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As filed with the Securities and Exchange Commission on August 7, 1997
Registration No.
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MERCANTILE BANK CORPORATION
(Name of small business issuer in its charter)
Michigan
(State or jurisdiction of
incorporation or organization)
6712
(Primary Standard Industrial
Classification Code Number)
216 North Division Avenue
Grand Rapids, Michigan 49503
(616) 242-9000
38-3360865
(I.R.S. Employer
Identification No.)
(Address and telephone number of principal executive
offices and principal place of business or intended principal place of business)
GERALD R. JOHNSON, JR., CHAIRMAN
42 Deer Run Drive N.E.
Ada, Michigan 49301
(616) 676-0201
(Name, address, and telephone number of agent for service)
Copies to:
JEROME M. SCHWARTZ
Dickinson, Wright, Moon, Van Dusen & Freeman
500 Woodward Avenue, Suite 4000
Detroit, Michigan 48226-3425
DONALD J. KUNZ
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226-3583
Approximate date of proposed sale to the public: As soon as practicable
after the 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 this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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 AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock 1,495,000 shares $10.00 $14,950,000 $4,530.31
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(1) Includes 195,000 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 AUGUST 7, 1997
PROSPECTUS
1,300,000 SHARES
MERCANTILE BANK CORPORATION LOGO
COMMON STOCK
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Mercantile Bank Corporation, a Michigan corporation (the "Company"), is
offering for sale 1,300,000 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 Mercantile Bank of West Michigan, a Michigan banking corporation (in
organization), to be located in Grand Rapids, 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., one of the Underwriters, 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 OTC Bulletin Board. The
organizers of the Bank are expected to purchase at least 328,500 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" COMMENCING 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)
<S> <C> <C> <C>
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Per Share................................. $10.00 $ $
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Total(2).................................. $13,000,000 $ $
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</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting".
(2) The Company has granted the Underwriters a 30-day option to purchase up to
195,000 additional shares of its Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise such option in full,
the Price to Public, Underwriting Discounts, and Proceeds to Company will be
approximately $ , $ and $ , respectively. See
"Underwriting." The Underwriters have agreed to limit the Underwriting
Discounts to 1.5% of the public offering price for up to 328,500 shares sold
by the Underwriters to organizers of the Bank or their immediate families.
See "Underwriting." Organizers of the Bank have provided nonbinding
expressions of interest to purchase a total of approximately 328,500 shares.
If 328,500 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
$248,000.
------------------
The shares of Common Stock are offered by the Underwriters subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to the right of the Underwriters 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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RONEY & CO. LOGO
THE DATE OF THIS PROSPECTUS IS , 1997.
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[KENT COUNTY MAP]
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AVAILABLE INFORMATION
The Company is not currently a reporting company pursuant to the Securities
Exchange Act of 1934, as amended (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 end, 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 Robert B. Kaminski,
Secretary, 216 North Division Avenue, Grand Rapids, Michigan 49503.
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IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS 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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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 Underwriters' over-allotment option.
THE COMPANY
The Company was incorporated on July 15, 1997 under Michigan law and
will be a bank holding company owning all of the common stock of the Bank. 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 range of commercial
and consumer banking services primarily in Kent County, Michigan, including
Grand Rapids and its suburbs. Those services will reflect the Bank's intended
strategy of serving small to medium size businesses, and individual customers
in its market area. The Bank's retail banking strategy will initially focus on
providing products and services, including automated teller machine, computer
home banking, telephone banking and automated bill paying services to
individuals in the Bank's market area. Completion of the offering will be
conditioned on the Company and the Bank having received all necessary
regulatory approvals, subject to the satisfaction of certain conditions.
Management anticipates commencing business in the fourth quarter of 1997.
REASON FOR STARTING MERCANTILE BANK OF WEST MICHIGAN
The liberalization of Michigan's branch banking laws, together with the
expansion of interstate banking, has led to substantial consolidation of the
banking industry in Michigan including the Bank's market area. In many cases,
when these consolidations occurred, local boards of directors were dissolved
and local management relocated or in some cases terminated.
In the opinion of the Company's management, this situation has created
a favorable opportunity for a new commercial bank with local management and
local directors. Management believes that such a bank can be successful in
attracting small to medium sized businesses and individuals as customers who
wish to conduct business with a locally owned and managed institution that
demonstrates an active interest in their business and personal financial
affairs. The Bank will seek to take advantage of this opportunity by
emphasizing in its marketing plan the Bank's local management, their strong
ties and active commitment to the community.
MARKET AREA
The Bank's primary service area will be Kent County, which includes the
City of Grand Rapids, the second largest city in the State of Michigan. Kent
County is comprised of 36 cities, villages or townships and ranks fourth in
population out of Michigan's 83 counties. Kent County covers 856 square miles.
According to available statistical data, Kent County has approximately 14,000
business establishments, an unemployment rate of approximately 3%, and a median
household income that is estimated to have grown approximately 40% from 1990 to
1996.
Kent County is also a significant banking market in the State of
Michigan. According to available industry data, as of June, 30, 1996, total
deposits in Kent County, including banks, thrifts and credit unions, were
approximately $7.6 billion.
The Bank's main office will be located in downtown Grand Rapids, and
will serve as the Company's corporate headquarters. The Company's address will
be 216 North Division Avenue, Grand Rapids, Michigan 49503. The Company's
telephone number is (616) 242-9000.
MANAGEMENT
Gerald Johnson, Jr., Chairman and Chief Executive Officer of the
Company and the Bank, has over 27 years experience in the financial services
industry, including 24 years of banking experience, 17 of which have been in
the Grand Rapids market area. Mr. Johnson was Chairman, President and Chief
Executive Officer of FMB - First Michigan Bank - Grand Rapids ("FMB-Grand
Rapids"), a Michigan banking corporation, from 1988 to May of 1997, and served
as that bank's President and Chief Executive Officer in 1987. FMB-Grand Rapids
had total assets of approximately $550 million at the time of Mr. Johnson's
decision to leave and start a new bank. FMB-Grand Rapids is a subsidiary of
First Michigan Bank Corporation, a bank holding company headquartered in
Zeeland, Michigan with total assets of over $3.6 billion as of June 30, 1997.
Robert Kaminski will serve as Senior Vice President and Secretary of the
Company and the Bank, and is expected to be responsible for credit, compliance
and operations for the Bank. Mr. Kaminski worked for FMB-Grand Rapids from
1984 to 1996 in various credit and loan review positions and worked for First
Michigan Bank Corporation as chief credit manager for three subsidiary banks
from 1996 until his decision to leave the bank in June of 1997.
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During the tenure of Mr. Johnson at FMB-Grand Rapids, total average
assets grew from approximately $83 million at the beginning of 1987 to $550
million at the time of his departure, while operating profits increased in each
of those years. From 1991 through 1996, FMB-Grand Rapids experienced a
compound annual growth in average assets of approximately 20%. Mr. Johnson has
chosen to join the Bank at a compensation level below what he earned in his
previous position.
Mr. Johnson has formed a Board of Directors comprised of individuals
with a broad background in business, real estate and law. In addition to Mr.
Johnson, current directors include Peter Cordes (business), John Gill
(business), David Hecht (law), Lawrence Larsen (business), Calvin Murdock
(business), Dale Visser (real estate) and Robert Wynalda (business). Messrs.
Larsen and Visser are former directors of FMB-Grand Rapids.
Mr. Johnson, the other members of the Board of Directors, and Mr.
Kaminski, represent a significant asset to the Company and the Bank. These
individuals have many years of personal experience in the Kent County and Grand
Rapids market and in some cases, have worked together successfully at other
financial institutions. The directors and officers assembled by the Company
represent a wide range of business, banking and investment knowledge and
experience. The Company believes that these individuals and their relationships
in the Kent County area should offer the Bank a substantial opportunity to
attract new relationships.
The Company anticipates that the organizers of the Bank, alone or with
their spouses, will purchase 328,500 shares of Common Stock in the offering at
the initial offering price. See "Principal Shareholders".
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THE OFFERING
Securities offered by 1,300,000 shares of Common Stock. In addition, the Company
the Company as granted the Underwriters an option to purchase up to an
additional 195,000 shares to cover over-allotments. See
"Description of Capital Stock."
Common Stock to be 1,300,000 shares (1,495,000 shares if the over-allotment
outstanding after option is exercised in full).
the offering (1)
Use of proceeds by Capitalization of the Bank and payment of organization and
the Company preopening expenses. See "Use of Proceeds."
Proposed NASD Over MBWM
the Counter
Bulletin Board
Symbol
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(1) Does not include 45,000 shares issuable upon exercise of outstanding
stock options under the Company's 1997 Employee Stock Option Plan.
