommends that the Corporation’s shareholders approve, the proposed amendment to the Restated Articles of Incorporation to authorize the issuance of up to 200,000 shares of preferred stock attached as Appendix A to this proxy statement. The board of directors determined the approval of the proposed amendment to authorize a limited class of preferred stock would be in the best interests of the Corporation and its shareholders. No class of preferred stock is presently authorized by the Corporation’s current Restated Articles of Incorporation.

 

One reason for proposing to authorize a limited class of preferred stock is to give the Corporation the ability to acquire an entity that has sold shares of preferred stock to the United States Department of the Treasury (Treasury) pursuant to the Treasury’s Capital Purchase Program (CPP) established under the Troubled Assets Relief Program (TARP). The Corporation has historically grown through acquisitions of banks and bank holding companies. If the Corporation determined in the future to acquire an entity that had participated in the CPP, then the Corporation could be required to issue shares of its preferred stock to the Treasury in substitution for the target entity’s preferred stock in order to complete the acquisition. While the Corporation evaluates strategic acquisition opportunities on an ongoing basis, as of the date of this proxy statement, the Corporation has no current plans to acquire an entity that has participated in the CPP.

 

Another reason for proposing to authorize a limited class of preferred stock is to give the Corporation the ability to participate in the TARP (but not the CPP), or other government program that is established in the future, which may require the issuance of preferred stock, should the board of directors decide that such participation in the future is in the best interests of the Corporation and its shareholders. The Corporation does not intend to participate in the CPP. As previously announced, the Corporation expressly decided against participation in the CPP even though Treasury approved it for participation. However, given the current financial and credit crisis and the continued deterioration of the Michigan economy, specifically, and the United States economy, generally, the board of directors believes it is in the best interests of the Corporation and its shareholders for the Corporation to have the ability to participate in other programs that may be announced under TARP or other government programs in the future. The board of directors cannot presently predict the nature or terms of any future government program and would evaluate whether participation in any such future program is in the best interests of the Corporation and its shareholders when and if any such future program is announced.

 

The proposed amendment does not allow the board of directors to issue preferred stock in its discretion. Rather, it limits the ability of the board of directors to issue preferred stock to the circumstances described above, namely: (i) in connection with the acquisition of an entity that has participated in a government sponsored program, or (ii) in connection with participation by the Corporation in a government sponsored program established in the future. These are the only circumstances under which the board of directors would be permitted to issue shares of preferred stock.

 

In these two limited circumstances, the proposed amendment would allow the board of directors to issue up to 200,000 shares of preferred stock without further shareholder approval. The board of directors would be able to determine the designations and relative voting, distribution, dividend, liquidation and other rights, preferences and limitations of the preferred stock, including, among other things: (i) the designation of each class or series and the number of shares in the class or series; (ii) the dividend rights, if any, of the class or series; (iii) the voting rights, if any (in addition to any prescribed by law), of the holders of shares of the class or series; (iv) the rights, if any, to convert or exchange the shares into or for other securities; (v) the conditions or restrictions, if any, on specified actions of the Corporation affecting the rights of the shares; (vi) the redemption provisions, if any, of the shares; (vii) the preference, if any, to which any class or series would be entitled in the event of the liquidation or distribution of the Corporation’s assets; and (viii) the provisions of a sinking fund, if any, provided for the redemption of the preferred stock.

 

The board of directors believes it is in the best interests of the Corporation and its shareholders to authorize a limited class of preferred stock. If approved, the proposed amendment would position the Corporation to be able to capitalize on future strategic acquisition opportunities and to respond effectively to future market conditions. The board of directors presently does not have any plan or proposal to issue preferred stock.

 

Your board of directors unanimously recommends that
you vote FOR approval of the Proposed Amendment
to the Restated Articles of Incorporation to
authorize the issuance of up to
200,000 shares of preferred stock

 

Ownership of Chemical Financial Common Stock

 

Five Percent Shareholders

 

Listed below are the only entities known by management to have been the beneficial owners of more than 5% of the outstanding shares of Chemical Financial common stock as of December 31, 2008.

 

		Amount and Nature of Beneficial Ownership
		of Common Stock(1)
		Sole				Shared				Sole				Shared				Total
Name and Address of		Voting				Voting				Dispositive				Dispositive				Beneficial				Percent
Beneficial Owner		Power				Power				Power				Power(2)				Ownership				of Class
Dimensional Fund Advisors LP(3)			1,940,234				—				1,977,520				—				1,977,520				8.3	%
Palisades West, Building One 6300 Bee Cave Road Austin, TX 78746
Chemical Bank(4)			1,556,723				—				1,559,579				188,784				1,748,363				7.3	%
Trust Department 333 E. Main Street Midland, MI 48640
Franklin Advisory Services, LLC and Affiliates(5)			1,467,809				—				1,522,909				—				1,522,909				6.4	%
One Parker Plaza, 9th Floor Fort Lee, NJ 07024

 

Ownership of Chemical Financial Common Stock by Directors and Executive Officers

 

The following table sets forth information concerning the number of shares of Chemical Financial common stock held as of December 31, 2008, by each of Chemical Financial’s directors and nominees for director, each of the named executive officers who are included in the Summary Compensation Table, and all of Chemical Financial’s directors, nominees for director and executive officers as a group:

 

