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As filed with the Securities and Exchange Commission on December 5, 1996
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MICHIGAN HERITAGE BANCORP, INC.
(Name of small business issuer as in its charter)
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Michigan 6712 38-3318018
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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21211 Haggerty Road
Novi, Michigan 48375-5306
(810) 380-0779
(Address and telephone number of principal executive
offices and principal place of business or intended principal place of business)
Anthony S. Albanese, President
Michigan Heritage Bancorp, Inc.
21211 Haggerty Road
Novi, Michigan 48375-5306
(810) 380-0779
(Name, address, and telephone number of agent for service)
Copies to:
Paul R. Rentenbach Gordon R. Lewis
Dykema Gossett PLLC Warner Norcross & Judd LLP
400 Renaissance Center 900 Old Kent Building
Detroit, Michigan 48243 111 Lyon St. N.W.
Grand Rapids, Michigan 49503-2489
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Approximate date of proposed sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title of Each Class Proposed Maximum Proposed Maximum
of Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered (1) Share Price(1) Registration Fee
- -------------------- -------------------- -------------------- -------------------- --------------------
Common Stock 1,150,000 shs. $10.00 $11,500,000 $3,484.84
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(1) Includes 150,000 shares of Common Stock which may be purchased by the
Underwriters to cover over-allotments.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a) OF
THE SECURITIES ACT OF 1933, MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED DECEMBER 5, 1996
PROSPECTUS
1,000,000 SHARES
[MICHIGAN HERITAGE BANCORP, INC. LOGO]
COMMON STOCK
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Michigan Heritage Bancorp, Inc., a Michigan corporation (the "Company"), is
offering for sale 1,000,000 shares of its Common Stock (the "Common Stock"). The
Company is a proposed bank holding company organized to own all of the common
stock of Michigan Heritage Bank, a Michigan banking corporation (in
organization), to be located in Novi, Michigan (the "Bank"). Neither the Company
nor the Bank has ever conducted any business operations other than matters
related to their initial organization and the raising of capital. See
"Business." There has been no public trading market for the Common Stock. Roney
& Co. L.L.C. (the "Underwriter" or "Roney & Co.") has advised the Company that
it anticipates making a market in the Common Stock following completion of the
offering, although there can be no assurance that an active trading market will
develop. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Company expects that the
quotations for the Common Stock will be reported on the NASD OTC Bulletin Board
under the symbol "MHBC." The directors and officers of the Company are expected
to purchase at least of the shares of Common Stock at the public
offering price.
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THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A SIGNIFICANT
AMOUNT OF RISK. SEE "RISK FACTORS" ON PAGE 5 FOR CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMPANY'S COMMON STOCK.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND THEY ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1)(2) COMPANY(2)(3)
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Per Share............................. $10.00 $ $
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Total(2).............................. $10,000,000 $ $
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(1) The Company has agreed to indemnify the Underwriter against certain
liabilities including liabilities under the Securities Act of 1933. See
"Underwriting".
(2) The Company has granted the Underwriter a 30-day option to purchase up to
150,000 additional shares of its Common Stock solely to cover
over-allotments, if any. If the Underwriter exercises such option in full,
the Price to Public, Underwriting Discounts, and Proceeds to the Company
will be approximately $ , $ and $ ,
respectively. See "Underwriting." The Underwriter has agreed that no
Underwriting Discounts will be incurred by the Company for up to 300,000
shares sold by the Underwriter to members of the Board of Directors or their
immediate families. See "Underwriting." If 300,000 shares are so purchased,
Underwriting Discounts will be reduced by, and Proceeds to the Company will
be increased by $ .
(3) Before deducting estimated offering expenses payable by the Company of
$200,000.
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The shares of Common Stock are offered by the Underwriter subject to prior
sale, when, as and if delivered to and accepted by the Underwriter, and subject
to the right of the Underwriter to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares of
Common Stock will be made in Detroit, Michigan, on or about , 1997.
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(LOGO)
THE DATE OF THIS PROSPECTUS IS , 1997.
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[MICHIGAN HERITAGE BANCORP, INC. MAP]
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AVAILABLE INFORMATION
The Company is not currently a reporting company pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"), but will be required to file reports
pursuant to the Exchange Act following the completion of the offering. The
Company, which will use a December 31 fiscal year, intends to furnish its
shareholders with annual reports containing audited financial information and,
for the first three quarters of each fiscal year, quarterly reports containing
unaudited financial information.
Requests for such documents should be directed to Darryle J. Parker,
Treasurer, 21211 Haggerty Road, Novi, Michigan 48375.
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IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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3.1
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless the context clearly suggests otherwise, references in this Prospectus to
the Company include the Bank. Except as otherwise indicated, all information in
this Prospectus assumes no exercise of the Underwriter's over-allotment option.
THE COMPANY
Michigan Heritage Bancorp, Inc. (the "Company") is a Michigan corporation
whose primary purpose will be to own and operate Michigan Heritage Bank (the
"Bank") as the Bank's sole shareholder. The Bank is organizing as a Michigan
banking corporation with depository accounts to be insured by the Bank Insurance
Fund of the Federal Deposit Insurance Corporation (the "FDIC"). The Bank intends
to provide a focused core of banking services, primarily for small to
medium-sized businesses, as well as individuals. The Bank's lending service will
focus primarily on commercial equipment financing and, to a lesser extent,
commercial real estate loans and commercial term loans to businesses secured by
the assets of the borrower. The Bank intends to originate a number of loans
through third party referral sources such as leasing companies and mortgage
brokers, many of whom are known to management. The Bank's retail strategy is
expected to focus on single-family mortgage loans, home equity loans and, to a
lesser extent, other forms of consumer lending. The Bank intends to offer
competitive rates on various deposit products as well as providing attractive
products and services. The Bank intends to offer its banking services primarily
in Oakland and western Wayne counties, including Novi, Farmington, Farmington
Hills, Livonia, Northville and Northville Township. These services will reflect
the Bank's intended strategy of serving small to medium size businesses as well
as individual customers in its market area. Completion of the offering will be
conditioned on, among other things, the Company and the Bank having received all
necessary regulatory approvals and satisfying certain conditions contained
therein. Management anticipates commencing business in the first quarter of
1997.
MANAGEMENT
The Company has assembled a management team and a Board of Directors that
have strong business experience in the Bank's market area and a shared vision
and commitment to the future growth and success of the Bank.
Richard Zamojski, Chairman and Chief Executive Officer of the Company and
the Bank, has over 20 years of experience in the financial services industry.
Prior to his arrival at the Company, Mr. Zamojski was Chairman and Chief
Executive Officer of a privately-owned financial institution located in
southeastern Michigan which had total assets of approximately $1 billion at the
time of his departure in August 1996. Anthony S. Albanese, President and Chief
Operating Officer of the Company, was President and Chief Operating Officer of
the same financial institution prior to coming to the Company and has over 20
years experience in the financial services industry. Mr. Zamojski and Mr.
Albanese have served together in management and executive capacities for three
financial institutions during the past 20 years. During their most recent
affiliation, the financial institution grew from approximately $120 million in
total assets to approximately $1 billion in total assets and developed from
primarily a mortgage banking institution to a diversified financial institution
offering a full line of commercial and consumer banking products. Mr. Zamojski
and Mr. Albanese have chosen to join the Company at compensation levels below
those earned in their previous positions. See "Management."
The Company has formed a Board of Directors comprised of individuals with a
broad background in business, leasing, real estate and banking. Current
directors include Philip Sotiroff, an attorney with over 30 years of legal
experience in banking and equipment financing, H. Perry Driggs, Jr., an
investment banker with over 20 years of experience in commercial banking,
Phillip Harrison, who has extensive background in equipment financing, and Lewis
George, a real estate developer.
Mr. Zamojski, Mr. Albanese and the other members of the Board of Directors
represent a significant asset to the Company and the Bank. These individuals
have many years of personal experience in the financial
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services industry and, in some cases, have worked together successfully at other
financial institutions. The officer staff currently assembled by the Company
represents a wide range of business, banking and investment knowledge and
experience. The Company believes that these individuals and their relationships
in the Bank's market area should offer the Bank a substantial opportunity to
attract new relationships.
MARKET AREA
The Bank's main office will be located along the rapidly developing
Haggerty Road corridor in the southeast corner of Novi, Michigan. The Bank has
leased a former bank branch building that is being renovated by the Bank. The
communities that will comprise the Bank's primary service area are Novi,
Farmington, Farmington Hills, Livonia, Northville and Northville Township.
Management believes these communities have an expanding and diverse economic
base, which includes a wide range of small to medium-sized businesses engaged in
manufacturing, high technology research and development, computer services and
retail. According to statistics issued by the United States Census Bureau (the
"Census Bureau") in 1990, median annual household incomes for the communities
that comprise the Bank's primary service area are: $47,518 (Novi); $41,040
(Farmington); $51,986 (Farmington Hills); $48,645 (Livonia); $38,629
(Northville); and $55,465 (Northville Township). Further, according to the
Southeastern Michigan Council of Government ("SEMCOG") projections, the
population in the Bank's primary service area is expected to grow from
approximately 265,600 in 1995 to over 280,000 by 2000, an increase in excess of
5.4%.
The Bank's secondary service area will be the remaining portion of Oakland
County not included within the primary service area. According to information
issued by Oakland County, the county is the third wealthiest county in the
nation among counties exceeding one million people and annual household income
more than doubled from $24,700 in 1980 to over $54,400 in 1993. According to
estimates of SEMCOG, population in Oakland County is projected to increase from
1,151,000 in 1995 to over 1,192,000 by 2000, an increase of 3.5%. Oakland County
is also a large banking market. According to available industry data, as of June
30, 1995, total deposits in Oakland County, including banks, thrifts and credit
unions, were approximately $18.4 billion.
The Bank's main office will also serve as the Company's corporate
headquarters. The Company's address will be 21211 Haggerty Road, Novi, Michigan
48375. The Company's telephone number is (810) 380-0779.
THE OFFERING
Securities offered by the
Company....................... 1,000,000 shares of Common Stock. In addition,
the Company has granted the Underwriter an
option to purchase up to an additional 150,000
shares to cover over-allotments. See
"Description of Capital Stock."
Common Stock to be outstanding
after the offering............ 1,000,000 shares (1,150,000 shares if the
over-allotment option is exercised in full).
Use of proceeds by the
Company....................... Capitalization of the Bank and payment of
organization and preopening expenses. See "Use
of Proceeds."
Proposed NASD Over-the-Counter
("OTC") Bulletin Board
Symbol........................ MHBC
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RISK FACTORS
The Common Stock offered hereby involves a high degree of risk and should
be considered only by persons who can afford the loss of their investment. The
following constitute some of the potential risks of an investment in the Common
Stock and should be carefully considered by prospective investors prior to
purchasing shares of Common Stock. The order of the following is not intended
to be indicative of the relative importance of any described risk nor is the
following intended to be inclusive of all risks of investment in the Common
Stock.
LACK OF OPERATING HISTORY
Neither the Company nor the Bank has any operating history. The business
of the Company and the Bank is subject to the risks inherent in the
establishment of a new business enterprise. Because the Company is only
recently formed and the Bank and the Company are in the process of obtaining
the necessary regulatory approvals, subject to the satisfaction of certain
conditions, and the Bank has not commenced banking operations as of the date of
this prospectus, prospective investors do not have access to all of the
information that, in assessing their proposed investment, is available to the
purchasers of securities of a financial institution with a history of
operations.
SIGNIFICANT START-UP LOSSES EXPECTED
As a result of the substantial start-up expenditures that must be incurred
by a new bank and the time it will take to develop its deposit base and loan
portfolio, it is expected that the Bank, and thus the Company, will operate at
a substantial loss during the start-up of the Bank. Accordingly, neither the
Company nor the Bank is expected to be profitable in the first year of
operation. Cumulative losses during the first two years of operation are
expected to be at least $500,000, but there can be no assurance that losses
will not exceed this amount. As a result, it is anticipated that the book
value of the Common Stock will decrease accordingly. Further, there is no
assurance that the Bank will ever operate profitably. If the Company does not
reach profitability and recover its accumulated operating losses and the
non-recoverable portion of its investment in fixed assets, investors will
suffer a significant decline in the value of their shares of Common Stock.
DELAY IN COMMENCING OPERATIONS
Although the Company and the Bank expect to receive all regulatory
approvals and commence business in their facilities during the first quarter
of 1997, there can be no assurance as to when, if at all, these events will
occur. Any delay in commencing operations will increase pre-opening expenses
and postpone realization by the Bank of potential revenues. Absent the receipt
of revenues and commencement of profitable operations, the Company's
accumulated deficit will continue to increase (and book value per share
decrease) as operating expenses such as salaries and other administrative
expenses continue to be incurred.
GOVERNMENT REGULATION AND MONETARY POLICY
The Bank has received preliminary approval from the Commissioner of the
Financial Institutions Bureau of the State of Michigan (the "Commissioner") to
organize and establish the Bank and expects to receive authority to commence
operations in the first quarter of 1997, subject to the satisfaction of certain
conditions. Those conditions include, among other things: (i) that beginning
paid-in capital of the Bank will be not less than $7.5 million; and (ii) a
commitment that the Bank will maintain a ratio of Tier 1 capital to total
assets for the first three years after commencing business of at least 8% and
an adequate valuation reserve in a minimum amount of 1.25% of the Bank's
outstanding loans and leases. Regulatory capital requirements imposed on the
Bank may have the effect of constraining future growth, absent the infusion of
additional capital.
The Bank expects to receive approval for the insurance of its deposits by
the FDIC by the end of December, 1996.
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The Company plans to file an application with the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") for approval to
acquire all of the shares of the Bank's stock in December, 1996. The Company
anticipates obtaining the approval of the Federal Reserve Board during the
first quarter of 1997. There can be no assurance, however, as to the timing of
such approval or that the Company will obtain such approval.
The Company and the Bank will be subject to extensive state and federal
government supervision, regulation and examination. Existing state and federal
banking laws will subject the Bank to substantial limitations with respect to
loans, purchase of securities, payment of dividends and many other aspects of
its banking business. Recently enacted legislation may adversely affect the
banking industry or the operations of the Bank and may result in increased
competition in the financial services industry. Federal economic and monetary
policy, as well as policy decisions of bank regulatory authorities, may affect
the Bank's ability to attract deposits, make loans and achieve satisfactory
interest spreads. See "Supervision and Regulation."
NO ASSURANCE OF DIVIDENDS
It is anticipated that no dividends will be paid on the Company's Common
Stock for the foreseeable future. The Company will be largely dependent upon
dividends paid by the Bank for funds to pay dividends on its Common Stock, if
and when such dividends are declared. No assurance can be given that future
earnings of the Bank, and resulting dividends to the Company, will be
sufficient to permit the legal payment of dividends to Company shareholders at
any time in the future. See "Supervision and Regulation." Even if the Company
may legally declare dividends, the amount and timing of such dividends will be
at the discretion of the Company's Board of Directors. The Board may in its
sole discretion decide not to declare dividends. These shares should not be
purchased by persons who need or desire dividend income from this investment.
For a more detailed discussion of other limitations on the payment of cash
dividends by the Company, see "Dividend Policy."
COMPETITION
The Company and the Bank will face strong competition for deposits, loans
and other financial services from numerous Michigan and out-of-state banks,
thrifts, credit unions and other financial institutions as well as other
entities which provide financial services, including consumer finance
companies, securities brokerage firms, mortgage brokers, equipment leasing
companies, insurance companies, mutual funds, and other lending sources and
investment alternatives. Some of the financial institutions and financial
services organizations with which the Bank will compete are not subject to the
same degree of regulation as the Bank. Many of the financial institutions
aggressively compete for business in the Bank's proposed market areas. Many of
these competitors have been in business for many years, have established
customer bases, have substantially higher lending limits than the Bank, are
larger and will be able to offer certain services that the Bank does not expect
to provide in the foreseeable future, including trust services, and
international banking services. In addition, most of these entities have
greater capital resources than the Bank, which, among other things, may allow
them to price their services at levels more favorable to the customer and to
provide larger credit facilities than could the Bank. See "Business -- Market
Area" and "Business -- Competition." Additionally, recently passed federal
legislation regarding interstate branching and banking and legislation
affecting the cost of deposit insurance premiums may act to increase
competition in the future from larger out-of-state banks and thrift
institutions. See "Supervision and Regulation -- Recent Regulatory
Developments."
DEPENDENCE ON MANAGEMENT
The Company and the Bank are, and for the foreseeable future will be,
dependent primarily upon the services of Richard Zamojski, the Chairman of the
Board and Chief Executive Officer of the Company and the Bank, and Anthony S.
Albanese, President and Chief Operating Officer of the Company and the Bank.
If the services of Mr. Zamojski or Mr. Albanese were to become unavailable to
the Company or the Bank for any reason, or if the Company or the Bank were
unable to hire highly qualified and experienced personnel either to replace Mr.
Zamojski or Mr. Albanese or any other proposed employee, or to adequately staff
the anticipated growth of the Bank, the operating results of the Company and
the Bank would be adversely affected. See "Business -- Employees" and
"Management."
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DISCRETION IN USE OF PROCEEDS
The offering is intended to raise funds to provide for the initial
capitalization of the Bank, purchase leasehold improvements, equipment and
other assets for the Bank's operations, fund loans, provide working capital for
general corporate purposes and pay initial operating expenses. While
management currently has no such plans, if opportunities arise, some of the
proceeds of the offering may also be used to finance acquisitions of other
financial institutions, branches of other institutions or expansion into other
lines of business closely related to banking. However, management will retain
discretion in employing the proceeds of the offering. See "Use of Proceeds."
LENDING RISKS AND LENDING LIMITS
The risk of nonpayment of loans is inherent in commercial banking, and
such nonpayment, if it occurs, would likely have a material adverse effect on
the Company's earnings and overall financial condition as well as the value of
the Common Stock. Because the Bank does not have an operating history, none of
the Bank's customers will have an established credit history with the Bank.
Management will attempt to minimize the Bank's credit exposure by carefully
monitoring the concentration of its loans within specific industries and
through loan application and approval procedures, but there can be no assurance
that such monitoring and procedures will reduce such lending risks. Credit
losses can cause insolvency and failure of a financial institution, and in such
event, its shareholders could lose their entire investment.
The Bank's self-imposed lending limit initially will be $1 million per
customer relationship. Accordingly, the size of the loans which the Bank can
offer to potential customers is less than the size of loans which most of the
Bank's competitors are able to offer. This limit initially will affect the
ability of the Bank to seek relationships with the area's larger businesses.
The Bank expects to accommodate loan volumes in excess of its lending limit
through the sale of participations in such loans to other banks. However,
there can be no assurance that the Bank will be successful in attracting or
maintaining customers seeking larger loans or that the Bank will be able to
engage in participations of such loans on terms favorable to the Bank.
IMPACT OF INTEREST RATES AND ECONOMIC CONDITIONS
The results of operations for financial institutions, including the Bank,
may be materially and adversely affected by changes in prevailing economic
conditions, including declines in real estate market values, rapid changes in
interest rates and the monetary and fiscal policies of the federal government.
See "Supervision and Regulation -- General" and "-- Recent Regulatory
Developments." The Bank's profitability is in part a function of the spread
between the interest rates earned on investments and loans and the interest
rates paid on deposits and other interest-bearing liabilities. In the early
1990s, many banking organizations experienced historically high interest rate
spreads. More recently, interest rate spreads have generally narrowed due to
changing market conditions and competitive pricing pressure, and there can be
no assurance that such factors will not continue to narrow interest rate
spreads or that the higher interest rate spreads will return. Although
economic conditions in the Bank's market area have been generally favorable,
there can be no assurance that such conditions will continue to prevail.
Substantially all the Bank's loans will be to businesses and individuals in
Southeastern Michigan and any decline in the economy of this area could have an
adverse impact on the Bank. Like most banking institutions, the Bank's net
interest spread and margin will be affected by general economic conditions and
other factors that influence market interest rates and the Bank's ability to
respond to changes to such rates. At any given time, the Bank's assets and
liabilities will be such that they are affected differently by a given change
in interest rates, principally due to the fact that the Bank does not plan to
match the maturities of its loans precisely with its deposits and other funding
sources. As a result, an increase or decrease in rates could have a material
adverse effect on the Bank's net income, capital and liquidity. While
management intends to take measures to mitigate interest rate risk, there can
be no assurance that such measures will be effective in minimizing the exposure
to interest rate risk. See "Supervision and Regulation."
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NEED FOR TECHNOLOGICAL CHANGE
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. The Company's
future success will depend in part on its ability to address the needs of its
customers by using technology to provide products and services that will
satisfy customer demands for convenience as well as to create additional
efficiencies in the Bank's operations. Many of the Bank's competitors have
substantially greater resources to invest in technological improvements. Such
technology may permit competitors to perform certain functions at a lower cost
than the Bank. There can be no assurance that the Bank will be able to
effectively implement new technology-driven products and services or be
successful in marketing such products and services to its customers. See
"Business -- Business Strategy."
ANTI-TAKEOVER PROVISIONS
Chapters 7A and 7B of the Michigan Business Corporation Act (the "MBCA")
provide for certain supermajority vote and other requirements on certain
business combinations with interested shareholders and limit voting rights of
certain acquirors of "control shares," as that term is defined in the MBCA. In
addition, federal law requires the approval of the Federal Reserve Board prior
to acquisition of "control" of a bank holding company. These provisions may
have the effect of delaying or preventing a change in control of the Company
without action by the shareholders. As a result, these provisions could
adversely affect the price of the Common Stock by, among other things,
preventing a shareholder of the Company's Common Stock from realizing a premium
which might be paid as a result of a change in control of the Company. See
"Description of Capital Stock - Certain Anti-Takeover Provisions."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation and Bylaws provide for the
indemnification of its officers and directors and insulate its officers and
directors from liability for certain breaches of the duty of care. It is
possible that the indemnification obligations imposed under these provisions
could result in a charge against the Company's earnings and thereby affect the
availability of funds for payment of dividends to the Company's shareholders.
See "Description of Capital Stock -- Indemnification of Directors and
Officers."
DETERMINATION OF OFFERING PRICE; LIMITED TRADING MARKET EXPECTED
The initial public offering price of $10.00 per share was determined by
the Company in consultation with the Underwriter. This price is not based upon
earnings or any history of operations and should not be construed as indicative
of the present or anticipated future value of the Common Stock. Prior to the
offering, there has been no public trading market for the Common Stock. The
price at which these shares are being offered to the public may be greater than
the market price for the Common Stock following the offering. The Underwriter
has advised the Company that, upon completion of the offering, it intends to
use reasonable efforts to initiate quotations of the Common Stock on the NASD
OTC Bulletin Board and to act as a market maker in the Common Stock, subject to
applicable laws and regulatory requirements, although the Underwriter is not
obligated to do so. Making a market in securities involves maintaining bid and
ask quotations and being able, as principal, to effect transactions in
reasonable quantities at those quoted prices, subject to various securities
laws and other regulatory requirements. The development of a public trading
market depends, however, upon the existence of willing buyers and sellers, the
presence of which is not within the control of the Company, the Bank or any
market maker. Market makers on the NASD OTC Bulletin Board are not required to
maintain a continuous two-sided market, are required to honor firm quotations
for only a limited number of shares, and are free to withdraw firm quotations
at any time. Even with a market maker, factors such as the limited size of the
offering, the lack of earnings history of the Company and the absence of a
reasonable expectation of dividends within the near future mean that there can
be no assurance of an active and liquid market for the Common Stock developing
in the foreseeable future. Even if a market develops, there can be no
assurance that a market will continue, or that shareholders will be able to
sell their shares at or above the price at which these shares are being offered
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to the public. Purchasers of Common Stock should carefully consider the
limited liquidity of their investment in the shares being offered hereby.
REGULATORY RISK
The banking industry is heavily regulated. Many of these regulations are
intended to protect depositors, the public, and the deposit insurance funds
administered by the FDIC, not shareholders. Applicable laws, regulations,
interpretations and enforcement policies have been subject to significant, and
sometimes retroactively applied, changes in recent years, and may be subject to
significant future changes. There can be no assurance that such future changes
will not adversely affect the business of the Company. In addition, the burden
imposed by federal and state regulations may place banks in general, and the
Company specifically, at a competitive disadvantage compared to less regulated
competitors. See "Supervision and Regulation."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered hereby are estimated to be $___________ ($___________ if
the Underwriter's over-allotment option is exercised in full), after deduction
of the underwriting discounts and commissions, but before deducting estimated
offering expenses of $200,000. The Underwriter has agreed that no underwriting
discounts or commissions will be incurred by the Company for the first 300,000
shares sold by the Underwriter to members of the Board of Directors, their
immediate families or certain other designated individuals. Such persons have
provided nonbinding expressions of interest to purchase approximately 300,000
shares. If such persons purchase 300,000 shares, underwriting discounts and
commissions will be reduced by, and proceeds to the Company will be increased
by $__________.
The Company expects to contribute approximately $7.5 million of the net
proceeds of the offering to the Bank by purchasing all of the Bank's common
stock to be issued. This purchase of the Bank's stock is intended to provide
the Bank with the capital required by regulators to commence operations. The
Bank plans to use approximately $30,000 for leasehold improvements and
$350,000 to purchase furniture, fixtures and equipment and other necessary
assets for the Bank's operations. The Company expects to use approximately
$200,000 of the net proceeds to pay for preopening and organizational expenses
of the Bank. These preopening and organizational costs were financed on an
interim basis from loans of approximately $200,000 made to the Company by
certain of the Bank's organizers. It is anticipated that these loans will be
repaid by the Company promptly following the completion of the offering.
Preopening income may offset some of these expenses. It is currently
anticipated that the balance of the net proceeds received by the Bank will be
used to fund investments in loans and securities and for payment of operating
expenses. The remaining net proceeds (plus any net proceeds as a result of the
exercise of the Underwriter's over-allotment option) initially will be invested
by the Company in investment grade securities and otherwise held by the Company
as working capital for general corporate purposes and to pay operating
expenses, as well as for possible future capital contributions to the Bank.
The funds will also be available to finance possible acquisitions of other
branches or expansion into other lines of business closely related to banking,
although the Company presently has no plans to do so.
DIVIDEND POLICY
The Company initially expects that Company and Bank earnings, if any, will
be retained to finance the growth of the Company and the Bank and that no cash
dividends will be paid for the foreseeable future. If the Bank achieves
profitability and recovers its operating deficit, the Company may consider
payment of dividends. However, the declaration of dividends will be at the
discretion of the Board of Directors and there is no assurance that dividends
will be declared at any time. If and when dividends are declared, the Company
will be dependent largely upon dividends paid by the Bank for funds to pay
dividends on the Common Stock. It is also possible, however, that the Company
might at some time in the future pay dividends generated from income or
investments and from other activities of the Company.
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<PAGE> 12
Under Michigan law, the Bank will be restricted as to the maximum amount
of dividends it may pay on its Common Stock. A Michigan state bank may not
declare dividends except out of net profits then on hand after deducting its
losses and bad debts and then only if the bank will have a surplus amounting to
at least 20% of its capital after the payment of the dividend. A Michigan
state bank may not declare or pay any cash dividend or dividend in kind until
the cumulative dividends on its preferred stock, if any, have been paid in
full. If the surplus of a Michigan state bank is at any time less than the
amount of its capital, before the declaration of a cash dividend or dividend in
kind, it must transfer to surplus not less than 10% of its net profits for the
preceding half-year (in the case of quarterly or semi-annual dividends) or the
preceding two consecutive half-year periods (in the case of annual dividends).
The ability of the Company and the Bank to pay dividends is also affected by
various regulatory requirements and policies, such as the requirement to
maintain adequate capital above regulatory guidelines. See "Supervision and
Regulation." Such requirements and policies may limit the Company's ability to
obtain dividends from the Bank for its cash needs, including funds for
acquisitions, payment of dividends by the Company and the payment of operating
expenses.
CAPITALIZATION
The following table sets forth the capitalization of the Company as it is
projected to be immediately after the sale of the 1,000,000 shares of Common
Stock offered hereby and the application of the estimated net proceeds. See
"Use of Proceeds."
Common Stock, no par value,
4,500,000 shares authorized;
1,000,000 shares issued and
outstanding $
-------------
Preferred Stock, no par value,
500,000 shares authorized;
no shares issued and outstanding $ 0
-------------
Retained earnings
-------------
Preopening and Organizational Expenses (1) $( 200,000)
-------------
Total shareholders' equity $
=============
____________________
(1) Preopening and organizational expenses will be amortized over a 60-month
period.
BUSINESS
BACKGROUND
The liberalization in recent years of Michigan's branch banking laws,
together with the expansion of interstate banking, has led to substantial
consolidation of the banking industry in Michigan and especially the
Metropolitan Detroit area in which the Bank is located. In the past several
years, many of the financial institutions within the primary market area of the
Bank have either been acquired by or merged with larger financial institutions
or out-of-state financial institutions. According to Sheshunoff Information
Services Inc., since 1990, over 70 bank branches have closed within the Bank's
primary and secondary market areas. In many cases, when these consolidations
occurred, local boards of directors were dissolved and local management
relocated or in some cases terminated. This has in some cases resulted in
policy and credit decisions being centralized away from the local management of
the financial providers in the Bank's primary and secondary market areas.
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<PAGE> 13
In the opinion of the Company's management, this situation has created a
favorable opportunity for a new bank with local management and directors.
Management of the Company believes that such a bank can attract those customers
who wish to conduct business with a locally managed institution that
demonstrates an active interest in their business and personal financial
affairs. The Company believes that a locally managed institution will be able
to deliver more timely responses to customer requests, provide customized
financial products and services, and offer the personal attention of the Bank's
senior banking officers.
The Company is incorporated as a Michigan business corporation and will
hold all of the Bank's issued and outstanding stock and will engage in the
business of a bank holding company under the federal Bank Holding Company Act
of 1956, as amended. On November 25, 1996, the Bank received an order from the
Commissioner preliminarily approving the application to establish the Bank,
subject to certain conditions set forth in its order. The Bank's application
for FDIC deposit insurance was filed on August 28, 1996, and the FDIC's
approval, if and when it is obtained, will be subject to certain conditions,
including conditions related to capital adequacy. The Company's application to
become a bank holding company for the Bank will be filed with the Federal
Reserve Board in December 1996, and the Federal Reserve Board's approval, if and
when it is obtained, also will be subject to certain conditions set forth in
its order. The Bank expects to receive the FDIC and the Federal Reserve Board
approvals and to have all such conditions satisfied in the first quarter of
1997. There can be no assurance, however, as to the timing of such approvals
or that the Bank and the Company will obtain such approvals. The Bank intends
to commence business as soon as reasonably practical upon completion of the
offering and satisfaction of conditions to which certain of its regulatory
approvals are subject. See "Risk Factors -- Delay in Commencing Operations"
and "Risk Factors -- Government Regulation and Monetary Policy."
The Company will own all of the issued and outstanding stock of the Bank.
Prior to the completion of the offering, the Company will have only one share
of Common Stock outstanding with such share being held by Richard Zamojski.
Following completion of the offering and before commencement of operations, the
Bank intends to complete the furnishing of its facility, certain training of
its staff and the purchase, lease and installation of equipment necessary to
transact a banking business. Correspondent banking relationships and other
arrangements for services will be completed as necessary.
The Company's principal office is located at 21211 Haggerty Road, Novi,
Michigan 48375, and its telephone number is (810) 380-0779.
BUSINESS STRATEGY AND PLAN OF OPERATION
The Bank intends to provide a focused range of business and consumer
financial services to serve small to medium-sized business customers as well as
individuals. The foundation of this strategy will be to emphasize the skills
which management has developed over the past 20 years and management's
commitment to the Bank's primary market area. The Bank's core business
activities will consist primarily of attracting deposits from the general
public and using such deposits, together with borrowings and equity capital, to
originate or purchase commercial equipment leases, commercial real estate
loans, residential mortgage loans, land contracts and home equity loans.
Richard Zamojski, Chairman and Chief Executive Officer of the Company and the
Bank, and Anthony S. Albanese, President and Chief Operating Officer of the
Company and the Bank, each have over 20 years experience in the financial
services industry. Prior to coming to the Company, Mr. Zamojski was Chairman
and Chief Executive Officer and Mr. Albanese was President and Chief Operating
Officer of a privately-owned financial institution located in southeastern
Michigan. During their tenure, the institution grew from approximately $120
million in total assets to approximately $1 billion in total assets and
developed from primarily a mortgage banking institution to a fully diversified
financial institution offering a full line of commercial and consumer banking
products. The Bank's executive officers and non-executive staff will be
committed to providing outstanding customer service and banking products. The
Bank intends to compete aggressively for its banking business through a
systematic program of direct calling on both customers and referral sources
such as attorneys, accountants and other business people, many of whom the
management has come to know during their professional careers.