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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, the Bank has not commenced operations, and the Bank and the
Company are in the process of obtaining necessary regulatory approvals,
prospective investors do not have access to all of the information that, in
assessing their proposed investment, would be available to the purchasers of
securities of a financial institution with a history of operations.
SIGNIFICANT 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, they are not
expected to be profitable for at least the first two years. Cumulative losses
during the first two years of operation are expected to exceed $1.4 million.
There is no assurance that the Bank or the Company will ever operate
profitably. As a result, it is anticipated that the book value of the Common
Stock will decrease accordingly. 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 in the offering would likely 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 the fourth 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 applied for all regulatory approvals required to organize the
Bank and expects to receive authority to commence operations, subject to the
satisfaction of certain conditions. Those conditions include, among other
things, that: (i) beginning paid-in capital of the Bank will be not less than
$11 million; (ii) 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; and (iii) a commitment that no dividends will be
paid by the Bank until all initial losses have been recaptured, an appropriate
allowance for loan and lease losses has been established, and overall capital
is adequate. Regulatory capital requirements imposed on the Bank may have the
effect of constraining future growth, absent the infusion of additional
capital.
The Company and the Bank will be subject to extensive state and federal
government supervision and regulation. 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. There can be no assurance that future legislation or
government policy will not adversely affect the banking industry or the
operations of the Bank. Federal economic and monetary policy 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 Common Stock for
the foreseeable future. The Company will be largely dependent upon dividends
paid by the Bank for funds to pay dividends on the 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. 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
regulatory limitations on the payment of cash dividends by the Company, see
"Dividend Policy."
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COMPETITION
The Company and the Bank will face strong competition for deposits, loans
and other financial services from numerous banks, savings 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, 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 area. Most of these competitors have been in business for many
years, have established customer bases, are larger, have substantially higher
lending limits than the Bank, and will be able to offer certain services that
the Bank does not expect to provide in the foreseeable future, including
multiple branches, 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 effective legislation regarding interstate branching and
banking may act to increase competition in the future from larger out-of-state
banks. See "Supervision and Regulation - Recent Regulatory Developments."
DEPENDENCE ON MANAGEMENT
The Company is, and for the foreseeable future will be, dependent
primarily upon the services of Gerald R. Johnson, Jr., the Chairman of the
Board and Chief Executive Officer of the Company. If the services of Mr.
Johnson were to become unavailable to the Company for any reason, or if the
Company were unable to hire highly qualified and experienced personnel either
to replace Mr. Johnson, or any other proposed employee, or to staff the
anticipated growth, the operating results of the Company would be adversely
affected. The Company and the Bank do not have employment agreements with, or
key man life insurance for, Mr. Johnson or any other of its officers. See
"Business - Employees" and "Management."
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 could 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 prudent 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 general lending limit is expected to initially be approximately
$1.65 million; subject to a higher lending limit of $2.75 million in specific
cases with approval by two-thirds of the Bank's Board of Directors.
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
with larger lending limits are able to offer. This limit initially may 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 exert such pressure or that
such high 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 Western 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 in such rates. At
any given time, the Bank's assets and liabilities will be such that they are
affected
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<PAGE> 8
differently by a given change in interest rates. 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
guard against 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."
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 provide for
certain supermajority vote and other requirements on certain business
combinations with interested shareholders and limit voting rights of certain
acquirers of control shares. In addition, federal law requires the approval of
the Board of Governors of the Federal Reserve System (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 Underwriters. 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. Roney & Co.,
L.L.C., one of the Underwriters, 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 OTC Bulletin Board and to act as a market
maker in the Common Stock, subject to applicable laws and regulatory
requirements, although it 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 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
for 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 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 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."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,300,000 shares of
Common Stock offered hereby are estimated to be $___ ($___ if the
Underwriters' over-allotment option is exercised in full), after deduction of
the underwriting discounts, but before deducting estimated offering expenses of
$______. The Underwriters have agreed to limit the underwriting discounts to
1.5% of the public offering price for the first 328,500 shares sold by the
Underwriters to organizers of the Bank or their immediate families. Such
persons have provided nonbinding expressions of interest to purchase
approximately 328,500 shares. If such persons purchase 328,500 shares,
underwriting discounts will be reduced by, and proceeds to the Company will be
increased by, $ .
The Company expects to contribute approximately $11,000,000 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 $650,000 for leasehold improvements and related
architectural and engineering services, and approximately $850,000 to purchase
furniture, fixtures and equipment and other necessary assets for the Bank's
operations. The Company expects to use approximately $46,000 of the net
proceeds to pay for organizational expenses of the Bank. These
organizational expenses, and other preopening expenses, were financed on an
interim basis from loans of approximately $278,500 made to the Company by
members of its Board of Directors. It is anticipated that this approximately
$278,500 of 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 Underwriters' over-allotment
option) will initially 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. After the Bank achieves
profitability, recovers its operating deficit, and funds an adequate reserve
for loan and lease losses, the Company may consider payment of dividends.
However, the declaration of dividends is 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 largely
dependent 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.
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 1,300,000 shares of Common
Stock offered hereby and the application of the estimated net proceeds. See
"Use of Proceeds."
<TABLE>
<S> <C>
Short-term debt $-0-
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized, none issued $-0-
Common Stock, no par value, 9,000,000 shares authorized,
1,300,000 shares issued and outstanding 1,300,000
Additional Paid-in Capital 10,723,000
Retained Earnings (204,000)
Organizational Expenses (1) (46,000)
------------
Total Equity $11,773,000
</TABLE>
- ---------
(1) The organizational expenses will be amortized over a 60 month period.
8
<PAGE> 10
BUSINESS
BACKGROUND
The liberalization of Michigan's branch banking laws, together with the
expansion of interstate banking, has led to substantial consolidation of the
banking industry in Michigan, including the West Michigan area, where the Bank
will be located. In the past, several 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. In some
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 local management.
In the opinion of the Company's management, this situation has created a
favorable opportunity for a new commercial 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, in many
cases, 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 Bank will seek to take
advantage of this opportunity by emphasizing in its marketing plan the Bank's
local management and the Bank's ties and commitment to its market area.
After the offering, the Company will own all of the issued and outstanding
stock of the Bank. Following completion of the offering and before
commencement of operations, the Bank intends to complete the furnishing of its
main office, 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 was incorporated as a Michigan business corporation on July
15, 1997. The Company was formed to acquire all of the Bank's issued and
outstanding stock and to engage in the business of a bank holding company under
the federal Bank Holding Company Act of 1956, as amended. On June 23, 1997,
the Company filed its application with the Commissioner of the Financial
Institutions Bureau of the State of Michigan (the "Commissioner") to establish
the Bank. The Company filed its application for deposit insurance with the
FDIC on June 30, 1997. The Company's application to become a bank holding
company for the Bank was filed with the Federal Reserve Board on , 1997. The
Company and the Bank expect to receive the necessary approvals of their
applications and commence business in the fourth quarter of 1997. See "Risk
Factors - Delay in Commencing Operations" and "Risk Factors - Government
Regulation and Monetary Policy."
The Company will maintain its offices at 216 North Division Avenue, Grand
Rapids, Michigan 49503, telephone number (616) 242-9000.
BUSINESS STRATEGY
The Bank intends to provide a range of business and consumer financial
services to serve small to medium-sized business customers and individuals. The
foundation of this strategy will be to emphasize local management and its
commitment to the Bank's primary market area. Gerald R. Johnson, Jr., Chairman
and Chief Executive Officer of the Company, has over 17 years of banking
experience in the Bank's market area. Mr. Johnson was President and Chief
Executive Officer of FMB, a Michigan banking corporation with more than $550
million of assets, at the time of his resignation from FMB to organize the
Bank. Mr. Johnson is assembling a staff that is expected to provide prompt
customer service and effective 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.
BUSINESS FINANCIAL SERVICES. The Bank intends to offer products and
services consistent with its goal of attracting small to medium-sized business
customers as well as a variety of individuals. Commercial loans will be offered
on both a secured and unsecured basis and will be available for working capital
purposes, the purchase of equipment and machinery, financing of accounts
receivable and inventory and for the purchase of real estate, primarily owner
occupied real estate. As part of its banking business, the Bank may make loans
to all types of borrowers secured by first and junior mortgages on various
types of real estate, including without limitation, single-family residential,
multi-family residential, mixed use, commercial, developed, and undeveloped.
In making such loans, the Bank will be subject to written policies, reviewed
and approved at least annually by the Bank's Board of Directors, pursuant to
federal law and regulations. Such policies will address loan portfolio
diversification and prudent underwriting standards, loan administration
procedures, and documentation, approval and reporting requirements. In
addition, federal regulations specify minimum supervisory loan-to-value ratios
applicable to each type of loan secured by real estate.