		Amount and Nature of Beneficial Ownership
		of Common Stock(1)
						Shared
		Sole Voting				Voting or				Stock Options				Total
Name of		and Dispositive				Dispositive				Exercisable				Beneficial				Percent
Beneficial Owner		Power				Power(2)				Within 60 Days				Ownership				of Class
G.E. Anderson			7,699				8,193								15,892				*
J.D. Bernson							20,903								20,903				*
N.A. Bowman			2,040												2,040				*
J.A. Currie			114,049				18,399								132,448				*
L.A. Gwizdala			673				39,730				26,990				67,393				*
T.T. Huff			12,832												12,832				*
K.W. Johnson			2,201								14,116				16,317				*
T.W. Kohn			24,149				8,034				22,258				54,441				*
M.T. Laethem							2,337								2,337				*
G.E. Merszei							8,000								8,000				*
T.F. Moore							13,717								13,717				*
A.J. Oliver			109,391												109,391				*
D.B. Ramaker			758				17,183				64,122				82,063				*
L.D. Stauffer							3,325								3,325				*
W.S. Stavropoulos			8,519				349,683	(6)							358,202	(6)			1.5	%
J.E. Tomczyk			659				1,623				23,720				26,002				*
F.C. Wheatlake			299				81,995								82,294				*
All directors and executive officers as a group			287,300				584,392	(6)			170,335				1,042,027	(6)			4.3	%

 

 

 

Director Compensation

 

During 2008, Chemical Financial compensated its directors who were not employees of Chemical Financial or its subsidiary, Chemical Bank, with an annual retainer of $20,000, at the rate of $750 for every board and Audit Committee meeting attended and at the rate of $550 for all other committee meetings attended. In addition, during 2008, non-employee directors of Chemical Financial were compensated at a rate of $750 for every Chemical Bank Loan Committee meeting attended and $550 for all other Chemical Bank committee meetings attended. In 2008, community advisory directors were compensated with an annual retainer fee of $2,500 and at the rate of $200 for every meeting attended. Employees of Chemical Financial or Chemical Bank do not receive any compensation for serving on, or attending meetings of, the board of directors of Chemical Financial or Chemical Bank or any community advisory board or meetings of any of their committees.

 

On April 20, 2008, the shareholders approved the Chemical Financial Corporation Directors’ Deferred Stock Plan (DDSP), authorizing the issuance of up to 400,000 shares of Chemical Financial common stock. The DDSP provides benefits to non-employee directors of Chemical Financial in the form of an equity retainer that is required to be deferred annually and invested in stock units representing shares of Chemical Financial common stock. The equity retainer is 50% of the annual retainer of each non-employee director, or such greater percentage as determined by the board of directors. The annual retainer is a lump sum amount paid to each non-employee director for the director’s service throughout the year to Chemical Financial and its shareholders. For 2008, the annual retainer paid to each non-employee director was $20,000, of which the equity retainer was $10,000. The difference between the annual retainer and the equity retainer is the cash retainer. The DDSP allows each non-employee director to voluntarily defer the cash retainer and/or all or any portion of director fees and invest in stock units representing shares of Chemical Financial common stock. The amount of the annual retainer and director fees contributed to the DDSP are vested immediately. The deferral election must be made before the beginning of a plan year. The DDSP is an unfunded supplemental nonqualified deferred compensation plan that complies with Internal Revenue Code Section 409A.

 

The equity retainer and any cash retainer voluntarily contributed to the DDSP are converted to stock units on the date paid. Any director fees that are voluntarily contributed to the DDSP are converted to stock units on the date Chemical Financial pays its next quarterly cash dividend. The number of stock units credited to each participating director’s account is determined by dividing the dollar amount of the equity retainer and any deferred cash retainer by the market value of a single share of Chemical Financial common stock on the date the annual retainer is paid, and by dividing the dollar amount of any deferred fees by the market value of a single share of Chemical Financial common stock on the next regular cash dividend payment date. Each participating director’s account is also credited with dividend equivalents on each date Chemical Financial pays cash dividends. Dividend equivalents are a number of stock units equal to the number of shares of common stock that have a market value equal to the amount of any cash dividends that would have been paid to a shareholders owning the number of shares of common stock represented by stock units in a participating director’s account on each cash dividend payment date.

 

Distributions will be made in common stock of Chemical Financial equal to the number of stock units in the participating director’s account. Any fractional shares will be paid in cash. Distributions will not be made until a director retires or terminates service as a director or upon the death of the director or a change in control of Chemical Financial. For common stock issued upon a director’s retirement from or termination of service, the director has a choice to receive the shares in a lump sum or in five annual installments. A director must make an irrevocable election between the lump sum and five annual installments at the time the director begins participating in the DDSP. The election is irrevocable and applies to all future deferral elections. Upon a change of control of Chemical Financial or death of the director, shares will be issued in a lump sum. Chemical Financial may also permit a distribution to a participating director due to an unforeseeable emergency.

 

Messrs. Laethem and Stauffer were the only two directors during 2008 that made voluntary contributions to the plan.