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<PAGE> 14
COMMERCIAL EQUIPMENT FINANCING (LEASE DISCOUNTING). During the past 20
years, the executive officers have developed significant expertise and
experience in various forms of commercial equipment financing. One such method
of equipment financing on which the Bank intends to focus is lease discounting.
Lease discounting is sometimes confused with direct leasing. Under a direct
lease, the leasing company acts as lessor and actually owns the equipment,
leases it to a third party and takes back the equipment at the end of the lease
and assumes the accompanying residual risk. Under a lease discounting loan,
the Bank will not be the lessor, but rather the Bank will be a funding source
to the leasing company ("Lessor"). Under lease discounting the Bank will make
a loan to the Lessor based on the discounted value of the lease payment stream
and will take an assignment of the lease payments which will then be made
directly to the Bank. The Lessor continues to own the equipment and assumes
the residual risk. Lease discount loans are in most cases full pay-out
transactions. In addition, the Bank assumes no direct residual risk on the
equipment. The Bank simply discounts a stream of payments and services the
loan.
The Bank intends to concentrate on the middle market range, where the
management team has the bulk of its experience. This range is characterized by
loan transactions between $25,000 and $500,000 involving lessees generally
having a net worth of $500,000 to $5 million. Equipment underlying the Bank's
equipment financing will include, without limitation, computer, medical,
transportation, office, graphic and printing equipment and machine tools. The
Company will lend to the Lessor, take an assignment of the lease payments to
repay the loan and take a security interest in the underlying collateral.
A typical lease discount loan generally is structured along the following
lines. The Lessor and lessee (the user of the equipment and ultimate repayment
source) build a relationship over a period of time such that the lessee
communicates its financing needs to the Lessor. The lessee selects the desired
equipment and vendor and agrees on the purchase price with the vendor.
The Lessor obtains financial information on the lessee and provides this
to a funding source, such as the Bank, for credit approval. Upon satisfactory
review, the Bank approves the lessee, sets the rate at which the lease will be
discounted and dollar amount of the loan. Once the equipment is delivered to
the lessee by the vendor, the appropriate documentation is presented to the
Bank for review and funding.
After satisfactory review of the documents and verification that the
equipment has been delivered to the lessee, the Bank typically obtains a
non-recourse note from the Lessor and discounts the lease by funding the
present value of the stream of payments. The loan proceeds are used to pay the
vendor for the equipment and the Lessor its profit on the transaction.
Non-recourse means the Bank must collect on its loan first from the lease
payment stream which has been assigned to the Bank and then from the underlying
collateral. The Lessor is under no obligation to make payments on the loan
except in the case of fraud or misrepresentation. The lessee is notified of
the transfer of the lease to the Bank, instructions are given to begin
remitting payment directly to the Bank and Uniform Commercial Code financing
statements are filed indicating that a purchase money security interest has
been obtained.
By dealing through Lessors in the leasing brokerage community, the Company
anticipates it will be able to reduce costs and keep lending and support staff
at lower levels, unlike other financial institutions which typically would
finance this type of equipment through a direct loan which requires a larger
staff of loan officers and support staff.
Because the Bank expects to be able to generate a significant volume of
commercial equipment lease paper, it is anticipated that the Bank will pursue
alternative sources of funding to compliment funds generated through deposit
gathering. Line of credit facilities with regional and national lending
institutions may be pursued to add funding capacity to the Bank. The Bank will
also endeavor to establish a network of local community banks that may purchase
loans or participate in its loan portfolios. These funding sources are
expected to allow the Bank to service its customer relationships, build its own
loan portfolio and generate fee and servicing revenue simultaneously.
OTHER COMMERCIAL LENDING. The Bank expects to offer commercial real
estate lending services to customers in its primary service area, secondary
service area and in southeastern Michigan in general. The Bank anticipates
12
<PAGE> 15
generating business through its affiliations with commercial real estate
brokers and on a direct basis with owners of commercial properties. These
loans generally would be secured by apartment buildings or owner-occupied
properties.
The Bank recognizes that commercial real estate lending generally involves
a higher degree of risk than residential real estate lending. In order to help
manage and reduce these risks, management intends to use strict underwriting
standards in its commercial real estate lending business. Bank policy will
govern adherence to specified loan to value ratios, income ratios and insurance
and escrow requirements. The Bank expects to require personal guarantees and
bank depository relationships for most commercial real estate borrowers.
The Bank also plans to offer loans secured by all assets of the customer,
including personal assets, and backed by the personal guarantee of the
customer. The Bank does not anticipate offering loans secured only by accounts
receivable and inventory.
RESIDENTIAL MORTGAGE LENDING. The Bank intends to originate residential
mortgage and home equity loans in its primary service area in particular, its
secondary service area in general and also in other areas of southeastern
Michigan. Management will seek to penetrate this market by capitalizing on
management's collective knowledge of these markets and its relationship with
correspondent brokers and other sources of residential mortgage loans. To a
lesser degree, the Bank will offer mortgage loans and other loan products
directly to the general public through its main office.
The majority of loans acquired or originated are expected to be
conventional mortgage loans secured by residential properties and comply with
requirements for sale to Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation. While some variable rate residential loans are
expected to be retained by the Bank, the majority of all conforming residential
loans are expected to be held for a short period of time (generally less than
60 days) and then sold to secondary market investors. It is intended that
these loans would be sold on a non-recourse basis and the Bank generally
expects to obtain purchase commitments from investors prior to funding the
loans. As a result of efforts in this area, the Bank plans to retain a portion
of the loan origination fee paid by the borrower and receive fees as
compensation for selling the loans to secondary market investors.
Through its mortgage lending activity, the Bank also expects to acquire or
originate non-conforming residential mortgage loans. These loans would not
meet government agency standards for a variety of reasons. The structure of
these loans would typically be a variable rate basis. Although a private
secondary market exists for these loans, the Bank expects to retain the
majority in its portfolio due to their interest rate sensitivity and rates of
return.
LAND CONTRACT LENDING. The Bank also intends to acquire land contract
loans. A land contract is a private lending arrangement between a buyer and
seller of residential real estate. These loans would be acquired on a
discounted non-recourse basis with financing terms on a fixed rate basis and
amortization period generally ranging from 5 to 15 years. It is expected that
these loans typically would come from rural outstate environments as well as
urban locations where conventional methods of financing are not available in
many cases. It is anticipated that this type of lending offers a higher rate
of return on investment as well as a higher degree of lending risk. To
compensate for this lending risk, reserves would be set aside at the time of
acquisition and held by the Bank during the term of the loan. Lending programs
of this type help provide financing to disadvantaged borrowers and at the same
time help the Bank to fulfill its responsibilities as mandated by the Community
Reinvestment Act.
DEPOSITS AND RETAIL BANKING. The Bank plans to offer its retail customers
a variety of deposit accounts and loan products. The Bank plans on taking
advantage of increasing population and rising income levels in the growing
areas of its primary and secondary market areas, including Wayne, Oakland,
Livingston, Washtenaw and Macomb counties. Bank personnel will be trained to
offer a variety of deposit options. These options are expected to include
demand deposit accounts, regular savings accounts, NOW accounts, money market
demand accounts and certificates of deposit. On the lending side, bank
representatives expect to provide products including home equity loans, lines
of credit, bridge loans and residential mortgage loans.
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<PAGE> 16
The Bank plans to operate its retail operations within its headquarters
facilities with both teller and drive-up service capabilities. The retail
service area within the main office occupies approximately 1,500 square feet.
The Bank's deposit funding strategy will be to offer a rate structure
slightly higher than the competition because of its anticipated low overhead.
One of the elements of the Bank's strategy will be to increase deposits at a
rate that is consistent with its growth in earning assets and to maintain a
stable rate of core deposits to time deposits so that the Bank can obtain a
lower cost and more stable source of funds.
Additionally, the Bank plans to offer a range of products and services,
including telephone banking and automated bill paying services to individuals
in the Bank's market area. Computer banking may be offered at a later date.
The management team plans to regularly review these products and services to
remain competitive in the marketplace.
INVESTMENTS. The principal investment of the Company is expected to be
its purchase of all of the common stock of the Bank. Funds retained by the
Company from time to time may be invested in various debt instruments,
including but not limited to obligations of or guaranteed by the United States,
general obligations of a state or political subdivision thereof, bankers'
acceptances or certificates of deposit of U.S. commercial banks, or commercial
paper of U.S. issuers rated in the highest category by a nationally-recognized
investment rating service. Although the Company is permitted to make limited
portfolio investments in equity securities and to make equity investments in
subsidiary corporations engaged in certain non-banking activities which may
include real estate-related activities, such as mortgage banking, community
development, real estate appraisals, arranging equity financing for commercial
real estate and owning and operating real estate used substantially by the Bank
or acquired for its future use, the Company has no present plans to make any
such equity investment. See "Supervision and Regulation -- The Company --
Investments and Activities." The Company's Board of Directors may alter the
Company's investment policy without shareholder approval.
The Bank may invest its funds in a wide variety of debt instruments and
may participate in the federal funds market with other depository institutions.
Subject to certain exceptions, the Bank is prohibited from investing in equity
securities. Under one such exception, in certain circumstances and with the
prior approval of the FDIC, the Bank could invest up to 10% of its total assets
in the equity securities of a subsidiary corporation engaged in certain real
estate-related activities. The Bank has no present plans to make such an
investment. Real estate acquired by the Bank in satisfaction of or foreclosure
upon loans may be held by the Bank, subject to a determination by a majority of
the Bank's Board of Directors at least annually of the advisability of
retaining such property, for a period not exceeding 60 months after the date of
acquisition, or such longer period as the Commissioner may approve. The Bank
is also permitted to invest an aggregate amount not in excess of its capital in
such real estate as is necessary for its accommodation in the transaction of
its business. The Bank has no present plans to make any such investment. The
Bank's Board of Directors may alter the Bank's investment policy without
shareholder approval.
Market Responsiveness. The management team will monitor the performance
of each part of the Bank's business strategy. The strategy may change based on
market conditions and acceptance of the strategy and as the executive officers
evaluate new opportunities. The Bank expects to respond to changes in the
marketplace by focusing attention and resources on those areas that show the
greatest potential for growth. While the Bank expects to concentrate on the
business strategy as described above, market forces may dictate alterations
that cannot be predicted at this time.
MARKET AREA
Management believes that recent changes in the local banking industry,
including mergers and acquisitions involving both commercial banks and thrift
institutions, resulted in a decrease in the level of service for small to
medium-sized business customers in the Bank's market area. Management believes
that there continues to be the perception in the local business community that
many of the larger financial institutions are not as focused on providing
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<PAGE> 17
personal service to small to medium-sized businesses. Accordingly, management
believes that there are increased market opportunities for the Bank to serve
these businesses.
The Bank's primary service area will be Novi, Farmington, Farmington
Hills, Livonia, Northville, and Northville Township. The communities of Novi,
Farmington, Farmington Hills and parts of Northville and Northville Township
are located within Oakland County, Michigan, and the communities of Livonia and
parts of Northville and Northville Township are located within Wayne County,
Michigan.
Management believes that the communities that comprise the Bank's primary
service area have a stable and diverse economic base, which includes a wide
range of small to medium-sized businesses engaged in manufacturing, high
technology research and development, computer services and retail. According
to statistics issued by the Census Bureau in 1990, median annual household
incomes in the communities that comprise the Bank's primary service area are:
$47,518 (Novi); $41,040 (Farmington); $51,986 (Farmington Hills); $48,645
(Livonia); $38,629 (Northville); and $55,465 (Northville Township). Further,
according to SEMCOG, the population in the Bank's primary service area is
expected to grow from approximately 265,600 in 1995 to over 280,000 by 2000,
an increase in excess of 5.4%.
The Bank's secondary service area will be the remaining portion of Oakland
County not included within the primary service area. According to information
issued by Oakland County, the county is the third wealthiest county in the
nation among counties exceeding one million people and average annual household
income more than doubled from $24,700 in 1980 to over $54,400 in 1993.
According to SEMCOG, population in Oakland County is projected to increase from
1,151,000 in 1995 to over 1,192,000 by 2000, an increase of 3.5%. Oakland
County is also a large banking market. According to available industry data,
as of June 30, 1995, total deposits in Oakland County, including banks,
thrifts, and credit unions, were approximately $18.4 billion.
COMPETITION
There are many thrifts, credit unions and bank offices located within the
Bank's primary and secondary market areas. Most are branches of larger
financial institutions which, in management's view, are managed with a
philosophy of strong centralization. The Bank will face competition from the
thrifts, credit unions and other banks as well as finance companies, insurance
companies, mortgage companies, securities brokerage firms, equipment leasing
companies, mutual funds, money market funds and other providers of financial
services. Most of the Bank's competitors have been in business a number of
years, have established customer bases, are larger and have higher lending
limits than the Bank. The Bank will compete for loans principally through its
ability to communicate effectively with its customers and to understand and
meet their needs. Management believes that its personal service philosophy
will enhance its ability to compete favorably in attracting individuals and
small businesses. The Bank will actively solicit retail customers and will
compete for deposits by offering customers personal attention, professional
service, computerized banking and competitive interest rates.
BANK PREMISES
The Bank has leased a 3,000 square foot building at 21211 Haggerty Road,
Novi, Michigan, for use as the Bank's main office and the Company's
headquarters. The building was originally built in 1988 to be a bank branch
and has one drive-up window and three drive-up bays. The building has
substantial on-site parking. There is one entrance/exit on Haggerty Road as
well as a rear exit to Orchard Hill Place. Access to the main office is
available to Oakland and Wayne County residents by using I-275, I-96, I-696 and
Grand River Avenue.
EMPLOYEES
Upon commencement of operations, the Bank expects to employ approximately
11 full-time employees, including its executive officers, teller staff and
other support positions. Management will encourage all employees to share
management's goal of high-quality customer service. Mr. Zamojski and Mr.
Albanese intend to actively monitor
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<PAGE> 18
the performance of the non-executive staff through programs and procedures they
have developed, adopted, implemented and operated over the past 20 years.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company as of the date hereof, and the
contemplated directors and officers of the Bank upon completion of this
offering, are as follows:
<TABLE>
<CAPTION>
Position with Director Term Position(s)
Name and Age the Company Expires with the Bank
- ------------ ------------------------------ ------------- --------------------
<S> <C> <C> <C>
Richard Zamojski, 45 Chairman of the Board, Chief 1999 Chairman of the
Executive Officer, and Board, Chief
Director Executive Officer,
and Director
Anthony S. Albanese, 49 President, Chief Operating 1998 President, Chief
Officer and Director Operating Officer
and Director
H. Perry Driggs, Jr., 60 Director 1999 Director
Lewis N. George, 58 Director 1998 Director
Phillip R. Harrison, 41 Director 1997 Director
Philip Sotiroff, 58 Director 1997 Director
Darryle J. Parker, 47 Secretary, Treasurer and Chief N/A Secretary,
Financial Officer Treasurer and Chief
Financial Officer
</TABLE>
Under Federal law and regulations and subject to certain exceptions, the
addition or replacement of any director, or the employment, dismissal or
reassignment of a senior executive officer, of the Bank occurring within two
years of the chartering of the Bank, its acquisition by the Company, or any
change in control of the Bank or the Company (or at any time that the Bank is
not in compliance with applicable minimum capital requirements or is otherwise
in a troubled condition) is subject to prior notice to and disapproval by the
FDIC.
The Company's Articles of Incorporation provide that the number of
directors, as determined from time to time by the Board of Directors, shall be
no less than five and no more than twelve. The Board of Directors has
presently fixed the number of directors at six. The Articles of Incorporation
further provide that the directors shall be divided into three classes, Class
I, Class II, and Class III, with each class serving a staggered three-year term
and with the number of directors in each class being as nearly equal as
possible. The initial terms of the Class I, Class II, and Class III directors
has been established at one year, two years, and three years, respectively.
The subsequent terms of each class of director will be three years.
Darryle J. Parker is employed by the Company and the Bank as Secretary,
Treasurer and Chief Financial Officer of the Company and the Bank. Mr. Parker
has over 23 years of experience in the financial services industry and worked
with Mr. Zamojski and Mr. Albanese prior to coming to the Company.
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<PAGE> 19
It is anticipated that the entire Board of Directors of the Bank will be
elected annually by its shareholder, the Company. Officers of the Company and
the Bank will be appointed annually by their respective Boards of Directors and
perform such duties as are prescribed in the Bylaws or by the Board of
Directors. There are no family relationships among any of the Company's
directors, officers or key personnel.
None of the executive officers or staff are subject to any agreements with
former employers that restrict their right to fully perform their duties with
the Company or the Bank.
EXPERIENCE OF DIRECTORS AND OFFICERS
The experience and backgrounds of the directors and officers, and their
proposed positions with the Company, are summarized below.
RICHARD ZAMOJSKI was employed by Sterling Bank & Trust, F.S.B. ("Sterling" )
from 1990 to August, 1996 where he attained the position of Chairman of the
Board and Chief Executive Officer. Mr. Zamojski was responsible for the
overall strategic plan of Sterling and was the chief liaison with the ownership
of the privately held Bank. Mr. Zamojski also had specific responsibility for
mortgage banking, human resources and the financial and accounting functions of
the Bank. Mr. Zamojski was chairman of the Operations Committee and served as
a member of the Executive, Trust, Loan and Credit, and Compensation Committees.
He also was a member of the Equipment Leasing Association, the Mortgage
Banker's Association of Michigan and the Builders Association of Southeastern
Michigan, where he also served as a past director. Previously, Mr. Zamojski
was employed by Whirlpool Financial Corporation ("Whirlpool") attaining the
position of Vice President-Marketing and member of the Board of Directors
(1984-1989), and Michigan National Leasing Corporation, where he was Group Vice
President until the acquisition of the business by Whirlpool in 1984. Mr.
Zamojski received his Bachelor of Science degree in Accounting from Central
Michigan University in 1973 and a Masters in Business Administration with a
concentration in Finance from the University of Michigan in 1975. He is a
resident of Brighton, Michigan.
ANTHONY S. ALBANESE was employed by Sterling from 1990 to May, 1996 where he
attained the position of President and Chief Operating Officer and was a member
of the Board of Directors. He also acted as the Community Reinvestment Act
("CRA") Officer and was a member of the Oakland County CRA Committee. Mr.
Albanese oversaw the day to day lending, loan purchasing, loan servicing and
trust operations of Sterling with credit approval authority of $1,000,000. Mr.
Albanese was also Chairman of the Electronic Data Processing Committee and a
member of the Asset/Liability, Trust, Operations, Executive and Loan and
Policy Committees. He also served on the IBM Community Bank Advisory Council,
was a member of the Equipment Leasing Association, the Mortgage Bankers
Association and the Builders Association of Southeastern Michigan. Previous
thereto, he was employed by Whirlpool attaining the position of Vice
President-Operations and was a member of the Board of Directors (1984-1989),
and Michigan National Leasing Corporation, where he was a Group Vice President
until the acquisition of the business by Whirlpool in 1984. Mr. Albanese
received an Associate in Science degree in General Business in 1973 and a
Bachelor of Science degree in Accounting in 1977 from Detroit College of
Business. He served in the U.S. Army Security Agency (Military Intelligence)
from 1965 to 1969 with service in Viet Nam during 1966-67. He is a resident of
Northville, Michigan.
DARRYLE J. PARKER has been in the banking industry in excess of 23 years, and
during the past 17 years has served as chief financial officer and/or
controller involving all phases of financial planning, analysis, and
accounting. He was most recently the Treasurer at Sterling (1993-1995) and,
prior to that, attained the positions of Assistant Vice President and
Controller at Heritage Federal Savings Bank, Taylor, Michigan (1992-93), Vice
President and Controller at Security Bank and Trust, Southgate, Michigan
(1990-1991), and Vice President and Cashier at Security Bank of Monroe, Monroe
Michigan (1970-1989). Mr. Parker has an Associate of Science, Monroe County
Community College (1976), a Bachelor of Business Administration in Accounting
from Ohio University (1986), a Masters in Business Administration from Michigan
State University (1988), and is a graduate from the School of Banking
Administration, Controllership, University of Wisconsin (1981). Mr. Parker was
in the United States Marine Corps (1967-1969) serving in Viet Nam. Mr. Parker
is a resident of Monroe, Michigan.
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<PAGE> 20
H. PERRY DRIGGS, JR. is the President of Great Lakes Capital Corporation, a
privately-owned investment banking and corporate finance firm (1987 to
present). Prior to that, he served as an executive at Michigan National Bank
and served in various capacities, including Treasurer at Michigan National
Corporation and its affiliates (1960-1987). Mr. Driggs is President of Time
Masters Company, and is a director of Detroit Mortgage and Realty Company and
Woodstone International, Inc. He received his undergraduate degree from
Harvard College (1958), a Masters degree in Industrial Engineering from
Northwestern University (1959) and returned to Harvard Business School for his
Masters in Business Administration (1961). Mr. Driggs is an active member of
the Financial Executives Institute, the Harvard Business School Club of
Detroit, the Northwestern University Alumni Association and is involved in a
number of local community and charitable organizations. Mr. Driggs is a
resident of Bingham Farms, Michigan.
LEWIS N. GEORGE is currently the President of The George Group, a real estate
development and management company. In 1960 Mr. George began his career with
Nicholas George Theatres, a family owned business that operated a chain of
movie theatres throughout the Detroit Metropolitan Area. He became President
from 1974 through the eventual sale of the theatres in 1988. Mr. George served
as an officer of the Detroit branch of the National Association of Theatre
Owners and was a past director and officer of the Detroit Variety Club. Mr.
George received his undergraduate degree from the University of Michigan (1961)
and a Juris Doctor from Wayne State Law School (1964). Mr. George is an active
member of Orchard Lake Country Club and is a resident of Orchard Lake,
Michigan.
PHILLIP R. HARRISON is the President of Harrison Capital Corporation, a private
investment banking firm which he founded in 1992. His company concentrates in
equity and debt placements for equipment leases and loans. Mr. Harrison was a
managing director of Kendall Capital Partners L.P. (1991-1992), a private
investment banking firm offering specialized advisory services in the areas of
secured asset financing, equipment leasing and project finance. He was a Vice
President and manager of U.S. Leasing International, Inc., a subsidiary of
Ford Motor Company (1986-1992), where he was responsible for the company's
investment in leveraged leases of equipment, facilities and real estate. He
received a Bachelor of Business Administration from Western Michigan University
(1977) and is a certified Public Accountant (1979). Mr. Harrison is a resident
of Brighton, Michigan.
PHILIP SOTIROFF is the President of Sotiroff & Abramczyk, P.C., a law firm
established in 1988, which is engaged in a general business practice with
concentrations in banking and financial institutions, equipment financing,
commercial lending and real estate transactions. Mr. Sotiroff has practiced
commercial law for over 33 years and has specialized in equipment finance since
1974. He has represented Michigan National Leasing Corporation, Whirlpool
Financial Corporation and other financial institutions with respect to a wide
range of commercial equipment financing. Mr. Sotiroff received his
undergraduate degree from the University of Michigan (1960) with honors, is a
member of the Phi Beta Kappa honorary fraternity, and received his Juris Doctor
with distinction from the University of Michigan (1963) where he was an editor
of the Michigan Law Review and received the honorary Order of the Coif. Mr.
Sotiroff is a member of the Michigan Association of Community Bankers and the
Michigan Banker's Association, as well as the Oakland County Bar Association
and the Economic Club of Detroit. Mr. Sotiroff is an active member of St.
Clements Orthodox Church (past chairman, Board of Trustees) and Birmingham
Country Club (past president) and is a resident of Bloomfield Hills, Michigan.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
In the first year of operation, no compensation is expected to be paid to
any directors of the Company for their services. Depending on the structure
and operation of the Company, the operations of the Bank and other factors, the
Company's and the Bank's Boards of Directors may thereafter determine that
reasonable fees or compensation are appropriate. In that event it is likely
that directors of the Company and the Bank would receive compensation, such as
meeting fees, which would be consistent with the compensation paid to directors
of financial institution holding companies and banks of similar size.
The Bank's three executive officers have all chosen to join the Bank at
compensation levels below those earned in their previous positions. Their
interest is to achieve earlier profitability for the Bank by reducing operating
expenses. The annual compensation for Mr. Zamojski and Mr. Albanese for the
first year of operations will be $100,000 each,
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<PAGE> 21
and Mr. Parker's compensation for the first year will be $60,000. Executive
officers' compensation in subsequent years will be determined by the
Compensation Committee, a committee of the Bank's Board of Directors comprised
of a majority of outside (non-employee) directors. The Bank's officers may
participate in the Company's 1996 Employee Stock Option Plan. Officers of the
Bank may also participate in any benefit plans adopted for Bank employees. The
Bank expects to adopt a 401(k) plan for its employees promptly after commencing
operations. Neither the Company nor the Bank has an employment agreement with
any officer.
1996 EMPLOYEE STOCK OPTION PLAN
The Board of Directors has adopted, and the sole shareholder of the
Company has approved, a 1996 Employee Stock Option Plan (the "Employee Plan").
The Employee Plan's adoption is intended to enable the key employees of the
Company or any subsidiary to participate in any growth and profitability of the
Company and encourage their continuation as employees of the Company or a
subsidiary to the benefit of the Company and its shareholders. Pursuant to the
Employee Plan, stock options may be granted which qualify under the Internal
Revenue Code as incentive stock options or as stock options that do not qualify
as incentive stock options. The Board is of the judgment that the interests of
the Company and its shareholders will be advanced by implementation of this
Employee Plan. The following is a summary of the principal provisions of the
Employee Plan.
GRANT OF OPTIONS AND ADMINISTRATION. The Employee Plan will be
administered by a committee of the Board of Directors of the Company comprised
of directors who are not eligible to participate in the Employee Plan (the
"Committee"). The Committee will make determinations with respect to the
officers and other key employees who will participate in the Employee Plan and
the extent of their participation, including the type of option. In making
such determinations, the Committee may consider the position and
responsibilities of the employee, the nature and value of his or her services
and accomplishments, the present and potential contribution of the employee to
the success of the Company, and such other factors as the Committee may deem
relevant.
SHARES. The total number of shares of Common Stock which may be issued
under the Employee Plan will not exceed 40,000 shares (subject to adjustment
for certain events as described below). The shares will be authorized but
unissued shares (including shares reacquired by the Company).
OPTION AGREEMENT. Each option granted under the Employee Plan will be
evidenced by an agreement in such form as the Committee shall from time to time
approve, which agreement must comply with and be subject to certain conditions
set forth in the Employee Plan. Options granted under the Employee Plan may be
incentive stock options or non-qualified options, as determined from time to
time by the Committee for each optionee.
OPTION PRICE. The option price will not be less than the fair market
value of the shares of Common Stock at the time the option is granted except in
the case of an incentive stock option granted to a 10% shareholder where the
option price will be equal to 110% of fair market value, and provided that for
all options granted during the twelve month period after completion of this
offering, the option price may not be less than the offering price per share
shown on the cover page of this Prospectus. For purposes of the Employee Plan,
fair market value per share means the average of the published closing bid and
asked prices of the Common Stock on the NASD OTC Bulletin Board (the "Bulletin
Board"), or if the Common Stock has become listed on The Nasdaq Stock Market
("Nasdaq"), then on Nasdaq instead; or if the Common Stock is not quoted on
either the Bulletin Board or Nasdaq, a value determined by any fair and
reasonable means prescribed by the Committee. The option price shall be paid
in cash or through the delivery of previously owned shares of the Company's
Common Stock, or by a combination of cash and Common Stock. The offering price
per share shown on the cover page of this Prospectus shall be used as the
market price for the Common Stock prior to the completion of the offering.
DURATION OF OPTIONS. The duration of each option will be determined by
the Committee, except that (1) the maximum duration may not exceed ten years
from the date of grant, and (2) for incentive stock options granted to persons
who own 10% or more of the Company's stock, the duration of such options may
not exceed five years from
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<PAGE> 22
the date of grant. The Committee will determine at the time of grant whether
the option will be exercisable in full or in cumulative installments.
Except as hereinafter provided, an option may be exercised by an optionee
only while such optionee is in the employ of the Company or a subsidiary. In
the event that the employment of an optionee to whom an option has been granted
under the Employee Plan shall terminate (except as set forth below) such option
may be exercised, to the extent that the option was exercisable on the date of
termination of employment, only until the earlier of three (3) months after
such termination or the original expiration date of the option; provided,
however, that if termination of employment results from death or total and
permanent disability, such three (3) month period shall be extended to twelve
(12) months.
ADJUSTMENTS. The Committee may make appropriate adjustments in the number
of shares of Common Stock for which options may be granted or which may be
issued under the Employee Plan and the price per share of each option if there
is any change in the Common Stock as a result of a stock dividend, stock split,
recapitalization or otherwise.
CHANGE IN CONTROL. In the case of a change in control (as defined in the
Employee Plan) of the Company, each option then outstanding shall become
exercisable in full immediately prior to such change in control.
TERMINATION OF EMPLOYEE PLAN AND AMENDMENTS. Options may not be granted
pursuant to the Employee Plan after December 31, 2006. The Board of Directors
may from time to time terminate the Employee Plan or amend the Employee Plan
subject to shareholder approval to the extent necessary to satisfy the
requirements of Rule 16b-3 under the Exchange Act, or any successor rule.
FEDERAL INCOME TAX CONSEQUENCES. The grant of a non-qualified option or
incentive stock option has no federal tax consequences for the optionee or the
Company. Upon the exercise of a non-qualified option, the optionee is deemed
to realize taxable income to the extent that the fair market value of the
shares of Common Stock exceeds the option price. The Company is entitled to a
tax deduction for such amounts at the date of exercise. If any stock received
upon the exercise of a non-qualified option is later sold, any excess of the
sale price over the fair market value of the stock at the date of exercise is
taxable to the optionee.
No taxable income results to the optionee upon the exercise of an
incentive stock option if the incentive stock option is exercised during the
period of the optionee's employment or within three months thereafter, except
in the case of disability or death. However, the amount by which the fair
market value of the stock acquired pursuant to an incentive stock option
exceeds the option price is a tax preference item which may result in the
imposition on the optionee of an alternative minimum tax. If no disposition of
the shares is made within two years from the date the incentive stock option
was granted and one year from the date of exercise, any profit realized upon
disposition of the shares may be treated as a long-term capital gain by the
optionee. The Company will not be entitled to a tax deduction upon such
exercise of an incentive stock option, nor upon a subsequent disposition of the
shares unless such disposition occurs prior to the expiration of the holding
periods.
Under the terms of the Employee Plan the aggregate market value
(determined at the time the option is granted) of the stock with respect to
which incentive stock options are exercisable for the first time in any year by
any optionee may not exceed $100,000.
1996 STOCK OPTION PLAN FOR NONEMPLOYEE DIRECTORS
In order to increase the proprietary interest of nonemployee directors of
the Company and to enhance the Company's ability to retain and attract
experienced and knowledgeable directors, the Board of Directors has adopted and
the sole shareholder of the Company has approved the 1996 Stock Option Plan for
Nonemployee Directors (the "Nonemployee Director Plan"). The following is a
summary of the Nonemployee Director Plan.
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<PAGE> 23
GRANT OF OPTIONS AND ADMINISTRATION. Pursuant to the Nonemployee Director
Plan, on February 1, 1997, the Company will automatically grant each person who
is then a director of the Company and who is not an employee of the Company or
any affiliate ("Nonemployee Director") an option to purchase 12,000 shares of
Common Stock of the Company at the per share offering price shown on the cover
page of this Prospectus. Nonemployee Directors who are appointed or elected
after March 1, 1997, will receive an option on the first day of the month
following their appointment or election for a lesser number of shares, the
number of which will depend on the annual shareholders' meeting which first
occurs concurrently with, or after he or she becomes a director, as set forth
in the table below:
<TABLE>
<S> <C>
The Nonemployee Director's
If the Nonemployee Director's Option will be for the
First Annual Meeting is the: Following Number of Shares:
----------------------------- ---------------------------
1998 Annual Meeting 3,000
1999 Annual Meeting 2,000
2000 Annual Meeting 1,000
</TABLE>
The Nonemployee Director Plan will be administered by the Committee or another
committee appointed by at least a majority of the Board of Directors of the
Company.