The Bank will generally look to a borrower's business operations as the
principal source of repayment and will also seek, when appropriate, security
interests in the inventory, accounts receivable or other personal property of
the borrower, and personal guaranties. Although the Bank intends to be
aggressive in seeking new loan growth, it intends to stress high quality in its
loans. To promote such standards, the Board of Directors of the Bank intends to
establish strict lending policies, including specified lending authorities,
loan review policies and lending committees. In establishing
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<PAGE> 11
such policies, the Board of Directors will be required to conform to applicable
bank regulatory requirements. See "Supervision and Regulation".
The Bank intends to actively pursue business checking accounts by offering
competitive rates, computerized banking, and other convenient services to its
business customers. In some cases the Bank will require its business borrowers
to maintain minimum balances. Management of the Bank also intends to establish
relationships with one or more correspondent banks and other independent
financial institutions to provide other services requested by its customers,
including loan participations where the requested loan amount exceeds the
Bank's legal lending limit.
CONSUMER FINANCIAL SERVICES. The Bank's retail banking strategy will
initially focus on providing attractive products and services, including
automated teller machine, computer home banking, telephone banking and
automated bill paying services to individuals in the Bank's market area. The
Bank believes that by offering these technologically advanced banking products
it can attract new deposits and loans without the necessity of expensive brick
and mortar branch operations.
In addition, the Bank will originate residential real estate loans in the
form of first mortgages and home equity loans. The Bank intends to apply to
the Federal Home Loan Mortgage Corporation (Freddie Mac) for approval as a
seller-servicer of residential mortgage loans and intends to sell most of its
fixed rate mortgages into the secondary market. Most of its adjustable rate
loans and home equity loans, which will also be primarily adjustable rate, are
intended to be held in the Bank's portfolio.
The Bank intends to offer other consumer lending services including credit
cards (through third-party providers), direct auto loans, and other personal
loan products on both a secured and unsecured basis.
Management expects that the Bank's staff will have access to current
software and database systems selected to deliver high-quality products and
provide responsive service to clients. The Bank expects to enter into
agreements with third-party service providers to provide customers with
convenient electronic access to their accounts and other bank products through
debit cards, voice response and home banking. The use of third-party service
providers is intended to allow the Bank to remain at the forefront of
technology while minimizing the costs of delivery.
INVESTMENTS. The principal investment of the Company will 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 United States commercial banks, or commercial
paper of United States 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 the 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 two-thirds of
the capital and surplus of the Bank in such real estate as is necessary for the
convenient 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 AREA
Management believes that recent changes in the local banking industry,
including mergers and acquisitions involving commercial banks and thrift
institutions, have 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 some areas of the local business
community that many of the larger financial institutions are not as focused on
providing 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 main office will be located at 216 North Division Avenue
between Lyon Street and Michigan Street in downtown Grand Rapids, Michigan, not
far from the Butterworth Hospital Complex and Grand Rapids Community College.
The Bank will be leasing a building that is being renovated by the Bank.
The Bank's primary service area will be Kent County which includes the
City of Grand Rapids, the second largest city in the State of Michigan. Kent
County is comprised of 36 cities, villages or townships and ranks fourth in
population out of Michigan's 83 counties. Kent County covers 856 square miles.
According to available statistical data, Kent County has approximately 14,000
business establishments, an unemployment rate of
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<PAGE> 12
approximately 3%, and a median household income that is estimated to have grown
approximately 40% from 1990 to 1996.
Kent County is also a significant banking market in the State of Michigan.
According to available industry data, as of June 30, 1996 total deposits in
Kent County, including banks, thrifts and credit unions, were approximately
$7.6 billion.
COMPETITION
There are many thrift institution, credit union and bank offices located
within the Bank's primary market area. 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 thrift
institutions, credit unions, and other banks as well as finance companies,
insurance companies, mortgage companies, securities brokerage firms, 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 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 is leasing and renovating a one story building in downtown Grand
Rapids, Michigan for use as the Bank's main office and the Company's
headquarters. This building is of masonry construction and has approximately
11,000 square feet of usable space. The Bank believes that this space will be
adequate for its present needs. As a result of the Bank's intended strategy of
providing personal customer service, the Bank does not intend to have teller
windows inside the Bank or drive through teller facilities. Instead, the Bank
intends to utilize customer services representatives who will service the
Bank's customers at desks conveniently located inside the Bank.
The lease for the Bank's office has an initial term of 10 years and the
Bank has four, five year renewal options. The monthly lease payments begin at
$12,487 per month in the first year and increase each year during the term of
the lease by the greater of the annual percentage increase in the Consumer
Price Index or 3%. In addition, the Bank will be required to make payments for
taxes, insurance, and other operating expenses. The Bank expects to expend
approximately $650,000 for tenant improvements and related architectural and
engineering services, and additional funds for furniture, fixtures and other
equipment.
The Bank's office is located at 216 North Division Avenue between Lyon
Street and Michigan Street in downtown Grand Rapids, Michigan, in a portion of
downtown Grand Rapids convenient to I-96. Access to the main office is
available to Kent County residents by utilizing I-196, US 131, Michigan Street,
and Lyon Street. The building is one of a few available locations in downtown
Grand Rapids with on-site parking. The parking consists of approximately 24
spaces, with no parking meters. The Bank expects to commence its business in
the fourth quarter of 1997.
EMPLOYEES
The Bank is assembling a staff of experienced professionals and expects to
have approximately 18 full time employees, including approximately eight
officers and ten customer service and other support persons, within the first
few months of operations.
PLAN OF OPERATION
The Company's plan of operation for the twelve months following the
completion of the offering does not contemplate the need to raise additional
funds during that period. Management has concluded, based on current
pre-opening growth projections, that the Bank is likely to have adequate funds
to meet its cash requirements for at least the next several years. Management
has no specific plans for product research or development which would be
performed within the next twelve months. Management plans to expend
approximately $650,000 for leasehold improvements and related architectural and
engineering services, and approximately $850,000 for furniture, fixtures,
equipment and other necessary assets, prior to commencing operation. During
the first twelve months of operation, the Company does not anticipate requiring
substantial additional equipment. No significant changes in the number of
employees is anticipated in the first twelve months of operations after the
Bank commences its business and completes the hiring of its approximately 18
initial employees.
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<PAGE> 13
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company as of the date hereof, and their
contemplated positions with the Bank upon completion of the offering, are as
follows:
<TABLE>
<CAPTION>
POSITION WITH
THE COMPANY POSITION(S)
NAME AGE (AND DIRECTOR CLASS) WITH THE BANK
- ---- --- -------------------- -------------
<S> <C> <C> <C>
Peter A. Cordes 56 Director (Class II) Director
C. John Gill 63 Director (Class I) Director
David M. Hecht 60 Director (Class II) Director
Gerald R. Johnson, Jr. 50 Chairman of the
Board, Chief Chairman of the
Executive Officer, Board, Chief
and Director (Class I) Executive Officer
and Director
Lawrence W. Larsen 57 Director (Class III) Director
Calvin D. Murdock 58 Director (Class I) Director
Dale J. Visser 61 Director (Class III) Director
Robert M. Wynalda 61 Director (Class II) Director
Robert B. Kaminski 35 Senior Vice President Senior Vice
and Secretary President and
Secretary
</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 or the Company at any
time that the Bank is not in compliance with applicable minimum capital
requirements, is otherwise in a troubled condition, or when the FDIC has
determined that such prior notice is appropriate, 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 six and no more than fifteen. The Board of Directors has
presently fixed the number of directors at eight. 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.
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 elected 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. Dale Visser, one of the directors, is the brother
of Bruce Visser, who is one of the organizers of 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.
PETER A. CORDES (Director) Mr. Cordes has served as President and Chief
Executive Officer of GWI Engineering Inc. ("GWI") of Grand Rapids, Michigan
since 1991. GWI is engaged in the engineering and manufacturing of custom
assembly and welding equipment for customers in a variety of industries in the
Midwest. Mr. Cordes purchased GWI in 1991 and is now sole owner. Mr. Cordes
is a 1966 graduate of St. Louis University with a degree in aeronautics. He is
a native of Traverse City, Michigan and has spent the last eighteen years in
West Michigan.
C. JOHN GILL (Director) Mr. Gill is Chairman of the Board and one of the
owners of Gill Industries of Grand Rapids, Michigan. He has served in this
capacity since he started this business in 1963. Gill Industries is a
manufacturing company involved with sheet metal stampings and assemblies for
the automotive and appliance industries. Mr. Gill is a native of Lakeview,
Michigan.