 

The board of directors adopted the Chemical Financial Corporation Plan for Deferral of Directors’ Fees in 1982 (prior plan). The prior plan was available to all directors of Chemical Financial and its subsidiaries who receive fees, including community advisory directors through December 31, 2008. Effective December 31, 2008, the prior plan was closed to new participants. Under the prior plan, directors and community advisory directors that participate in the prior plan must elect before December 31 of each year to defer either 50% or 100% of fees to be earned in the following year. Those fees will be paid out in any number of calendar years from one to ten commencing during or following the year the director ceases to be a director or the year after the director attains age 70. During the deferral period, the prior plan provides that the Corporation shall accrue to the directors or community advisory directors interest on the accumulated amount of deferred fees at the rate paid by Chemical Bank on a variable rate money market savings account. Mr. Stauffer was the only director of the Corporation who elected to defer any compensation under the prior plan during 2008. As of December 31, 2008, Ms. Bowman and Mr. Stauffer were the only Chemical Financial directors who were participants in the prior plan.

 

2008 DIRECTOR COMPENSATION

 

																		Change in
																		Pension
																		Value and
		Fees																Nonqualified
		Earned												Non-Equity				Deferred
		or Paid				Stock				Option				Incentive Plan				Compensation				All Other
Name		in Cash(1)				Awards(2)				Awards				Compensation				Earnings				Compensation(3)				Total
Gary E. Anderson		$	32,950			$	10,000																			$	42,950
J. Daniel Bernson			32,050				10,000																				42,050
Nancy Bowman			30,350				10,000																				40,350
James A. Currie			21,300				10,000																				31,300
Thomas T. Huff			38,050				10,000																				48,050
Michael T. Laethem			20,700				19,350																				40,050
Geoffery E. Merszei			20,250				10,000																				30,250
Terence F. Moore			33,700				10,000																				43,700
Aloysius J. Oliver			32,800				10,000																				42,800
Larry D. Stauffer			20,850				18,050																				38,900
William S. Stavropoulos			20,850				10,000																				30,850
Franklin C. Wheatlake			32,600				10,000																				42,600

 

 

Compensation Discussion and Analysis

 

Overview

 

The Compensation and Pension Committee (the “Committee”) assists the board of directors in discharging its responsibilities relating to executive compensation and in fulfilling its responsibilities relating to Chemical Financial’s compensation and benefit programs and policies. The Committee administers and makes recommendations with respect to Chemical Financial’s compensation plans and reviews and approves the compensation of executive and senior officers. The Committee currently consists of nine directors, all of whom are independent under applicable Nasdaq Stock Market and SEC standards. The Committee receives recommendations from Chemical Financial’s Chief Executive Officer regarding the compensation of executive and senior officers (other than the Chief Executive Officer). All executive and senior officers of Chemical Financial are eligible to participate in the same executive compensation plans that are available to the Chief Executive Officer, with the exception of the supplemental pension plan.

 

Compensation Philosophy and Objectives

 

Chemical Financial’s philosophy is to maximize long-term return to shareholders consistent with its commitments to maintain the safety and soundness of the institution and provide the highest possible level of service at a fair price to the customers and communities that it serves. To do this, the Committee believes Chemical Financial must provide competitive salaries and appropriate incentives to achieve long-term shareholder return. The Corporation’s executive compensation policies are designed to achieve four primary objectives:

 

 

The Committee’s goal is to effectively balance salaries with potential compensation that is performance-based commensurate with an officer’s individual management responsibilities and potential for future contribution to corporate objectives. The portion of total compensation that is based on corporate performance and long-term shareholder return increases as an executive’s responsibilities increase.

 

Elements of Compensation

 

Chemical Financial’s executive compensation program has consisted primarily of the following elements: (i) base salary and benefits; (ii) annual cash bonus incentives; (iii) longer-term equity-based incentives in the form of stock options and restricted stock performance units; and (iv) participation in the Corporation’s retirement plans. Each component of compensation is intended to accomplish one or more of the compensation objectives discussed above.

 

Base Salary and Benefits. To attract and retain officers with exceptional abilities and talent, annual base salaries are set to provide competitive levels of compensation. The Committee considers each officer’s performance, current compensation and responsibilities within the Corporation. The Committee determines base salaries by periodically collecting information from other bank holding companies within its peer group for comparison. The Committee also considers past individual performance and achievements when establishing base salaries. The Committee does not give specific weight to any particular factor, although the most weight is given to net income, credit quality and the management of risk.

 

Annual Cash Bonus Incentives.  Annual cash bonus incentives are used to reward executive and senior officers for the Corporation’s overall financial performance, taking into consideration individual performance.

 

Beginning in 2008, the Corporation implemented a formula approach for awarding cash bonuses to named executive officers. For each named executive officer, the Committee set a bonus target as a percentage of salary. For 2008, the bonus targets as a percentage of salary for each of the named executive officers were as follows: Mr. Ramaker — 70%; Ms. Gwizdala — 50%; Mr. Kohn — 50%; Mr. Tomczyk — 40%; and Mr. Johnson — 40%. The Committee may change the bonus targets each year.

 

After determining the bonus target for each named executive officer, the Committee then weighted the amount of the bonus between achievement of financial performance goals by the Corporation and achievement of individual goals. For 2008, the weighting for each of the named executive officers was as follows: Mr. Ramaker — 80% (financial performance goals), 20% (individual goals); Ms. Gwizdala — 70% (financial performance goals), 30% (individual goals); Mr. Kohn — 70% (financial

performance goals), 30% (individual goals); Mr. Tomczyk — 60% (financial performance goals), 40% (individual goals); and Mr. Johnson — 70% (financial performance goals), 30% (individual goals). The Committee at its own discretion may change the weighting between financial performance goals and individual goals each year.