SHARES. The total number of shares of the Company's Common Stock which
may be issued under the Nonemployee Director Plan will not exceed 60,000
shares (subject to adjustment for certain events as described below). The
shares will be authorized but unissued shares (including shares reacquired by
the Company).
OPTION AGREEMENT. Each option granted under the Nonemployee Director Plan
will be evidenced by an agreement in such form as the Committee shall from time
to time approve, which agreement must comply with and be subject to certain
conditions set forth in the Nonemployee Director Plan.
SCHEDULE FOR BECOMING FULLY EXERCISABLE. Options granted in 1997 under
the Nonemployee Director Plan are immediately exercisable for 6,000 shares of
Common Stock. On March 1 of each year beginning with March 1, 1998, each such
option will become exercisable for an additional 2,000 shares of Common Stock,
until it is exercisable in full. In the event of a "change in control" of the
Company, as defined in the Nonemployee Director Plan, each option then
outstanding shall become immediately exercisable in full, immediately prior to
such change in control. Options granted to persons appointed or elected to the
Board after March 1, 1997, will become fully exercisable 180 days after the
date of grant.
OPTION PRICE. The option exercise price for options granted under the
Nonemployee Director Plan will be the fair market value per share on the date
the option is granted to the Nonemployee Director. For purposes of the
Nonemployee Director Plan, fair market value per share means the average
between the published closing bid and asked prices of the Common Stock on the
Bulletin Board or, if the Common Stock has become listed on Nasdaq, then on
Nasdaq instead; or if the Common Stock is not quoted on either the Bulletin
Board or Nasdaq, a value determined by any fair and reasonable means prescribed
by the Committee. The options are not transferable by Nonemployee Directors,
except by will, the laws of descent and distribution, or pursuant to a
qualified domestic relations order. To the extent exercisable, each option may
be exercised from time to time, in full, or in part in minimum installment of
1,000 shares, during the term of the option. Payment of the option exercise
price may be made in cash or shares of Common Stock already owned by the person
exercising the option, valued at the fair market value per share of Common
Stock on the date of exercise, or a combination of cash and Common Stock. For
purposes of the grant of options under the Nonemployee Director Plan, and not
for any other purpose, the Board of Directors has determined that the offering
price per share shown on the cover page of this Prospectus shall be used as the
market price for the Common stock prior to the completion of the offering and
for options under the Nonemployee Director Plan issued on February 1, 1997.
DURATION OF OPTIONS. The unexercised portion of each option automatically
expires, and is no longer exercisable, on the earliest to occur of the
following: (i) seven years after the option is granted, (ii) three months after
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<PAGE> 24
the person who was granted the option ceases to be a Nonemployee Director,
other than due to permanent disability, death, or for cause, (iii) one year
following the death or permanent disability of the Nonemployee Director, and
(iv) immediately upon termination of the Nonemployee Director's service for
cause.
ADJUSTMENTS. In the event that there is any change in the number of shares
of Common Stock through the declaration of stock dividends or stock splits, or
through recapitalization, merger, consolidation, combination of shares, or
otherwise, the Committee or the Board of Directors will make such adjustments,
if any, as it may deem appropriate, in the number of shares of Common Stock
subject to outstanding options, the option price, and any other terms it deems
appropriate.
TERMINATION OF PLAN AND AMENDMENT. The Board of Directors of the Company
may, from time to time, terminate or suspend the Nonemployee Director Plan, in
whole or in part, or amend the Nonemployee Director Plan, without approval of
the shareholders of the Company; except that no such action shall be taken by
the Board that (i) materially increases the benefits accruing to the
participants, materially increases the number of securities that may be issued
(except adjustments permitted under the paragraph above), or materially
modifies the eligibility requirements for participation, (ii) causes the
Nonemployee Director Plan to fail to satisfy the applicable requirements of
Rule 16b-3 under the Exchange Act, or any Nonemployee Director to fail to
qualify as a "disinterested person" as defined in that rule, or (iii) impairs
the rights of any option holder granted under the Nonemployee Director Plan,
without such option holder's consent.
FEDERAL INCOME TAX CONSEQUENCES. Under current federal income tax law,
options granted under the Nonemployee Director Plan will be non-qualified stock
options which do not qualify as incentive stock options under Section 422 of
the Internal Revenue Code. The grant of a non-qualified option has no federal
tax consequences for the optionee or the Company. Upon the exercise of a
non-qualified option, the optionee is deemed to realize taxable income to the
extent that the fair market value of the shares of Common Stock exceeds the
option price. The Company is entitled to a tax deduction for such amounts at
the date of exercise. If any stock received upon the exercise of a
non-qualified option is later sold, any excess of the sale price over the fair
market value of the stock at the date of exercise is taxable to the optionee.
RELATED PARTY TRANSACTIONS
LOANS FROM ORGANIZERS
Over the past several months, the organizers of the Bank have loaned an
aggregate amount of approximately $200,000 to the Company to cover
organizational expenses of the Company and the Bank. No interest is payable on
the loans. All of these loans will be repaid by the Company from the net
proceeds of the offering. The organizers include the members of the Board of
Directors and executive officers.
LEGAL
Sotiroff & Abramczyk, P.C., of which Mr. Philip Sotiroff is a member, has
performed legal services for the Company and the Bank during the organizing
process and in connection with this offering. The Company has paid that firm
approximately $50,000 in fees for those services. The Company and the Bank
expect to retain Mr. Sotiroff's firm as general counsel after operations
commence.
BANKING TRANSACTIONS
It is anticipated that the directors and officers of the Company and the
Bank and the companies with which they are associated will have banking and
other transactions with the Company and the Bank in the ordinary course of
business. It is the Bank's policy that any loans and commitments to lend to
such affiliated persons or entities included in such transactions will be made
in accordance with all applicable laws and regulations and on substantially the
same
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<PAGE> 25
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with unaffiliated parties of similar
creditworthiness, and will not involve more than normal risk or present other
unfavorable features to the Company and the Bank. Applicable law and Bank
policy generally require that transactions between the Company or the Bank, and
any officer, director, principal shareholder, or other affiliate of the Company
or the Bank will be on terms no less favorable to the Company or the Bank than
could be obtained on an arms-length basis from unaffiliated independent third
parties.
INDEMNIFICATION
The Articles of Incorporation and Bylaws of the Company provide for the
indemnification of directors and officers of the Company, including reasonable
legal fees, incurred by such directors and officers while acting for or on
behalf of the Company as a director or officer, subject to certain limitations.
See "Description of Capital Stock -- Indemnification of Directors and
Officers." The scope of such indemnification otherwise permitted by Michigan
law may be limited in certain circumstances by Federal law and regulations.
See "Supervision and Regulation -- Recent Regulatory Developments." The
Company may purchase directors' and officers' liability insurance for directors
and officers of the Company and the Bank.
PRINCIPAL SHAREHOLDERS
The Company has only one share of Common Stock outstanding with such share
being held by Richard Zamojski. The following table sets forth certain
information with respect to the anticipated beneficial ownership of the
Company's Common Stock after the sale of shares offered hereby, by (i) each
person expected by the Company to beneficially own more than 5% of the
outstanding Common Stock; (ii) each of the current directors and executive
officers of the Company; and (iii) all such directors and executive officers of
the Company as a group. All share numbers are provided based upon such
directions from the Company and non-binding expressions of interest supplied
by the persons listed below. Depending upon their individual circumstances at
the time, each of such persons may purchase a greater or fewer number of shares
than indicated in the following table and in fact may purchase no shares.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 26
<TABLE>
Number of shares Percentage of
beneficially owned outstanding shares
Name and Address after offering (1) after offering (3)
- ---------------- ------------------ ------------------
<S> <C> <C>
Anthony S. Albanese
330 Eaton Drive
Northville, MI 48167
H. Perry Driggs, Jr.
30915 Timberbrook Lane
Bingham Farms, MI 48025 (2)
Lewis N. George
5241 North Bay Drive
Orchard Lake, MI 48324 (2)
Phillip R. Harrison
4792 Split Rail
Brighton, MI 48116 (2)
Darryle J. Parker
5750 Parkside Drive
Monroe, MI 48161
Philip Sotiroff
770 E. Glengarry Circle
Bloomfield Hills, MI 48301 (2)
Richard Zamojski
11790 Pine Mountain Drive
Brighton, MI 48116
</TABLE>
______________________
(1) Some or all of the Common Stock listed may be held jointly with, or for
the benefit of, spouses and children of, or various trusts established by,
the person indicated.
(2) Includes 6,000 shares that such person has the right to acquire within 60
days of the date of this prospectus, pursuant to the Company's Nonemployee
Director Plan. Such person also holds an option under such plan to
purchase an additional 6,000 shares.
(3) The percentages shown are based on the 1,000,000 shares offered hereby
plus the number of shares that the named person or group has the right to
acquire within 60 days of the date of this Prospectus, and assumes no
exercise of the Underwriter's over-allotment option.
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<PAGE> 27
SUPERVISION AND REGULATION
GENERAL
Financial institutions and their holding companies are extensively
regulated under federal and state law. Consequently, the growth and earnings
performance of the Company and the Bank can be affected not only by management
decisions and general economic conditions, but also by the statutes
administered by, and the regulations and policies of, various governmental
regulatory authorities. Those authorities include, but are not limited to, the
Federal Reserve Board, the FDIC, the Commissioner, the Securities and Exchange
Commission (the "SEC"), the Michigan Department of Consumer and Industry
Services, the Internal Revenue Service and state taxing authorities. The
effect of such statutes, regulations and policies can be significant, and
cannot be predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the
scope of business, investments, reserves against deposits, capital levels
relative to operations, lending activities and practices, the nature and amount
of collateral for loans, the establishment of branches, mergers, consolidations
and dividends. The system of supervision and regulation applicable to the
Company and the Bank establishes a comprehensive framework for their respective
operations and is intended primarily for the protection of the FDIC's deposit
insurance funds, the depositors of the Bank and the public, rather than
shareholders of the Bank or the Company.
Federal law and regulations, including provisions added by the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and
regulations promulgated thereunder, establish supervisory standards applicable
to the operation, management and lending activities of the Bank, including
internal controls, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation and loan-to-value ratios for loans secured
by real property. The Bank intends to comply with these requirements, and in
some cases may apply more restrictive standards.
The following references to statutes and regulations are intended to
summarize material effects of certain government regulation on the business of
the Company and the Bank. Any change in government regulation may have a
material adverse effect on the Company, the Bank and their operations.
THE COMPANY
GENERAL. The Company will apply to the Federal Reserve Board pursuant to
Section 3(a)(1) of the Bank Holding Company Act of 1956, as amended ("BHCA"),
for prior approval to acquire all of the capital stock of the Bank. When the
Company becomes the sole shareholder of the Bank, the Company will be a bank
holding company and, as such, will be required to register with, and will be
subject to the supervision of and regulation by, the Federal Reserve Board
under the BHCA. Under the BHCA, the Company will be subject to periodic
examination by the Federal Reserve Board and will be required to file periodic
reports of its operations and such additional information as the Federal
Reserve Board may require. The Company also will be required to file periodic
reports with, and otherwise comply with the rules and regulations of, the SEC
under the federal securities laws.
In accordance with Federal Reserve Board policy, the Company will be
expected to act as a source of financial strength to the Bank and to commit
resources to support the Bank in circumstances where the Company might not do
so absent such policy. In addition, in certain circumstances a Michigan state
bank having impaired capital may be required by the Commissioner either to
restore the bank's capital by a special assessment upon its shareholders or to
initiate the liquidation of the bank.
INVESTMENTS AND ACTIVITIES. Under the BHCA, bank holding companies are
prohibited, with certain limited exceptions, from engaging in, or acquiring,
directly or indirectly, control of voting securities or assets of a company
engaged in, any activity other than banking or managing or controlling banks or
an activity that the Federal Reserve Board determines to be so closely related
to banking or managing or controlling banks as to be a proper incident thereto.
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<PAGE> 28
Under current Federal Reserve Board regulations, such permissible non-bank
activities include such things as mortgage banking, equipment leasing,
securities brokerage and consumer and commercial finance company operations.
Any such acquisition will require, except in certain cases, prior written
notice to the Federal Reserve Board.
In evaluating a written notice of such an acquisition, the Federal Reserve
Board will consider various factors, including among others the financial and
managerial resources of the notifying bank holding company and its
subsidiaries, and the relative public benefits and adverse effects which may be
expected to result from the performance of the activity by an affiliate of such
company. The Federal Reserve Board may apply different standards to activities
proposed to be commenced de novo and activities commenced by acquisition, in
whole or in part, of a going concern. The required notice period may be
extended by the Federal Reserve Board under certain circumstances, including a
notice for acquisition of a company engaged in activities not previously
approved by regulation of the Federal Reserve Board. If such a proposed
acquisition is not disapproved or subjected to conditions by the Federal
Reserve Board within the applicable notice period, it is deemed approved by the
Federal Reserve Board.
In general, any direct or indirect acquisition by the Company of any
voting shares of any bank which would result in the Company's direct or
indirect ownership or control of more than 5% of any class of voting shares of
such bank, and any merger or consolidation of the Company with another bank
holding company, will require the prior written approval of the Federal Reserve
Board under the BHCA. In acting on such applications, the Federal Reserve
Board must consider various statutory factors, including among others, the
effect of the proposed transaction on competition in the relevant geographic
and product markets, each party's financial condition and managerial resources
and record of performance under the Community Reinvestment Act. Since
September 29, 1995, the BHCA has permitted the Federal Reserve Board under
specified circumstances to approve the acquisition, by a bank holding company
located in one state, of a bank or bank holding company located in another
state, without regard to any prohibition contained in state law. See "Recent
Regulatory Developments."
The merger or consolidation of an existing bank subsidiary of the Company
with another bank, or the acquisition by such a subsidiary of assets of another
bank, or the assumption of liability by such a subsidiary to pay any deposits
in another bank, will require the prior written approval of the responsible
Federal depository institution regulatory agency under the Bank Merger Act,
based upon a consideration of statutory factors similar to those outlined above
with respect to the BHCA. In addition, in certain such cases an application
to, and the prior approval of, the Federal Reserve Board under the BHCA and/or
the Commissioner under the Michigan Banking Code, may be required.
CAPITAL REQUIREMENTS. The Federal Reserve Board uses capital adequacy
guidelines in its examination and regulation of bank holding companies. If
capital falls below minimum guidelines, a bank holding company may, among other
things, be denied approval to acquire or establish additional banks or non-bank
businesses.
The Federal Reserve Board's capital guidelines establish the following
minimum regulatory capital requirements for bank holding companies: (i) a
leverage capital requirement expressed as a percentage of total assets, (ii) a
risk-based requirement expressed as a percentage of total risk-weighted assets,
and (iii) a Tier 1 leverage requirement expressed as a percentage of total
assets. The leverage capital requirement consists of a minimum ratio of total
capital to total assets of 6%, with an expressed expectation that banking
organizations generally should operate above such minimum level. The
risk-based requirement consists of a minimum ratio of total capital to total
risk-weighted assets of 8%, of which at least one-half must be Tier 1 capital
(which consists principally of shareholders' equity). The Tier 1 leverage
requirement consists of a minimum ratio of Tier 1 capital to total assets of 3%
for the most highly rated companies, with minimum requirements of 4% to 5% for
all others.
The risk-based and leverage standards presently used by the Federal
Reserve Board are minimum requirements, and higher capital levels will be
required if warranted by the particular circumstances or risk profiles of
individual banking organizations. Further, any banking organization
experiencing or anticipating significant growth would be expected to maintain
capital ratios, including tangible capital positions (i.e., Tier 1 capital less
all intangible assets), well above the minimum levels.
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The Federal Reserve Board's regulations provide that the foregoing capital
requirements will generally be applied on a bank-only (rather than a
consolidated) basis in the case of a bank holding company with less than $150
million in total consolidated assets unless: (i) the bank holding company is
engaged directly or indirectly in any non bank activity involving significant
leverage or (ii) the holding company has outstanding significant debt held by
the general public. Nonetheless, on a pro forma basis, assuming the issuance
and sale by the Company of the 1,000,000 shares of Common Stock offered hereby
at $10.00 per share, the Company's leverage capital ratio, risk-based capital
ratio and Tier 1 leverage ratio, in each case as calculated on a consolidated
basis under the Federal Reserve Board's capital guidelines, would exceed the
minimum requirements.
DIVIDENDS. The Company is a corporation separate and distinct from the
Bank. Most of the Company's revenues will be received by it in the form of
dividends or interest paid by the Bank. The Bank is subject to statutory
restrictions on its ability to pay dividends. See "The Bank -- Dividends."
The Federal Reserve Board has issued a policy statement on the payment of cash
dividends by bank holding companies. In the policy statement, the Federal
Reserve Board expressed its view that a bank holding company experiencing
earnings weaknesses should not pay cash dividends exceeding its net income or
which could only be funded in ways that weakened the bank holding company's
financial health, such as by borrowing. Additionally, the Federal Reserve
Board possesses enforcement powers over bank holding companies and their
non-bank subsidiaries to prevent or remedy actions that represent unsafe or
unsound practices or violations of applicable statutes and regulations. Among
these powers is the ability to proscribe the payment of dividends by banks and
bank holding companies. Similar enforcement powers over the Bank are possessed
by the FDIC. The "prompt corrective action" provisions of FDICIA impose
further restrictions on the payment of dividends by insured banks which fail to
meet specified capital levels and, in some cases, their parent bank holding
companies.
In addition to the restrictions on dividends imposed by the Federal
Reserve Board, the Michigan Business Corporation Act imposes certain
restrictions on the declaration and payment of dividends by Michigan
corporations such as the Company. See "Description of Capital Stock -- Common
Stock -- Dividend Rights."
THE BANK
GENERAL. Upon completion of its organization, the Bank will be a Michigan
banking corporation, and its deposit accounts will be insured up to applicable
limits by the FDIC under the Bank Insurance Fund (the "BIF"). As an
FDIC-insured, Michigan-chartered bank, the Bank will be subject to the
examination, supervision, reporting and enforcement requirements of the
Commissioner, as the chartering authority for Michigan banks, and the FDIC, as
administrator of the BIF. These agencies and federal and state law extensively
regulate various aspects of the banking business including, among other things,
permissible types and amounts of loans, investments and other activities,
capital adequacy, branching, interest rates on loans and on deposits, the
maintenance of non-interest bearing reserves on deposit accounts and the safety
and soundness of banking practices.
DEPOSIT INSURANCE. As an FDIC-insured institution, the Bank will be
required to pay deposit insurance premium assessments to the FDIC. Pursuant to
FDICIA, the FDIC adopted a risk-based assessment system under which all insured
depository institutions are assigned one of nine categories (consisting of one
of three capital subcategories and one of three supervisory subcategories) and
assessed insurance premiums based upon their level of capital and supervisory
evaluation. Institutions classified as well-capitalized (as defined by the
FDIC) and considered healthy pay the lowest premium while institutions that are
less than adequately capitalized (as defined by the FDIC) and considered of
substantial supervisory concern pay the highest premium. Risk classification
of all insured institutions is made by the FDIC for each semi-annual assessment
period.
FDICIA required the FDIC to establish assessment rates at levels which
would restore the BIF to a mandated reserve ratio of 1.25% of insured deposits
over a period not to exceed 15 years. In November 1995, the FDIC determined
that the BIF had reached the required ratio. Accordingly, the FDIC has
established the schedule of BIF insurance assessments for the first semi-annual
assessment period of 1997, ranging from 0% of deposits for institutions in the
highest category to .27% of deposits for institutions in the lowest category.
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The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution or
its directors have engaged or are engaging in unsafe or unsound practices, or
have violated any applicable law, regulation, rule, order or any condition
imposed in writing by, or written agreement with, the FDIC, or if the
institution is in an unsafe or unsound condition to continue operations. The
FDIC may also suspend deposit insurance temporarily during the hearing process
for a permanent termination of insurance if the institution has no tangible
capital.
CAPITAL REQUIREMENTS. The FDIC has established the following minimum
capital standards for state-chartered, FDIC-insured non-member banks, such as
the Bank: (i) a leverage requirement consisting of a minimum ratio of Tier 1
capital to total assets of 3% for the most highly-rated banks and a minimum
ratio of Tier I capital to total assets of 4% to 5% for all others, and (ii) a
risk-based capital requirement consisting of a minimum ratio of total capital
to total risk-weighted assets of 8%, of which at least one-half of that total
capital amount must consist of Tier 1 capital. Tier 1 capital consists
principally of shareholders' equity.
The capital requirements described above are minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions. As a condition to the regulatory
approvals of the Bank's formation, the Bank will be required to have an initial
capitalization sufficient to provide a ratio of Tier 1 capital to total
estimated assets of at least 8% at the end of the third year of operation.
PROMPT CORRECTIVE ACTION. FDICIA establishes a system of prompt
corrective action to resolve the problems of undercapitalized institutions.
Under this system, federal depository institution regulators are required to
take certain mandatory supervisory actions, and may take certain discretionary
supervisory actions against undercapitalized institutions, the severity of
which depends upon the institution's degree of capitalization. In addition,
subject to a narrow exception, FDICIA generally requires the federal depository
institution regulators to appoint a receiver or conservator for an institution
that is critically undercapitalized.
As mandated by FDICIA, the federal banking regulators have specified by
regulation the relevant capital measures at which an insured depository
institution is deem well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized. Pursuant to
the FDIC's regulations implementing the prompt corrective action provisions of
FDICIA, a bank will be deemed to be: (i) well capitalized if the bank has a
total risk-based capital ratio of 10% or greater, Tier 1 risk-based capital
ratio of 6% or greater and leverage ratio of 5% or greater; (ii) adequately
capitalized if the bank has a total risk-based capital ratio of 8% or greater,
Tier 1 risk-based capital ratio of 4% or greater and leverage ratio of 4% or
greater (3% for the most highly rated banks); (iii) undercapitalized if the
bank has a total risk-based capital ratio of less than 8%, Tier 1 risk-based
capital ratio of less than 4% or leverage ratio of less than 4% (less than 3%
for the most highly rated banks); (iv) significantly undercapitalized if the
bank has a total risk-based capital ratio of less than 6%, Tier 1 risk-based
capital ratio of less than 3% or leverage ratio of less than 3%; and (v)
critically undercapitalized if the bank has a ratio of tangible equity to total
assets of 2% or less.
Subject to certain exceptions, these capital ratios are generally
determined on the basis of Call Reports submitted by each depository
institution and the reports of examination by each institution's appropriate
federal depository institution regulatory agency.
Depending upon the capital category to which an institution is assigned,
the regulators' corrective powers include: requiring the submission of a
capital restoration plan; (which must include a holding company guarantee of
performance) placing limits on asset growth and restrictions on activities;
requiring the institution to issue additional capital stock (including
additional voting stock) or to be acquired; restricting transactions with
affiliates; restricting the interest rate the institution may pay on deposits;
ordering a new election of directors of the institution; requiring that senior
executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks requiring the holding company to
divest certain subsidiaries including the institution; requiring the
institution to divest certain subsidiaries; prohibiting the payment of
principal or interest on subordinated debt; and ultimately, appointing a
receiver or conservator for the institution.
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In general, a depository institution may be reclassified to a lower
category than is indicated by its capital position if the appropriate federal
depository institution regulatory agency determines the institution to be
otherwise in an unsafe or unsound condition or to be engaged in an unsafe or
unsound practice. This could include a failure by the institution, following
receipt of a less-than-satisfactory rating on its most recent examination
report, to correct the deficiency.
DIVIDENDS. As a banking corporation organized under Michigan law, the
Bank will be restricted as to the maximum amount of dividends it may pay on its
Common Stock. The Bank may not pay dividends except out of net profits after
deducting its losses and bad debts. The Bank may not declare or pay a dividend
unless it will have a surplus amounting to at least 20% of its capital after
the payment of the dividend. If the Bank has a surplus less than the amount of
its capital it may not declare or pay any dividend until an amount equal to at
least 10% of net profits for the preceding half- year (in the case of quarterly
or semi-annual dividends) or full year (in the case of annual dividends) has
been transferred to surplus. The Bank may, with the approval of the
Commissioner, by vote of shareholders owning 2/3 of the stock eligible to vote,
increase its capital stock by a declaration of a stock dividend, provided that
after the increase its surplus equals at least 20% of its capital stock, as
increased. The Bank may not declare or pay any dividend until the cumulative
dividends on preferred stock (should any such stock be issued and outstanding)
have been paid in full. The Bank has no present plans to issue preferred
stock.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. The FDIC may prevent an insured bank from paying dividends
if the bank is in default of payment of any assessment due to the FDIC. In
addition, payment of dividends by a bank may be prevented by the applicable
federal regulatory authority if such payment is determined, by reason of the
financial condition of such bank, to be an unsafe and unsound banking practice.
INSIDER TRANSACTIONS. The Bank is subject to certain restrictions imposed
by the Federal Reserve Act ("FRA") on any extensions of credit to the Company
or its subsidiaries, on investments in the stock or other securities of the
Company or its subsidiaries, and the acceptance of the stock or other
securities of the Company or its subsidiaries as collateral for loans. These
restrictions limit the aggregate amount of transactions with any individual
affiliate to 10% of the Bank's capital and surplus, limit the aggregate amount
of transactions with all affiliates to 20% of the Bank's capital and surplus,
require that loans and certain other extensions of credit be secured by
collateral in certain specified amounts and types, generally prohibit the
purchase of low quality assets from affiliates and generally require that
certain transactions with affiliates, including loans and asset purchases, be
on terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the Bank as those prevailing
at the time for comparable transactions with nonaffiliated individuals or
entities.
Also, the FRA prescribes certain limitations and reporting requirements on
extensions of credit by the Bank to its directors and executive officers, to
directors and executive officers of the Company and its subsidiaries, to
principal shareholders of the Company and its subsidiaries, to principal
shareholders of the Company and to "related interests" of such directors,
officers and principal shareholders. Among other things, the FRA, and the
regulations thereunder, require such loans to be made on substantially the same
terms as those offered to unaffiliated individuals, place limits on the amount
of loans the Bank may extend to such individuals and require certain approval
procedures to be followed. In addition, such legislation and regulations may
affect the terms upon which any person becoming a director or officer of the
Company or one of its subsidiaries or a principal shareholder of the Company
may obtain credit from banks with which the Bank maintains a correspondent
relationship.
SAFETY AND SOUNDNESS STANDARDS. On July 10, 1995, the FDIC, the Office of
Thrift Supervision, the Federal Reserve Board and the Office of the Comptroller
of the Currency published final guidelines implementing the FDICIA requirement
that the federal banking agencies establish operational and managerial
standards to promote the safety and soundness of federally insured depository
institutions. The guidelines, which took effect on August 9, 1995, establish
standards for internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation, fees and benefits, and specifically prohibit, as an unsafe
and unsound practice, excessive compensation that could lead to a material loss
to an institution. The federal banking
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agencies also adopted asset quality and earnings standards that were added to
the safety and soundness guidelines effective October 1, 1996. If an
institution fails to comply with any of the standards set forth in the
guidelines, the institution's primary federal regulator may require the
institution to submit a plan for achieving and maintaining compliance.
Failure to submit an acceptable compliance plan, or failure to adhere to a
compliance plan that has been accepted by the appropriate regulator, would
constitute grounds for further enforcement action.
STATE BANK ACTIVITIES. Under FDICIA, as implemented by final regulations
adopted by the FDIC, FDIC-insured state banks are prohibited, subject to
certain exceptions, from directly or indirectly acquiring or retaining any
equity investments of a type, or in an amount, that are not permissible for a
national bank. FDICIA, as implemented by FDIC regulations, also prohibits
FDIC-insured state banks and their subsidiaries, subject to certain exceptions,
from engaging as principal in any activity that is not permitted for a national
bank or its subsidiary, respectively, unless the bank meets, and continues to
meet, its minimum regulatory capital requirements and the FDIC determines the
activity would not pose a significant risk to the deposit insurance fund of
which the bank is a member. Impermissible investments and activities must be
divested or discontinued within certain time frames set by the FDIC in
accordance with FDICIA. These restrictions are not currently expected to have
a material impact on the operations of the Bank.
CONSUMER BANKING. The Bank's business will include making a variety of
types of loans to individuals. In making these loans, the Bank will be subject
to state usury and regulatory laws and to various federal statutes, such as the
Equal Credit Opportunity Act, Fair Credit Reporting Act, Truth in Lending Act,
Real Estate Settlement Procedures Act and Home Mortgage Disclosure Act, and the
regulations promulgated thereunder, which prohibit discrimination, specify
disclosures to be made to borrowers regarding credit and settlement costs and
regulate the mortgage loan servicing activities of the Bank, including the
maintenance and operation of escrow accounts and the transfer of mortgage loan
servicing. The Riegle Act imposed new escrow requirements on depository and
non-depository mortgage lenders and servicers under the National Flood
Insurance Program. See "Recent Regulatory Developments." In receiving
deposits, the Bank will be subject to extensive regulation under state and
federal law and regulations, including the Truth in Savings Act, the Expedited
Funds Availability Act, the Bank Secrecy Act, the Electronic Funds Transfer Act
and the Federal Deposit Insurance Act. Violation of these laws could result in
the imposition of significant damages and fines upon the Bank, its directors
and officers.
RECENT REGULATORY DEVELOPMENTS.
The Deposit Insurance Funds Act of 1996 (the "DIFA"), which was part of
the omnibus appropriations bill for fiscal year 1997, addresses the problem of
the undercapitalized Savings Association Insurance Fund (the "SAIF"). As
required under the DIFA, the FDIC imposed a one-time special assessment on
savings associations to bring the SAIF up to a mandated reserve ratio of 1.25%
of insured deposits.
In addition, beginning on January 1, 1997, banks and thrifts will be
required to share in the payment of the Financing Corporation (the "FICO")
bonds. The FICO bonds were issued pursuant to the Competitive Equality Banking
Act of 1987 to recapitalize the Federal Savings and Loan Insurance Corporation.
Prior to the enactment of the DIFA, savings associations alone paid
assessments on the FICO bonds.
In 1994, the Congress enacted two major pieces of banking legislation, the
Riegle Act and the Riegle-Neal Interstate Banking and Branching Efficiency Act
(the "Riegle-Neal Act"). The Riegle Act addressed such varied issues as the
promotion of economic revitalization of defined urban and rural "qualified
distressed communities" through special purpose "Community Development
Financial Institutions," the expansion of consumer protection with respect to
certain loans secured by a consumer's home and reverse mortgages and reductions
in compliance burdens regarding Currency Transaction Reports, in addition to
reform of the National Flood Insurance Program, the promotion of a secondary
market for small business loans and leases and mandating specific changes to
reduce regulatory impositions on depository institutions and holding companies.
The Riegle-Neal Act substantially changed the geographic constraints
applicable to the banking industry. Effective September 29, 1995, the
Riegle-Neal Act allows bank holding companies to acquire banks located in any
state in the
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United States without regard to geographic restrictions or reciprocity
requirements imposed by state law, but subject to certain conditions, including
limitations on the aggregate amount of deposits that may be held by the
acquiring holding company and all of its insured depository institution
affiliates. Effective June 1, 1997 (or earlier if expressly authorized by
applicable state law), the Riegle-Neal Act allows banks to establish interstate
branch networks through acquisitions of other banks, subject to certain
conditions, including certain limitations on the aggregate amount of deposits
that may be held by the surviving bank and all of its insured depository
institution affiliates. The establishment of de novo interstate branches or
the acquisition of individual branches of a bank in another state (rather than
the acquisition of an out-of-state bank in its entirety) is allowed by the
Riegle-Neal Act only if specifically authorized by state law. The legislation
allows individual states to "opt-out" of certain provisions of the Riegle-Neal
Act by enacting appropriate legislation prior to June 1, 1997.