DAVID M. HECHT (Director) Mr. Hecht is an attorney with the law firm, Hecht
& Lentz, in Grand Rapids, Michigan. He is Chairman and one of the owners of
the law firm. Mr. Hecht established the firm in 1993. Prior to this, he was a
partner in the Grand Rapids office of the law firm of Dickinson, Wright, Moon,
Van Dusen & Freeman. Mr. Hecht is a
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<PAGE> 14
native of Grand Rapids and a graduate of the University of Michigan and the
University of Wisconsin. He has practiced law for 36 years, including the
past 25 years in Grand Rapids. Mr. Hecht is on the Board of Trustees of the
Grand Valley University Foundation and a Director of Hospice Foundation of
Greater Grand Rapids.
GERALD R. JOHNSON, JR. (Chairman of the Board, Chief Executive Officer, and
Director) has over 27 years experience in the financial service industry,
including 24 years of commercial banking experience. Mr. Johnson was appointed
President and Chief Executive Officer of FMB-Grand Rapids in 1986, and served
as Chairman, President and Chief Executive Officer from 1988 to May of 1997,
when he resigned to organize the Company. In the Grand Rapids market, prior to
joining FMB-Grand Rapids, Mr. Johnson was employed in various lending
capacities by Union Bank (now part of First Chicago NBD), Pacesetter Bank-Grand
Rapids (now part of Old Kent), and Manufacturers Bank (now part of Comerica
Bank). Mr. Johnson has been involved in charitable and community activities
for many years. He currently serves as a Vice Chairman of the Board of the
Downtown YMCA, Chairman of Residential Treatment of West Michigan, and is
affiliated with Life Guidance Services, American Heart Association of Greater
Grand Rapids, Economic Development Foundation, Grand Rapids Rotary Club, and
Michigan Trails Girl Scout Council. Mr. Johnson also has past affiliations
with Hope Network, Project Rehab, and the Grand Rapids Area Chamber of Commerce
where he was a board member for six years.
LAWRENCE W. LARSEN (Director) Mr. Larsen is President and owner of Central
Industrial Corporation of Grand Rapids, Michigan, and has served in that
capacity since he started that company in 1967. Central Industrial Corporation
is a wholesale distributor of industrial supplies. Mr. Larsen is also an owner
and director of Jet Products, Inc. of West Carrollton, Ohio. Jet Products,
Inc. designs, manufactures and sells hose reels and related products. Mr.
Larsen is a native of Wisconsin. He has spent the last 31 years in the Grand
Rapids area. Mr. Larsen is an active supporter of the Catholic secondary
schools system in Grand Rapids. Mr. Larsen served as a director of FMB-Grand
Rapids from 1980 until June of 1997, and was a member of the Executive Loan
Committee and the Audit Committee.
CALVIN D. MURDOCK (Director) Mr. Murdock is President of SF Electronics,
Inc. ("SFE") of Grand Rapids, Michigan. He has held this position since 1994.
From 1992 to 1994, he served as the General Manager of SFE, and in 1991, served
as SFE's Controller. SFE is a wholesale industrial electronics components
supplier. Mr. Murdock is a Michigan native and a graduate of Ferris State
University with a degree in accounting. Prior to joining SFE, Mr. Murdock
owned and operated businesses in the manufacturing and supply of automobile
wash equipment.
DALE J. VISSER (Director) Mr. Visser is Treasurer and one of the owners of
Visser Brothers Construction of Grand Rapids, Michigan. He has served as
Treasurer of this company since 1960. Mr. Visser grew up in the construction
industry as his father started Visser Brothers in 1926. As an owner of the
company with his brother, Mr. Visser has also held the position of President.
Visser Brothers is a construction general contractor specializing in commercial
buildings. Mr. Visser also has an ownership interest in several real estate
projects in the Grand Rapids area including Eastbrook Mall and Breton Village
Shopping Center. Mr. Visser served as a director of FMB-Grand Rapids from 1972
until June of 1997. He is a Grand Rapids native and a graduate of the
University of Michigan with a degree in civil engineering. Mr. Visser is
active in the community having served on the boards for the Grand Rapids YMCA,
Christian Rest Home, and West Side Christian School.
ROBERT A. WYNALDA (Director) Mr. Wynalda is Chief Executive Officer and an
owner of Wynalda Litho Inc. of Rockford, Michigan. Mr. Wynalda has held this
position since he founded the company in 1970. Wynalda Litho Inc. is a
commercial printing company serving customers from around the country. Mr.
Wynalda is a native of Grand Rapids and has spent 45 years in the printing
business. Mr. Wynalda serves on the Board of Trustees for Cornerstone College
of Grand Rapids, and formerly served as a director of a local financial
institution.
ROBERT B. KAMINSKI (Senior Vice President and Secretary) Mr. Kaminski has
over 13 years of commercial banking experience, all with First Michigan Bank
Corporation and its subsidiaries. From 1984 to 1993, Mr. Kaminski worked for
FMB-Grand Rapids in various capacities in the areas of credit administration
and bank compliance. In 1993, Mr. Kaminski was appointed Vice President in
charge of Loan Review and Compliance for FMB-Grand Rapids. From 1996 through
June of 1997, when he resigned. Mr. Kaminski served as Vice President and
Manager of the Commercial Credit Department for three of First Michigan Bank
Corporation's subsidiaries. Mr. Kaminski serves on the Leadership Committee
for the National Kidney Foundation of Michigan in Grand Rapids, the Board of
Directors for HELP Pregnancy Crisis Aid, Inc., and is a career mentor for
Aquinas College of Grand Rapids.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
In the first year of operation, no compensation is expected to be paid to
any directors of the Company or the Bank for their services in such capacities.
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.
Mr. Johnson, the Bank's Chairman, President, and Chief Executive Officer,
has chosen to join the Bank at a compensation level below what he earned in his
previous position. His interest in doing this is to reduce operating expenses
in the start up phase of the Bank. The annual compensation for Mr. Johnson for
the first year of operations is expected to be $150,000. His compensation in
subsequent years will be determined by the Company's and the Bank's Boards of
Directors. In making their determinations, it is expected that the Boards of
Directors will receive recommendations from their Compensation Committees,
which will be comprised of outside directors. Mr. Johnson
13
<PAGE> 15
and the other officers of the Bank may participate in the Company's 1997
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. Neither the Company nor the Bank has an employment
agreement with any officer.
1997 EMPLOYEE STOCK OPTION PLAN
The Board of Directors has adopted, and the sole shareholder of the
Company has approved, a 1997 Employee Stock Option Plan (the "Plan"). The
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 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 Plan. The
following is a summary of the principal provisions of the Plan.
ADMINISTRATION. The Plan will be administered by the Board of Directors
of the Company. The Board of Directors 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 Board of Directors 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 Board of Directors
may deem relevant.
SHARES. The total number of shares of Common Stock which may be issued
under the Plan will not exceed 130,000 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 Plan will be evidenced by
an agreement in such form as the Board of Directors shall from time to time
approve, which agreement must comply with and be subject to certain conditions
set forth in the Plan. Options granted under the Plan may be incentive stock
options or non-qualified options, as determined from time to time by the Board
of Directors 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. For purposes of the
Plan, fair market value per share means the average of the published closing
bid and asked prices of the Common Stock on the 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 Board of Directors. 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. For
purposes of the grant of options under the Plan, and not for any other purpose,
the Board of Directors has determined that $10 per share should 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 Board of Directors, 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 the date of grant. The Board of
Directors 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 Plan terminates (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 will be extended to twelve
(12) months.
ADJUSTMENTS. The Board of Directors 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 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
Plan) of the Company, each option then outstanding shall become exercisable in
full immediately prior to the change in control.
TERMINATION OF PLAN AND AMENDMENTS. An option may not be granted pursuant
to the Plan after July 1, 2002. The Board of Directors may from time to time
amend or terminate 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. No amendment or termination of the Plan will adversely
affect any option then outstanding under the Plan without the approval of the
optionee.
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
14
<PAGE> 16
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 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.
As of August 1, 1997, the Company had outstanding two options to purchase
an aggregate of 45,000 shares of its Common Stock at an exercise price of
$10.00 per share pursuant to the Plan.
RELATED PARTY TRANSACTIONS
LOANS FROM ORGANIZERS
Over the past several months, organizers of the Bank have loaned
approximately $278,500 in aggregate amount to the Company to cover
organizational expenses of the Bank and the Company. Interest is payable on
the loans at the rate of 5% per annum. All of these loans will be repaid by
the Company from the net proceeds of the offering. Each of the organizers who
has loaned money to the Company is a member of the Company's Board of
Directors.