 

The Committee further weighted the bonus amount for achievement of financial performance goals by the Corporation among specified goals. For 2008, the specific goals and weighting were as follows: earnings per share growth (50%), level of nonperforming assets (25%), and amount of noninterest expense (25%). The Committee at its own discretion may change the specific goals and weightings each year.

 

For named executive officers other than the Chief Executive Officer, the Chief Executive Officer recommends the individual goals to the Committee. The Committee reviews, modifies, and approves the recommendations of the Chief Executive Officer. The Committee determines the individual goals for the Chief Executive Officer.

 

If all of the financial performance goals were met and a named executive officer met all of his or her individual goals, then the named executive officer would have been paid the full amount of his or her bonus target. If some, but not all, of the financial performance goals or individual goals were met, then the named executive officer’s bonus amount would have been reduced by the weighting given each goal. For example, using 2008 weightings, if the earnings per share goal is not met, then the amount of each named executive officer’s bonus weighted to achievement of financial performance goals would have been reduced by 50%. If none of the financial performance goals were met and a named executive officer did not meet his or her individual goals, then the named executive officer would not have been paid a bonus. The Committee may also reduce each named executive officer’s bonus amount based on other factors it considers relevant.

 

For 2008, bonuses paid to the named executive officers totaled $114,000 and represented only 18% of total potential bonuses because no financial performance goals and only some individual performance goals were met. Total bonuses paid to the named executive officers in 2008 were 8% less than the bonuses paid to such officers in 2007.

 

Longer-Term Equity-Based Incentives. A portion of potential career compensation is also linked to corporate performance through equity-based compensation awards, including stock options and restricted stock performance units. Other forms of equity-based compensation may be awarded by the Committee. Awards under Chemical Financial’s equity-based compensation plan are designed to:

 

 

The Committee believes that stock ownership by management has been demonstrated to be beneficial to shareholders and stock options have been granted by Chemical Financial to officers pursuant to various plans for many years. The Committee administers all aspects of these plans and also has authority to determine the individuals to whom and the terms upon which equity-based compensation awards are granted.

 

Beginning in 2008, the Corporation implemented a formula approach for awarding equity-based compensation. For each named executive officer, the Committee set a target for equity-based compensation based on a percentage of base salary. For 2008, the targets as a percentage of base salary for each named executive officer were as follows: Mr. Ramaker — 100%; Ms. Gwizdala — 70%; Mr. Kohn — 70%; Mr. Tomczyk — 60%; and Mr. Johnson — 50%. The targets set by the Committee are calculated using the market value of the Corporation’s common stock.

 

After determining the equity-based compensation target for each named executive officer, the Committee then allocated the total target amount between stock options and restricted stock performance units. For 2008, the allocation for each named executive officer was as follows: Mr. Ramaker — 40% (stock options), 60% (restricted stock performance units); Ms. Gwizdala — 50% (stock options), 50% (restricted stock performance units); Mr. Kohn — 50% (stock options), 50% (restricted stock performance units); Mr. Tomczyk — 60% (stock options), 40% (restricted stock performance units); and Mr. Johnson — 60% (stock options), 40% (restricted stock performance units).

 

The variable used to determine the amount of stock options and restricted stock performance units awarded is the market price of one share of Chemical Financial common stock on the date of the award. For example, assume the following: (i) the market price of one share of Chemical Financial common stock was $25 on the date that the options and restricted stock performance units were awarded to a named executive officer, (ii) the named executive officer’s base salary was $200,000 annually, (iii) the

Committee set a target of 70% of base salary for the named executive officer, and (iv) the named executive officer’s allocation was 50% (stock options) and 50% (restricted stock performance units). The named executive officer would have been awarded approximately 2,800 stock options and 2,800 restricted stock performance units.

 

In 2008, the Committee granted awards of stock options to purchase 17,611 shares to the named executive officers. The Committee has no policy as to timing of awards of stock options. All stock option awards have been made at the market value of Chemical Financial’s common stock on the date of grant. Stock options are generally granted for a term of 10 years. All stock options permit the exercise price to be paid by delivery of cash, and the Committee has also approved the payment of the exercise price by surrendering shares of common stock. The stock options granted in 2008 vest in one-third increments on each anniversary date of the award over the first three years of the option term. Vesting of stock options may be accelerated upon certain events, including a change in control of the Corporation.

 

In 2008, the Committee granted 19,024 restricted stock performance units to the named executive officers. The restricted stock performance units vest at December 31, 2010 if any of the predetermined targeted earnings per share levels are achieved in 2010. The restricted stock performance units vest from 0.5x to 2x the number of units originally granted depending on which, if any, of the predetermined targeted earnings per share levels are met in 2010. Upon vesting, the restricted stock performance units will be converted to shares of the Corporation’s stock on a one-to-one basis. However, if the minimum earnings per share performance level is not achieved in 2010, no shares will be issued.

 

Retirement Plans. Chemical Financial has a qualified pension plan (“Pension Plan”) that covers certain employees, a 401(k) savings plan that covers all employees and a supplemental retirement plan currently covering only the Chief Executive Officer. The Committee believes that Chemical’s retirement plans encourage long-term commitment by the Corporation’s officers and assist Chemical Financial in attracting and retaining talented executives.