In November, 1995, Michigan exercised its right to opt-in early to the
Riegle-Neal Act, and permitted non-U.S. banks to establish branch offices in
Michigan. Effective November 29, 1995, the Michigan Banking Code was amended
to permit, in appropriate circumstances and with the approval of the
Commissioner, (i) the acquisition of Michigan-chartered banks by FDIC-insured
banks, savings banks or savings and loan associations located in other states,
(ii) the sale by a Michigan-chartered bank of one or more of its branches (not
comprising all or substantially all of its assets) to an FDIC-insured bank,
savings bank or savings and loan association located in a state in which a
Michigan-chartered bank could purchase one or more branches of the purchasing
entity, (iii) the acquisition by a Michigan-chartered bank of an FDIC-insured
bank, savings bank or savings and loan association located in another state,
(iv) the acquisition by a Michigan-chartered bank of one or more branches (not
comprising all or substantially all of the assets) of an FDIC-insured bank,
savings bank or savings and loan association located in another state, (v) the
consolidation of one or more Michigan-chartered banks and FDIC-insured banks,
savings banks or savings and loan associations located in other states having
laws permitting such consolidation, with the resulting organization chartered
either by Michigan or one of such other states, (vi) the establishment by
Michigan-chartered banks of branches located in other states, the District of
Columbia or U.S. territories or protectorates, (vii) the establishment of
branches in Michigan by FDIC-insured banks located in other states, the
District of Columbia or U.S. territories or protectorates having laws
permitting a Michigan-chartered bank to establish a branch in such
jurisdiction, and (viii) the establishment by foreign banks of branches located
in Michigan. The amending legislation also expanded the regulatory authority
of the Commissioner and made certain other changes.
The Michigan Legislature has adopted, with effect from March 28, 1996, the
Credit Reform Act. This statute, together with amendments to other related
laws, permits regulated lenders, indirectly including Michigan-chartered banks,
to charge and collect higher rates of interest and increased fees on certain
types of loans to individuals and businesses. The laws prohibit "excessive
fees and charges", and authorize governmental authorities and borrowers to
bring actions for injunctive relief and statutory and actual damages for
violations by lenders. The statutes specifically authorize class actions, and
also civil money penalties for knowing and wilful, or persistent violations.
FDIC regulations, which became effective April 1, 1996, impose certain
limitations (and in certain cases, prohibitions) on (i) "golden parachute"
severance payments by troubled depository institutions, their subsidiaries and
affiliated holding companies to institution-affiliated parties (primarily
directors, officers, employees or principal shareholders of the institution),
and (ii) indemnification payments by a depository institution, their
subsidiaries and affiliated holding companies, regardless of financial
condition, to institution-affiliated parties. The FDIC regulations impose
limitations on indemnification payments which could restrict, in certain
circumstances, payments by the Company or the Bank to their respective
directors or officers otherwise permitted under the Michigan Business
Corporation Act ("MBCA") or the Michigan Banking Code, respectively. See
"Description of Capital Stock -- Indemnification of Directors and Officers."
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 4,500,000 shares of
Common Stock and 500,000 shares of Preferred Stock. As of the date of this
Prospectus, there is one share of Common Stock issued and outstanding. No
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shares of Preferred Stock have been issued by the Company nor does the Company
have any plans or intentions to issue any Preferred Stock.
Michigan law allows the Company's Board of Directors to issue additional
shares of stock up to the total amount of Common Stock and Preferred Stock
authorized without obtaining the prior approval of the shareholders.
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue Preferred
Stock, in one or more series, from time to time, with such voting powers, full
or limited but not to exceed one vote per share, or without voting powers, and
with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as may be provided in the resolution or resolutions adopted by the Board of
Directors. The authority of the Board of Directors includes, but is not
limited to, the determination or fixing of the following with respect to shares
of such class or any series thereof: (i) the number of shares and designation
of such series; (ii) the dividend rate, the relation which such dividends shall
bear to dividends paid on any other class of stock or any other series of
Preferred Stock, and whether dividends are to be cumulative; (iii) the amount
per share, if any, which holders shall be entitled to receive upon redemption
of shares or upon voluntary or involuntary liquidation, dissolution or winding
up of the Company; (iv) the conversion or exchange rights, if any, of shares of
such series; (v) whether shares are to be redeemable, and, if so, whether
redeemable for cash, property or rights; (vi) whether the shares shall be
subject to the operation of a purchase, retirement or sinking fund, and, if so,
upon what conditions; (vii) the voting powers, full or limited, if any, of the
shares; (viii) whether the issuance of any additional shares, or of any shares
of any other series, shall be subject to restrictions as to issuance, or as to
the powers, preferences or rights of any such other series; and (ix) any other
preferences, privileges and powers and relative, participating, optional or
other special rights and qualifications, limitations or restrictions.
COMMON STOCK
Dividend Rights. Subject to any prior rights of any holders of Preferred
Stock then outstanding, the holders of the Common Stock will be entitled to
dividends when, as and if declared by the Company's Board of Directors out of
funds legally available therefor. Under Michigan law, dividends may be legally
declared or paid only if after the distribution the corporation can pay its
debts as they come due in the usual course of business and the corporation's
total assets equal or exceed the sum of its liabilities plus the amount that
would be needed to satisfy the preferential rights upon dissolution of any
holders of preferred stock then outstanding whose preferential rights are
superior to those receiving the distribution. Funds for the payment of
dividends by the Company are expected to be obtained primarily from dividends
of the Bank. There can be no assurance that the Company will have funds
available for dividends, or that if funds are available, that dividends will be
declared by the Company's Board of Directors. As the Bank is not expected to
be profitable during its start up period, the Company does not expect to be in
a position to declare dividends at any time in the foreseeable future.
Voting Rights. Subject to the rights, if any, of holders of shares of
Preferred Stock then outstanding, all voting rights are vested in the holders
of shares of Common Stock. Each share of Common Stock entitles the holder
thereof to one vote on all matters, including the election of directors.
Shareholders of the Company do not have cumulative voting rights.
Preemptive Rights. Holders of Common Stock do not have preemptive rights.
Liquidation Rights. Subject to any rights of any Preferred Stock then
outstanding, holders of Common Stock are entitled to share on a pro rata basis
in the net assets of the Company which remain after satisfaction of all
liabilities.
Transfer Agent. Registrar and Transfer Company, Cranford, New Jersey,
will serve as the transfer agent of the Company's Common Stock.
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DESCRIPTION OF CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION
AND BYLAWS
The following provisions of the Company's Articles of Incorporation and
Bylaws may delay, defer, prevent or make it more difficult for a person to
acquire the Company or to change control of the Company's Board of Directors,
thereby reducing the Company's vulnerability to an unsolicited takeover
attempt.
Classification of the Board of Directors. The Company's Articles of
Incorporation provide for the Board of Directors to be divided into three
classes of directors, each class to be as nearly equal in number as possible,
and the Company's Bylaws provide that the number of directors shall be fixed by
majority of the Board at no fewer than five nor more than twelve. Pursuant to
the Articles of Incorporation, the Company's directors have been divided into
three classes. Two Class I directors have been elected for a term expiring at
the 1998 annual meeting of shareholders, two Class II directors have been
elected for a term expiring at the 1999 annual meeting of shareholders and two
Class III directors have been elected for a term expiring at the 2000 annual
meeting of shareholders (in each case, until their respective successors are
elected and qualified). Subsequent terms of each class of director will be
three years.
Removal of Directors. The MBCA provides that, unless the Articles of
Incorporation otherwise provide, shareholders may remove a director or the
entire board of directors with or without cause. The Company's Articles of
Incorporation provide that a director may be removed only for cause and only by
the affirmative vote of the holders of a majority of the voting power of all
the shares of the Company entitled to vote generally in the election of
directors.
Filling Vacancies on the Board of Directors. The Company's Articles of
Incorporation provide that a new director chosen to fill a vacancy on the Board
of Directors will serve for the remainder of the full term of the class in
which the vacancy occurred.
Nominations of Director Candidates. The Company's Bylaws include a
provision governing nominations of director candidates. Nominations for the
election of directors may be made by the Board of Directors, a nominating
committee appointed by the Board of Directors or any shareholder entitled to
vote for directors. In the case of a shareholder nomination, the Bylaws
provide certain procedures that must be followed. The shareholder intending to
nominate candidates for election must deliver written notice containing certain
specified information to the Secretary of the Company at least ninety (90) days
prior to the anniversary date of the immediately preceding annual meeting of
shareholders.
Certain Shareholder Action. The Company's Articles of Incorporation do
not permit shareholder action to be taken by written consent by less than 100%
of the total shares entitled to vote. In addition, the Company's Bylaws do not
permit shareholders of the Company to call a special meeting of shareholders or
require that the Board call such a special meeting. The MBCA permits
shareholders holding 10% or more of all of the shares entitled to vote at a
meeting to request the Circuit Court of the County in which the Company's
principal place of business or registered office is located to order a special
meeting of shareholders for good cause shown.
Increased Shareholder Vote for Alteration, Amendment or Repeal of Article
or Bylaw Provisions. The Company's Articles of Incorporation require the
affirmative vote of the holders of at least 75% of the voting stock of the
Company entitled to vote generally in the election of directors for the
alteration, amendment or repeal of, or the adoption of any provision
inconsistent with the foregoing provisions of the Company's Articles of
Incorporation or Bylaws.
CERTAIN ANTI-TAKEOVER PROVISIONS
Michigan Fair Price Act. Certain provisions of the MBCA establish a
statutory scheme similar to the supermajority and fair price provisions found
in many corporate charters (the "Fair Price Act"). The Fair Price Act provides
that a supermajority vote of 90% of the shareholders and no less than
two-thirds of the votes of noninterested shareholders must approve a "business
combination." The Fair Price Act defines a "business combination" to encompass
any merger, consolidation, share exchange, sale of assets, stock issue,
liquidation or reclassification of securities involving an "interested
shareholder" or certain "affiliates." An "interested shareholder" is generally
any person who owns 10
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percent or more of the outstanding voting shares of the corporation. An
"affiliate" is a person who directly or indirectly controls, is controlled by,
or is under common control with a specified person.
The supermajority vote required by the Fair Price Act does not apply to
business combinations that satisfy certain conditions. These conditions
include, among others: (i) the purchase price to be paid for the shares of the
corporation in the business combination must be at least equal to the highest
of either (a) the market value of the shares or (b) the highest per share price
paid by the interested shareholder within the preceding two-year period or in
the transaction in which the shareholder became an interested shareholder,
whichever is higher; and (ii) once becoming an interested shareholder, the
person may not become the beneficial owner of any additional shares of the
corporation except as part of the transaction which resulted in the interested
shareholder becoming an interested shareholder or by virtue of proportionate
stock splits or stock dividends. The requirements of the Fair Price Act do not
apply to business combinations with an interested shareholder that the board of
directors has approved or exempted from the requirements of the Fair Price Act
by resolution prior to the time that the interested shareholder first became an
interested shareholder.
Control Share Act. The MBCA regulates the acquisition of "control shares"
of large public Michigan corporations (the "Control Share Act"). Following
completion of the offering, the Control Share Act is expected to apply to the
Company and its shareholders. The Control Share Act establishes procedures
governing "control share acquisitions." A control share acquisition is defined
as an acquisition of shares by an acquiror which, when combined with other
shares held by that person or entity, would give the acquiror voting power,
alone or as part of a group, at or above any of the following thresholds: 20
percent, 33-1/3 percent or 50 percent. Under the Control Share Act, an
acquiror may not vote "control shares" unless the corporation's disinterested
shareholders (defined to exclude the acquiring person, officers of the target
corporation, and directors of the target corporation who are also employees of
the corporation) vote to confer voting rights on the control shares. The
Control Share Act does not affect the voting rights of shares owned by an
acquiring person prior to the control share acquisition. The Control Share Act
entitles corporations to redeem control shares from the acquiring person under
certain circumstances. In other cases, the Control Share Act confers
dissenters' right upon all of the corporation's shareholders except the
acquiring person.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide that the Company shall indemnify its present
and past directors, executive officers, and such other persons as the Board of
Directors may authorize, to the fullest extent permitted by law. The Bylaws
contain indemnification provisions concerning third party actions as well as
actions in the right of the Company. The Bylaws provide that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that he or she is or was a
director or officer of the Company, or while serving as such a director or
officer, is or was serving at the request of the Company as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, whether for
profit or not, against expenses (including attorney's fees), judgments,
penalties, fees and amounts paid in settlement actually and reasonably incurred
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company or its shareholders, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
With respect to derivative actions, the Bylaws provide that the Company
shall indemnify any person who was or is a party to or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he or she is or was a director or officer of the Company, or, while
serving as such a director or officer, is or was serving at the request of the
Company as a director, officer, partner, trustee, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, against expenses (including attorney's
fees) and amounts paid in settlement actually and reasonably incurred by him or
her in connection with the action or suit if he or she acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the Company or its shareholders. No indemnification is provided
in the Bylaws in respect of any claim, issue or matter in which such
34
<PAGE> 37
person has been found liable to the Company except to the extent that a court
of competent jurisdiction determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
LIMITATION OF DIRECTOR LIABILITY
The MBCA permits corporations to limit the personal liability of their
directors in certain circumstances. The Company's Articles of Incorporation
provide that a director of the Company shall not be personally liable to the
Company or its shareholders for monetary damages for breach of the director's
fiduciary duty. However, they do not eliminate or limit the liability of a
director for any breach of a duty, act or omission for which the elimination or
limitation of liability is not permitted by the MBCA, currently including,
without limitation, the following: (i) breach of the director's duty of
loyalty to the Company or its shareholders; (ii) acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law;
(iii) illegal loans, distributions of dividends or assets, or stock purchases
as described in Section 551(1) of MBCA; and (iv) transactions from which the
director derived an improper personal benefit.
SHARES ELIGIBLE FOR FUTURE SALE
The Company presently has one share of Common Stock outstanding. That
share is held by a member of the Board of Directors and it will be redeemed at
its original cost after completion of the offering. Upon completion of the
offering, the Company expects to have 1,000,000 shares of its Common Stock
outstanding. The 1,000,000 shares of the Company's Common Stock sold in the
offering (plus any additional shares sold upon the Underwriter's exercise of
their over-allotment option) have been registered with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933 (the "Securities
Act") and may generally be resold without registration under the Securities Act
unless they were acquired by directors, executive officers or other affiliates
of the Company (collectively, "Affiliates"). Affiliates of the Company may
generally only sell shares of the Common Stock pursuant to Rule 144 under the
Securities Act.
In general, under Rule 144 as currently in effect, an affiliate (as
defined in Rule 144) of the Company may sell shares of Common Stock within any
three-month period in an amount limited to the greater of 1% of the outstanding
shares of the Company's Common Stock or the average weekly trading volume in
the Company's Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain manner-of-sale provisions,
holding periods for restricted shares, notice requirements and the availability
of current public information about the Company.
The Company and the directors and officers of the Company and the Bank
(who are expected to hold an aggregate of approximately 73,500 shares after the
offering), have agreed, or will agree, that (i) they will not issue, offer for
sale, sell, transfer, grant options to purchase or otherwise dispose of any
shares of Common Stock without the prior written consent of the Underwriter for
a period of 180 days from the date of this Prospectus, except that (a) the
Company may issue shares upon the exercise of options under the Company's 1996
Employee Stock Option Plan or the Nonemployee Directors Plan, and (b) the
directors and officers may give Common Stock owned by them to others who have
agreed in writing to be bound by the same agreement, and (ii) they will not
sell, transfer, assign, pledge or hypothecate any shares of Common Stock for a
period of three months from the date of the Prospectus acquired in connection
with directions from the Company for issuer directed securities.
Prior to the offering, there has been no public trading market for the
Common Stock, and no predictions can be made as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the
prevailing market price of the Common Stock after completion of the offering.
Nevertheless, sales of substantial amounts of Common Stock in the public market
could have an adverse effect on prevailing market prices.
35
<PAGE> 38
UNDERWRITING
The Underwriter has agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company 1,000,000 shares of the
Company's Common Stock. The Underwriting Agreement provides that the
obligations of the Underwriter thereunder are subject to certain conditions and
provides for the Company's payment of certain expenses incurred in connection
with the review of the underwriting arrangements for the offering by the
National Association of Securities Dealers, Inc. (the "NASD"). The Underwriter
is obligated to purchase all 1,000,000 of the shares of Common Stock offered
hereby, excluding shares covered by the over-allotment option granted to the
Underwriter, if any are purchased.
If the Underwriting Agreement is terminated, except in certain limited
cases, the Underwriting Agreement provides that the Company will reimburse the
Underwriter for all accountable out-of-pocket expenses, including Underwriter's
counsel's fees and any Blue Sky costs, incurred by it in connection with the
proposed purchase and sale of the Common Stock, up to $50,000. If the
Underwriter purchases 1,000,000 shares, then the Company will reimburse the
Underwriter for all accountable out-of-pocket expenses, including Underwriter's
counsel's fees and any Blue Sky costs, incurred by it in connection with the
proposed purchase and sale of the Common Stock, up to $25,000. If the
Underwriter exercises the full amount of the over-allotment option, then the
Company will not reimburse the Underwriter for any out-of-pocket expenses. The
Company must pay certain fees and expenses if, within one year after the
execution of the Underwriting Agreement, (i) the Company terminates the
Underwriting Agreement for reasons other than the Underwriter's refusal to or
inability to complete the Offering, and (ii) the Company raises capital either
publicly or privately. The Company has advanced $15,000 to the Underwriter in
connection with the Company's expense reimbursement obligation.
The Company and the Underwriter have agreed that the Underwriter will
purchase the 1,000,000 shares of Common Stock offered hereunder at a price to
the public of $10.00 per share less underwriting discounts and commissions of
$____ per share. However, no underwriting discounts or commissions will be
incurred by the Company with respect to the first 300,000 shares sold to
members of the Board of Directors of the Company, their immediate families or
certain other designated individuals. The Underwriter proposes to offer the
Common Stock to selected dealers who are members of the NASD, at a price of $10
per share less a concession not in excess of $_______ per share. The
Underwriter may allow, and such dealers may re-allow, concessions not in excess
of $______ per share to certain other brokers and dealers.
The Underwriter has informed the Company that the Underwriter does not
intend to make sales to any accounts over which it exercises discretionary
authority.
The Company has granted the Underwriter an option, exercisable within 30
days after the date of this offering, to purchase up to an additional 150,000
shares of Common Stock from the Company to cover over-allotments, if any, at
the same price per share as is to be paid by the Underwriter for the other
shares offered hereby. The Underwriter may purchase such shares only to cover
over-allotments, if any, in connection with the offering.
The Underwriting Agreement contains indemnity provisions between the
Underwriter and the Company and the controlling persons thereof against certain
liabilities, including liabilities arising under the Securities Act. The
Company is generally obligated to indemnify the Underwriter and its controlling
persons in connection with losses or claims arising out of any untrue statement
of a material fact contained in this Prospectus or in related documents filed
with the Commission or with any state securities administrator, or any omission
of certain material facts from such documents.
There has been no public trading market for the Common Stock. The price
at which the shares are being offered to the public was determined by
negotiations between the Company and the Underwriter. This price is not based
upon earnings or any history of operations and should not be construed as
indicative of the present or anticipated future value of the Common Stock.
Several factors were considered in determining the initial offering price of
the Common Stock, among them the size of the offering, the desire that the
security being offered be attractive to individuals and the Underwriter's
experience in dealing with initial public offerings for financial institutions.
36
<PAGE> 39
LEGAL PROCEEDINGS
Neither the Bank nor the Company is a party to any pending legal
proceedings or aware of any threatened legal proceedings where the Company or
the Bank may be exposed to any material loss.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for
the Company by Dykema Gossett PLLC, Detroit, Michigan. Warner Norcross & Judd
LLP, Grand Rapids, Michigan, is acting as counsel for the Underwriter in
connection with certain legal matters relating to the shares of Common Stock
offered hereby.
EXPERTS
The financial statements of the Company included in this Prospectus have
been audited by Plante & Moran, LLP, independent public accountants, as
indicated in their report with respect thereto. Such financial statements and
their report have been included herein in reliance upon the authority of said
firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission ("SEC")
a Form SB-2 Registration Statement under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the Rules and Regulations of the SEC. For
further information pertaining to the shares of Common Stock offered hereby and
to the Company, reference is made to the Registration Statement, including the
Exhibits filed as a part thereof, copies of which can be inspected at and
copied at the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and Room 1400, 75 Park Place, New York New York 10007. Copies
of such materials can also be obtained at prescribed rates by writing to the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, the SEC maintains a World Wide Web site that contains
reports, proxy and information statements that are filed electronically with
the SEC. The address of the site is http://www.sec.gov.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions discussed above under "Description of
Capital Stock -- Indemnification of Directors and Officers," or otherwise, the
Company has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
37
<PAGE> 40
MICHIGAN HERITAGE BANCORP, INC.
FINANCIAL STATEMENTS
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
INDEPENDENT AUDITORS' REPORT............................................F-2
FINANCIAL STATEMENTS
Balance Sheet........................................................F-3
Statement of Shareholder's Equity....................................F-4
Statement of Income..................................................F-5
Statement of Cash Flows..............................................F-6
Notes to Financial Statements........................................F-7
</TABLE>
F-1
<PAGE> 41
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Michigan Heritage Bancorp, Inc.
We have audited the accompanying balance sheet of Michigan Heritage Bancorp,
Inc. (a company in the development stage) as of October 31, 1996, and the
related statements of shareholder's equity, income and cash flows for the ten
months ended October 31, 1996 and since inception. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Michigan Heritage Bancorp,
Inc. (a company in the development stage) as of October 31, 1997, and the
results of its operations and cash flows for the ten months ended October 31,
1996 and since inception in conformity with generally accepted accounting
principles.
/S/ Plante & Moran, LLP
November 21, 1996
Bloomfield Hills, Michigan
F-2
<PAGE> 42
MICHIGAN HERITAGE BANCORP, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
October 31, 1996
ASSETS
<TABLE>
<S> <C>
Cash $ 7,983
Office equipment 8,619
Organization and preopening costs 95,652
Deferred offering costs 15,000
---------
Total assets $ 127,254
=========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable $ 22,244
Related party notes payable (Note 2) 105,000
SHAREHOLDER'S EQUITY
Preferred stock - no par value; 500,000 shares
authorized, none issued ----
Common stock - no par value; 4,500,000 shares authorized,
one share issued and outstanding 10
---------
Total stockholder's equity 10
---------
Total liabilities and stockholder's equity $ 127,254
=========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 43
MICHIGAN HERITAGE BANCORP, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF SHAREHOLDER'S EQUITY
TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
PREFERRED COMMON
STOCK STOCK TOTAL
--------- ------- -------
<S> <C> <C> <C>
Balance at January 1, 1996 (and since inception) $ --- $ --- $ ---
Issuance of common stock --- 10 10
----- ----- ------
Balance at October 31, 1996 $ --- $ 10 $ 10
===== ===== ======
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 44
MICHIGAN HERITAGE BANCORP, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF INCOME
TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
Ten Months
Ended Since
October 31, 1996 Inception
----------------- -------------
<S> <C> <C>
Total revenue $ --- $ ---
Total expense --- ---
----------------- -------------
Net Income $ --- $ ---
================= =============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 45
MICHIGAN HERITAGE BANCORP, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
Ten Months
Ended Since
October 31, 1996 Inception
---------------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES -
Development stage operations
Net income $ ---- $ ----
Adjustments to reconcile net income from development
operations to net cash from operating activities -
Increase in accounts payable 22,244 22,244
-------- ---------
Net cash provided by operating activities 22,244 22,244
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of office equipment (8,619) (8,619)
Organizational and preopening costs (95,652) (95,652)
-------- ---------
Net cash used in investing activities (104,271) (104,271)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party notes payable 105,000 105,000
Deferred offering costs (15,000) (15,000)
Sale of common stock 10 10
-------- ---------
Net cash provided by financing activities 90,010 90,010
-------- ---------
NET INCREASE IN CASH 7,983 7,983
CASH - Beginning of period --- ---
-------- ---------
CASH - End of period $ 7,983 $ 7,983
-------- ---------
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE> 46
MICHIGAN HERITAGE BANCORP, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Michigan Heritage Bancorp, Inc. (the "Company")
was incorporated in 1989, but remained dormant until recently. The
Company became active to operate a new bank, Michigan Heritage Bank
(the "Bank") in Novi, Michigan. The Company intends to raise a
minimum of $9,310,000 in equity capital through the sale of 1,000,000
shares of the Company's common stock at $10 per share, net of
underwriting discounts and offering costs. Proceeds from the offering
will be used to capitalize the Bank, lease facilities and provide
working capital.
Basis of presentation - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Organization and Preopening Costs - Organization and preopening
costs represent incorporation costs, salaries, legal and accounting
costs and other costs relating to the organization. Management
anticipates that organization and preopening costs will approximate
$200,000 through commencement of operations.
NOTE 2 - NOTES PAYABLE RELATED PARTIES
Noninterest-bearing demand notes payable in the amount of
$105,000 are outstanding to the Company's organizers. Management
intends to repay the loans from the proceeds of the common stock
offering.
NOTE 3 - RELATED PARTY LEASE COMMITMENT
In September 1996, the Company entered into a lease commitment
for an office through June 30, 2002. In connection with the lease,
the Company obtained a standby letter of credit in the amount of
$35,000 for the benefit of the landlord. The Company has the right,
if regulatory approvals necessary to operate the Bank are not obtained
by September 1, 1997, to pay $35,000 and terminate the lease.
F-7
<PAGE> 47
NOTE 3 - OPERATING LEASE (Continued)
The future minimum lease payments are as follows:
1996 $ 7,500
1997 45,000
1998 45,000
1999 45,000
2000 45,000
2001 45,000
Thereafter 22,500
--------
Total $255,000
========
NOTE 4 - COMMITMENT
In November 1996, the Company entered into a commitment to
remodel the facility. The commitment is for $87,000 and is payable
upon the completion of the project.
NOTE 5 - STOCK OPTION PLANS
The Company has adopted a stock option plan for its employees and
also has one for its nonemployee directors. The total number of
shares which may be issued under both plans will not exceed one
hundred thousand shares. The shares will be authorized but unissued
shares.
F-8
<PAGE> 48
- -------------------------------------------------------
- -------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 2
Prospectus Summary..................... 3
Risk Factors........................... 5
Use of Proceeds........................ 9
Dividend Policy........................ 9
Capitalization......................... 10
Business............................... 10
Management............................. 16
Related Party Transactions............. 22
Principal Shareholders................. 24
Supervision and Regulation............. 25
Description of Capital Stock........... 32
Shares Eligible for Future Sale........ 35
Underwriting........................... 36
Legal Proceedings...................... 37
Legal Matters.......................... 37
Experts................................ 37
Additional Information................. 37
Index to Financial Statements.......... F-1
</TABLE>
------------------------
UNTIL , 1997 (90 DAYS AFTER THE EFFECTIVE DATE OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
1,000,000 SHARES
[MICHIGAN HERITAGE BANCORP, INC. LOGO]
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
(LOGO)
, 1997
- -------------------------------------------------------
- -------------------------------------------------------
<PAGE> 49
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The registrant's Bylaws provide that the registrant shall indemnify its
present and past directors, executive officers, and such other persons as the
Board of Directors may authorize, to the full extent permitted by law.
The registrant's Bylaws contain indemnification provisions concerning
third party actions as well as actions in the right of the registrant. The
Bylaws provide that the registrant shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the registrant) by
reason of the fact that he or she is or was a director or officer of the
registrant or is, or while serving as such a director or officer was, serving
at the request of the registrant as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise, whether for profit or not, against
expenses (including attorney's fees), judgments, penalties, fees and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with such action, suit or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the registrant or its shareholders, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
With respect to derivative actions, the Bylaws provide that the registrant
shall indemnify any person who was or is a party to or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the registrant to procure a judgment in its favor by reason of the
fact that he or she is or was a director or officer of the registrant, or is or
was serving at the request of the registrant as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorney's fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such judgment or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the registrant or its shareholders and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person has been found liable to the registrant unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
The registrant's Articles of Incorporation provide that a director of the
registrant shall not be personally liable to the registrant or its shareholders
for monetary damages for breach of the director's fiduciary duty. However, it
does not eliminate or limit the liability of a director for any breach of a
duty, act or omission for which the elimination or limitation of liability is
not permitted by the Michigan Business Corporation Act (the "MBCA"), currently
including, without limitation, the following: (1) breach of the director's
duty of loyalty to the registrant or its shareholders; (2) acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law; (3) illegal loans, distributions of dividends or assets, or stock
purchases as described in Section 551(1) of MBCA; and (4) transactions from
which the director derived an improper personal benefit.
II-1
<PAGE> 50
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the Common Stock being registered, other than
underwriting discounts and commissions. All amounts shown are estimates,
except the SEC registration fee and the NASD filing fee, and assume sale of
1,000,000 shares in the offering.
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,485
NASD filing fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,650
Printing and mailing expenses . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Fees and expenses of counsel . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
Accounting and related expenses . . . . . . . . . . . . . . . . . . . . . . . 30,000
Blue Sky fees and expenses (including counsel fees) . . . . . . . . . . . . . 20,000
Registrar and Transfer Agent fees . . . . . . . . . . . . . . . . . . . . . . 3,500
Underwriter's Expenses* . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,365
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000
========
</TABLE>
* If the Underwriter exercises its over-allotment option, then the
Underwriter's Expenses will be $0.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
The registrant has borrowed approximately $200,000 from its organizers
during the past nine months to pay organizational and related expenses. To the
extent that such transactions would be deemed to involve the offer or sale of a
security, the registrant would claim an exemption under Section 4(2) of the
Securities Act of 1933 for such transactions. In addition, the registrant,
sold one share of its Common Stock to Richard Zamojski, its Chairman and Chief
Executive Officer, for $10. The registrant also claims an exemption for such
sale pursuant to Section 4(2).
<TABLE>
<CAPTION>
ITEM 27.EXHIBITS.
Exhibit No. Description
- --------------- ---------------
<S> <C>
1 *Form of Underwriting Agreement
3.1 *Restated Articles of Incorporation of Michigan Heritage Bancorp, Inc.
3.2 *Bylaws of Michigan Heritage Bancorp, Inc.
4.1 **Specimen common stock certificate
5 *Opinion of Dykema Gossett PLLC
10.1 *Form of 1996 Employee Stock Option Plan
10.2 *Form of 1996 Stock Option Plan for Nonemployee Directors
21 *Subsidiaries of Michigan Heritage Bancorp, Inc.
23.1 *Consent of Dykema Gossett PLLC (included in opinion filed as Exhibit 5)
23.2 *Consent of Plante & Moran, LLP
24 *Power of Attorney (included on page II-4)
27 *Financial Data Schedule (EDGAR filing only)
</TABLE>
__________________
* Filed herewith.
** To be filed by amendment.
II-2
<PAGE> 51
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) The registrant will provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(3) The registrant will:
(i) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant under Rule 424(b)(1), or (4) or 497(h)
under the Securities Act as part of this registration statement as of the
time the SEC declared it effective; and
(ii) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
[Remainder of Page Intentionally Left Blank]
II-3
<PAGE> 52
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Novi,
State of Michigan, on December 5, 1996.
MICHIGAN HERITAGE BANCORP, INC.
By: /s/ Anthony S. Albanese
-----------------------
Anthony S. Albanese, President
POWER OF ATTORNEY
Each of the undersigned whose signature appears below hereby constitutes
and appoints Richard Zamojski and Anthony S. Albanese, and each of them acting
alone, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, under the Securities Act of 1933.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
indicated on December 5, 1996.
<TABLE>
<CAPTION>
Signatures Title
<S> <C>
/s/ Richard Zamojski Chairman of the Board, Chief Executive Officer and Director (principal executive officer)
- --------------------
Richard Zamojski
/s/ Anthony S. Albanese President, Chief Operating Officer and Director
- -----------------------
Anthony S. Albanese
/s/ Darryle J. Parker Secretary, Treasurer and Chief Financial Officer (principal financial and accounting
- ---------------------- officer)
Darryle J. Parker
/s/ H. Perry Driggs, Jr. Director
- ----------------------
H. Perry Driggs, Jr.
/s/ Lewis M. George Director
- ----------------------
Lewis N. George
</TABLE>
II-4
<PAGE> 53
<TABLE>
<S> <C>
/s/ Phillip R. Harrison Director
- -----------------------
Phillip R. Harrison
/s/ Philip Sotiroff Director
- -----------------------
Philip Sotiroff
</TABLE>
II-5
<PAGE> 54
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- ------------------------------------------------------------------------------------------
<C> <S>
1 *Form of Underwriting Agreement
3.1 *Restated Articles of Incorporation of Michigan Heritage Bancorp, Inc.