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. 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 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. 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 "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 to date issued only one share of Common Stock. 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. Pursuant to the Underwriting
Agreement between the Company and the Underwriters (the "Underwriting
Agreement"), the Company will direct the Underwriters to offer to sell the
number of shares listed below to the directors and executive officers listed
below (each being an organizer of the Bank), and 50,000 shares to Bruce Visser,
also an organizer of the Bank. All share numbers are provided based upon such
directions from the Company and non-binding expressions of interest supplied by
the persons listed below, and Bruce Visser. Depending upon their individual
circumstances at the time, each of such persons may purchase a greater or fewer
number of shares than indicated, and in fact may purchase no shares.
15
<PAGE> 17
<TABLE>
<CAPTION>
Number of shares Percentage of
beneficially owned outstanding shares
Name and Address after offering (1) after offering (3)
- ---------------- ------------------ ------------------
<S> <C> <C>
Peter A. Cordes
5447 Forest Bend Dr. S.E.
Ada, Michigan 49301 25,000 1.9 %
C. John Gill
4174 Winterwood Ct. N.E.
Grand Rapids, Michigan 49546 25,000 1.9 %
David M. Hecht
2020 Robinson Rd. S.E.
Grand Rapids, Michigan 49506 50,000 3.8 %
Gerald R. Johnson
42 Deer Run Drive N.E.
Ada, Michigan 49301 60,000 (2) 4.6 %
Lawrence R. Larsen
547 Kent Hills Rd., N.E.
Grand Rapids, Michigan 49505 13,500 1.0 %
Calvin D. Murdock
2778 Walker Avenue N.W.
Grand Rapids, Michigan 49544 15,000 1.2 %
Dale J. Visser
6872 Farrell Drive
Rockford, Michigan 49341 50,000 3.8 %
Robert M. Wynalda
3395 Valley View Drive N.E.
Rockford, Michigan 49341 50,000 3.8 %
Directors and executive
officers of the Company as
a group (8 persons)(4) 288,500 (2) 22 %
</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 10,000 shares that such person has the right to acquire within
60 days of August 1, 1997 pursuant to the Company's 1997 Employee Stock
Option Plan. Such person also holds an option under such plan to purchase
an additional 30,000 shares.
(3) The percentages shown are based on the 1,300,000 shares offered hereby
plus the number of shares that the named person or group has the right to
acquire within 60 days of August 1, 1997; and in each case assumes no
exercise of the Underwriters' over-allotment option.
(4) Does not include 50,000 shares (3.8% of the outstanding shares after the
offering) that Bruce Visser, who is Dale Visser's brother and one of the
Bank's organizers, has expressed an interest in purchasing. These 50,000
shares, together with the 278,500 shares shown in the table (calculated
without taking into account shares referred to in footnote 2 above),
comprise the 328,500 shares that the organizers of the Bank have expressed
an interest in acquiring in the offering.
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 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.
16
<PAGE> 18
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 lending activities of the Bank, including internal controls, credit
underwriting, loan documentation, 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 certain government regulation of the business of the Company and the
Bank, and are qualified by reference to the text of such statutes and
regulations. Any change in government regulation may have a material effect on
the business of the Company and the Bank.
THE COMPANY
GENERAL. The Company has applied for approval of the Commissioner, and on
_____, 1997 applied for approval of the Federal Reserve Board, to acquire all of
the capital stock to be issued by the Bank in connection with its organization.
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 regulation by, the Federal Reserve Board under the Bank
Holding Company Act, as amended (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.
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.
Any capital loans by a bank holding company to a subsidiary bank are
subordinate in right of payment to deposits and to certain other indebtedness
of such subsidiary bank. In the event of a bank holding company's bankruptcy,
any commitment by the bank holding company to a federal bank regulatory agency
to maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment. This priority would also apply
to guarantees of capital plans under FDICIA.
INVESTMENTS AND ACTIVITIES. Under the BHCA, bank holding companies are
prohibited, with certain limited exceptions, from engaging in activities other
than those of banking or of managing or controlling banks and from acquiring or
retaining direct or indirect ownership or control of voting shares or assets of
any company which is not a bank or bank holding company, other than subsidiary
companies furnishing services to or performing services for its subsidiaries,
and other subsidiaries engaged in activities which the Federal Reserve Board
determines to be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Since September, 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."
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 relevant geographic and
product markets, the convenience and needs of the communities to be served, and
each party's financial condition, managerial resources, and record of
performance under the Community Reinvestment Act.
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.
With certain limited exceptions, the BHCA prohibits bank holding companies
from acquiring direct or indirect ownership or control of voting shares or
assets of any company other than a bank, unless the company involved is engaged
solely in one or more activities which the Federal Reserve Board has determined
to be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. Under current Federal Reserve Board regulations, such
permissible non-bank activities include such things as mortgage banking,
equipment leasing,
17
<PAGE> 19
securities brokerage, and consumer and commercial finance company operations.
As a result of recent amendments to the BHCA, many types of such acquisitions
may be effected by those bank holding companies which satisfy certain statutory
criteria concerning management, capitalization, and regulatory compliance, if
written notice is given to the Federal Reserve Board within 10 business days
after the transaction. In other cases, prior written notice to the Federal
Reserve Board will be required.
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 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.
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.
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. Nonetheless, on a pro forma basis,
assuming the issuance and sale by the Company of the 1,300,000 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.
FDICIA requires the federal bank regulatory agencies biennially to review
risk-based capital standards to ensure that they adequately address interest
rate risk, concentration of credit risk and risks from non-traditional
activities and, since adoption of the Riegle Community Development and
Regulatory Improvement Act of 1994 (the "Riegle Act"), to do so taking into
account the size and activities of depository institutions and the avoidance of
undue reporting burdens. See "Recent Regulatory Developments." In 1995, the
agencies adopted regulations requiring as part of the assessment of an
institution's capital adequacy the consideration of: (i) identified
concentrations of credit risks, (ii) the exposure of the institution to a
decline in the value of its capital due to changes in interest rates, and (iii)
the application of revised conversion factors and netting rules on the
institution's potential future exposure from derivative transactions. In
addition, the agencies in September 1996, adopted amendments to their
respective risk based capital standards to require banks and bank holding
companies having significant exposure to market risk arising from, among other
things, trading of debt instruments, (i) to measure that risk using an internal
value-at-risk model conforming to the parameters established in the agencies'
standards, and (ii) to maintain a commensurate amount of additional capital to
reflect such risk. The new rules were adopted effective January 1, 1997, with
compliance mandatory from and after January 1, 1998.
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 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 in
appropriate cases to proscribe the payment of dividends by banks and bank
holding companies. Similar enforcement powers over the Bank are possessed by
the FDIC. It is also unlawful for any insured depository institution to pay a
dividend at a time when it is in default of payment of any assessment to 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.
18
<PAGE> 20
In addition to the restrictions on dividends imposed by the Federal
Reserve Board, the Michigan Business Corporation Act (the "MBCA") 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 by the Bank
Insurance Fund (the "BIF") of the FDIC. As a BIF-insured, Michigan chartered
bank, the Bank will be subject to the examination, supervision, reporting and
enforcement jurisdiction 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 placed into one of nine categories and assessed
insurance premiums based upon their level of capital and supervisory
evaluation. Institutions classified as well-capitalized (as defined by the
FDIC) and not exhibiting financial, operational or compliance weaknesses, pay
the lowest premium while institutions that are less than well - capitalized (as
defined by the FDIC) and exhibit such weaknesses in a moderately severe to
unsatisfactory degree pay the highest premium. Risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment
period.
The Federal Deposit Insurance Act ("FDIA") requires the FDIC to establish
semi-annual assessment rates so as to maintain the ratio of the Deposit
Insurance Fund to total estimated insured deposits at not less than 1.25%.
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.
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, 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: a leverage requirement consisting of a minimum ratio of Tier 1
capital to total assets of 3% for the most highly-rated banks with minimum
requirements of 4% to 5% for all others, and a risk-based capital requirement
consisting of a minimum ratio of total capital to total risk-weighted assets of
8%, at least one-half of which must be Tier 1 capital. Tier 1 capital consists
principally of shareholders' equity. In addition, the FDIC has adopted
requirements for each state-chartered, non-member bank having trading activity
as shown on its most recent Consolidated Report of Condition and Income ("Call
Report") in an amount equal to 10% or more of its total assets, (i) to measure
its market risk using an internal value-at-risk model conforming to the FDIC's
capital standards, and (ii) to maintain a commensurate amount of additional
capital to reflect such risk. This regulation was adopted effective January 1,
1997, with compliance mandatory on and after January 1, 1998.
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.