 

The Pension Plan was frozen as of June 30, 2006 for employees with less than 15 years of vested service or whose age plus years of vested service were less than 65 as of June 30, 2006 (non-grandfathered employees). At June 30, 2006, approximately two-thirds of the Corporation’s salaried employees were non-grandfathered employees. As of that date, no additional Pension Plan benefits will be earned by non-grandfathered employees. On July 1, 2006, non-grandfathered employees began receiving four percent of their eligible pay as a contribution to a defined contribution plan. Pension Plan benefits for remaining eligible employees (grandfathered employees) as of June 30, 2006 were not changed and grandfathered employees will continue to accrue benefits based on their salary and years of credited service.

 

Pension Plan benefits are based on the annual base salary of eligible employees as of January 1 of each year. Upon retirement at age 65, a retiree will receive an annual benefit of 1.52% of his or her average annual base salary for the five highest consecutive years during the ten years preceding his or her date of retirement, multiplied by the retiree’s number of years of credited service (subject to a maximum of 30 years). Benefits at retirement ages under 65 are also determined based upon length of service and pay, as adjusted in accordance with the Pension Plan. The Pension Plan provides for vesting of benefits after attaining five years of service, disability and death benefits, and optional joint and survivor benefits for the employee and his or her spouse. Additionally, unreduced Pension Plan benefits are available for retirement at age 60 and above when the retiree’s age plus vested years of service sums at least 85. Pension Plan benefits for non-grandfathered employees will be based on years of credited service as of June 30, 2006 and generally average annual base salary as of January 1 for the five years preceding June 30, 2006.

 

The Internal Revenue Code limits both the amount of eligible compensation for benefit calculation purposes and the annual benefits that may be paid from a tax-qualified retirement plan. As permitted by the Employee Retirement Income Security Act of 1974 (ERISA), Chemical Financial established a supplemental pension plan, the Chemical Financial Corporation Supplemental Pension Plan (Supplemental Plan) that provides for the payment to certain executive officers of Chemical Financial, as determined by the Committee, of the benefits to which they would have been entitled, calculated under the provisions of the Pension Plan, as if the limits imposed by the Internal Revenue Code did not apply. Currently, only the Chief Executive Officer is a participant in the Supplemental Plan. Under the Supplemental Plan, participant benefits would be payable in a lump sum upon a change in control if the applicable participant was not eligible to retire at the time of the change in control. The Committee believes the triggering event of a simple change of control is appropriate under these circumstances because new management could terminate the Supplemental Plan and eliminate significant previously accumulated benefits.

Stock Ownership Guidelines

 

In 2008, the Committee implemented stock ownership guidelines that set forth the expected investment in shares of Chemical Financial common stock for, among others, the named executive officers. Expected ownership is expressed as a percentage of the named executive officer’s base salary as determined from time to time. The expected ownership for the named executive officers is as follows: Mr. Ramaker — 300%; Ms. Gwizdala — 100%; Mr. Kohn — 100%; Mr. Tomczyk — 100%; and Mr. Johnson — 100%. Stock ownership is determined in the same manner as beneficial ownership is determined under the rules of the Commission. Other than Mr. Ramaker, each named executive officer is allowed three years from the date the guidelines first became applicable to him or her to achieve the expected stock ownership. Mr. Ramaker is allowed five years from the date the guidelines first became applicable to him to achieve the expected stock ownership.

 

Impact of Accounting and Tax Treatment on Compensation

 

All stock options granted by Chemical Financial under plans not associated with acquisitions of other companies during the last decade have been nonstatutory stock options, such that the Corporation receives a tax deduction for income deemed to be received by officers upon exercise of such options.

 

Section 162(m) of the Internal Revenue Code places a limit on the deductibility for federal income tax purposes of the compensation paid to the named executive officers set forth in the Summary Compensation Table who were employed by Chemical Financial on the last day of its taxable year. Under Section 162(m), compensation paid to such persons in excess of $1 million in a taxable year is not generally deductible. However, compensation that qualifies as “performance-based” as determined under Section 162(m) does not count against the $1 million limitation. One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goal under which compensation may be paid be disclosed to and approved by Chemical Financial’s shareholders. For purposes of Section 162(m) the material terms include: (a) the employees eligible to receive compensation; (b) a description of the business criteria on which the performance goal is based; and (c) the maximum amount of compensation that can be paid to an employee under the performance goal. The Chemical Financial Corporation Stock Incentive Plan of 2006 satisfies the requirements of Section 162(m) of the Code. Due to the relatively conservative amount of annual compensation, Chemical Financial believes its compensation policies reflect due consideration of Section 162(m).

 

Executive Compensation

 

Summary of Executive Compensation

 

The following table shows information concerning the compensation earned from Chemical Financial or its subsidiaries during the three years ended December 31, 2008, by the Chief Executive Officer, the Chief Financial Officer and each of Chemical Financial’s three most highly compensated executive officers who served in positions other than Chief Executive Officer or Chief Financial Officer at December 31, 2008 (the “named executive officers”). The positions listed in the table are those in which the applicable officer served at December 31, 2008.