3.2 *Bylaws of Michigan Heritage Bancorp, Inc.
4.1 **Specimen common stock certificate
5 *Opinion of Dykema Gossett PLLC
10.1 *Form of 1996 Employee Stock Option Plan
10.2 *Form of 1996 Stock Option Plan for Nonemployee Directors
21 *Subsidiaries of Michigan Heritage Bancorp, Inc.
23.1 *Consent of Dykema Gossett PLLC (included in opinion filed as Exhibit 5)
23.2 *Consent of Plante & Moran, LLP
24 *Power of Attorney (included on page II-4)
27 *Financial Data Schedule (EDGAR filing only)
</TABLE>
- -------------------------
* Filed herewith.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 1
1,000,000 SHARES
MICHIGAN HERITAGE BANCORP, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_____________, 1997
Roney & Co. L.L.C.
One Griswold
Detroit, Michigan 48226
Dear Sirs:
Michigan Heritage Bancorp, Inc., a Michigan corporation (the "COMPANY"),
proposes to issue and sell 1,000,000 shares (the "FIRM SHARES") of its
authorized but unissued Common Stock (the "COMMON STOCK") to Roney & Co.
L.L.C., a Delaware limited liability company ("RONEY & CO." or "UNDERWRITER").
In addition, the Company proposes to grant to the Underwriter an option to
purchase up to an additional 150,000 shares (the "OPTIONAL SHARES") to cover
over-allotments. The Firm Shares and the Optional Shares are called,
collectively, the "SHARES."
1. SALE AND PURCHASE OF THE SHARES.
(a) On the basis of the representations, warranties and agreements of
the Company contained in, and subject to the terms and conditions of, this
Agreement, the Company agrees to issue and sell to the Underwriter, and the
Underwriter agrees to purchase the Firm Shares at a purchase price of
$_____ per Share, except as set forth in Section 1(b) below.
(b) On the basis of the representations, warranties and agreements of
the Company contained in, and subject to the terms and conditions of, this
Agreement, and pursuant to directions from the Company, the Underwriter
will offer to sell to each of the persons listed on Exhibit A (who may
purchase alone or with family members to the extent permitted by the
Free-Riding and Withholding Interpretation (the "INTERPRETATION") under the
Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (the "NASD")) the number of Shares set forth opposite their respective
names on Exhibit A. To the extent such persons (alone or with such family
members) offer to buy such Shares, the
<PAGE> 2
Underwriter agrees to purchase up to 300,000 of such Shares at a
purchase price of $10.00 per Share. The purchase price for such
Shares over 300,000 shall be as set forth in Section 1(b) above. The
parties agree that the securities purchased and sold under this
subparagraph shall constitute "issuer directed securities" sold to the
issuer's employees or directors or other persons under the
Interpretation.
(c) On the basis of the representations, warranties and
agreements of the Company contained in, and subject to the terms and
conditions of, this Agreement, the Company grants to the Underwriter
an option to purchase all or any part of the Optional Shares at a
price per Share of $________. The over-allotment option may be
exercised only to cover over-allotments in the sale of the Firm Shares
by the Underwriter and may be exercised in whole or in part at any
time or times on or before 12:00 noon, Detroit time, on the day before
the Firm Shares Closing Date (as defined in Section 2 below), and only
once at any time after that date and within 30 days after the
Effective Date (as defined in Section 4 below), in each case upon
written or transmitted facsimile notice, or verbal notice confirmed by
transmitted facsimile, written or telegraphic notice, by Roney & Co.
to the Company no later than 12:00 noon, Detroit time, on the day
before the Firm Shares Closing Date or at least three but not more
than five full business days before the Optional Shares Closing Date
(as defined in Section 2 below), as the case may be, setting forth the
number of Optional Shares to be purchased and the time and date (if
other than the Firm Shares Closing Date) of such purchase.
2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm Shares
to Roney & Co. and payment of the purchase price by certified or official
bank check payable in Detroit Clearing House (next day) funds to the
Company, shall take place at the offices of Roney & Co., One Griswold,
Detroit, Michigan 48226, at 10:00 a.m., Detroit time, at such time and
date, not later than the third (or, if the Firm Shares are priced, as
contemplated by Rule 15c6-1(c) under the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), after 4:30 p.m., Washington, D.C. time,
the fourth) full business day following the first date that any of the
Shares are released by the Underwriter for sale to the public, as Roney &
Co. shall designate by at least 48 hours prior notice to the Company (the
"FIRM SHARES CLOSING DATE"); provided, however, that if the Prospectus (as
defined in Section 4 below) is at any time prior to the Firm Shares Closing
Date recirculated to the public, the Firm Shares Closing Date shall occur
upon the later of the third or fourth, as the case the may be, full
business day following the first date that any of the Shares are released
by the Underwriter for sale to the public or the date that is 48 hours
after the date that the Prospectus has been so recirculated.
To the extent the option with respect to the Optional Shares is
exercised, delivery by the Company of the Optional Shares, and payment of
the purchase price by certified or official bank check payable in Detroit
Clearing House (next day) funds to the Company, shall take place at the
offices of Roney & Co. specified above at the time and on the date (which
may
2
<PAGE> 3
be the Firm Shares Closing Date) specified in the notice referred to
in Section l(c) (such time and date of delivery and payment are called the
"OPTIONAL SHARES CLOSING DATE"). The Firm Shares Closing Date and the Optional
Shares Closing Date are called, individually, a "CLOSING DATE" and,
collectively, the "CLOSING DATES."
Certificates representing the Firm Shares shall be registered in
such names and shall be in such denominations as Roney & Co. shall request at
least two full business days before the Firm Shares Closing Date or, in the case
of the Optional Shares, on the day of notice of exercise of the option as
described in Section l(c), and shall be made available to Roney & Co. for
checking and packaging, at such place as is designated by Roney & Co., at least
one full business day before the Closing Date.
3. PUBLIC OFFERING. The Company understands that the Underwriter proposes
to make a public offering of the Shares, as set forth in and pursuant to the
Prospectus, as soon after the Effective Date as Roney & Co. deems advisable. The
Company hereby confirms that the Underwriter and dealers have been authorized to
distribute each preliminary prospectus and are authorized to distribute the
Prospectus (as from time to time amended or supplemented).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Underwriter and agrees
with the Underwriter as follows:
(a) The Company has carefully prepared in conformity with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT") and the rules and regulations adopted by the Securities and Exchange
Commission (the "COMMISSION") thereunder (the "RULES"), a registration
statement on Form SB-2 (No. 33-4113), including a preliminary prospectus,
and has filed with the Commission the registration statement and such
amendments thereof as may have been required to the date of this Agreement.
Copies of such registration statement (including all amendments thereof)
and of the related preliminary prospectus have heretofore been delivered by
the Company to you. The term "PRELIMINARY PROSPECTUS" means any
preliminary prospectus (as defined in Rule 430 of the Rules) included at
any time as a part of the registration statement. The registration
statement as amended (including any supplemental registration statement
under Rule 462(b) or any amendment under Rule 462(c) of the Rules) at the
time and on the date it becomes effective (the "EFFECTIVE DATE"), including
the prospectus, financial statements, schedules, exhibits, and all other
documents incorporated by reference therein or filed as a part thereof, is
called the "REGISTRATION STATEMENT;" provided, however, that "REGISTRATION
STATEMENT" shall also include all Rule 430A Information (as defined below)
deemed to be included in such Registration Statement at the time such
Registration Statement
3
<PAGE> 4
becomes effective as provided by Rule 430A of the Rules. The term
"PROSPECTUS" means the Prospectus as filed with the Commission pursuant to
Rule 424(b) of the Rules or, if no filing pursuant to Rule 424(b) of the
Rules is required, means the form of final prospectus included in the
Registration Statement at the time such Registration Statement becomes
effective. The term "RULE 430A INFORMATION" means information with respect
to the Shares and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A of
the Rules. Reference made herein to any preliminary prospectus or to the
Prospectus shall be deemed to refer to and include any document attached as
an exhibit thereto or incorporated by reference therein, as of the date of
such preliminary prospectus or the Prospectus, as the case may be. The
Company will not file any amendment of the Registration Statement or
supplement to the Prospectus to which Roney & Co. shall reasonably object
in writing after being furnished with a copy thereof.
(b) Each preliminary prospectus, at the time of filing thereof,
contained all material statements which were required to be stated therein
in accordance with the Securities Act and the Rules, and conformed in all
material respects with the requirements of the Securities Act and the
Rules, and did not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The Commission has not issued any order
suspending or preventing the use of any preliminary prospectus. When the
Registration Statement shall become effective, when the Prospectus is first
filed pursuant to Rule 424(b) of the Rules, when any post-effective
amendment of the Registration Statement shall become effective, when any
supplement to or pre-effective amendment of the Prospectus is filed with
the Commission and at each Closing Date, the Registration Statement and the
Prospectus (and any amendment thereof or supplement thereto) will comply
with the applicable provisions of the Securities Act and the Exchange Act
and the respective rules and regulations of the Commission thereunder, and
neither the Registration Statement nor the Prospectus, nor any amendment
thereof or supplement thereto, will contain any untrue statement of a
material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representation or warranty as to the
information contained in the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriter, specifically for use in connection with the preparation
thereof.
4
<PAGE> 5
(c) All contracts and other documents required to be filed as exhibits
to the Registration Statement have been filed with the Commission as
exhibits to the Registration Statement.
(d) Plante & Moran, LLP, whose report is filed with the Commission as
part of the Registration Statement, are, and during the periods covered by
their report were, independent public accountants as required by the
Securities Act and the Rules.
(e) The Company and its subsidiary, Michigan Heritage Bank, a Michigan
banking corporation (the "BANK"), have been duly organized and are validly
existing as a corporation or banking corporation, as applicable, in good
standing under the laws of the State of Michigan. Neither the Company nor
the Bank have any properties or conduct any business outside of the State
of Michigan which would require either of them to be qualified as a foreign
corporation or bank, as the case may be, in any jurisdiction outside of
Michigan. Neither the Company nor the Bank has any directly or indirectly
held subsidiary other than the Bank. The Company has all power, authority,
authorizations, approvals, consents, orders, licenses, certificates and
permits needed to enter into, deliver and perform this Agreement and to
issue and sell the Shares.
(f) The application for permission to organize the Bank (the "FIB
APPLICATION") was approved by the Commissioner of the Financial
Institutions Bureau for the State of Michigan (the "COMMISSIONER") on
____________, 1996, pursuant to Order No. _________________, subject to
certain conditions specified in the Order and supplemental correspondence
from the Commissioner dated the same date. The Order and supplemental
correspondence from the Commissioner are collectively referred to in this
Agreement as the "FIB ORDER." All conditions contained in the FIB Order
required to be satisfied before the date of this Agreement have been
satisfied. The application to the Federal Deposit Insurance Corporation
(the "FDIC") to become an insured depository institution under the
provisions of the Federal Deposit Insurance Act (the "FDIC APPLICATION")
was approved by order of the FDIC dated ______________, 1996 (the "FDIC
ORDER"), subject to certain conditions specified in the Order. All
conditions contained in the FDIC Order required to be satisfied before the
date of this Agreement have been satisfied. The Company's application to
become a bank holding company and acquire all issued capital stock of the
Bank (the "BANK HOLDING COMPANY APPLICATION") under the Bank Holding
Company Act of 1956, as amended, was approved on _______________, 1997 (the
"FEDERAL RESERVE BOARD APPROVAL"), subject to certain conditions specified
in the Federal Reserve Board Approval. All conditions in the Federal
Reserve Board Approval required to be satisfied before the date of this
Agreement have been satisfied. Each of the
5
<PAGE> 6
FIB Application, FDIC Application, and Bank Holding Company
Application, at the time of their respective filings, contained
all required information and such information was complete and
accurate in all material respects. Other than the remaining
conditions to be fulfilled under the FIB Order, FDIC Order and the
Federal Reserve Board Approval specified above, no authorization,
approval, consent, order, license, certificate or permit of and
from any federal, state, or local governmental or regulatory
official, body, or tribunal, is required for the Company or the
Bank to commence and conduct their respective businesses and own
their respective properties as described in the Prospectus, except
such authorizations, approvals, consents, orders, licenses,
certificates, or permits as are not material to the commencement
or conduct of their respective businesses or to the ownership of
their respective properties.
(g) The financial statements of the Company and any related
notes thereto, included in the Registration Statement and the
Prospectus, present fairly the financial position of the Company
as of the date of such financial statements and for the period
covered thereby. Such statements and any related notes have been
prepared in accordance with generally accepted accounting
principals applied on a consistent basis and certified by the
independent accountants named in subsection 4(d) above. No other
financial statements are required to be included in the Prospectus
or the Registration Statement.
(h) The Company owns adequate and enforceable rights to use
any patents, patent applications, trademarks, trademark
applications, service marks, copyrights, copyright applications
and other similar rights (collectively, "INTANGIBLES") necessary
for the conduct of the material aspects of its business as
described in the Prospectus and the Company has not infringed, is
infringing, or has received any notice of infringement of, any
Intangible of any other person.
(i) The Company has a valid and enforceable leasehold
interest in the real property located at 100 North Main Street,
Mount Clemens, Michigan, which is as described in the Prospectus,
and is free and clear of all liens, encumbrances, claims, security
interests and defects.
(j) There are no litigation or governmental or other proceedings or
investigations pending before any court or before or by any public body or
board or threatened against the Company or the Bank and to the best of the
Company's knowledge, there is no reasonable basis for any such litigation,
proceedings or investigations, which would have a material adverse effect
on commencement or conduct of the respective businesses of the Company or
the Bank or the ownership of their respective properties.
6
<PAGE> 7
(k) The Company and Bank have filed all federal, state, and
local tax returns required to be filed by them and paid all taxes
shown due on such returns as well as all other material taxes,
assessments and governmental charges which have become due; no
material deficiency with respect to any such return has been
assessed or proposed.
(l) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any material adverse change in the
condition (financial or other), business, properties or prospects
of the Company.
(m) No default exists, and no event has occurred which with
notice or lapse of time, or both, would constitute a default, in
the due performance and observance of any material term, covenant
or condition, by the Company, the Bank or, to the best of the
Company's knowledge, any other party, of any lease, indenture,
mortgage, note or any other agreement or instrument to which the
Company or the Bank is a party or by which either of them or
either of their businesses may be bound or affected, except such
defaults or events as are not material to the commencement or
conduct of their respective businesses or ownership of their
respective properties.
(n) Neither the Company nor the Bank is in violation of any
term or provision of the articles of incorporation or bylaws of
the Company or the Bank. Neither the Company nor the Bank is in
violation of, nor is either of them required to take any action to
avoid any material violation of, any franchise, license, permit,
judgment, decree, order, statute, rule or regulation.
(o) Neither the execution, delivery or performance of this Agreement
by the Company nor the consummation of the transactions contemplated
hereby (including, without limitation, the issuance and sale by the
Company of the Shares) will give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict with or
result in the breach of any term or provision of, or constitute a default
(or an event which with notice or lapse of time, or both, would constitute
a default) under, or require any consent under, or result in the execution
or imposition of any lien, charge or encumbrance upon any properties or
assets of the Company or the Bank pursuant to the terms of, any lease,
indenture, mortgage, note or other agreement or instrument to which the
Company or the Bank is a party or by which either of them or either of
their businesses may be bound or affected, or any franchise, license,
permit, judgment, decree, order, statute, rule or regulation or violate
any provision of the articles of incorporation or bylaws of the Company or
the Bank, except those which are immaterial in amount or effect.
7
<PAGE> 8
(p) The Company has authorized capital stock as set forth in
the Prospectus. One share of Common Stock of the Company is
issued and outstanding, which will be redeemed at or promptly
following the Closing if permitted by applicable law. No shares
of preferred stock are issued and outstanding. The issuance, sale
and delivery of the Shares have been duly authorized by all
necessary corporate action by the Company and, when issued, sold
and delivered against payment therefor pursuant to this Agreement,
will be duly and validly issued, fully paid and nonassessable and
none of them will have been issued in violation of any preemptive
or other right. Upon issuance, sale, and delivery thereof against
payment therefor pursuant to the subscription agreement, all of
the capital stock of the Bank will be duly authorized and validly
issued, fully paid and nonassessable and will be owned by the
Company, free and clear of all liens, encumbrances and security
interests (subject to the provisions of the Michigan Banking Code
of 1969 (the "BANKING CODE"), including, without limitation,
Sections 77 and 201 of the Banking Code). There is no outstanding
option, warrant or other right calling for the issuance of, and no
commitment, plan or arrangement to issue, any share of stock of
the Company or the Bank or any security convertible into or
exchangeable for stock of the Company or the Bank, except for
stock options described in the Registration Statement (the "STOCK
OPTIONS") under the 1996 Employee Stock Option Plan and the 1996
Stock Option Plan for Nonemployee Directors (collectively, the
"STOCK OPTION PLANS"). The Common Stock, the Shares and the Stock
Options conform to all statements in relation thereto contained in
the Registration Statement and the Prospectus.
(q) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, neither the Company nor the Bank has (1) issued any
securities or incurred any material liability or obligation,
direct or contingent, (2) entered into any material transaction,
or (3) declared or paid any dividend or made any distribution on
any of their stock, except liabilities, obligations, and
transactions reasonably expected based on the disclosures in the
Prospectus, and redemption of one share of Common Stock for $10 at
or promptly following the Closing if permitted by applicable law.
(r) This Agreement has been duly and validly authorized, executed and
delivered by the Company and is the legal, valid and binding agreement and
obligation of the Company.
(s) The Commission has not issued any order preventing or suspending
the use of any preliminary prospectus.
(t) Neither the Company, nor the Bank, nor, to the Company's
knowledge any director, officer, agent, employee or other person
associated with
8
<PAGE> 9
the Company or the Bank, acting on behalf of the Company or the Bank, has
used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity;
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment.
(u) Neither the Company nor the Bank nor any affiliate of
either of them has taken, and they will not take, directly or
indirectly, any action designed to cause or result in, or which
has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the
shares of the Common Stock in order to facilitate the sale or
resale of any of the Shares.
(v) No transaction has occurred between or among the Company
or the Bank and any of their officers, directors, organizers or
the Company's shareholder or any affiliate or affiliates of any
such officer, director, organizer, or shareholder, that is
required to be described in and is not described in the
Prospectus.
(w) The Company is not and will not after the offering be an
"investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of
1940, as amended.
(x) The Company has obtained from all of its executive officers and
directors their written agreement that (i) for a period of 180 days from
the date of the Effective Date, they will not offer to sell, sell,
transfer, contract to sell, or grant any option for the sale of or
otherwise dispose of, directly or indirectly, any shares of Common Stock
of the Company (or any securities convertible into or exercisable for such
shares of Common Stock), except for (1) the exercise of Stock Options
under the Stock Option Plans or (2) gifts of Common Stock (or other
securities) to a donee or donees who agree in writing to be bound by this
clause, and (ii) for a period of three months from the date of the
Effective Date, they will not sell, transfer, assign, pledge, or
hypothecate any shares of Common Stock acquired under Paragraph 1(b),
above, except with respect to Richard Zamojski who may resell one share of
Common Stock to the Company.
5. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation of the
Underwriter to purchase the Shares shall be subject to the accuracy of the
representations and warranties of the Company in this Agreement as of the date
of this Agreement and as of the Firm Shares Closing Date or Optional Shares
Closing Date, as the case may be, to the accuracy of the statements of Company
officers made pursuant to the provisions of this Agreement, to the
9
<PAGE> 10
performance by the Company of its obligations under this Agreement, and to the
following additional terms and conditions:
(a) The Registration Statement shall have become effective
not later than 5:00 P.M., Detroit time, on the date of this
Agreement or on such later date and time as shall be consented to
in writing by Roney & Co.; if the filing of the Prospectus, or any
supplement thereto, is required pursuant to Rule 424(b) of the
Rules, the Prospectus shall have been filed in the manner and
within the time period required by Rule 424(b) of the Rules; at
each Closing Date, if any, no stop order shall have been issued or
proceedings therefor initiated or threatened by the Commission;
and any request of the Commission for inclusion of additional
information in the Registration Statement, or otherwise, shall
have been complied with to the reasonable satisfaction of Roney &
Co.
(b) At each Closing Date, Roney & Co. shall have received the
favorable opinion of Dykema Gossett PLLC, counsel for the Company,
dated the Firm Shares Closing Date or the Optional Shares Closing
Date, as the case may be, addressed to the Underwriter and in form
and scope reasonably satisfactory to counsel for Roney & Co. to
the effect that:
(i) Each of the Company and the Bank (A) is a
corporation or banking corporation, as applicable, existing
and in good standing under the laws of the State of Michigan
and (B) is not required to be qualified to do business in
any jurisdiction outside Michigan.
(ii) Each of the Company and the Bank has full
corporate power and authority and all material
authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory
officials and bodies necessary to own its properties and to
commence and conduct its business as described in the
Registration Statement and Prospectus, including, without
limitation, the FIB Order, the FDIC Order and the Federal
Reserve Board Approval, subject to the fulfillment of the
conditions with respect to the FIB Order, the FDIC Order and
the Federal Reserve Board Approval all as described in
Section 4(f) above, except for such authorizations,
approvals, orders, licenses, certificates and permits as are
not material to the ownership of their properties or
commencement or conduct of their businesses;
(iii) The Company has authorized capital stock as set
forth in the Prospectus and, prior to the Closing, had one
share of Common Stock issued and outstanding; the Shares
have been duly and validly authorized and issued and upon
receipt by the Company of payment therefor in
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<PAGE> 11
accordance with the terms of this Agreement will be fully paid and
nonassessable and are not and will not be subject to preemptive
rights; the Shares and the other capital stock and Stock Options of
the Company conform in all material respects to the descriptions
thereof contained in the Registration Statement and the Prospectus;
(iv) To such counsel's knowledge, after due inquiry,
the Company has no directly or indirectly held subsidiary
other than the Bank;
(v) When issued, sold, and delivered against payment
therefor in accordance with the terms of the subscription
agreement, the Company will be the registered holder of all
of the outstanding capital stock of the Bank, and all such
shares of stock so held will be validly issued and
outstanding, fully paid and nonassessable and will be owned
free and clear of any liens, encumbrances or other claims or
restrictions whatsoever, subject to the provisions of the
Banking Code, including, without limitation, Sections 77 and
201 of the Banking Code;
(vi) The certificates evidencing the Shares are in the
form approved by the Board of Directors of the Company,
comply with the bylaws and the articles of incorporation of
the Company, comply as to form and in all other material
respects with applicable legal requirements;
(vii) This Agreement has been duly and validly
authorized, executed and delivered by the Company, and is
the legal, valid and binding agreement and obligation of the
Company enforceable in accordance with its terms, except (a)
as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws
relating to or affecting enforcement of creditors' rights or
by general equity principles, whether applied in an action
at law or in equity, or by the discretionary nature of
specific performance, injuncture relief, and other equitable
remedies, including the appointment of a receiver, and (b),
with respect to provisions relating to indemnification and
contribution, to the extent they are held by a court of
competent jurisdiction to be void or unenforceable as
against public policy;
(viii) The Company is conveying to the Underwriter good
and valid title to the Shares, free and clear of any liens,
encumbrances, security interests, restrictions, and adverse
claims;
(ix) To the best of such counsel's knowledge, after due
inquiry, there are (A) no contracts or other documents which
are required to be
11
<PAGE> 12
filed as exhibits to the Registration Statement other than those
filed as exhibits thereto, (B) no legal or governmental proceedings
pending or threatened against the Company or the Bank, and (C) no
statutes or regulations applicable to the Company or the Bank, or
certificates, permits, grants or other consents, approvals, orders,
licenses or authorizations from regulatory officials or bodies,
which are required to be obtained or maintained by the Company or
the Bank and which are of a character required to be disclosed in
the Registration Statement and Prospectus which have not been so
disclosed and properly described therein;
(x) The statements in the Registration Statement and
the Prospectus, insofar as they are descriptions of
corporate documents, stock option plans, contracts,
agreements or other documents specifically identified in the
Registration Statement or descriptions of laws, regulations,
or regulatory requirements, or refer to compliance with law
or to statements of law or legal conclusions, are correct in
all material respects;
(xi) To the best of such counsel's knowledge, after due
inquiry, the execution, delivery and performance of this Agreement,
the consummation of the transactions herein contemplated and the
compliance with the terms and provisions hereof by the Company will
not give rise to a right to terminate or accelerate the due date of
any payment due under, or conflict with or result in a breach of any
of the terms or provisions of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a
default) under, or require any consent under, or result in the
execution or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company or the Bank pursuant to the
terms of, any lease, indenture, mortgage, note or other agreement or
instrument to which the Company or the Bank is a party or by which
either of them or either of their properties or businesses is or may
be bound or affected, nor will such action result in any violation
of the provisions of the articles of incorporation or bylaws of the
Company or the Bank or any statute or any order, rule, or regulation
applicable to the Company or the Bank of any court or any federal,
state, local or other regulatory authority or other governmental
body, the effect of which, in any such case, would be expected to be
materially adverse to the Company or the Bank;
(xii) To the best of such counsel's knowledge, after
due inquiry, no consent, approval, authorization or order of
any court or governmental
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<PAGE> 13
agency or body, domestic or foreign, is required to be obtained by
the Company in connection with the execution and delivery of this
Agreement or the sale of the Shares to the Underwriter as
contemplated by this Agreement, except those which have been
obtained;
(xiii) To the best of such counsel's knowledge, after
due inquiry, (A) neither the Company nor the Bank is in
breach of, or in default (and no event has occurred which,
with notice or lapse of time, or both, would constitute a
default) under, any lease, indenture, mortgage, note, or
other agreement or instrument to which the Company or the
Bank, as the case may be, is a party; or (B) neither the
Company nor the Bank is in violation of any term or
provision of either of their articles of incorporation or
bylaws, or of any franchise, license, grant, permit,
judgment, decree, order, statute, rule or regulation; and
(C) neither the Company nor the Bank has received any notice
of conflict with the asserted rights of others in respect of
Intangibles necessary for the commencement or conduct of its
business, the effect of which, in any such case, would be
expected to be materially adverse to the Company or the
Bank;
(xiv) The Registration Statement and the Prospectus and
any amendments or supplements thereto (other than the
financial statements as to which no opinion need be
rendered) comply as to form with the requirements of the
Securities Act and the Rules in all material respects; and
(xv) The Registration Statement is effective under the
Securities Act, and, to the best of such counsel's
knowledge, after due inquiry, no proceedings for a stop
order are pending or threatened under the Securities Act.
In rendering the foregoing opinion, such counsel may rely upon
certificates of public officials (as to matters of fact and law) and
officers of the Company (as to matters of fact), and include customary
qualifications in its opinion as are acceptable to Roney & Co. Copies of
all such certificates shall be furnished to counsel to Roney & Co. on the
Closing Date.
In addition, such counsel shall state that they have participated in
conferences with officers of the Company and representatives of the
Underwriter at which the contents of the Registration Statement and
Prospectus and related matters were discussed and although such counsel
did not independently verify the accuracy or completeness of the
statements made in the Registration Statement
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<PAGE> 14
and Prospectus, on the basis of the foregoing, nothing has come to the
attention of such counsel that would lead them to believe that the
Registration Statement or Prospectus, as amended or supplemented, if
amended or supplemented, contains any untrue statement of a material fact
or omits a material fact required to be stated therein or necessary to
make the statements therein not misleading; except that such statement may
exclude financial statements, financial data, and statistical information
included in the Registration Statement and Prospectus.
(c) On or prior to each Closing Date, Roney & Co. shall have
been furnished such documents, certificates and opinions as they
may reasonably require for the purpose of enabling them to review
the matters referred to in subsection (b) of this Section 5, and
in order to evidence the accuracy, completeness or satisfaction of
the representations, warranties or conditions herein contained.
(d) Prior to each Closing Date, (i) there shall have been no
material adverse change in the condition or prospects, financial
or otherwise, of the Company or the Bank; (ii) there shall have
been no material transaction, not in the ordinary course of
business, entered into by the Company or the Bank except as set
forth in the Registration Statement and Prospectus, other than
transactions referred to or contemplated therein or to which Roney
& Co. has given its written consent; (iii) neither the Company nor
the Bank shall be in default (nor shall an event have occurred
which, with notice or lapse of time, or both, would constitute a
default) under any provision of any material agreement,
understanding or instrument relating to any outstanding
indebtedness that is material in amount; (iv) no action, suit or
proceeding, at law or in equity, shall be pending or threatened
against the Company or the Bank before or by any court or Federal,
state or other commission, board or other administrative agency
having jurisdiction over the Company or the Bank, as the case may
be, which is expected to have a material adverse effect on the
Company or the Bank; and (v) no stop order shall have been issued
under the Securities Act and no proceedings therefor shall have
been initiated or be threatened by the Commission.
(e) At each Closing Date, Roney & Co. shall have received a
certificate signed by the Chairman of the Board and the President of the
Company dated the Firm Shares Closing Date or Optional Shares Closing
Date, as the case may be, to the effect that the conditions set forth in
subsection (d) above have been satisfied and as to the accuracy, as of the
Firm Shares Closing Date or the Optional Shares Closing Date, as the case
may be, of the representations and warranties of the Company set forth in
Section 4 hereof.
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<PAGE> 15
(f) At or prior to each Closing Date, Roney & Co. shall have
received a "blue sky" memorandum (upon which Roney & Co. may rely)
of Dykema Gossett PLLC, counsel for the Company, addressed to
Roney & Co. and in form and scope reasonably satisfactory to Roney
& Co. concerning compliance with the blue sky or securities laws
of the states listed in Exhibit B attached to this Agreement.
(g) All proceedings taken in connection with the sale of the
Shares as herein contemplated shall be reasonably satisfactory in
form and substance to Roney & Co. and to counsel for Roney & Co.,
and Roney & Co. shall have received from counsel for Roney & Co. a
favorable opinion, dated as of each Closing Date, with respect to
such of the matters set forth under Subsections (b) (i), (iii),
(vi), (vii), and (xv) of this Section 5, and with respect to such
other related matters as Roney & Co. may require, if the failure
to receive a favorable opinion with respect to such other related
matters would cause Roney & Co. to deem it inadvisable to proceed
with the sale of the Shares.
(h) There shall have been duly tendered to Roney & Co.
certificates representing all the Shares agreed to be sold by the
Company on the Firm Shares Closing Date or the Optional Shares
Closing Date, as the case may be.
(i) No order suspending the sale of the Shares prior to each
Closing Date, in any jurisdiction listed in Exhibit B, shall have
been issued on the Firm Shares Closing Date or the Optional Shares
Closing Date, as the case may be, and no proceedings for that
purpose shall have been instituted or, to Roney & Co.'s knowledge
or that of the Company, shall be contemplated.
(j) The NASD, upon review of the terms of the public offering
of the Shares, shall not have objected to the Underwriter's
participation in the same.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Firm Shares Closing Date or the Optional Shares
Closing Date, as the case may be, is not so fulfilled, Roney & Co. may terminate
this Agreement pursuant to Section 9(c) hereof or, if Roney & Co. so elects,
waive any such conditions which have not been fulfilled or extend the time of
their fulfillment.
6. COVENANTS.
The Company covenants and agrees that it will:
(a) Use its best efforts to cause the Registration Statement to
become effective and will notify Roney & Co. immediately, and confirm the
notice in
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<PAGE> 16
writing, (i) when the Registration Statement and any post-effective
amendment thereto becomes effective, (ii) of the issuance by the
Commission of any stop order or of the initiation, or the threatening, of
any proceedings for that purpose and (iii) of the receipt of any comments
from the Commission. The Company will make every reasonable effort to
prevent the issuance of a stop order, and, if the Commission shall enter a
stop order at any time, the Company will make every reasonable effort to
obtain the lifting of such order at the earliest possible moment.
(b) During the time when a prospectus is required to be
delivered under the Securities Act, comply so far as it is able
with all requirements imposed upon it by the Securities Act, as
now and hereafter amended, and by the Rules, as from time to time
in force, so far as necessary to permit the continuance of sales
of or dealings in the Shares. If at any time when a prospectus
relating to the Shares is required to be delivered under the
Securities Act any event shall have occurred as a result of which,
in the reasonable opinion of counsel for the Company or counsel
for Roney & Co., the Registration Statement or Prospectus as then
amended or supplemented includes an untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading,
or if it is necessary at any time to amend or supplement the
Registration Statement or Prospectus to comply with the Securities
Act, the Company will notify Roney & Co. promptly and prepare and
file with the Commission an appropriate amendment or supplement in
form satisfactory to Roney & Co. The cost of preparing, filing and
delivering copies of such amendment or supplement shall be paid by
the Company.