FDIA establishes five capital categories, and the federal depository
institution regulators, as directed by FDIA, have adopted, subject to certain
exceptions, the following minimum requirements for each of such categories:
<TABLE>
<CAPTION>
Total Tier 1
Risk-Based Risk-Based Leverage
Capital Ratio Capital Ratio Ratio
------------- ------------- -----
<S> <C> <C> <C>
5% or above
4% or above
Less than 4%
Well capitalized 10% or above 6% or above Less than 3%
Adequately capitalized 8% or above 4% or above A ratio of tangible
Undercapitalized Less than 8% Less than 4% equity to total
Significantly undercapitalized Less than 6% Less than 3% assets of 2% or
Critically undercapitalized - - less
</TABLE>
19
<PAGE> 21
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.
Among other things, FDIA requires the federal depository institution
regulators to take prompt corrective action in respect of depository
institutions that do not meet minimum capital requirements. The scope and
degree of regulatory intervention is linked to the capital category to which a
depository institution is assigned.
Depending upon the capital category to which an institution is assigned,
the regulators' corrective powers include: requiring the submission of a
capital restoration plan; 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
institution to divest certain subsidiaries; prohibiting the payment of
principal or interest on subordinated debt; and ultimately, appointing a
receiver for the institution.
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 two-thirds 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.
FDIA 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.
The Federal Reserve Board has issued a policy statement providing that bank
holding companies and insured banks should generally only pay dividends out of
current operating earnings.
INSIDER TRANSACTIONS. The Bank is subject to certain restrictions imposed
by the Federal Reserve Act 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 to any person. Certain
limitations and reporting requirements are also placed on extensions of credit
by the Bank to its directors and officers, to directors and officers of the
Company and its subsidiaries, to principal shareholders of the Company, and to
"related interests" of such directors, officers and principal shareholders. 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. In general, the guidelines prescribe the
goals to be achieved in each area, and each institution will be responsible for
establishing its own procedures to achieve those goals. 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. The preamble to the guidelines
states that the agencies expect to require a compliance plan from an
institution whose failure to meet one or more of the standards is of such
severity that it could threaten the safe and sound operation of the
institution. 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. Effective
October 1, 1996, the agencies expanded the guidelines to establish asset
quality and earnings standards. As before, the new guidelines make each
depository institution responsible for establishing its own procedures to meet
such goals.
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 making or retaining equity investments of a type, or
in an amount, that are not permissible for a national bank. FDICIA, as
implemented by FDIC regulations, also
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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 FDIA. Violation of these laws could result in the imposition of
significant damages and fines upon the Bank, its directors and officers.
RECENT REGULATORY DEVELOPMENTS.
In 1994, the Congress enacted two major pieces of banking legislation, the
Riegle Act and the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (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 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. As further amended, effective October 21, 1996, and June 30, 1997,
the Michigan Banking Code now permits, in appropriate circumstances, (a) with
the approval of the Commissioner, (i) the acquisition of all or substantially
all of the assets of a Michigan-chartered bank by an FDIC-insured bank, savings
bank, or savings and loan association located in another state, (ii) the
acquisition by a Michigan-chartered bank of all or substantially all of the
assets of an FDIC-insured bank, savings bank or savings and loan association
located in another state, (iii) 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 by Michigan, (iv) the
establishment by a foreign bank, which has not previously designated any other
state as its home state under the International Banking Act of 1978, of
branches located in Michigan, and (v) the organization of a branch 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 (b) upon written notice to the
Commissioner, (i) 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, the District of Columbia, or a U.S. territory or protectorate,
(ii) the establishment by Michigan-chartered banks of branches located in other
states, the District of Columbia, or U.S. territories or protectorates, and
(iii) the consolidation of one or more Michigan-chartered banks and
FDIC-insured banks, savings banks or savings and loan associations located in
other states, with the resulting organization chartered by one of such other
states, and (c) 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. 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
21
<PAGE> 23
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 willful, or persistent violations.
FDIC regulations which became effective April 1, 1996, impose limitations
(and in certain cases, prohibitions) on (i) certain "golden parachute"
severance payments by troubled depository institutions and their affiliated
holding companies to institution-affiliated parties (primarily directors,
officers, employees, or principal shareholders of the institution), and (ii)
certain indemnification payments by a depository institution or its affiliated
holding company, 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
MBCA or the Michigan Banking Code, respectively. See "Description of Capital
Stock - Indemnification of Directors and Officers."
The Omnibus Consolidated Appropriations Act, 1997 ("OCCA"), was enacted
September 30, 1996. It amended many of the principal federal laws regulating
banks and bank holding companies. As part of the projected conversion or
closure of all thrift institutions in the U.S., OCCA modified existing laws (a)
to impose a special, one-time assessment on all deposits insured by the Savings
Association Insurance Fund ("SAIF") of the FDIC to bring the SAIF reserves to
the statutory minimum ratio of 1.25% of all SAIF-insured deposits, (b) to
permit the Financing Corporation to impose (in the same manner as regular FDIC
insurance assessments) assessments upon commercial banks to fund repayment of
its bonds which had been issued to pay for losses resulting from widespread
failures of thrift institutions during the 1980's, (c) to prohibit shifting
deposits from SAIF insurance to BIF insurance, and (d) to merge, prospectively,
the BIF and SAIF into a single Deposit Insurance Fund ("DIF"). The merger of
the funds will occur on January 1, 1999, if no insured depository institution
remains a savings association on that date. There can be no assurance whether
or when the merger of the BIF and SAIF will in fact occur.
OCCA also amended the BHCA (a) to eliminate the requirement of prior
written notice to the Federal Reserve Board by well-capitalized and
well-managed bank holding companies meeting certain statutory criteria wishing
to engage de novo (or in certain cases through acquisition) in a non-banking
activity already permitted by order or regulation of the Federal Reserve Board,
(b) to shorten to 12 business days the prior written notice to the Federal
Reserve Board required from well-managed and well-capitalized bank holding
companies meeting such criteria for other acquisitions of non-banking companies
engaged in non-banking activities so permitted, and (c) to eliminate the
opportunity for a hearing on applications to the Federal Reserve Board for
permission to engage in non-banking activities (other than the acquisition of a
savings association).
Among the other changes made by OCCA, the statute (a) increased the number
of banks exempted from compliance with the record-keeping and reporting
requirements of the Home Mortgage Disclosure Act and eligible for an 18-month
cycle of regulatory examinations by increasing the total assets cut-off in each
case, (b) simplified the disclosure requirements for residential mortgage loans
by harmonizing the requirements of the Truth-in-Lending Act and Real Estate
Settlement Procedures Act, (c) substantially re-wrote the Fair Credit Reporting
Act, and (d) expanded the authority of the Federal Reserve Board under the
Consumer Leasing Act and directed the Board to issue model disclosure forms for
use in leasing personal property.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 9,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock. As of the date of this
Prospectus, there is one share of Common Stock issued and outstanding. No
shares of Preferred Stock have been issued by the Company.
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 and whether dividends are to be cumulative;
(iii) whether shares are to be redeemable, and, if so, whether redeemable for
cash, property or rights; (iv) the rights to which the holders of shares shall
be entitled, and the preferences, if any, over any other series; (v) whether
the shares shall be subject to the operation of a purchase, retirement or
sinking fund, and, if so, upon what conditions; (vi) whether the shares shall
be convertible into or exchangeable for shares of any other class or of any
other series of any class of capital stock and the terms and conditions of such
conversion or exchange; (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.
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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
State Street Bank & Trust Company of Boston, Massachusetts, serves as the
transfer agent of the Company's Common Stock.
DESCRIPTION OF CERTAIN CHARTER PROVISIONS
The following provisions of the Company's Articles of Incorporation 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 also provides that the number of directors shall be
fixed by majority of the Board at no fewer than six nor more than fifteen.
Pursuant to the Articles of Incorporation, the Company's directors have been
divided into three classes. Three Class I directors have been elected for a
term expiring at the 1998 annual meeting of shareholders, three 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).
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 Articles of Incorporation 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 Articles of Incorporation provide certain
procedures that must be followed. A shareholder intending to nominate
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candidates for election must deliver written notice containing certain
specified information to the Secretary of the Company at least sixty (60) days
but not more than 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 require that any shareholder
action must be taken at an annual or special meeting of shareholders, that any
meeting of shareholders must be called by the Board of Directors or the
Chairman of the Board, and, unless otherwise provided by law, prohibit
shareholder action by written consent. Shareholders of the Company are not
permitted 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 Shareholders' Vote for Alteration, Amendment or Repeal of
Article Provisions
The Company's Articles of Incorporation require the affirmative vote of
the holders of at least 66 2/3 percent 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.
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 percent 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 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 Articles of Incorporation provide that the Company shall
indemnify its present and past directors, officers, and such other persons as
the Board of Directors may authorize, to the fullest extent permitted by law.
The Company's 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
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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.
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 MBCA or
the Michigan Banking Code, respectively.
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 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.