 

SUMMARY COMPENSATION TABLE

																										Change in
																										Pension
																										Value and
																										Nonqualified
																						Non-Equity				Deferred
Name and														Stock				Option				Incentive Plan				Compensation				All Other
Principal Position		Year				Salary(1)				Bonus				Awards				Awards(2)				Compensation				Earnings(3)				Compensation(4)				Total
David B. Ramaker			2008			$	382,217			$	30,150							$	83,918							$	131,000			$	4,849			$	632,134
Chairman, President and			2007				322,000				40,150								33,440								63,000				4,983				463,573
Chief Executive Officer of			2006				310,000				30,150								—								73,000				4,883				418,033
the Corporation
Lori A. Gwizdala			2008			$	231,750			$	24,150							$	35,088							$	76,000			$	4,583			$	371,571
Executive Vice President,			2007				207,500				24,150								13,514								26,000				4,465				275,629
Chief Financial Officer and			2006				201,000				18,150								—								37,000				4,330				260,480
Treasurer of the Corporation
Thomas W. Kohn			2008			$	206,807			$	17,150							$	34,557							$	86,000			$	4,619			$	349,133
Executive Vice President of			2007				165,250				22,150								13,514								31,000				3,788				235,702
Community Banking and			2006				157,981				19,150								—								48,000				3,643				228,774
Secretary of the Corporation
James E. Tomczyk			2008			$	195,637			$	21,150							$	25,251							$	6,000			$	4,816			$	252,854
Executive Vice President and			2007				164,750				20,150								13,000								—				10,788				208,688
Senior Credit Officer of			2006				159,500				15,150								5,295								7,000				6,863				193,808
Chemical Bank
Kenneth W. Johnson			2008			$	183,385			$	22,150							$	20,821							$	3,000			$	3,983			$	233,339
Executive Vice President and			2007				154,500				18,150								7,862								—				9,543				190,055
Director of Bank Operations			2006				127,885				12,650								—								3,000				5,362				148,897
of Chemical Bank

 

 

 

 

Equity-Based Awards and Values

 

Certain named executive officers were granted equity-based compensation awards during 2008. The following tables provide information concerning stock options and restricted stock performance units granted during 2008, unexercised stock options and unvested restricted stock performance units held at December 31, 2008 and stock options exercised by the named executive officers during 2008:

 

Grants of Plan-Based Awards

 

All Other

All Other

Stock

Option

Awards:

Awards:

Grant

Estimated Future Payouts

Estimated Future Payouts

Number of

Number of

Exercise or

Date Fair

Under Non-Equity Incentive

Under Equity Incentive

Shares of

Securities

Base Price

Value of

Plan Awards

Plan Awards(1)

Stock or

Underlying

of Option

Stock and

Threshold

Target

Maximum

Threshold

Target

Maximum

Units

Options

Awards

Option

Name

Grant Date

($)

($)

($)

(#)

(#)

(#)

(#)

(#)

($/Share)

Awards(2)

David B. Ramaker

2/25/08

4,676

9,353

18,706

6,235

$

24.52

$

38,969

Lori A. Gwizdala

2/25/08

1,654

3,308

6,616

3,308

24.52

20,675

Thomas W. Kohn

2/25/08

1,476

2,952

5,904

2,952

24.52

18,450

James E. Tomczyk

2/25/08

957

1,915

3,830

2,872

24.52

17,950

Kenneth W. Johnson

2/25/08

748

1,496

2,992

2,244

24.52

14,025

 

 

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2008

Option Awards

Stock Awards

Equity

Incentive

Equity

Plan

Equity

Incentive

Awards:

Incentive

Plan

Market

Plan

Awards:

or Payout

Awards:

Market

Number of

Value of

Number of

Number of

Number of

Number of

Value of

Unearned

Unearned

Securities

Securities

Securities

Shares or

Shares or

Shares,

Shares, Units

Underlying

Underlying

Underlying

Units of

Units of

Units or

or Other

Unexercised

Unexercised

Unexercised

Option

Option

Option

Stock That

Stock That

Other Rights

Rights That

Options

Options

Unearned

Grant

Exercise

Expiration

Have Not

Have Not

That Have

Have Not

Name

Exercisable

Unexercisable(1)

Options

Date

Price

Date

Vested

Vested

Not Vested(2)

Vested(3)

David B. Ramaker

2,422

10/15/01

$

23.63

10/15/11

5,512

12/09/02

27.78

12/09/12

8,400

12/12/03

35.67

12/12/13

15,750

12/13/04

39.69

12/13/14

20,000

12/20/05

32.28

12/20/15

12,038

24,077

(a)

07/20/07

24.78

07/20/17

6,235

(b)

02/25/08

24.52

02/25/18

4,676

$

130,366

Lori A. Gwizdala

4,725

12/12/03

$

35.67

12/12/13

8,400

12/13/04

39.69

12/13/14

9,000

12/20/05

32.28

12/20/15

4,865

9,730

(c)

07/20/07

24.78

07/20/17

3,308

(d)

02/25/08

24.52

02/25/18

1,654

$

46,114

Thomas W. Kohn

2,756

12/09/02

$

27.78

12/09/12

2,887

12/12/03

35.67

12/12/13

5,250

12/13/04

39.69

12/13/14

6,500

12/20/05

32.28

12/20/15

4,865

9,730

(e)

07/20/07

24.78

07/20/17

2,952

(f)

02/25/08

24.52

02/25/18

1,476

$

41,151

James E. Tomczyk

1,555

01/25/00

$

23.14

01/25/10

1,389

10/15/01

23.63

10/15/11

2,756

12/09/02

27.78

12/09/12

2,887

12/12/03

35.67

12/12/13

5,250

12/13/04

39.69

12/13/14

6,500

12/20/05

32.28

12/20/15

3,383

6,766

(g)