(c) Deliver to the Underwriter such number of copies of each
preliminary prospectus as may reasonably be requested by Roney & Co. and,
as soon as the Registration Statement, or any amendment or supplement
thereto, becomes effective, deliver to the Underwriter three signed copies
of the Registration Statement, including exhibits, and all post-effective
amendments thereto and deliver to the Underwriter such number of copies of
the Prospectus, the Registration Statement and supplements and amendments
thereto, if any, without exhibits, as Roney & Co. may reasonably request.
(d) Endeavor in good faith, in cooperation with Roney & Co.
and its counsel, at or prior to the time the Registration
Statement becomes effective, to qualify the Shares for offering
and sale under the securities laws relating to the offering or
sale of the Shares of the states listed in Exhibit B. In each
jurisdiction where such qualification shall be effected, the
Company will, unless Roney & Co. agrees that such action is not at
the time necessary or advisable, file and make
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<PAGE> 17
such statements or reports at such times as are or may reasonably be
required by the laws of such jurisdiction. The Company will advise Roney
& Co. promptly of the suspension of the qualification of the Shares for
offering, sale or trading in any jurisdiction, or any initiation or threat
of any proceeding for such purpose, and in the event of the issuance of
any order suspending such qualification, the Company, with the cooperation
of Roney & Co., will use all reasonable efforts to obtain the withdrawal
thereof.
(e) Furnish its security holders as soon as practicable an
earnings statement (which need not be certified by independent
certified public accountants unless required by the Securities Act
or the Rules) covering a period of at least twelve months
beginning after the effective date of the Registration Statement,
which shall satisfy the provisions of Section 11(a) of the
Securities Act and the Rules thereunder.
(f) For a period of five years from the Effective Date,
furnish to its shareholders annual audited and quarterly unaudited
consolidated financial statements with respect to the Company
including balance sheets and income statements.
(g) For a period of five years from the Effective Date,
furnish to Roney & Co. the following:
(i) at the time they have been sent to shareholders of
the Company or filed with the Commission three copies of
each annual, quarterly, interim, or current financial and
other report or communication sent by the Company to its
shareholders or filed with the Commission;
(ii) as soon as practicable, three copies of every
press release and every material news item and article in
respect of the Company or the affairs of the Company which
was released by the Company;
(iii) all other information reasonably requested by Roney & Co.
with respect to the Company to comply with Rule 15c2-11 of the Rules
and Section 4 of Schedule H of the NASD By-Laws; and
(iv) such additional documents and information with respect to
the Company and its affairs as Roney & Co. may from time to time
reasonably request.
(h) Acquire all of the Bank's outstanding capital stock, free and
clear of all liens, encumbrances, or other claims or restrictions
whatsoever, for not less
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<PAGE> 18
than $7,500,000 from the proceeds of the offering and, in all other
material respects, apply the net proceeds from the offering in the manner
set forth under "Use of Proceeds" in the Prospectus.
(i) Not file any amendment or supplement to the Registration
Statement or Prospectus after the effective date of the
Registration Statement to which Roney & Co. shall reasonably
object in writing after being furnished a copy thereof.
(j) Timely file with the Commission reports on Form SR (if
applicable) containing the information required by that Form in
accordance with the provisions of Rule 463 of the Regulation under
the Act.
(k) Comply with all registration, filing and reporting
requirements of the Securities Act or the Exchange Act, which may
from time to time be applicable to the Company.
(l) Cause the proper submission of the Certificate of Paid In
Capital and Surplus, give advance written notice to the
Commissioner of the Bank's projected opening date, and in all
other respects use reasonable efforts to comply with the
requirements of, and satisfy the conditions of, the FIB Order, the
FDIC Order and the Federal Reserve Board Approval; provided,
however, that it shall not be a breach of this Section 6(l) for
the Company or the Bank to fail to maintain any specified level of
capital, surplus, capital ratio, valuation reserve or financial or
operating performance after the Bank has commenced the business of
banking if such failure is waived or performance of such
requirement or condition is accepted as sufficient by the FIB, the
FDIC, and/or the Federal Reserve Board, as applicable.
(m) Pay, or reimburse if paid by the Underwriter, whether or not the
transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Company under this Agreement, including those relating
to (1) the preparation, printing, filing and delivery of the Registration
Statement, including all exhibits thereto, each preliminary prospectus,
the Prospectus, all amendments of and supplements to the Registration
Statement and the Prospectus, and the printing of the Underwriting
Agreement and related agreements including, without limitation, the Dealer
Agreement, (2) the issuance of the Shares and the preparation and delivery
of certificates for the Shares to the Underwriter, (3) the registration or
qualification of the Shares for offer and sale under the securities or
"blue sky" laws of the various jurisdictions referred to in Exhibit B,
including the fees and disbursements of counsel in connection with such
registration and
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<PAGE> 19
qualification and the preparation and printing of preliminary,
supplemental, and final blue sky memoranda, (4) the furnishing
(including costs of shipping and mailing) to the Underwriter of
copies of each preliminary prospectus, the Prospectus and all
amendments of or supplements to the Prospectus, and of the several
documents required by this Section to be so furnished, (5) the
filing requirements and fees of the NASD in connection with its
review of the terms of the public offering and the underwriting,
(6) the furnishing (including costs of shipping and mailing) of
copies of all reports and information required by Section 6(g),
(7) all transfer taxes, if any, with respect to the sale and
delivery of the Shares by the Company to the Underwriter, (8) the
inclusion of the Shares on the OTC Bulletin Board; and (9) the
Underwriter's out-of-pocket expenses, including without
limitation, road show expenses and legal fees of counsel to Roney
& Co. (such out-of-pocket expenses and legal fees payable by the
Company shall not exceed $50,000). Upon a successful completion
of the offering, if the Underwriter purchases the Firm Shares and
all of the Optional Shares, the Underwriter will credit the
out-of-pocket and legal fee reimbursement described in Section
6(m)(9) against the underwriting discount. Upon a successful
completion of the offering, if the Underwriter purchases the Firm
Shares, but less than all of the Optional Shares, the Underwriter
will credit $25,000 of the out-of-pocket and legal fee
reimbursement described in Section 6(m)(9) against the
underwriting discount.
(n) Not, without the prior written consent of Roney & Co.,
sell, contract to sell or grant any option for the sale of or
otherwise dispose of, directly or indirectly, or register with the
Commission, any shares of Common Stock of the Company (or any
securities convertible into or exercisable for such shares of
Common Stock) within 180 days after the date of the Prospectus,
except as provided in this Agreement and except for grants and
exercises of Stock Options under the Stock Option Plans as
described in the Prospectus.
(o) For not less than 3 fiscal years after the Effective Date,
maintain the Exchange Act registration of the Common Stock, unless the
Company's shareholders direct the Company to reregister the Common Stock.
(p) Use its best efforts to cause itself and the Bank to
commence their businesses as described in the Prospectus not later
than March 31, 1997.
(q) Not, for one year after the Effective Date, issue any
stock options to purchase Common Stock under either of the Stock
Option Plans, or any other stock option plan of the Company, that
have an exercise price of less than $10 per share.
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<PAGE> 20
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act against any and all losses, claims, damages
and liabilities, joint or several (including any reasonable
investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they may become
subject under the Securities Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any preliminary
prospectus, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that
such indemnity shall not inure to the benefit of the Underwriter
(or any person controlling the Underwriter) on account of any
losses, claims, damages or liabilities arising from the sale of
the Shares in the public offering to any person by the Underwriter
if such untrue statement or omission or alleged untrue statement
or omission was made in such preliminary prospectus, the
Registration Statement or the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of the
Underwriter specifically for use therein. The Company shall not
be liable hereunder to the Underwriter (or any controlling person
thereof) to the extent that any loss, claim, damage or other
liability incurred by the Underwriter arises from the
Underwriter's fraudulent act or omission.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act,
each director of the Company and each officer of the Company who signs the
Registration Statement, to the same extent as the foregoing indemnity from
the Company to the Underwriter, but only insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue statement
or omission or alleged untrue statement or omission which was made in any
preliminary prospectus, the Registration Statement or the Prospectus, or
any amendment thereof or supplement thereto, in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriter specifically for use therein; provided, however, that the
obligation of the Underwriter to indemnify the Company (including any
controlling person, director or officer thereof) hereunder
20
<PAGE> 21
shall be limited to the total price at which the Shares purchased by the
Underwriter hereunder were offered to the public. The Underwriter shall
not be liable hereunder to the Company (including any controlling person,
director or officer thereof) to the extent that any loss, claim, damage or
other liability incurred by the Company arises from a fraudulent act or
omission by the Company.
(c) Any party that proposes to assert the right to be indemnified
under this Section will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a
claim is to be made against an indemnifying party or parties under this
Section, notify each such indemnifying party of the commencement of such
action, suit or proceeding, enclosing a copy of all papers served, but the
omission so to notify such indemnifying party of any such action, suit or
proceeding shall not relieve it from any liability that it may have to any
indemnified party otherwise than under this Section. In case any such
action, suit or proceeding shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof and the approval by the indemnified party of such
counsel, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses, except as provided below and except
for the reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The indemnified
party shall have the right to employ its counsel in any such action, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (1) the employment of counsel by such indemnified
party has been authorized in writing by the indemnifying parties, (2) the
indemnified party shall have reasonably concluded that, because of the
existence of different or additional defenses available to the indemnified
party or of other reasons, there may be a conflict of interest between the
indemnifying parties and the indemnified party in the conduct of the
defense of such action (in which case the indemnifying parties shall not
have the right to direct the defense of such action on behalf of the
indemnified party) or that, under the circumstances, it is otherwise
appropriate, or (3) the indemnifying parties shall not have employed
counsel to assume the defense of such action within a reasonable time
after notice of the commencement thereof, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying
parties. An indemnifying party shall not be liable for any settlement of
any action, suit, proceeding or claims effected without its written
consent.
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<PAGE> 22
8. CONTRIBUTION. In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in Section 7(a) or
7(b) is due in accordance with its terms but for any reason is held to be
unavailable, the Company and the Underwriter shall contribute to the aggregate
losses, claims, damages and liabilities (including any investigation, legal and
other expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting any contribution received from other persons), to which the Company
and the Underwriter may be subject, in such proportion so that the Underwriter
is responsible for that portion represented by the percentage that the
underwriting discount appearing on the front cover page of the Prospectus bears
to the public offering price appearing thereon and the Company is responsible
for the balance; provided, however, that (a) in no case shall the Underwriter be
responsible for any amount in excess of the underwriting discount applicable to
the Shares purchased by the Underwriter hereunder and (b) no person found guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section, each
person, if any, who controls the Underwriter within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution as
the Underwriter, and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act, each officer of the Company
who shall have signed the Registration Statement and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to clauses (a) and (b) of this Section. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent.
In any proceeding relating to the Registration Statement, any
preliminary prospectus, the Prospectus or any supplement thereto or amendment
thereof, each party against whom contribution may be sought under this Section 8
hereby consents to the jurisdiction of any court in Michigan, agrees that
process issuing from such court may be served upon him or it by any other
contributing party and consents to the service of such process and agrees that
any other contributing party may join him or it as an additional defendant in
any such proceeding in which such other contributing party is a party.
9. TERMINATION. This Agreement may be terminated by Roney & Co. by
notifying the Company at any time:
22
<PAGE> 23
(a) before the earliest of (1) 11:00 a.m., Detroit time, on
the business day following the Effective Date, (2) the time of
release by Roney & Co. for publication of the first newspaper
advertisement with respect to the Shares and (3) the time when the
Shares are first generally offered by the Underwriter to dealers
by letter or telegram;
(b) at or before any Closing Date if, in the judgment of
Roney & Co., payment for and delivery of the Shares is rendered
impracticable or inadvisable because (1) additional material
governmental restrictions, not known to be in force and effect
when this Agreement is signed, shall have been imposed upon
trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange, on
the American Stock Exchange or on the over-the-counter market, or
trading in securities generally shall have been suspended on
either such Exchange or on the over-the-counter market or a
general banking moratorium shall have been established by federal,
New York or Michigan authorities, (2) a war or other calamity
shall have occurred or shall have accelerated to such an extent as
to affect adversely the marketability of the Shares, (3) the
Company or the Bank shall have sustained a material loss by fire,
flood, accident, hurricane, earthquake, theft, sabotage or other
calamity or malicious act, which, whether or not said loss shall
have been insured, will in Roney & Co.'s opinion, make it
inadvisable to proceed with the offering of the Shares, (4) the
FIB Order, the FDIC Order, or the Federal Reserve Board Approval
shall have been withdrawn or materially altered, or notice shall
have been received to the effect that any of such approvals will
not be received, or, if received, will be subject to conditions
that the Company would not be able to fulfill in a reasonable time
in Roney & Co.'s reasonable opinion, (5) in Roney & Co.'s
reasonable opinion it is not probable that the Company and Bank
will be able to commence business before December 31, 1996, for
any reason, or (6) there shall have been such material change in
the condition, business operations or prospects of the Company or
the
market for the Shares or similar securities as in Roney & Co.'s
judgment would make it inadvisable to proceed with the offering of
the Shares; or
(c) at or before any Closing Date, if any of the conditions
specified in Section 5 or any other agreements, representations or
warranties of the Company in this Agreement shall not have been
fulfilled when and as required by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, except as
otherwise provided in this Agreement, the Company shall not be under any
liability to the Underwriter (other than for obligations assumed in Section 6
hereof), and the Underwriter shall not be under any liability to the Company;
provided, however, that if this Agreement is terminated by Roney & Co.
23
<PAGE> 24
because of any failure, refusal or inability on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
for any reasons provided in subparagraphs (b) and (c) above, the Company will
(1) pay the Break Up Fee (as defined below), if and when required below, and (2)
reimburse the Underwriter for all accountable out-of-pocket expenses (including,
without limitation, road show expenses and fees and disbursements of counsel to
Roney & Co.) up to a maximum of $65,000 (including the $15,000 advance described
below) incurred by it in connection with the proposed purchase and sale of the
Shares or in contemplation of performing its obligations hereunder. The
Underwriter acknowledges receipt of a $15,000 advance from the Company. If this
Agreement is terminated for any reason, the Underwriter shall be entitled to
retain such advance as reimbursement for its accountable out-of-pocket expenses;
provided, however, in the event that the accountable out-of-pocket expenses to
be reimbursed under this paragraph are less than $15,000, the Underwriter shall
pay such difference to the Company. If this Agreement is not terminated, the
$15,000 shall be credited at closing against the underwriting discount. A
"BREAK UP FEE" of 3% of any capital raised (either publicly or privately) by the
Company shall be paid to Roney & Co. by the Company upon completion of such
capital raising if the Company raises such capital at any time or times within
one year after this Agreement is terminated by Roney & Co. because of any
failure, refusal or inability on the part of the Company to comply with the
terms or to fulfill any of the conditions of the Agreement, or for any reasons
provided in subparagraphs (b) and (c) above.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement shall be
deemed to be representations, warranties and agreements at the Closing Dates,
and such representations, warranties and agreements of the Company, including,
without limitation, the payment and reimbursement agreements contained in
Section 6 hereof and the indemnity and contribution agreements contained in
Sections 7 and 8 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Underwriter or any
controlling person and shall survive termination of this Agreement and/or
delivery of the Shares to and payment for the Shares by the Underwriter pursuant
to this Agreement. In addition, the covenants contained in Section 6 hereof,
the agreements contained in this Section 10 and in Sections 7, 8 and 9 shall
survive termination of this Agreement and/or delivery of the Shares to and
payment for the Shares by the Underwriter pursuant to this Agreement.
11. MISCELLANEOUS. This Agreement has been and is made for the benefit of
the Underwriter, the Company and their respective successors and assigns, and,
to the extent expressed herein, for the benefit of persons controlling the
Underwriter or the Company, and directors and certain officers of the Company,
and their respective successors and assigns, and no other person, partnership,
association or corporation shall acquire or have any right under or by virtue of
this Agreement. The term "SUCCESSORS AND ASSIGNS" shall not include any
purchaser of Shares from the Underwriter merely because of such purchase.
24
<PAGE> 25
If any action or proceeding shall be brought by the Underwriter or the
Company in order to enforce any right or remedy under this Agreement, the
Underwriter and the Company hereby consent to, and agree that they will submit
to, the jurisdiction of the courts of the State of Michigan and of any Federal
court sitting in the State of Michigan.
All notices and communications hereunder shall be in writing and
mailed or delivered or by telephone or telegraph, if subsequently confirmed in
writing, to Roney & Co., at One Griswold, Detroit, Michigan 48226 (facsimile No.
(313) 963-2303) (with a copy to Gordon R. Lewis, Warner Norcross & Judd LLP, 900
Old Kent Building, 111 Lyon Street, N.W., Grand Rapids, Michigan 49503
(facsimile No. (616) 752-2500)); and to the Company at 21211 Haggerty Road,
Novi, Michigan 48084, Attention: Anthony S. Albanese, President (facsimile No.
(810) 380-0738) (with a copy to Paul R. Rentenbach, Dykema Gossett PLLC, 400
Renaissance Center, Detroit, Michigan 48243 (facsimile No. (313) 568-6915).
This Agreement shall be construed in accordance with the laws of the
State of Michigan, without giving effect to principles of conflicts of laws.
25
<PAGE> 26
Please confirm that the foregoing correctly sets forth the agreement
between us.
Very truly yours,
MICHIGAN HERITAGE BANCORP, INC.
By:
----------------------------
Richard Zamojski
Its: Chairman of the Board
And by:
----------------------------
Anthony S. Albanese
Its President
Confirmed by Roney & Co.
RONEY & CO. L.L.C.
By:
---------------------------------
John C. Donnelly
Director, Corporate Finance 158013
26
<PAGE> 27
EXHIBIT A
Number Relationship
of of Person to
Name Shares to the Company
---- ------ --------------
<PAGE> 28
EXHIBIT B
States
------
Michigan
Florida
Illinois
Indiana
New Jersey
New York
Ohio
<PAGE> 1
EXHIBIT 3.1
C&S 510 (Rev. 7/96)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
- ------------------------------------------------------------------------------------------
<S><C>
Date Received (FOR BUREAU USE ONLY)
- -------------------------------------
- -------------------------------------
Name
Paul R. Rentenbach
- --------------------------------------------------
Address
Dykema Gossett PLLC, 400 Renaissance Center
- --------------------------------------------------
City State Zip Code
Detroit Michigan 48243 EFFECTIVE DATE:
- --------------------------------------------------
- ------------------------------------------------------------------------------------------
Document will be returned to the name and address you enter above
</TABLE>
CID Number: 237-008
RESTATED ARTICLES OF INCORPORATION
For use by domestic profit corporations
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Articles:
<TABLE>
<S><C>
1. The present name of the corporation is: Michigan Heritage Bancorp, Inc.
2. The corporation identification number
(CID) assigned by the Bureau is: 237-008.
3. All former names of the corporation are: Dykema Nameholding Corporation No. 3.
4. The date of filing the original
Articles of Incorporation was: September 22, 1989
</TABLE>
The following Restated Articles of Incorporation supersede the Articles of
Incorporation as amended and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
The name of the corporation is Michigan Heritage Bancorp, Inc.
ARTICLE II
The purposes for which the corporation is organized are to become a
registered bank holding company under the federal Bank Holding Company Act of
1956, as amended, and to engage in any activity within the purposes for which
corporations may be organized under the Business Corporation Act of Michigan,
as it exists on the date hereof and as it may be amended from time to time
hereafter (the "Michigan Business Corporation Act").
<PAGE> 2
ARTICLE III
The aggregate number of shares of all classes of the capital stock which
the corporation has authority to issue is 5,000,000, which shall be divided
into a class of 4,500,000 shares ("Common Shares") of common stock and a class
of 500,000 shares ("Preferred Shares") of preferred stock.
Preferred Shares
Subject to the limitations and restrictions set forth in this Article III,
the Board of Directors is authorized and empowered at any time, and from time
to time, to designate and issue any authorized and unissued Preferred Shares
(whether or not previously designated as shares of a particular series, and
including Preferred Shares of any series issued and thereafter acquired by the
corporation) as shares of one or more series, hereby or hereafter to be
designated. Each different series of Preferred Shares may vary as to dividend
rate, redemption price, liquidation price, voting rights and conversion rights,
if any, all of which shall be fixed as hereinafter provided. Each series of
Preferred Shares issued hereunder shall be so designated as to distinguish the
shares thereof from the shares of the other series and classes. All Preferred
Shares of any one series shall be alike in every particular.
The rights, qualifications, limitations or restrictions of each series of
Preferred Shares shall be as stated and expressed in the resolution or
resolutions adopted by the Board of Directors which provides for the issuance
of such series, which resolutions shall determine, fix or alter the following:
(1) The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board of
Directors in creating such series) be increased or decreased (but not below
the number of shares then outstanding) from time to time by action of the
Board of Directors;
(2) The rate of the annual dividends thereon and the relation which such
dividends shall bear to the dividends payable on any other class of capital
stock or on any other series of Preferred Shares, the terms and conditions
upon which and the periods in respect of which dividends shall be payable,
whether and upon what conditions such dividends shall be cumulative and if
cumulative, the date or dates from which dividends shall accumulate;
(3) The amount per share, if any, which the holders of Preferred Shares of
such series shall be entitled to receive, in addition to any dividends
accrued and unpaid thereon, (a) upon the redemption thereof, plus the
premium payable upon redemption, if any; or (b) upon the voluntary
liquidation, dissolution or winding up of the corporation; or (c) upon the
involuntary liquidation, dissolution or winding up of the corporation;
(4) The conversion or exchange rights, if any, of such series, including
without limitation, the price or prices, rate or rates, provisions for the
adjustment thereof (including
2
<PAGE> 3
provisions for protection against the dilution or impairment of such
rights), and all other terms and conditions upon which Preferred Shares
constituting such series may be convertible into, or exchangeable for
shares of any other class or classes or series;
(5) Whether the shares of such series shall be redeemable, and, if
redeemable, whether redeemable for cash, property or rights, including
securities of any other corporation, at the option of either the holder or
the corporation or upon the happening of a specified event, the limitations
and restrictions with respect to such redemption, the time or times when,
the price or prices or rate or rates at which, the adjustments with which
and the manner in which such shares shall be redeemable, including the
manner of selecting shares of such series for redemption if less than all
shares are to be redeemed;
(6) Whether the shares of such series shall be subject to the operation of
a purchase, retirement, or sinking fund, and, if so, whether and upon what
conditions such purchase, retirement or sinking fund shall be cumulative or
noncumulative, the extent to which and the manner in which such fund shall
be applied to the purchase or redemption of the shares of such series for
retirement or to other corporate purposes and the terms and provisions
relative to the operation thereof;
(7) The voting rights per share, if any, of each such series, and whether
and under what conditions the shares of such series (alone or together with
the shares of one or more other series) shall be entitled to vote
separately as a single class, upon any merger, share exchange or other
transaction of the corporation, or upon any other matter, including
(without limitation) the elections of one or more additional directors of
the corporation in case of dividend arrearage or other specified events;
(8) Whether the issuance of any additional shares of such series, or of any
shares of any other series shall be subject to restrictions as to issuance
or as to the power, preferences or rights of any such other series; and
(9) Any other preferences, privileges and powers and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions of such series, as the Board of Directors may
deem advisable and as shall not be inconsistent with the provisions of
these Articles of Incorporation.
Common Shares
None of the Common Shares shall be entitled to any preferences, and each
Common Share shall be equal to every other share of such class of stock in
every respect.
After payment or declaration of full cumulative dividends on all shares
having priority over the Common Shares as to dividends, and after making all
sinking or retirement fund payments on all series of Preferred Shares and on
any other stock of the corporation ranking as to dividends or
3
<PAGE> 4
assets prior to the Common Shares providing for the same, dividends on the
Common Shares may be declared and paid, but only when and as determined by the
Board of Directors.
On any dissolution, liquidation or winding up of the corporation, after
there shall have been paid to or set aside for the holders of all shares having
priority over the Common Shares the full preferential amounts to which they are
respectively entitled, the holders of the Common Shares shall be entitled to
receive pro rata all the remaining assets of the corporation available for
distribution to its shareholders.
At all meetings of shareholders of the corporation, the holders of the
Common Shares shall be entitled to one vote for each Common Share held by them
of record.
General Provisions
No shareholder of this corporation shall by reason of his holding shares
of any class have any preemptive or preferential right to purchase or subscribe
to any shares of any class of this corporation, now or hereafter to be
authorized, or any notes, debentures, bonds, or other securities convertible
into or carrying options or warrants to purchase shares of any class, now or
hereafter to be authorized, whether or not the issuance of any such shares or
such notes, debentures, bonds, or other securities, would adversely affect the
dividend or voting rights of such shareholder, other than such rights, if any,
as the Board of Directors, in its discretion from time to time may grant and at
such price as the Board of Directors in its discretion may fix; and the Board
of Directors may issue shares of any class of this corporation, or any notes,
debentures, bonds, or other securities convertible into or carrying options or
warrants to purchase shares of any class, without offering any such shares of
any class, either in whole or in part, to the existing shareholders of any
class.
ARTICLE IV
The address and the mailing address of the current registered office of
the corporation is 21211 Haggerty Road, Novi, Michigan 48375.
The name of the current resident agent at the registered office is Anthony
S. Albanese.
ARTICLE V
When a compromise or arrangement or a plan or reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them,
a court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or
4
<PAGE> 5
reorganization, to be summoned in such manner as the court directs. If a
majority in number, and representing three-fourths in value of claims, of the
creditors or class of creditors, or if the shareholders or class of
shareholders to be affected by the proposed compromise or arrangement or a
reorganization representing three-fourths of such shares, agree to a compromise
or arrangement or a reorganization of this corporation as a consequence of the
compromise or arrangement, the compromise or arrangement and the
reorganization, if sanctioned by the court to which the application has been
made, shall be binding on all the creditors or class of creditors, or on all
the shareholders or class of shareholders and also on this corporation.
ARTICLE VI
At the effective date of these Restated Articles of Incorporation, the
Board of Directors shall be divided into three classes as nearly equal in
number as possible, with the term of office of one class expiring each year.
The Board of Directors shall by resolution designate the directors for each
class, and directors in the first class (Class I) shall hold office for a term
expiring at the annual meeting of shareholders in 1998, directors of the second
class (Class II) shall hold office for a term expiring at the next succeeding
annual meeting, and directors of the third class shall be elected to hold
office for a term expiring at the third succeeding annual meeting. During the
intervals between annual meetings of shareholders, any vacancy occurring in the
Board of Directors caused by resignation, removal, death or incapacity, and any
newly created directorships resulting from an increase in the number of
directors, shall be filled by a majority vote of the directors then in office,
whether or not a quorum. Each director chosen to fill a vacancy shall hold
office for the unexpired term of the Class in which such vacancy occurred.
Each director chosen to fill a newly created directorship shall hold office
until the next election of the Class for which such director shall have been
chosen. When the number of directors is changed, any newly created
directorships or any decrease in directorships shall be so apportioned among
the Classes as to make all Classes as nearly equal in number as possible. Any
director may be removed from office as a director at any time, but only for
cause, by the affirmative vote of shareholders of record holding a majority of
the outstanding shares of stock of the corporation entitled to vote in
elections of directors given at a meeting of the shareholders specifically
called for that purpose.
ARTICLE VII
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, provided that the foregoing shall not eliminate or limit
the liability of a director for any of the following: (i) a breach of the
director's duty of loyalty to the corporation or its shareholders; (ii) acts or
omissions not in good faith or that involve intentional misconduct or knowing
violation of law; (iii) a violation of Section 551(1) of the Michigan Business
Corporation Act; or (iv) any transaction from which the director derived an
improper personal benefit. If the Michigan Business Corporation Act hereafter
is amended to authorize the further elimination or limitation of the liability
of directors, then the liability of a
5
<PAGE> 6
director of the corporation, in addition to the limitation on personal
liability contained herein, shall be eliminated or limited to the fullest
extent permitted by the Michigan Business Corporation Act as so amended. No
amendment or repeal of this Article VII shall apply to or have any effect on
the liability or alleged liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to the
effective date of any such amendment or repeal.
ARTICLE VIII
Notwithstanding any other provisions of these Articles of Incorporation,
no amendment to these Articles of Incorporation shall amend or repeal any or
all of the provisions of Articles VI, VII or this Article VIII of these
Articles of Incorporation, and the shareholders of the corporation shall not
have the right to amend or repeal any or all provisions of the Bylaws of the
corporation, unless so adopted by the affirmative vote of the holders of not
less than three-fourths of the outstanding shares of stock of the corporation
generally entitled to vote in the election of directors, considered for
purposes of this Article VIII as a class; provided, however, that in the event
the Board of Directors of the corporation shall recommend to the shareholders
the adoption of any such amendment of a nature described in this Article VIII,
the shareholders of record holding a majority of the outstanding shares of
stock of the corporation entitled to vote in elections of directors, considered
for the purposes of this Article VIII as a class, may amend, modify or repeal
any or all of such provisions.
* * * * * *
These Restated Articles of Incorporation were duly adopted by the written
consent of the sole shareholder of the Corporation in accordance with Section
407 of the Michigan Business Corporation Act.
Signed this November 13, 1996.
By: /s/ ANTHONY S. ALBANESE
------------------------------
Anthony S. Albanese, President
Name of person or organization Preparer's name and business
remitting fees: telephone number:
Dykema Gossett PLLC Paul R. Rentenbach
(313) 568-6973
6
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
MICHIGAN HERITAGE BANCORP, INC.
ARTICLE I
OFFICES
1.01 PRINCIPAL OFFICE. The principal office of the corporation shall be
at such place as the Board of Directors shall from time to time determine.
1.02 OTHER OFFICES. The corporation also may have offices at such other
places as the Board of Directors from time to time determines or the business
of the corporation requires.
ARTICLE II
SEAL
2.01 SEAL. The corporation may have a seal in such form as the Board of
Directors may from time to time determine. The seal may be used by causing it
or a facsimile to be impressed, affixed or otherwise reproduced.
ARTICLE III
CAPITAL STOCK
3.01 ISSUANCE OF SHARES. The shares of capital stock of the corporation
shall be issued in such amounts, at such times, for such consideration and on
such terms and conditions as the Board shall deem advisable, subject to the
Articles of Incorporation and any requirements of the laws of the State of
Michigan.
3.02 CERTIFICATES FOR SHARES. The shares of the corporation shall be
represented by certificates signed by the Chairman of the Board of Directors
(if such office is filled), President or a Vice President of the corporation,
and also may be signed by the Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary of the corporation, and may be sealed with the seal of the
corporation or a facsimile thereof. The signatures of the officers may be
facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the corporation itself or its employee.
In case an officer who has signed or whose facsimile signature has been placed
upon a certificate ceases to be such officer before the certificate is issued,
it may be issued by the corporation with the same effect as if he were such
officer at the date of issuance. A certificate representing shares shall state
upon its face that the corporation is formed under the laws of the State of
Michigan, the name of the person to whom it is issued, the number and class of
shares, and the designation of the series, if any, which the certificate
represents, and such other provisions as may be required by the laws of the
State of Michigan.
<PAGE> 2
3.03 TRANSFER OF SHARES. The shares of the capital stock of the
corporation are transferable only on the books of the corporation upon
surrender of the certificate therefor, properly endorsed for transfer, and the
presentation of such evidences of ownership and validity of the assignment as
the corporation may require.
3.04 REGISTERED SHAREHOLDERS. The corporation shall be entitled to treat
the person in whose name any share of stock is registered as the owner thereof
for purposes of dividends and other distributions in the course of business, or
in the course of recapitalization, merger, plan of share exchange,
reorganization, sale of assets, liquidation or otherwise and for the purpose of
votes, approvals and consents by shareholders, and for the purpose of notices
to shareholders, and for all other purposes whatever, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the
part of any other person, whether or not the corporation shall have notice
thereof, save as expressly required by the laws of the State of Michigan.