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 or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
(the "SEC") such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
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: (1) breach of the director's duty of
loyalty to the Company 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 the MBCA; and (4) transactions from which the
director derived an improper personal benefit.
SHARES ELIGIBLE FOR FUTURE SALE
As of July 15, 1997, the Company had one share of Common Stock outstanding
that was held by a member of the Board of Directors. Upon completion of the
offering, the Company expects to have 1,300,000 shares of its Common Stock
outstanding. The 1,300,000 shares of the Company's Common Stock sold in the
offering (plus any additional shares sold upon the Underwriters' exercise of
their over-allotment option) have been registered with the SEC under 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 Bruce
Visser, one of the organizers of the Bank (who are expected to hold an
aggregate of approximately 328,500 shares after the offering, excluding the
shares that Mr. Johnson and Mr. Kaminski have the right to acquire pursuant to
options granted to them under the Company's 1997 Employee Stock Option Plan),
have agreed, or will agree, that (a) 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 Roney & Co., L.L.C., as
representative of the Underwriters, for a period of 150 days from the date of
this Prospectus, except that (i) the Company may issue shares upon the exercise
of options under the Company's 1997 Employee Stock Option Plan and (ii) the
directors, officers and Mr. Visser may give Common Stock owned by them to
others who have agreed in writing to be bound by the same agreement, and (b)
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.
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As of August 1, 1997, the Company had outstanding two options to purchase
an aggregate of 45,000 shares of its Common Stock at an exercise price of $10
per share pursuant to the Company's 1997 Employee Stock Option Plan. Mr.
Johnson holds an option for 40,000 of these shares and Mr. Kaminski holds an
option for 5,000 of these shares.
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.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated
_____________, 1997 (the "Underwriting Agreement") among the Company and the
several Underwriters named below (the "Underwriters"), the Company has agreed
that it will sell to each of the Underwriters, and each of such Underwriters
for which Roney & Co., L.L.C. is acting as a representative (the
"Representative") has severally agreed to purchase from the Company, the
respective number of shares of Common Stock as set forth opposite its name
below:
Number of Shares
of
Underwriter Common Stock
----------- ----------------
Roney & Co., L.L.C.
The Underwriting Agreement provides that the obligations of the
Underwriters 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.
If the Underwriting Agreement is terminated, except in certain limited
cases, the Underwriting Agreement provides that the Company will reimburse the
Underwriters for all accountable out-of-pocket expenses incurred by them in
connection with the proposed purchase and sale of the Common Stock up to a
maximum of $40,000. The Company has advanced $20,000 to the Underwriters in
connection with such expense reimbursement. The Underwriting Agreement
provides that in the event the accountable out-of-pocket expenses to be
reimbursed upon such termination total an amount less than $20,000, the
Underwriters shall pay such difference to the Company.
The Company and the Underwriters have agreed that the Underwriters will
purchase the 1,300,000 shares of Common Stock offered hereunder at a price to
the public of $10.00 per share less underwriting discounts of $__ per share.
However, the Underwriters have agreed to limit the underwriting discounts to
1.5% of the public offering price ($0.15 per share) with respect to the first
328,500 shares sold to organizers of the Bank or their immediate families. The
Underwriters propose to offer the Common Stock to selected dealers who are
members of the National Association of Securities Dealers, Inc., at a price of
$10.00 per share less a concession not in excess of $___ per share. The
Underwriters may allow, and such dealers may re-allow, concessions not in excess
of $___ per share to certain other brokers and dealers. After the Common Stock
is released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Representative.
The Company, the directors and officers of the Company, and Bruce Visser,
an organizer of the Bank, have agreed to be subject to certain lock-up
restrictions as described above in "Shares Eligible for Future Sale."
The Representative has informed the Company that the Underwriters do not
intend to make sales to any accounts over which the Underwriters exercise
discretionary authority.
The Company has granted the Underwriters an option, exercisable within 30
days after the date of the offering, to purchase up to an additional 195,000
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 Underwriters for the other
shares offered hereby. The Underwriters may purchase such shares only to cover
over-allotments, if any, in connection with the offering.
The Underwriting Agreement contains indemnity provisions between the
Underwriters 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 Underwriters and their
respective 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 Underwriters. 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 Underwriters'
experience in dealing with initial public offerings for financial institutions.
26
<PAGE> 28
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 Dickinson, Wright, Moon, Van Dusen & Freeman, Detroit, Michigan.
Honigman Miller Schwartz and Cohn, Detroit, Michigan, is acting as counsel for
the Underwriters 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 Crowe, Chizek and Company 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 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 7 World Trade
Center, Suite 1300, New York New York 10048. Copies of such materials can also
be obtained on the SEC's Web site at http://www.sec.gov and at prescribed rates
by writing to the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549.
27
<PAGE> 29
MERCANTILE BANK CORPORATION
FINANCIAL STATEMENTS
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX
PAGE NO.
REPORT OF INDEPENDENT AUDITORS F-2
FINANCIAL STATEMENTS
Balance Sheet F-3
Statement of Shareholder's Equity F-4
Statement of Operations F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
F-1
<PAGE> 30
MERCANTILE BANK CORPORATION
FINANCIAL STATEMENTS
(A COMPANY IN THE DEVELOPMENT STAGE)
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Mercantile Bank Corporation
Grand Rapids, Michigan
We have audited the accompanying balance sheet of Mercantile Bank Corporation
(a Company in the development stage) as of July 21, 1997, and the related
statements of shareholder's equity, operations and cash flows for the period
from July 15, 1997 (inception) through July 21, 1997. 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 Mercantile Bank Corporation (a
Company in the development stage) as of July 21, 1997, and the results of its
operations and cash flows for the period from July 15, 1997 (inception) through
July 21, 1997 in conformity with generally accepted accounting principles.
/S/ CROWE, CHIZEK & COMPANY LLP
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
July 22, 1997
F-2
<PAGE> 31
MERCANTILE BANK CORPORATION
(A Company in the Development Stage)
BALANCE SHEET
July 21, 1997
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash $232,940
Organization costs 25,560
Deferred offering costs 20,000
--------
$278,500
========
LIABILITIES AND RETAINED EARNINGS
Accounts payable $27,732
Related party notes payable (Note 2) 278,500
--------
306,232
Shareholder's equity
Preferred stock, no par value; 1,000,000 shares
authorized, none issued
Common stock, no par value; 9,000,000 shares
authorized, none issued
Additional paid-in capital
Deficit accumulated during the development stage (27,732)
--------
Total shareholder's equity (27,732)
--------
Total liabilities and shareholder's equity $278,500
========
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE> 32
MERCANTILE BANK CORPORATION
(A Company in the Development Stage)
STATEMENT OF SHAREHOLDER'S EQUITY
Period from July 15, 1997 (inception) to July 21, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Preferred Common Paid-In Development
Stock Stock Capital Stage Total
----- ----- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AT JULY 15, 1997
Net loss $(27,732) $(27,732)
-------- ---------
BALANCE AT JULY 21, 1997 $ 0 $ 0 $ 0 $(27,732) $(27,732)
======= ===== ====== ======== =========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 33
MERCANTILE BANK CORPORATION
(A Company in the Development Stage)
STATEMENT OF OPERATIONS
Period from July 15, 1997 (inception) to July 21, 1997
<TABLE>
<S> <C>
Total operating income $ 0
Operating expenses
Salaries and employee benefit 24,817
Other 2,915
---------
27,732
---------
NET LOSS $(27,732)
========
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE> 34
MERCANTILE BANK CORPORATION
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS
Period from July 15, 1997 (inception) to July 21, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES FROM DEVELOPMENT
STAGE OPERATIONS
Net loss $(27,732)
Adjustments to reconcile net income from development
stage operations to net cash provided by operating activities
Increase in accounts payable 27,732
---------
Net cash from operating activities 0
CASH FLOWS FROM INVESTING ACTIVITIES
Organizational costs (25,560)
---------
Net cash from investing activities (25,560)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party loans payable 278,500
Deferred offering costs (20,000)
---------
Net cash from financing activities 258,500
---------
Net increase in cash 232,940
Cash, beginning balance 0
---------
CASH, ENDING BALANCE $232,940
=========
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE> 35
MERCANTILE BANK CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
July 21, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: Mercantile Bank Corporation (the "Company") was incorporated on
July 15, 1997 as a bank holding company to establish and operate a new bank,
Mercantile Bank of West Michigan (the "Bank") in Grand Rapids, Michigan. The
Company intends to raise a minimum of $12,023,000 in equity capital through the
sale of 1,300,000 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 Costs: Organization costs represent incorporation costs,
salaries, legal and accounting costs and other costs relating to the
organization. Management anticipates that organization costs will approximate
$46,000 through commencement of operations.