07/20/07

24.78

07/20/17

2,872

(h)

02/25/08

24.52

02/25/18

957

$

26,681

Kenneth W. Johnson

1,157

10/15/01

$

23.63

10/15/11

1,653

12/09/02

27.78

12/09/12

1,837

12/12/03

35.67

12/12/13

3,150

12/13/04

39.69

12/13/14

3,500

12/20/05

32.28

12/20/15

2,819

5,639

(i)

07/20/07

24.78

07/20/17

2,244

(j)

02/25/08

24.52

02/25/18

748

$

20,854

 

 

(a) 12,038 on 7/20/09 and 12,039 on 7/20/10

 

(b) 2,078 on 2/25/09, 2,078 on 2/25/10 and 2,079 on 2/25/11

 

(c) 4,865 on 7/20/09 and 4,865 on 7/20/10

 

(d) 1,102 on 2/25/09, 1,103 on 2/25/10 and 1,103 on 2/25/11

 

(e) 4,865 on 7/20/09 and 4,865 on 7/20/10

 

(f) 984 on 2/25/09, 984 on 2/25/10 and 984 on 2/25/11

 

(g) 3,383 on 7/20/09 and 3,383 on 7/20/10

 

(h) 957 on 2/25/09, 957 on 2/25/10 and 958 on 2/25/11

 

(i) 2,819 on 7/20/09 and 2,820 on 7/20/10

 

(j) 748 on 2/25/09, 748 on 2/25/10 and 748 on 2/25/11

 

 

2008 OPTION EXERCISES AND STOCK VESTED

Option Awards

Stock Awards

Number of

Value

Number of

Value

Shares Acquired

Realized on

Shares Acquired

Realized on

Name

on Exercise(1)

Exercise

on Vesting

Vesting

David B. Ramaker

5,911

$

25,054

Lori A. Gwizdala

10,274

57,277

Thomas W. Kohn

5,126

28,814

James E. Tomczyk

—

—

Kenneth W. Johnson

—

—

 

 

Pension Benefits in 2008

 

The following table provides information concerning pension benefits for the named executive officers.

 

PENSION BENEFITS

 

				Number				Present Value				Payments
				of Years of				of Accumulated				During Last
Name		Plan Name		Credited Service				Benefit				Fiscal Year
David B. Ramaker		Employees’ Pension Plan			19.2			$	489,000			$	—
		Supplemental Pension Plan			19.2				224,000				—
Lori A. Gwizdala		Employees’ Pension Plan			24.0				493,000				—
Thomas W. Kohn		Employees’ Pension Plan			22.2				475,000				—
James E. Tomczyk		Employees’ Pension Plan			7.4				104,000				—
Kenneth W. Johnson		Employees’ Pension Plan			11.5				55,000				—

 

Chemical Financial has a noncontributory defined benefit pension plan that is qualified for federal tax purposes, the Chemical Financial Corporation Employees’ Pension Plan (Pension Plan) and is considered a tax-qualified retirement plan. Chemical Financial has the authority to change or terminate the Pension Plan at any time. The Internal Revenue Code limits both the amount of eligible compensation for benefit calculation purposes and the annual benefits that may be paid from a tax-qualified retirement plan. As permitted by the Employee Retirement Income Security Act of 1974 (ERISA), Chemical Financial established a supplemental pension plan, the Chemical Financial Corporation Supplemental Pension Plan (Supplemental Plan) that provides for the payment to certain executive officers of Chemical Financial, as determined by the Compensation and Pension Committee, of the benefits to which they would have been entitled, calculated under the provisions of the Pension Plan, as if the limits imposed by the Internal Revenue Code did not apply. As of December 31, 2008, Mr. Ramaker was the only active employee eligible for benefits under the Supplemental Plan.

 

The Pension Plan was frozen as of June 30, 2006 for employees with less than 15 years of service or whose age plus years of service were less than 65 as of June 30, 2006 (non-grandfathered employees). At June 30, 2006, approximately two-thirds of the Corporation’s salaried employees were non-grandfathered employees. As of that date, no additional Pension Plan benefits will be earned by non-grandfathered employees. On July 1, 2006, non-grandfathered employees began receiving four percent of their eligible pay as a contribution to a defined contribution plan. Pension Plan benefits for remaining eligible employees (grandfathered employees) as of June 30, 2006 were not changed and grandfathered employees will continue to accrue benefits based on their salary and years of credited service.

 

Pension Plan benefits are based on the annual base salary of eligible employees as of January 1 of each year. The amount shown under the caption “Salary” in the Summary Compensation Table in this proxy statement is representative of the most recent calendar year compensation used in calculating average pay under the Pension Plan (subject to any applicable cap under ERISA for employees who are not included in the Supplemental Plan). Upon retirement at age 65, a retiree will receive an annual benefit of 1.52% of his or her average annual base salary for the five highest consecutive years during the ten years preceding his or her date of retirement, multiplied by the retiree’s number of years of credited service (subject to a maximum of 30 years). Benefits at retirement ages under 65 are also determined based upon length of service and pay, as adjusted in accordance with the Pension Plan. The Pension Plan provides for vesting of benefits after attaining five years of service,

disability and death benefits, and optional joint and survivor benefits for the employee and his or her spouse. Additionally, unreduced Pension Plan benefits are available for retirement at age 60 and above when the retiree’s age plus vested years of service sums at least 85. Pension Plan benefits for non-grandfathered employees will be based on years of credited service as of June 30, 2006 and generally average annual base salary as of January 1 for the five years preceding June 30, 2006. Messrs. Tomczyk’s and Johnson’s pension benefits were frozen as of June 30, 2006.