3.05 LOST OR DESTROYED CERTIFICATES. Upon the presentation to the
corporation of a proper affidavit attesting the loss, destruction or mutilation
of any certificate or certificates for shares of stock of the corporation, the
Board of Directors shall direct the issuance of a new certificate or
certificates to replace the certificates so alleged to be lost, destroyed or
mutilated. The Board of Directors may require as a condition precedent to the
issuance of new certificates any or all of the following: (a) presentation of
additional evidence or proof of the loss, destruction or mutilation claimed;
(b) advertisement of loss in such manner as the Board of Directors may direct
or approve; (c) a bond or agreement of indemnity, in such form and amount and
with such sureties, or without sureties, as the Board of Directors may direct
or approve; or (d) the order or approval of a court or judge.
ARTICLE IV
SHAREHOLDERS AND MEETINGS OF SHAREHOLDERS
4.01 PLACE OF MEETINGS. All meetings of shareholders shall be held at the
principal office of the corporation or at such other place as shall be
determined by the Board of Directors and stated in the notice of meeting.
4.02 ANNUAL MEETING. The annual meeting of shareholders of the
corporation shall be held on such date, and at such times as the Board of
Directors may select. Directors shall be elected at each annual meeting and
such other business, as may properly come before the meeting, shall be
considered. The Board of Directors acting by resolution may postpone and
reschedule any previously scheduled annual meeting of shareholders. Any annual
meeting of shareholders may be adjourned by the Chairman of the meeting or
pursuant to a resolution of the Board of Directors.
4.03 SPECIAL MEETINGS. Special meetings of the shareholders may be called
by the Board of Directors, the Chairman of the Board of Directors (if such
office is filled), or by the President.
2
<PAGE> 3
At any special meeting of shareholders, the business which may be transacted
shall be limited to that which was specifically stated in the notice of such
special meeting provided to shareholders.
4.04 NOTICE OF MEETINGS. Except as otherwise provided by statute, written
notice of the time, place and purposes of a meeting of shareholders shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each shareholder of record entitled to vote at the meeting, either personally
or by mailing such notice to his or her last address as it appears on the books
of the corporation. No notice need be given of an adjourned meeting of the
shareholders provided the time and place to which such meeting is adjourned are
announced at the meeting at which the adjournment is taken and at the adjourned
meeting only such business is transacted as might have been transacted at the
original meeting. However, if after the adjournment a new record date is fixed
for the adjourned meeting a notice of the adjourned meeting shall be given to
each shareholder of record on the new record date entitled to notice as
provided in this Bylaw.
4.05 RECORD DATES. The Board of Directors may fix in advance a date as
the record date for the purpose of determining shareholders entitled to notice
of and to vote at a meeting of shareholders or an adjournment thereof, or to
express consent or to dissent from a proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of a dividend
or allotment of a right, or for the purpose of any other action. The date fixed
shall not be more than 60 nor less than 10 days before the date of the meeting,
nor more than 60 days before any other action. In such case only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to notice of and to vote at such meeting or adjournment thereof, or to
express consent or to dissent from such proposal, or to receive payment of such
dividend or to receive such allotment of rights, or to participate in any other
action, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation, or otherwise, after any such record date. Nothing in
this Bylaw shall affect the rights of a shareholder and his transferee or
transferor as between themselves.
4.06 LIST OF SHAREHOLDERS. The Secretary of the corporation or the agent
of the corporation having charge of the stock transfer records for shares of
the corporation shall make and certify a complete list of the shareholders
entitled to vote at a shareholders' meeting or any adjournment thereof. The
list shall be: arranged alphabetically within each class and series, with the
address of, and the number of shares held by, each shareholder; produced at the
time and place of the meeting; subject to inspection by any shareholder during
the whole time of the meeting; and prima facie evidence as to who are the
shareholders entitled to examine the list or vote at the meeting.
4.07 QUORUM. Except in circumstances requiring a greater quorum by the
Articles of Incorporation or by the laws of the State of Michigan, the
shareholders present at a meeting in person or by proxy who, as of the record
date for such meeting, were holders of a majority of the outstanding shares of
the corporation entitled to vote at the meeting shall constitute a quorum at
the meeting. Whether or not a quorum is present, a meeting of shareholders may
be adjourned by a vote of the shares present in person or by proxy. When the
holders of a class or series of
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shares are entitled to vote separately on an item of business, this Bylaw
applies in determining the presence of a quorum of such class or series for
transaction of such item of business.
4.08 PROXIES. A shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize other persons
to act for the shareholder by proxy. A proxy shall be signed by the
shareholder or the shareholder's authorized agent or representative and shall
not be valid after the expiration of three years from its date unless otherwise
provided in the proxy. A proxy is revocable at the pleasure of the shareholder
executing it except as otherwise provided by the laws of the State of Michigan.
4.09 INSPECTORS OF ELECTION. The Board of Directors, or the Chairman
presiding at any shareholders' meeting, may appoint one or more inspectors. If
appointed, the inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum and the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine challenges or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the person presiding at the
meeting, the inspectors shall make and execute a written report to the person
presiding at the meeting of any of the facts found by them and matters
determined by them. The report shall be prima facie evidence of the facts
stated and of the vote as certified by the inspectors.
4.10 CONDUCT OF BUSINESS. The Chairman of the Board of Directors, or such
other person who shall be designated by him or her or by the Board of Directors
to preside at a meeting of the shareholders, shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her to be
proper.
At any annual meeting of shareholders, only such business shall be
conducted as shall have been brought before the meeting (a) by or at the
direction of the Board of Directors or (b) by any shareholder of the
corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 4.10. For business to be
properly brought before an annual meeting by a shareholder, the shareholder
must submit written notice to the Secretary of the corporation either by
personal delivery or by U.S. mail, certified or registered. To be timely, a
shareholder's notice must be delivered to or received by the Secretary not less
than sixty (60) days prior to the anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty (20) days, notice by the shareholder to
be timely must be so delivered or received not later than the close of business
on the later of the sixtieth (60th) day prior to such annual meeting or the
tenth (10th) day following the day on which notice of the annual meeting was
first mailed. A shareholder's notice to the Secretary shall set forth as to
each matter such shareholder intends to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting,
(ii) the name and address, as they appear on the corporation's books, of the
shareholder proposing such business,
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(iii) the class and number of shares of voting stock that are beneficially owned
by such shareholder, and (iv) any material interest of such shareholder in the
proposed business to be brought before the annual meeting. Notwithstanding
anything to the contrary contained in these Bylaws, no business shall be brought
before or conducted at an annual meeting except in accordance with the
provisions of this Section 4.10. The person presiding at the annual meeting
shall, if the facts so warrant, determine and declare to the meeting in
accordance with the provisions of this Section 4.10 whether or not the proposed
business is properly brought before the meeting, and, if he or she should so
determine that it is not properly brought before the meeting, the proposed
business shall not be transacted.
At any special meeting of the shareholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
4.11 VOTING. Each outstanding share is entitled to one vote on each
matter submitted to a vote, unless otherwise provided in the Articles of
Incorporation. Votes shall be cast in writing, signed by the shareholder or
shareholder's proxy. Except as otherwise provided by the Articles of
Incorporation, directors shall be elected by a plurality of the votes cast at
any election.
ARTICLE V
DIRECTORS
5.01 NUMBER. The business and affairs of the corporation shall be managed
by a Board of Directors. The Board of Directors shall consist of not less than
five nor more than fifteen persons, and the number of directors shall be fixed
by the Board of Directors from time to time. The directors need not be
residents of Michigan or shareholders of the corporation.
5.02 NOMINATIONS. Nominations for the election of directors may be made
by the Board of Directors, the Nominating Committee of the Board of Directors
(if constituted), or by any shareholder entitled to vote in the election of
directors generally. However, any such shareholder may nominate one or more
persons for election as directors at a meeting only if written notice of such
shareholder's intent to make such nomination or nominations has been given,
either by personal delivery or by United States certified or registered mail,
postage prepaid, to the Secretary of the corporation not later than (i) with
respect to an election to be held at an annual meeting, 90 days in advance of
such meeting, and (ii) with respect to an election to be held at a special
meeting of shareholders for the election of directors, the close of business on
the seventh day following the date on which notice of such meeting is first
given to shareholders. Each such notice by a shareholder shall set forth:
(a) the name and address of the person or persons to be nominated and of
the shareholder who intends to make the nomination;
(b) a representation that the shareholder is a holder of record of stock
of the corporation entitled to vote at such meeting;
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(c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person (naming such person) pursuant
to which the nomination or nominations are to be made by the shareholder;
(d) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated by the Board of Directors; and
(e) the consent of each nominee to serve as a director of the corporation
if so elected.
The person presiding at the meeting may refuse to acknowledge the nomination of
any person not made in compliance with the foregoing procedures.
5.03 ELECTION, RESIGNATION AND REMOVAL. Directors shall be elected at
each annual meeting of the shareholders, each to hold office for the term
specified in the Articles of Incorporation and until the director's successor
is elected, or until the director's resignation or removal. A director may
resign by written notice to the corporation. The resignation is effective upon
its receipt by the Secretary of the corporation or at such subsequent time as
may be set forth in the notice of resignation. A director or the entire Board
of Directors may be removed, with cause, by vote of the holders of a majority
of outstanding shares entitled to vote at an election of directors.
5.04 VACANCIES. Vacancies in the Board of Directors occurring by reason
of death, resignation, removal, increase in the number of directors or
otherwise shall be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors. Each
person so elected shall serve as a director for a term of office continuing
until the next election of the class of directors for which such new director
was elected. A vacancy that will occur at a specific date, by reason of a
resignation effective at a later date or otherwise, may be filled before the
vacancy occurs, but the newly elected director may not take office until the
vacancy occurs.
5.05 ANNUAL MEETING. The Board of Directors shall meet each year for the
purpose of electing officers and considerating such other business that may
properly be brought before the meeting; provided that, if less than a majority
of the directors appear at the annual meeting of the Board of Directors, the
holding of such annual meeting shall not be required and the matters which
might have been taken up therein may be taken up at any later special or annual
meeting, or by written consent.
5.06 REGULAR AND SPECIAL MEETINGS. Regular meetings of the Board of
Directors may be held at such times and places as the Board of Directors may
from time to time determine. Special meetings of the Board may be called by
the Chairman of the Board of Directors (if such
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office is filled) or the President and shall be called by the President or
Secretary upon the written request of any two directors.
5.07 NOTICES. No notice shall be required for annual or regular meetings
of the Board of Directors or for adjourned meetings, whether regular or
special. Two days' written notice, or 24-hour telephonic notice, shall be
given for special meetings of the Board of Directors, and such notice shall
state or recite the time, place and purpose or purposes of the meeting.
5.08 QUORUM. A majority of the Board of Directors then in office, or of
the members of a committee thereof, constitutes a quorum for the transaction of
business. The vote of a majority of the directors present at any meeting at
which there is a quorum shall be the acts of the Board of Directors or of the
committee, except as a larger vote may be required by the laws of the State of
Michigan. A member of the Board of Directors or of a committee designated by
the Board of Directors may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can communicate with each other. Participation in
a meeting in this manner constitutes presence in person at the meeting.
5.09 EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board, appoint three or more
members of the Board as an executive committee to exercise all powers and
authorities of the Board in management of the business and affairs of the
corporation, except that the committee shall not have power or authority to:
(a) amend the Articles of Incorporation; (b) adopt an agreement of merger or
consolidation; (c) recommend to shareholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets; (d) recommend to
shareholders a dissolution of the corporation or revocation of a dissolution;
(e) amend these Bylaws; (f) fill vacancies in the Board of Directors; or (g)
unless expressly authorized by the Board of Directors, declare a dividend or
authorize the issuance of stock.
The Board of Directors from time to time may, by like resolution, appoint
such other committees of one or more directors to have such authority as shall
be specified by the Board of Directors in the resolution making such
appointments. The Board of Directors may designate one or more directors as
alternate members of any committee who may replace an absent or disqualified
member at any meeting thereof.
5.10 DISSENTS. A director who is present at a meeting of the Board of
Directors, or a committee thereof of which the director is a member, at which
action on a corporate matter is taken is presumed to have concurred in that
action unless the director's dissent is entered in the minutes of the meeting
or unless the director files a written dissent to the action with the person
acting as secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the Secretary of the corporation
promptly after the adjournment of the meeting. Such right to dissent does not
apply to a director who voted in favor of such action. A director who is absent
from a meeting of the Board, or a committee thereof of which he is a
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member, at which any such action is taken is presumed to have concurred in the
action unless he files his written dissent with the Secretary of the
corporation within a reasonable time after he has knowledge of the action.
5.11 COMPENSATION. The Board of Directors, by affirmative vote of a
majority of directors in office and irrespective of any personal interest of
any of them, may establish reasonable compensation of directors for services to
the corporation as directors or officers.
ARTICLE VI
NOTICES, WAIVERS OF NOTICE AND MANNER OF ACTING
6.01 NOTICES. All notices of meetings required to be given to
shareholders, directors or any committee of directors may be given by mail,
telecopy, telegram, radiogram or cablegram to any shareholder, director or
committee member at his or her last address as it appears on the books of the
corporation. Such notice shall be deemed to be given at the time when the same
shall be mailed or otherwise dispatched. Telephonic notice may be given for
special meetings of the Board as provided in Section 5.07.
6.02 WAIVER OF NOTICE. Notice of the time, place and purpose of any
meeting of shareholders, directors or committee of directors may be waived by
telecopy, telegram, radiogram, cablegram or other writing, either before or
after the meeting, or in such other manner as may be permitted by the laws of
the State of Michigan. Attendance of a person at any meeting of shareholders,
in person or by proxy, or at any meeting of directors or of a committee of
directors, constitutes a waiver of notice of the meeting except as follows:
(a) In the case of a shareholder, unless the shareholder at the beginning
of the meeting objects to holding the meeting or transacting business at the
meeting, or unless with respect to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, the shareholder objects to considering the matter when it is presented.
(b) In the case of a director, unless he or she at the beginning of the
meeting, or upon his or her arrival, objects to the meeting or the transacting
of business at the meeting and does not thereafter vote for or assent to any
action taken at the meeting.
6.03 ACTION WITHOUT A MEETING. Any action required or permitted at any
meeting of shareholders or directors or committee of directors may be taken
without a meeting, without prior notice and without a vote, if all of the
shareholders or directors or committee members entitled to vote thereon consent
thereto in writing before or after the action is taken.
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ARTICLE VII
OFFICERS
7.01 NUMBER. The Board of Directors shall appoint a President, a
Secretary and a Treasurer and may appoint a Chairman of the Board of Directors,
and one or more Vice Presidents, Assistant Secretaries or Assistant Treasurers.
Any two or more of the above offices, except those of President and Vice
President, may be held by the same person. No officer shall execute,
acknowledge or verify an instrument in more than one capacity if the instrument
is required by law, the Articles of Incorporation or these Bylaws to be
executed, acknowledged, or verified by one or more officers.
7.02 TERM OF OFFICE, RESIGNATION AND REMOVAL. An officer shall hold
office for the term for which he or she is appointed and until his or her
successor is appointed, or until his or her resignation or removal. An officer
may resign by written notice to the corporation. The resignation is effective
upon its receipt by the corporation or at a subsequent time specified in the
notice of resignation. An officer may be removed by the Board with or without
cause. The appointment of a person to serve as an officer of the corporation
does not of itself create contract rights.
7.03 VACANCIES. The Board of Directors may fill any vacancies in any
office occurring for whatever reason and at whatever time.
7.04 AUTHORITY. All officers, employees and agents of the corporation
shall have such authority and perform such duties in the conduct and management
of the business and affairs of the corporation as may be designated by the
Board of Directors and these Bylaws.
ARTICLE VIII
DUTIES OF OFFICERS
8.01 CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of
Directors, if such office is filled, shall be the chief executive officer of
the corporation and shall preside at all meetings of the shareholders and of
the Board of Directors at which the Chairman is present. The Chairman shall
see that all orders and resolutions of the Board of Directors are carried into
effect, and the Chairman shall have the general powers of supervision and
management usually vested in the chief executive officer of a corporation,
including the authority to vote all securities of other corporations and
business organizations held by the corporation.
8.02 PRESIDENT. If the office of Chairman is filled, the President shall
be the chief operating officer of the corporation and shall have the general
powers of supervision and management over the day-to-day operations of the
corporation. In the absence or disability of the Chairman of the Board of
Directors, or if that office has not been filled, the President also shall
perform the duties of the Chairman of the Board as set forth in these Bylaws.
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8.03 VICE PRESIDENTS. The Vice Presidents, in order of seniority, as
determined by the Board of Directors, shall, in the absence or disability of
the President perform the duties and exercise the powers of the President and
shall perform such other duties as the Board of Directors or the President may
from time to time prescribe.
8.04 SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and of shareholders and shall record all votes and minutes of all
proceedings in a book to be kept for that purpose, shall give or cause to be
given notice of all meetings of the shareholders and of the Board of Directors,
and shall keep in safe custody the seal of the corporation and, when authorized
by the Board of Directors, affix the same to any instrument requiring it, and
when so affixed it shall be attested by the signature of the Secretary, or by
the signature of the Treasurer or an Assistant Secretary. The Secretary may
delegate any of the duties, powers and authorities of the Secretary to one or
more Assistant Secretaries, unless such delegation is disapproved by the Board
of Directors.
8.05 TREASURER. The Treasurer shall have the custody of the corporate
funds and securities; shall keep full and accurate accounts of receipts and
disbursements in books of the corporation; and shall deposit all moneys and
other valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors. The Treasurer
shall render to the President and directors, whenever they may require it, an
account of his or her transactions as Treasurer and of the financial condition
of the corporation. The Treasurer may delegate any of his or her duties,
powers and authorities to one or more Assistant Treasurers, unless such
delegation is disapproved by the Board of Directors.
8.06 ASSISTANT SECRETARIES AND TREASURERS. The Assistant Secretaries, in
order of their seniority, shall perform the duties and exercise the powers and
authorities of the Secretary in case of the Secretary's absence or disability.
The Assistant Treasurers, in the order of their seniority, shall perform the
duties and exercise the powers and authorities of the Treasurer in case of the
Treasurer's absence or disability. The Assistant Secretaries and Assistant
Treasurers shall also perform such duties as may be delegated to them by the
Secretary and Treasurer, respectively, and also such duties as the Board of
Directors may prescribe.
ARTICLE IX
SPECIAL CORPORATE ACTS
9.01 ORDERS FOR PAYMENT OF MONEY. All checks, drafts, notes, bonds, bills
of exchange and orders for payment of money of the corporation shall be signed
by such officer or officers or such other person or persons as the Board of
Directors may from time to time designate.
9.02 CONTRACTS AND CONVEYANCES. The Board of Directors of the corporation
may in any instance designate the officer and/or agent who shall have authority
to execute any contract, conveyance, mortgage, proxy or other instrument on
behalf of the corporation, or may ratify or
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confirm any execution. When the execution of any instrument has been authorized
without specification of the executing officers or agents, the Chairman of the
Board of Directors, the President or any Vice President, and the Secretary or
Assistant Secretary or Treasurer or Assistant Treasurer, may execute the same
in the name and on behalf of this corporation and may affix the corporate seal
thereto.
ARTICLE X
BOOKS AND RECORDS
10.01 MAINTENANCE OF BOOKS AND RECORDS. The proper officers and agents of
the corporation shall keep and maintain such books, records and accounts of the
corporation's business and affairs, minutes of the proceedings of its
shareholders, Board and committees, if any, and such stock ledgers and lists of
shareholders, as the Board of Directors shall deem advisable, and as shall be
required by the laws of the State of Michigan and other states or jurisdictions
empowered to impose such requirements. Books, records and minutes may be kept
within or without the State of Michigan in a place which the Board shall
determine.
10.02 RELIANCE ON BOOKS AND RECORDS. In discharging his duties, a
director or an officer of the corporation, when acting in good faith, may rely
upon information, opinions, reports, or statements (including financial
statements and other financial data) if prepared or presented by any of the
following:
(a) One or more directors, officers, or employees of the corporation, or
of a business organization under joint control or common control, whom the
director or officer reasonably believes to be reliable and competent in the
matters presented.
(b) Legal counsel, public accountants, engineers, or other persons as to
matters the director or officer reasonably believes are within the person's
professional or expert competence.
(c) A committee of the Board of Directors of which he or she is not a
member if the director or officer reasonably believes the committee merits
confidence.
A director or officer is not entitled to rely on the information set forth
above if he or she has knowledge concerning the matter in question that makes
reliance otherwise permitted unwarranted.
ARTICLE XI
INDEMNIFICATION
11.01 NON-DERIVATIVE ACTIONS. Subject to all of the other provisions of
this Article XI, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative and whether formal or informal (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a
director or officer of the
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corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including actual and reasonable
attorneys' fees), judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to any criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of the corporation or its shareholders,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
11.02 DERIVATIVE ACTIONS. Subject to all of the provisions of this
Article XI, the corporation shall indemnify any person who was or is a party to
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that the person is or was a director or officer
of the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorneys' fees) and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders. However, indemnification
shall not be made for any claim, issue or matter in which such person has been
found liable to the corporation unless and only to the extent that the court in
which such action or suit was brought has determined upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnification for the
reasonable expenses incurred.
11.03 EXPENSES OF SUCCESSFUL DEFENSE. To the extent that a person has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 11.01 or 11.02 of these Bylaws, or in defense
of any claim, issue or matter in the action, suit or proceeding, the person
shall be indemnified against actual and reasonable expenses (including
attorneys' fees) incurred by such person in connection with the action, suit or
proceeding and any action, suit or proceeding brought to enforce the mandatory
indemnification provided by this Article XI.
11.04 DEFINITION. For the purposes of Sections 11.01 and 11.02, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
"serving at the request of the corporation" shall include any service as a
director, officer, employee, or agent of the corporation which imposes
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duties on, or involves services by, the director or officer with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner the person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be considered to have acted in a manner "not opposed to the best
interests of the corporation or its shareholders" as referred to in Sections
11.01 and 11.02.
11.05 CONTRACT RIGHT; LIMITATION ON INDEMNITY. The right to
indemnification conferred in this Article XI shall be a contract right, shall
apply to services of a director or officer as an employee or agent of the
corporation as well as in such person's capacity as a director or officer from
the date he became or becomes such director or officer, and any repeal or
modification of this section shall not adversely affect any right or protection
existing at the time of such repeal or modification. Except as provided in
Section 11.03 of these Bylaws, the corporation shall have no obligations under
this Article XI to indemnify any person in connection with any proceeding, or
part thereof, initiated by such person without authorization by the Board of
Directors.
11.06 DETERMINATION THAT INDEMNIFICATION IS PROPER. Any indemnification
under Section 11.01 or 11.02 of these Bylaws (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the person is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
Section 11.01 or 11.02, whichever is applicable, and upon an evaluation of the
reasonableness of expenses and amount paid in settlement. Such determination
and evaluation shall be made in any of the following ways:
(a) by a majority vote of a quorum of the Board consisting of directors
who are not parties or threatened to be made parties to such action, suit or
proceeding;
(b) if the quorum described in clause (a) above is not obtainable, then by
a majority vote of a committee of directors duly designated by the Board of
Directors and consisting solely of two or more directors who are not at the
time parties or threatened to be made parties to the action, suit or
proceeding;
(c) by independent legal counsel in a written opinion which counsel shall
be selected in one of the following ways: (i) by the Board of Directors or its
committee in the manner prescribed in subparagraph (a) or (b); or (ii) if a
quorum of the Board of Directors cannot be obtained under subparagraph (a) and
a committee cannot be designated under subparagraph (b), by the Board of
Directors; or
(d) by the shareholders, but shares held by directors or officers who are
parties or threatened to be made parties to the action, suit or proceeding may
not be voted.
11.07 PROPORTIONATE INDEMNITY. If a person is entitled to indemnification
under Section 11.01 or 11.02 for a portion of expenses, including attorneys'
fees, judgments, penalties, fines,
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and amounts paid in settlement, but not for the total amount thereof, the
corporation shall indemnify the person for the portion of the expenses,
judgments, penalties, fines, or amounts paid in settlement for which the person
is entitled to be indemnified.
11.08 EXPENSE ADVANCE. The corporation shall pay or reimburse the
reasonable expenses incurred by a person referred to in Section 11.01 or 11.02
of these bylaws who is a party or threatened to be made a party to an action,
suit, or proceeding in advance of final disposition of the proceeding if all of
the following apply: (a) the person furnishes the corporation a written
affirmation of his or her good faith belief that he or she has met the
applicable standard of conduct set forth in Section 11.01 or 11.02; (b) the
person furnishes the corporation a written undertaking executed personally, or
on his or her behalf, to repay the advance if it is ultimately determined that
he or she did not meet the standard of conduct; (c) the authorization of
payment is made in the manner specified in Section 11.06; and (d) a
determination is made that the facts then known to those making the
determination would not preclude indemnification under Section 11.01 or 11.02.
The undertaking shall be an unlimited general obligation of the person on whose
behalf advances are made but need not be secured.
11.09 NON-EXCLUSIVITY OF RIGHTS. The indemnification or advancement of
expenses provided under this Article XI is not exclusive of other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under a contractual arrangement with the corporation. However, the
total amount of expenses advanced or indemnified from all sources combined
shall not exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
11.10 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the corporation to the fullest extent of the
provisions of this Article XI with respect to the indemnification and
advancement of expenses of directors and officers of the corporation.
11.11 FORMER DIRECTORS AND OFFICERS. The indemnification provided in this
Article XI continues as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such person.
11.12 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have power to
indemnify him against such liability under these Bylaws or the laws of the
State of Michigan.
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11.13 CHANGES IN MICHIGAN LAW. In the event of any change of the Michigan
statutory provisions applicable to the corporation relating to the subject
matter of this Article XI of these Bylaws, then the indemnification to which
any person shall be entitled hereunder shall be determined by such changed
provisions, but only to the extent that any such change permits the corporation
to provide broader indemnification rights than such provisions permitted the
corporation to provide prior to any such change. Subject to Section 11.15, the
Board of Directors is authorized to amend these Bylaws to conform to any such
changed statutory provisions.
11.14 ENFORCEMENT OF RIGHTS. Any indemnification or payment in advance of
final disposition under this Article XI shall be made promptly, and in any
event within 30 days, after written request to the corporation by the person
seeking such indemnification or payment. The rights granted by this Article XI
shall be enforceable by such person in any court of competent jurisdiction.
11.15 AMENDMENT OR REPEAL OF ARTICLE XI. No amendment or repeal of this
Article XI shall apply to or have any effect on any director or officer of the
corporation for or with respect to any acts or omissions of such director or
officer occurring prior to such amendment or repeal.
ARTICLE XII
CONTROL SHARES AND CONTROL SHARE ACQUISITIONS
12.01 CONTROL SHARE ACQUISITIONS. If the corporation is or becomes
subject to Chapter 7B of the Michigan Business Corporation Act, effective on
the first day on which the corporation has one hundred (100) or more
shareholders of record, shares of capital stock of the corporation constituting
"control shares" acquired in "control share acquisitions" (as defined in
Chapter 7B of such Act) shall have the same voting rights as were accorded such
shares before the "control share acquisition" only to the extent specifically
granted by resolution approved by the shareholders of the corporation in
accordance with Chapter 7B of such Act.
13.02 REDEMPTION OF CONTROL SHARES. Control shares as to which all of the
following conditions are met may be redeemed by the corporation, upon approval
by the Board of Directors, at any time after such conditions have been met:
(a) either (i) an acquiring person statement has been filed with the
corporation, a meeting of the shareholders has been held at which voting rights
of the control shares have been submitted to the shareholders for a vote, and
the shareholders do not grant full voting rights to the control shares, or (ii)
if an acquiring person statement has not been filed with the corporation with
respect to a control share acquisitions and the redemption is completed during
the period ending sixty (60) days after the last acquisition of control shares
or the power to direct the exercise of voting power of control shares, by the
acquiring person; and
15
<PAGE> 16
(b) the consideration to be paid in redemption of the control shares
consists of cash, property or securities of the corporation, or any combination
thereof, including shares of capital stock of the corporation or debt
obligations of the corporation; and
(c) the price to be paid for the control shares does not exceed the fair
value of the shares, as determined by the Board of Directors, which value shall
not be less that the highest price paid per share by the acquiring person in
the control share acquisition.
13.03 PROCEDURES. The Board of Directors may, by resolution, adopt
procedures for the giving of notice of such redemption to the acquiring person
and for the delivery of certificates representing the control shares to be
acquired in exchange for the corporation's payment of fair value therefor.
ARTICLE XIII
AMENDMENTS
13.01 AMENDMENTS. The Bylaws of the corporation and any Article or
provision thereof may be amended or repealed, in whole or in part, by majority
vote of the Board of Directors provided that notice of the meeting at which
such amendment or repeal is to be acted upon includes notice of the proposed
amendment or repeal.
16
<PAGE> 1
EXHIBIT 5
[DYKEMA GOSSETT LETTERHEAD]
December 4, 1996
Michigan Heritage Bancorp, Inc.
21211 Haggerty Road
Novi, Michigan 48375
Re: Registration Statement on Form SB-2
Gentlemen:
We have acted as counsel for Michigan Heritage Bancorp, Inc., a
Michigan corporation (the "Company"), in connection with the preparation
and filing with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, of a Registration Statement on Form SB-2 (the
"Registration Statement") relating to the offering of up to 1,150,000 shares of
the Company's Common Stock, no par value (the "Shares"), consisting of
1,000,000 shares of Common Stock to be purchased by underwriters on a "firm
commitment" basis and up to 150,000 shares of Common Stock which such
underwriters may purchase to cover over-allotments.
In so acting, we have examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such corporate
records, documents, certificates and other instruments as in our judgment were
necessary or appropriate to enable us to render the opinions expressed below.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is in good
standing under the laws of the State of Michigan.
2. The Shares to which the Registration Statement relates
have been duly authorized for issuance and, when issued and
sold in the manner specified in the Registration Statement,
the Shares will be validly issued, fully paid and
nonassessable.
<PAGE> 2
Michigan Heritage Bancorp, Inc.
December 4, 1996
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
DYKEMA GOSSETT PLLC
/s/ Paul R. Rentenbach
Paul R. Rentenbach
<PAGE> 1
EXHIBIT 10.1
MICHIGAN HERITAGE BANCORP, INC.
1996 EMPLOYEE STOCK OPTION PLAN
-------
Effective December 31, 1996
<PAGE> 2
MICHIGAN HERITAGE BANCORP, INC.
1996 EMPLOYEE STOCK OPTION PLAN
Subject to shareholder approval, effective December 31, 1996, the plan
described herein is hereby adopted as the Michigan Heritage Bancorp, Inc. 1996
Employee Stock Option Plan (the "Plan").
1. Purpose. The purpose of this Plan is to promote the best interests of
the Corporation and its shareholders by encouraging Employees of the Corporation
to acquire a proprietary interest in the Company through the grant of Options,
thus identifying their interests with those of shareholders and encouraging
Employees to make greater efforts on behalf of the Corporation to achieve its
long-term business plans and objectives.
2. Definitions. As used in this Plan, the following terms have the
meaning described below:
(a) "Agreement" means the written agreement that sets forth the
terms of a Participant's Option.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Change in Control" means the occurrence of any of the following
events:
(i) If any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), or group of persons acting in concert,
other than the Corporation, a Subsidiary or an employee benefit plan
or employee benefit plan trust maintained by the Corporation or a
Subsidiary, becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 of the Exchange Act, except that a person also shall be
deemed the beneficial owner of all securities which such person may
have a right to acquire, whether or not such right is presently
exercisable), directly or indirectly, of securities of the Corporation
representing fifty (50%) or more of the combined voting power of the
Corporation's then outstanding securities ordinarily having the right
to vote in the election of directors; or
(ii) A liquidation or dissolution of the Corporation, sale of
substantially all of the assets of the Corporation, or a merger,
consolidation or combination in which the Corporation is not the
survivor; or
(iii) The addition of new members to the Board within any
consecutive twenty-four (24) month period, which members constitute a
majority of the Board, unless a majority of the Board consists of
incumbent members of the
<PAGE> 3
Board in office prior to the commencement of such twenty-four (24)
month period, plus new members who were recommended or appointed by a
majority of the incumbent directors in office immediately prior to the
addition of such new members to the Board.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee of the Board of
Directors, consisting of two or more disinterested members of the Board, as
defined in Rule 16b-3 of the Exchange Act (i.e., a director who is not,
during the one year prior to service as a member of the Committee, or
during such service, granted or awarded securities pursuant to this Plan or
any other plan of the Corporation or any of its affiliates), who have been
appointed by the Board to act as the committee for purposes of
administering this Plan.
(f) "Common Stock" means shares of the Corporation's authorized
Common Stock.
(g) "Corporation" means Michigan Heritage Bancorp, Inc., a Michigan
corporation.
(h) "Disability" means total and permanent disability, as defined in
Section 22(e) of the Code.
(i) "Employee" means a salaried employee of the Corporation or
Subsidiary who has an "employment relationship" with the Corporation or a
Subsidiary, as defined in Treasury Regulation 1.421-7(h) and who is either
an executive officer of the Company or a director of one of the Company's
principal departments (but does not mean a member of the Committee), and
the term "employment" means employment with the Corporation or a Subsidiary
of the Corporation.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time and any successor thereto.
(k) "Fair Market Value" means, for purposes of determining the value
of Common Stock, the average of the published closing bid and asked prices
of the Common Stock on the NASD OTC Bulletin Board (the "Bulletin Board"),
or if the Common Stock has become listed on The Nasdaq Stock Market
("Nasdaq"), then on Nasdaq instead; or if the Common Stock is not quoted on
either the Bulletin Board or Nasdaq, a value determined by any fair and
reasonable means prescribed by the Committee.
(l) "Grant Date" means the date on which the Committee authorizes an
2
<PAGE> 4
individual Option or such later date as shall be designated by the
Committee.
(m) "Incentive Stock Option" means an Option that is intended to
meet the requirements of Section 422 of the Code.
(n) "Initial Offering Price" means the price per share of Common
Stock received by the Company, excluding any underwriters' fees or
commissions in connection with its initial public offering of Common
Stock.
(o) "Nonqualified Stock Option" means an Option that is not intended
to constitute an Incentive Stock Option.
(p) "Option" means either an Incentive Stock Option or a
Nonqualified Stock Option.
(q) "Option Agreement" means either or both of an Incentive Stock
Option Agreement between a Participant and the Corporation relative to
the grant of an Option as described in Section 6(a) of this Plan.
(r) "Participant" means an Employee designated by the Committee to
participate in this Plan.
(s) "Retirement" means termination of a Participant's employment
under the terms of the Corporation's profit sharing plan.
(t) "Subsidiary" means a corporation of which at least fifty-one
percent (51%) of the outstanding voting stock is owned by the Company,
either directly or indirectly through one or more other Subsidiaries.
3. Administration. This Plan shall be administered by the Committee, in
accordance with Rule 16b-3 of the Exchange Act. The Committee shall interpret
this Plan, prescribe, amend, and rescind rules and regulations relating to this
Plan, and make all other determinations necessary or advisable for the
administration of this Plan. The Committee will make determinations with respect
to the officers and other key employees who will participate in the Plan and the
extent of their participation, including the type of option. In making such
determinations, the Committee may consider the position and responsibilities of
the employee, the nature and value of his or her services and accomplishments,
the present and potential contribution of the employee to the success of the
Company, and such other factors as the Committee may deem relevant. The decision
of the Committee on any question concerning the interpretation of this Plan or
any Option granted under this Plan shall be final and binding upon all
Participants.
4. Participants. Participants in this Plan shall be such Employees
(including
3
<PAGE> 5
Employees who are directors) of the Corporation and its Subsidiaries as the
Committee may select from time to time. The Committee may grant Options to an
individual upon the condition that the individual become an Employee of the
Corporation or of a Subsidiary, provided that the Option award shall be deemed
to be granted only on the date that the individual becomes an Employee.
5. Stock. Subject to adjustment as provided in Section 9, the total
number of shares of Common Stock available for grants of Options under this Plan
shall be forty thousand (40,000). Shares subject to any unexercised portion of a
terminated, cancelled or expired Option granted hereunder may again be
subjected to grants under this Plan.
6. Grant of Options.
(a) Terms and Conditions; Designations. The Committee, at any time
and from time to time, subject to the terms and conditions of this Plan,
may grant Options to such Employees and for such number of shares of Common
Stock as it shall designate. The Committee shall determine the general
terms and conditions of exercise, including any applicable vesting
requirements, and the Committee may designate any Option granted as either
an Incentive Stock Option or a Nonqualified Stock Option, or may designate
a portion of an Option as an Incentive Stock Option or a Nonqualified Stock
Option. Each grant of an Option shall be evidenced by an Incentive Stock
Option Agreement or a Nonqualified Stock Option Agreement, as the case may
be, which shall specify the applicable terms and conditions and
designations relative to such grant as determined by the Committee. Each
Option granted under this Plan shall meet all of the terms and conditions
of this Plan, except that an Incentive Stock Option shall comply with the
additional requirements of Section 6(b) below.
(b) Additional Requirements of Incentive Stock Options. Any Option
intended to constitute an Incentive Stock Option shall meet all of the
terms and conditions of this Plan and, in addition, shall comply with all
of the following requirements of this Section 6(b):
(i) No Incentive Stock Option shall be granted with an exercise
price below its Fair Market Value on the Grant Date or with an
exercise term that extends beyond ten (10) years from the Grant Date.
(ii) An Incentive Stock Option shall not be granted to any
Participant who owns (within the meaning of Section 424(d) of the
Code) stock of the Corporation or any Subsidiary possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation or a Subsidiary unless, at the Grant Date,
the exercise price for the Option is at least one hundred ten percent
(110%) of the Fair Market Value of the shares subject to the Option
and the Option, by its terms, is not exercisable more than five (5)
years after the Grant
4
<PAGE> 6
Date.
(iii) The aggregate Fair Market Value of the underlying Common Stock
(determined at the Grant Date) as to which Incentive Stock Options
granted under this Plan (including a plan of a Subsidiary) may first
be exercised by a Participant in any one calendar year shall not
exceed one hundred thousand dollars ($100,000). To the extent that an
Option intended to constitute an Incentive Stock Option shall violate
the foregoing one hundred thousand dollar ($100,000) limitation, the
portion of the Option that exceeds the one hundred thousand dollar
($100,000) limitation shall be deemed to constitute a Nonqualified
Stock Option.
(c) Option Price. The Committee shall determine the Option price per
share for each Option granted under this Plan. The option price will not be
less than the Fair Market Value of the shares of Common Stock at the time
the option is granted except in the case of an incentive stock option
granted to a 10% shareholder where the option price will be equal to 110%
of Fair Market Value; provided that for all Options granted during the 12
month period following an initial public offering of Common Stock by the
Company, the Option price shall not be less than the Initial Offering
Price. The option price shall be paid in cash or through the delivery of
previously owned shares of the Company's Common Stock, or by a
combination of cash and Common Stock.
(d) Notice of Exercise and Payment.
(i) A Participant shall exercise an Option by delivery to the
Corporation of a notice of exercise in substantially the form set
approved by the Committee.
(ii) The purchase price for shares of Common Stock to be acquired
upon exercise of an Option granted hereunder shall be paid in full in
cash or by personal check, bank draft or money order at the time of
exercise; provided, however, that in lieu of such form of payment a
Participant may pay such purchase price in whole or in part by
tendering shares of Common Stock, duly endorsed for transfer (or with
duly executed stock powers attached), or in any combination of the
above. Shares of Common Stock surrendered upon exercise shall be
valued at Fair Market Value on the business day preceding the date on
which the certificate(s) for such shares, duly endorsed for transfer
or accompanied by appropriate stock powers, are surrendered to the
Corporation. Participants who are subject to short swing profit
restrictions under the Exchange Act and who exercise an Option by
tendering previously-acquired shares shall do so only in accordance
with the provisions of Rule 16b-3 of the Exchange Act. Notwithstanding
the foregoing, any Option shall be deemed exercised by delivery to the
Corporation of a properly executed exercise notice, acceptable to the
Corporation, together with irrevocable instructions to the
Participant's broker to
5
<PAGE> 7
deliver to the Corporation sufficient cash to pay the exercise price
and any applicable income and employment withholding taxes, in
accordance with a written agreement between the Corporation and the
brokerage firm ("cashless exercise procedure").
(e) Acceleration of Exercise of Option. The Committee, in its sole
discretion, may accelerate the time at which any option may be exercised in
whole or in part.
7. Termination of Employment.
(a) Options.
(i) If, prior to the date that an Option first becomes
exercisable, a Participant's employment is terminated for any reason
other than a Change in Control, the Participant's right to exercise
the Option shall terminate and all rights thereunder shall cease.
(ii) In the event that the employment of an optionee to whom an
option has been granted under the Plan shall terminate (except as set
forth below) such option may be exercised, to the extent that the
option was exercisable on the date of termination of employment, only
until the earlier of three (3) months after such termination or the
original expiration date of the option; provided however, that if
termination of employment results from death or total and permanent
disability, such three (3) month period shall be extended to twelve
(12) months.
(iii) The Committee, at the time of a Participant's termination of
employment, may, in its sole discretion, accelerate the term of an
Option or extend the exercise period of an Option.
8. Adjustments. The total amount of Common Stock for which Options may be
granted under this Plan, and the number of shares subject to any such grants
(both as to the number of shares of Common Stock and the Option price), shall be
appropriately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock resulting from payment of a stock dividend on
Common Stock, a subdivision or combination of shares of Common Stock, a stock
split, a recapitalization or otherwise. The foregoing adjustments and the manner
of application of the foregoing provisions shall be determined by the Committee
in its sole discretion. Any such adjustment may provide for the elimination of
any fractional share which might otherwise become subject to an Option.
9. Change in Control; Golden Parachutes. Notwithstanding anything
contained herein to the contrary, upon a Change in Control, any outstanding
Option granted hereunder shall immediately become exercisable in full,
regardless of any installment provision applicable to
6
<PAGE> 8
such Option; provided, however, that to the extent that the acceleration of a
grant is deemed to constitute a "golden parachute payment" under Section 280G of
the Code and such payment, when aggregated with other golden parachute payments
to the Participant results in an "excess golden parachute payment" under Section
280G of the Code, any accelerated payment under this Section 11 shall be reduced
to the highest permissible amount that shall not subject the Participant to an
excess golden parachute excise tax under Section 4999 of the Code and shall
entitle the Corporation to retain its full compensation tax deduction for the
payment.
10. Securities Laws.
(a) Compliance. Notwithstanding anything contained herein to the
contrary, the Corporation's obligation to sell and deliver Common Stock pursuant
to the exercise of an Option is subject to such compliance with federal and
state laws, rules and regulations applying to the authorization, issuance or
sale of securities as the Corporation deems necessary or advisable. No shares
shall be issued until counsel for the Corporation has determined that the
Corporation has complied with all requirements under appropriate securities
laws.
(b) Assurance of No Violation. The Corporation shall not be required to
sell and deliver Common Stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares shall not violate any of
the provisions of the Securities Act of 1933, as amended, or the Exchange Act,
or the rules and regulations of the Securities Exchange Commission promulgated
thereunder or those of the National Association of Securities Dealers, Inc. (the
"NASD") with respect to NASDAQ or any stock exchange on which the Common Stock
may be listed, the provisions of any state laws governing the sale of
securities, or that there has been compliance with the provisions of such acts,
rules, regulations and laws.
(c) Restrictions. The Committee may impose such restrictions on any
shares of Common Stock acquired pursuant to the exercise of an Option under this
Plan as it may deem advisable, including, without limitation, restrictions (i)
under applicable federal securities laws, (ii) under the requirements of the
NASD with respect to NASDAQ or any stock exchange or other recognized trading
market upon which such shares of Common Stock are then listed or traded, and
(iii) under any blue sky or state securities laws applicable to such shares.
Notwithstanding any other provision of this Plan, the Committee may impose such
conditions on the exercise of an Option as may be required to satisfy the
requirements of Rule 16b-3 of the Exchange Act.
11. Withholding Taxes--Nonqualified Stock Options.
(a) Corporation's Right to Withhold; Use of Previously-Acquired Shares
and Cashless Exercise Procedure. The Corporation shall have the right to
withhold from a Participant's compensation or require a Participant to remit
sufficient funds to satisfy applicable withholding for income and employment
taxes upon the exercise of a Nonqualified Stock Option. A Participant may make a
written election to tender previously-acquired shares of
7
<PAGE> 9
Common Stock or have shares of Common Stock withheld from the exercise,
provided that the shares have an aggregate Fair Market Value sufficient to
satisfy in whole or in part the applicable withholding taxes. The cashless
exercise procedure of Section 6(d)(ii) may be utilized to satisfy the
withholding requirements related to the exercise of a Nonqualified Stock
Option.
(b) Insider Trading Restrictions. Except as permitted under Rule 16b-3
of the Exchange Act, a Participant subject to the insider trading restrictions
of Section 16(b) of the Exchange Act may use Common Stock to satisfy the
applicable withholding requirements only if notice of election to exercise is
given to the Committee within the ten (10) day "window periods" set forth in
Rule 16b-3, or if such election is made at least six months prior to the date
on which the exercise of the Nonqualified Stock Option. Any election by a
Participant to utilize Common Stock for withholding purposes is subject to the
discretion of the Committee.
12. Termination and Amendment. The Board may terminate this Plan, or
the granting of Options under this Plan, at any time. An option may not be
granted pursuant to the Plan after December 31, 2006. The Board of Directors
may from time to time terminate the Plan or amend the Plan subject to
shareholder approval to the extent necessary to satisfy the requirements of
Rule 16b-3 under the Exchange Act, or any successor rule. The Board may amend
or modify this Plan at any time and from time to time, but no amendment or
modification, without the approval of the shareholders of the Corporation,
shall (a) materially increase the benefits accruing to Participants under this
Plan, (b) increase the amount of Common Stock for which grants and awards may
be made under this Plan, except as permitted under Section 11 hereof, or (c)
change the provisions relating to the eligibility of individuals to whom grants
and awards may be made under this Plan. No amendment, modification, or
termination of this Plan shall in any manner affect any Option granted under
this Plan without the consent of the Participant holding the Option.
13. Miscellaneous.
(a) Partial Exercise; No Fractional Shares. The Committee may permit,
and shall establish procedures for, the partial exercise of Options granted
under this Plan, provided that no fractional shares of Common Stock shall be
issued upon exercise of an Option.
(b) Rights Prior to Issuance of Shares. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option until the
issuance of a stock certificate for such shares. No adjustment shall be made
for dividends or other rights with respect to such shares for which the record
date is prior to the date the certificate is issued.
(c) Non-Assignability. No Option shall be transferable by a Participant
except by will or the laws of descent and distribution. During the lifetime of
a Participant, an Option shall be exercised only by the Participant. Any
transferee of an Option shall take the same subject to the terms and conditions
of this Plan and the related Agreement. No transfer of an Option by
8
<PAGE> 10
will or the laws of descent and distribution shall be effective to bind the
Corporation unless the Corporation shall have been furnished with written
notice thereof and with a copy of the will and/or such other evidence as the
Corporation may deem necessary to establish the validity of the transfer and
the acceptance by the transferee of the terms and conditions of the Option.
(d) Effect on Employment. Neither the adoption of this Plan nor the
granting of any Option pursuant to this Plan shall be deemed to confer on any
person any right to continue in the employ of the Company or a Subsidiary or to
continue to perform services for the Company or a Subsidiary or interferes in
any way with the right of the Company or a Subsidiary to terminate such
person's service as an officer or employee at any time.
(e) Use of Proceeds. The proceeds received from the sale of Common
Stock pursuant to this Plan will be used for general corporate purposes of the
Corporation.
(f) Captions. The captions and headings of the sections and the
subsections have been inserted as a matter of convenience and reference only
and shall not control or affect the meaning or construction of this Plan.
14. Approval of Plan. This Plan shall be subject to the approval of
the holders of at least a majority of the Common Stock of the Corporation
present and entitled to vote at a meeting of shareholders of the Corporation
held within twelve (12) months after adoption of this Plan by the Board. No
Option granted under this Plan may be exercised in whole or in part until this
Plan has been approved by the shareholders as provided herein. If not approved
by shareholders within such twelve (12) month period, this Plan and any Options
granted hereunder shall be rescinded.
BOARD APPROVAL: December __, 1996
SHAREHOLDER APPROVAL: December __, 1996
9
<PAGE> 1
EXHIBIT 10.2
MICHIGAN HERITAGE BANCORP, INC.
1996 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
-----------------
Effective: December 31, 1996
<PAGE> 2
MICHIGAN HERITAGE BANCORP, INC.
1996 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
Subject to shareholder approval, effective December 31, 1996, the plan
described herein is hereby adopted as the Michigan Heritage Bancorp, Inc. 1996
Nonemployee Director Stock Option Plan (the "Plan").
I. GENERAL PROVISIONS
1.1 Purpose. The purpose of this Plan is to promote the best
interests of the Corporation and its shareholders by attracting and motivating
highly qualified individuals to serve as Directors and to encourage such
Directors to acquire an ownership interest in the Corporation, thus
identifying their interests with those of shareholders.
1.2 Definitions. As used in this Plan, the following terms have
the meaning described below:
(a) "Agreement" means the written agreement that sets forth
the terms of a Participant's Option.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Change in Control" means the occurrence of any of the
following events:
(i) If any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), or group of persons acting in
concert, other than the Corporation, a Subsidiary or an employee benefit plan
or employee benefit plan trust maintained by the Corporation or a Subsidiary,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 of the
Exchange Act, except that a person also shall be deemed the beneficial owner of
all securities which such person may have a right to acquire, whether or not
such right is presently exercisable), directly or indirectly, of securities of
the Corporation representing twenty (20%) or more of the combined voting power
of the Corporation's then outstanding securities ordinarily having the right to
vote in the election of directors; or
(ii) A liquidation or dissolution of the Corporation,
sale of substantially all of the assets of the Corporation, or a merger,
consolidation or combination in which the Corporation is not the survivor; or
(iii) The addition of new members to the Board within
any consecutive twenty-four (24) month period, which members constitute a
majority of the Board, unless a majority of the Board, consists of incumbent
members of the Board in office prior to the commencement of such twenty-four
(24) month period, plus new members who were recommended or appointed by a
majority of the incumbent directors in office immediately prior
<PAGE> 3
to the addition of such new members to the Board.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Committee" means the Compensation Committee of the
Corporation, if any, which shall be comprised of two or more disinterested
members of the Board, as defined in Rule 16b-3.
(f) "Common Stock" means shares of the Corporation's
authorized Common Stock.
(g) "Corporation" means Michigan Heritage Bancorp, Inc., a
Michigan Corporation.
(h) "Director" means a member of the Corporation's Board of
Directors.
(i) "Disability" means total and permanent disability, as
defined in Section 22(e) of the Code.
(j) "Effective Date" means December 31, 1996.
(k) "Eligible Director" means a Director who is not an
Employee of the Corporation.
(l) "Employee" means an employee of the Corporation or its
Subsidiaries, who has an "employment relationship" with the Corporation or its
Subsidiaries, as defined in Treasury Regulation 1.421-7(h), and the term
"employment" means employment with the Corporation or its subsidiaries.
(m) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and any successor thereto.
(n) "Expiration Date" means the date set forth in the
Agreement relating to an Option on which the right to exercise such Option
shall expire, except as otherwise provided in Article III below. Unless
otherwise provided in the Agreement, the Expiration Date for an Option shall
be the seventh (7th) anniversary of its Grant Date.
(o) "Fair Market Value" means, for purposes of determining
the value of Common Stock, the average between the published closing bid and
asked prices of the Common Stock on the NASD OTC Bulletin Board or if the
Common Stock has become listed on The Nasdaq Stock Market or a national
securities exchange, then on The Nasdaq Stock Market or such exchange instead;
or if the Common Stock is not quoted on either the NASD OTC Bulletin
2
<PAGE> 4
Board or the Nasdaq Stock Market or any nationally recognized stock exchange, a
value determined by any fair and reasonable means prescribed by the Committee.
(p) "Grant Date" means the date on which an Option was
automatically awarded pursuant to Section 2.1.
(q) "Initial Offering Price" means the price per share of
Common Stock received by the Company, excluding any underwriters' fees or
commissions in connection with its initial public offering of Common Stock.
(r) "Nonemployee Director" means a Director who is not an
Employee of the Company.
(s) "Nonqualified Stock Option" means an Option that is not
intended to meet the requirements of Section 422 of the Code.
(t) "Option" means a Nonqualified Stock Option to purchase
Common Stock granted under this Plan.
(u) "Participant" means each of the Nonemployee Directors
of the Corporation participating in this Plan from time to time.
(v) "Plan" means this Michigan Heritage Bancorp, Inc. 1996
Nonemployee Director Stock Option Plan, the terms of which are set forth
herein, and any amendments hereto.
(w) "Rule 16b-3" means Rule 16b-3 under the Exchange Act,
as in effect from time to time.
(x) "Subsidiary" means a corporation of which more than
fifty percent (50%) of the outstanding voting stock is owned by the
Corporation, either directly or indirectly through one or more other
Subsidiaries.
1.3 Administration. To the extent permitted by Rule 16b-3, the
Plan shall be administered by the Committee or another committee appointed by
at least a majority of the Board of Directors of the Corporation. The
Committee shall interpret the Plan, prescribe, amend, and rescind rules and
regulations relating to the Plan, and make all other determinations necessary
or advisable for its administration. The decision of the Committee on any
question concerning the interpretation of the Plan or its administration with
respect to any Option granted under the Plan shall be final and binding upon
all Participants.
1.4 Stock. The total number of shares of Common Stock available
for grants under the Plan shall not, in the aggregate, exceed 60,000 shares of
Common Stock, as adjusted from time to time in accordance with Article IV.
Shares subject to any unexercised portion of a
3
<PAGE> 5
terminated, forfeited, cancelled or expired Option granted hereunder shall be
available for subsequent grants under the Plan. In the event that an option
granted under the Plan is exercised by the delivery of shares of Common Stock
previously acquired upon the exercise of Options issued under the Plan or
through the retention of options procedure as described in Section 2.6 below,
the shares of Common Stock so delivered to the Corporation or underlying such
retained options shall be available for subsequent grants under this Plan.
II. STOCK OPTIONS FOR ELIGIBLE DIRECTORS
2.1 Automatic Grants of Options to Nonemployee Directors.
(a) Eligibility. All Nonemployee Directors of the
Corporation who have been elected by the shareholders at an Annual Meeting, who
have been appointed by the incorporator, or who have been appointed to fill a
vacancy on the Board, and are serving on the Board at the time an Option is
granted hereunder shall automatically participate hereunder.
(b) Initial Options; Subsequent Options. On February 1,
1997, the Company shall grant to each Participant an option to purchase 12,000
shares of Common Stock at the Initial Offering Price (the "Initial Option").
The Initial Options shall become exercisable at the following times with
respect to the amount of shares listed:
Exercisability
Date Number of Shares
-------------- ----------------
March 1, 1997 6,000 shares
March 1, 1998 8,000 shares
March 1, 1999 10,000 shares
March 1, 2000 12,000 shares
Nonemployee Directors who are appointed or elected after March 1, 1997,
and who become Participants, shall be granted an option ("Subsequent Option")
on the first day of the month following their appointment or election as a
director for a number of shares which is equal to the amount set forth in the
following table, and is based on the time of their appointment or election in
relation to the next regular annual meeting of shareholders of the Company, as
follows:
Year of First Annual
Meeting of Shareholders
After Appointment or Number of
Election Options Granted
----------------------- ---------------
1998 3,000 shares
1999 2,000 shares
2000 1,000 shares
4
<PAGE> 6
All Subsequent Options shall become exercisable in full 180 days
following their date of grant. The grant of Initial Options and Subsequent
Options shall be automatic and nondiscretionary.
(c) No Discretion. Notwithstanding any provision in the
Plan to the contrary, the Committee shall have no discretion with respect to
the terms of grants made to a Nonemployee Director pursuant to this Article II,
except to the extent such discretion would not result in the grant or the
Plan failing to qualify for the disinterested Director exemption provided
under Rule 16b-3.
2.2 Option Agreement. Each Option granted pursuant to this Article
II shall be evidenced by an Agreement for Nonemployee Directors in accordance
with the terms of the Plan and shall specify, among other things, the exercise
price, the term of the Option, the date or dates on which the Option becomes
exercisable, the number of shares to which the Option relates, and other such
provisions as the Committee shall determine.
2.3 Option Price. The purchase price per share of Common Stock for
the Initial Option shall be the Initial Public Offering price per share, which
is deemed to be the Fair Market Value of the Common Stock at such time of grant
or such Options. The purchase price per share of Common Stock for all
Subsequent Options granted pursuant to this Article II shall be equal to the
Fair Market Value per share of Common Stock on the Grant Date.
2.4 Payment for Option Shares. The purchase price for shares of
Common Stock to be acquired upon exercise of an Option granted hereunder shall
be paid in full at the time of exercise in any of the following ways: (a) in
cash; (b) by certified check, bank draft or money order; (c) by delivery to the
Corporation of previously-acquired shares of the Corporation's Common Stock
with a Fair Market Value (determined on the last trading date immediately
preceding the date of exercise) equal to the exercise price; or (d) by any
combination of the foregoing.
III. TERMINATION
3.1 General. The unexercised portion of each option automatically
expires, and is no longer exercisable, on the earliest to occur of the
following: (i) seven (7) years after the option is granted , (ii) three (3)
months after the person who was granted the option ceases to be a Nonemployee
Director, other than due to permanent disability, death, or for cause, (iii) one
(1) year following the death or permanent disability of the Nonemployee
Director, and (iv) termination of the Nonemployee Director's service as such,
for cause.
3.2 Post-Termination Exercise. During the period from the
Participant's termination of services as a Nonemployee Director until the
termination of the Option, the Participant, or the person or persons to whom
the Option shall have been transferred by will, by the laws of descent and
distribution, or pursuant to a qualified domestic relations order may exercise
the Option only
5
<PAGE> 7
to the extent that such Option was exercisable on the date of the Participant's
termination.
IV. ADJUSTMENTS AND CHANGE IN CONTROL
4.1 Adjustments. The total amount of Common Stock for which
Options may be granted under this Plan, and the number of shares subject to any
such grants (both as to the number of shares of Common Stock and the Option
price), shall be appropriately adjusted for any increase or decrease in the
number of outstanding shares of Common Stock resulting from payment of a
stock dividend on Common Stock, a subdivision or combination of shares of
Common Stock, a stock split, a recapitalization of Common Stock, or otherwise.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined and made by the Committee. Any such adjustment
may provide for the elimination of any fractional share which might otherwise
become subject to an Option.
4.2 Change in Control. Notwithstanding anything contained herein
to the contrary, upon a Change in Control, any outstanding Option granted
hereunder immediately shall become exercisable in full.
V. MISCELLANEOUS
5.1 Partial Exercise. The Committee shall permit, and shall
establish procedures for, the partial exercise of Options under the Plan.
5.2 Rule 16b-3 Requirements. Notwithstanding any other provision
of the Plan, the Committee may impose such conditions on the exercise of an
Option as may be required to satisfy the requirements of Rule 16b-3 and any
successor thereto.
5.3 Rights Prior to Issuance of Shares. No Participant shall have
any rights as a shareholder with respect to shares covered by an Option until
and only to the extent that the Option is exercised.
5.4 Non-Assignability. Except as set forth below, no Option shall
be transferable by a Participant except by will, the laws of descent and
distribution, or pursuant to a qualified domestic relations order and during
the lifetime of a Participant, an Option shall be exercised only by the
Participant. Notwithstanding the foregoing, to the extent permitted by Rule
16b-3 of the Securities Exchange Act of 1934, as amended from time to time, an
Option may be transferred by a Participant to a living trust of which the
Participant is the grantor and beneficiary during his lifetime, if such transfer
shall not be deemed to constitute a change in beneficial ownership. No transfer
of an Option by will or the laws of descent and distribution (or to a living
trust as applicable) shall be effective to bind the Corporation unless the
Corporation shall have been furnished with written notice thereof and a copy of
the will (or trust) or such evidence as the Corporation may deem necessary to
establish the validity of the transfer and the acceptance by the transferee of
the terms and conditions of the Option.
6
<PAGE> 8
5.5 Securities Laws.
(a) Anything to the contrary herein notwithstanding, the
Corporation's obligation to sell and deliver Common Stock pursuant to the
exercise of an Option is subject to such compliance with federal and state
laws, rules and regulations applying to the authorization, issuance or sale of
securities as the Corporation deems necessary or advisable. The Corporation
shall not be required to sell and deliver Common Stock unless and until it
receives satisfactory assurance that the issuance or transfer of such shares
shall not violate any of the provisions of the Securities Act of 1933, as
amended, or the Exchange Act, or the rules and regulations of the Securities
and Exchange Commission promulgated thereunder or those of the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., the National Association of
Securities Dealers, Inc. or any stock exchange on which the Common Stock may be
listed, the provisions of any state laws governing the sale of securities, or
that there has been compliance with the provisions of such acts, rules,
regulations and laws.
(b) The Committee may impose such restrictions on any
shares of Common Stock acquired pursuant to the exercise of an Option as it may
deem advisable, including, without limitation, restrictions (i) under
applicable federal securities laws, (ii) required by the American Stock
Exchange, Inc., the Nasdaq Stock Market or any stock exchange or other
recognized trading market upon which such shares of Common Stock are then
listed or traded, and (iii) under any blue sky or state securities laws
applicable to such shares. No shares shall be issued until counsel for the
Corporation has determined that the Corporation has complied with all
requirements under appropriate securities laws.
5.6 Termination and Amendment.
(a) The Board may terminate or suspend the Plan, in whole
or in part, or the granting of Options under the Plan, at any time. No new
grants shall be made under the Plan after December 31, 2000.
(b) The Board may amend or modify the Plan at any time and
from time to time, without shareholder approval, no amendment or modification,
without the approval of the shareholders of the Corporation, except that no
such action shall be taken by the Board that (i) materially increase the
benefits accruing to Participants under the Plan, materially increase the
amount of Common Stock for which grants may be made under the Plan, except as
permitted under Sections 1.4 and 4.1, or materially change the provisions
relating to the eligibility of individuals to whom grants may be made under the
Plan, (ii) causes the Nonemployee Director to fail to satisfy the applicable
requirements of Rule 16b-3 under the Exchange Act, or any Nonemployee Director
to fail to qualify as a "disinterested person" as defined in that rule, or
(iii) impairs the rights of any option holder granted under the Nonemployee
Director Plan, without such option holder's consent. Unless otherwise
permitted under Rule 16b-3, this Plan shall not be amended more than once in
any six (6) month period other than to comply with changes in the Code or the
Exchange Act.
7
<PAGE> 9
(c) No amendment, modification or termination of the Plan
shall adversely affect any Option granted under the Plan without the consent of
the Participant holding the Option.
5.7 Effect on Services. Neither the adoption of the Plan nor the
granting of any Option pursuant to the Plan shall be deemed to create any right
in any individual to be retained as a Nonemployee Director.
5.8 Use of Proceeds. The proceeds received from the sale of Common
Stock pursuant to the Plan shall be used for general corporate purposes of the
Corporation.
5.9 Approval of Plan. The Plan shall be subject to the approval of
the holders of at least a majority of the shares of Common Stock of the
Corporation present and entitled to vote at a meeting of shareholders of the
Corporation held within twelve (12) months after adoption of the Plan by the
Board. Any Option granted under the Plan prior to such shareholder approval,
shall be conditioned upon receipt of such approval, and may not be exercised in
whole or in part unless the Plan has been approved by the shareholders as
provided herein. If not approved by shareholders within twelve (12) months
after approval by the Board, the Plan shall be rescinded, and any Options
granted under the Plan shall be void retroactive to the Grant Date.
BOARD APPROVAL: December __, 1996
SHAREHOLDER APPROVAL: December __, 1996
8
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ ------------------------------
Michigan Heritage Bank Michigan
<PAGE> 1
EXHIBIT 23.2
Independent Auditor's Consent
We consent to the use in this Registration Statement of Michigan Heritage
Bancorp, Inc. (the "Company") on Form SB-2 of our report dated November 21,
1996, on the financial statements for the period ended October 31, 1996,
appearing in this Registration Statement. We also consent to the reference to
us under the heading "Experts", and to the incorporation by reference of this
consent into any Rule 462(b) registration statement of the Company that
incorporates by reference this Registration Statement.
Plante & Moran, LLP
Plante & Moran, LLP
Bloomfield Hills, Michigan
December 2, 1996
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