 

The present value of accumulated benefits under the Pension Plan shown in the Pension Benefits table are based on the assumption that an employee retires at the earliest unreduced retirement age defined under the Pension Plan; which is the earlier of normal retirement age or age 60 or older with 85 points (age plus vesting service). The assumed retirement age is normal retirement (age 65) for Mr. Tomczyk and age 60 for all other named executive officers. The present value of accumulated benefits is also based on the assumption that the employee will elect a benefit for his or her life with 120 monthly payments guaranteed. If the employee were to elect a benefit payable to a surviving spouse of 50% or more of the employee’s retirement benefit or for the employee’s life only, the retirement benefit for the employee would be adjusted. The benefits listed in the Pension Benefits table are not subject to a deduction for social security or any other offset amount.

 

The present value of accumulated Pension Plan and Supplemental Plan benefits were computed using a 6.5% discount rate at December 31, 2008 and December 31, 2007 and the RP2000 Combined Health Mortality Table at December 31, 2008 and December 31, 2007. Lump sum retirement benefits are not available in the Pension Plan, unless an employee is involuntarily terminated or the option was available in a predecessor plan. A portion of Messrs. Tomczyk’s and Johnson’s Pension Plan benefits are available to be paid in a lump-sum at their election, due to this benefit payment option having been available in a predecessor plan. In addition, Mr. Ramaker’s benefits under the Supplemental Plan upon a Change in Control would be paid in a lump sum, if at the time of the Change in Control he was not eligible to retire. For purposes of the Supplemental Plan, a Change in Control is a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A of the Securities Exchange Act of 1934, as amended. At December 31, 2008, Mr. Ramaker’s pro forma lump sum distribution payable in the event of a Change in Control was calculated at $184,592 using interest and mortality assumptions set forth under Internal Revenue Code Section 417(e) (3) as modified by the Pension Protection Act of 2006. The look back month for determining the interest assumption was August of the year preceding the calculation date.

 

Deferred Compensation

 

In September 2006, the board of directors approved the Chemical Financial Corporation Deferred Compensation Plan (DC Plan), a voluntary nonqualified supplemental retirement program for a select group of management personnel. The DC Plan is unfunded for tax purposes and for purposes of ERISA. The named executive officers in this proxy statement are eligible to participate in the DC Plan. There are no employer contributions to the DC Plan. Participants may elect to defer up to 75% of their salary, excluding bonus, to the DC Plan. The election to defer compensation under the DC Plan is irrevocable for each plan year as of the beginning of each plan year. Participant contributions are made into a grantor trust for the purpose of providing for payment of the deferred compensation under this plan. The investment of employee contributions are self-directed by participants within an established array of money market, equity and fixed income mutual funds. The aggregate earnings on these investments, by each named executive officer who is a participant in the DC Plan, is included in the table below, and are attributable to the specific investments selected by each participant. Participants may change the designation of their investments at such times as mutually agreed by the parties. As of December 31, 2008, participants could change their investment designation on a daily basis. Participants elect in advance of the deferral of their compensation when the funds will be distributable. The aggregate balances of the participants are distributable, as designated by each participant, during January of the calendar year following the calendar year in which the following occur: the participant’s termination of employment; a change in control; the participant’s death or disability; an unforeseeable emergency or at a specified time, as determined by the participant. The DC Plan provides for distributions to be made in a lump sum amount, five-year installments or ten-year installments.

 

2008 NONQUALIFIED DEFERRED COMPENSATION

 

		Executive				Registrant				Aggregate				Aggregate				Aggregate
		Contributions in				Contributions				Earnings in				Withdrawals/				Balance at
Name		Last FY(1)				Last FY				Last FY(2)				Distributions				Last FYE
David B. Ramaker		$	13,000							$	389				—			$	29,805
Lori A. Gwizdala			5,000								(2,860	)			—				8,620
Thomas W. Kohn			—								—				—				—
James E. Tomczyk			—								—				—				—
Kenneth W. Johnson			—								—				—				—

 

 

Compensation Committee Interlocks and Insider Participation

 

During 2008, the Compensation and Pension Committee was composed of Mr. Anderson, Chairman, Ms. Bowman and Messrs. Bernson, Currie, Huff, Moore, Oliver, Stavropoulos and Wheatlake. Mr. Oliver was formerly President and Chief Executive Officer of the Corporation from January 1997 through December 31, 2001.

 

Compensation Committee Report

 

In fulfilling its oversight responsibilities, the Compensation and Pension Committee reviewed and discussed the Compensation Discussion and Analysis required by Regulation S-K Item 402(b) issued by the SEC with the Chief Executive Officer of the Corporation. In reliance on these reviews and discussions, the Compensation and Pension Committee recommended to the board of directors (and the board approved) that the Compensation Discussion and Analysis be included in this proxy statement for the Corporation’s 2009 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission.

 

Respectfully Submitted,

 

Gary E. Anderson, Chairman
J. Daniel Bernson
Nancy Bowman
James A. Currie
Thomas T. Huff

Terence F. Moore
Aloysius J. Oliver
William S. Stavropoulos
Franklin C. Wheatlake