Income Taxes: The Company records income tax expense based on the amount of
taxes due on its tax return plus the change in deferred taxes computed based on
the future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities, using enacted tax rates.
Deferred Offering Costs: Deferred offering costs include legal, consulting and
accounting costs incurred in connection with the registration of the Company's
Common Stock. These costs will be charged against the stock proceeds or, if
the offering is not successful, charged to expense at that time.
NOTE 2 - NOTES PAYABLE RELATED PARTIES
Loans payable in the amount of $278,500 at 5% interest are outstanding to
members of the Board of Directors of the Company. Management intends to repay
the loans from the proceeds of the Common Stock offering and is required to
repay the loans on or before May 31, 1998.
(Continued)
F-7
<PAGE> 36
MERCANTILE BANK CORPORATION
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
July 21, 1997
NOTE 3 - LEASE COMMITMENT
The Company is currently in the process of negotiating a lease commitment for a
building located in downtown Grand Rapids for use as the Company's main office.
The terms of the lease are not yet finalized but management anticipates that
the initial term will be for 10 years at $150,000 per year with options to
extend for four successive five year periods. The lease also has an escalation
clause allowing for annual increases of the greater of 3% or the percentage
increase in the Consumer Price Index. The Company plans to make leasehold
improvements of approximately $650,000. The Company will be responsible for
all necessary utilities, etc.
NOTE 4 - DATA PROCESSING AGREEMENT
The Company is negotiating a contract with a data processing company to
outsource the Company's data processing. The terms of the contract are
anticipated to be for five years with continuing two year renewal periods. Data
processing services for the Company are expected to include Customer
Information Systems, Loan and Deposit processing, ACH processing, ATM
processing, Asset Liability Management software, Smart reports, etc.
NOTE 5 - INCOME TAXES
At July 21, 1997, the Company had approximately $28,000 of net operating loss
carryforwards. The tax benefit of these carryforwards ($9,500) has been offset
by a valuation allowance.
NOTE 6 - SUBSEQUENT EVENTS
On July 22, 1997, the Board of Directors of the Company adopted a 1997 Employee
Stock Option Plan (the "Plan"). The Board has authorized 130,000 shares for
use by the Plan. The option price will not be less than the fair market value
of the shares at the time of grant, except as granted to a 10% shareholder
where the option price will be equal to 110% of fair market price. The Board
has determined the option price to be $10 for those options granted prior to
the completion of the public offering of the Company. The duration of each
option may not exceed ten years from the date of grant, for 10% shareholders
the duration is five years. The Plan will terminate on July 1, 2002.
At the July 22, 1997 meeting, the Board granted a total of 45,000 options to
executive officers of the Company. These options have not yet been exercised.
F-8
<PAGE> 37
=======================================================
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........................ 8
Dividend Policy........................ 8
Capitalization......................... 8
Business............................... 9
Management............................. 12
Related Party Transactions............. 15
Principal Shareholders................. 15
Supervision and Regulation............. 16
Description of Capital Stock........... 22
Shares Eligible for Future Sale........ 25
Underwriting........................... 26
Legal Proceedings...................... 27
Legal Matters.......................... 27
Experts................................ 27
Additional Information................. 27
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.
=======================================================
=======================================================
1,300,000 SHARES
[LOGO]
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
[LOGO]
, 1997
=======================================================
<PAGE> 38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The registrant's Articles of Incorporation provide that the registrant
shall indemnify its present and past directors, 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 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.
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
1,300,000 shares in the offering.
<TABLE>
<S> <C>
SEC registration fee $ 4,530.31
NASD filing fee 1,995.00
Printing and mailing expenses 43,000.00
Fees and expenses of counsel 130,000.00
Accounting and related expenses 40,000.00
Blue Sky fees and expenses (including counsel fees) 20,000.00
Registrar and Transfer Agent fees 3,500.00
Miscellaneous 4,974.69
-----------
Total $248,000.00
===========
</TABLE>
II-1
<PAGE> 39
Item 26. Recent Sales of Unregistered Securities.
During the past several months, the registrant has borrowed approximately
$278,500 from members of the registrant's Board of Directors 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 Rule 504 of Regulation D or Section 4(2) of the
Securities Act of 1933 for such transactions. In addition, the registrant sold
one share of its Common Stock to Gerald R. Johnson, Jr., the Chairman of the
Board and Chief Executive Officer of the registrant, for $10. The registrant
also claims an exemption for such sale pursuant to Rule 504 of Regulation D or
Section 4(2).
Item 27. Exhibits.
Exhibit No. Description
1 Form of Underwriting Agreement
3.1 Articles of Incorporation of Mercantile Bank Corporation
3.2 Bylaws of Mercantile Bank Corporation
4.1 Specimen Stock Certificate of Mercantile Bank
Corporation
5 Opinion of Dickinson, Wright, Moon, Van Dusen & Freeman
10.1 1997 Employee Stock Option Plan
10.2 Lease Agreement
21 Subsidiaries of Mercantile Bank Corporation
23.1 Consent of Dickinson, Wright, Moon, Van Dusen &
Freeman (included in opinion filed as Exhibit 5)
23.2 Consent of Crowe, Chizek and Company LLP
27 Financial Data Schedule
__________________
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 SEC 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
liabilities arising under the Securities Act (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.
II-2
<PAGE> 40
(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.
II-3
<PAGE> 41
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, thereunder duly
authorized, in the City of Grand Rapids, State of Michigan, on August 5, 1997.
MERCANTILE BANK CORPORATION
By: /S/GERALD R. JOHNSON, JR.
---------------------------------
Gerald R. Johnson, Jr., Chairman
of the Board and Chief Executive
Officer
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 August 5, 1997.
<TABLE>
<CAPTION>
Signatures Title
<S> <C>
/S/ PETER A. CORDES Director
- --------------------
Peter A. Cordes
/S/ C. JOHN GILL Director
- --------------------
C. John Gill
/S/ DAVID M. HECHT Director
- --------------------------
David M. Hecht
/S/ GERALD R. JOHNSON, JR. Chairman of the Board, Chief Executive Officer
- -------------------------- and Director (principal executive officer,
Gerald R. Johnson, Jr. principal financial officer and principal
accounting officer)
/S/ LAWRENCE W. LARSEN Director
- ----------------------
Lawrence W. Larsen
/S/ CALVIN D. MURDOCK Director
- ----------------------
Calvin D. Murdock
/S/ DALE J. VISSER Director
- ----------------------
Dale J. Visser
/S/ ROBERT M. WYNALDA Director
- ----------------------
Robert M. Wynalda
</TABLE>
II-4
<PAGE> 42
MERCANTILE BANK CORPORATION
Registration Statement on Form SB-2
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
1 Form of Underwriting Agreement
3.1 Articles of Incorporation of Mercantile Bank Corporation
3.2 Bylaws of Mercantile Bank Corporation
4.1 Specimen Stock Certificate of Mercantile Bank Corporation
5 Opinion of Dickinson, Wright, Moon, Van Dusen & Freeman
10.1 1997 Employee Stock Option Plan
10.2 Lease Agreement
21 Subsidiaries of Mercantile Bank Corporation
23.1 Consent of Dickinson, Wright, Moon, Van Dusen &
Freeman (included in opinion filed as Exhibit 5)
23.2 Consent of Crowe, Chizek and Company LLP
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 1
1,300,000 SHARES
MERCANTILE BANK CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
____________, 1997
Roney & Co., L.L.C.
One Griswold
Detroit, Michigan 48226
Dear Sirs:
Mercantile Bank Corporation, a Michigan corporation (the "Company"),
proposes to issue and sell 1,300,000 shares (the "Firm Shares") of its
authorized but unissued Common Stock (the "Common Stock") to the several
underwriters named in Exhibit A attached to this Agreement (the "Underwriters")
for whom Roney & Co., L.L.C., a Delaware limited liability company, is acting
as representative ("Roney & Co."). In addition, the Company proposes to grant
to the Underwriters an option to purchase up to an additional 195,000 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 Underwriters, and the Underwriters agree severally and
not jointly, to purchase, the Firm Shares set forth opposite their
respective names on Exhibit A at a purchase price of $9.30 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, the policies of the National
Association of Securities Dealers, Inc. (the "NASD"), and pursuant
to directions from the Company, the Underwriters will offer to
sell to each of the persons listed on Exhibit B (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 NASD) the number of Shares
set forth opposite their respective names on
<PAGE> 2
Exhibit B. To the extent such persons (alone or with such family
members) offer to buy such Shares, the Underwriters agree to
purchase up to 328,500 of such Shares at a purchase price of $9.85
per Share. 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
Underwriters an option to purchase all or any part of the Optional
Shares at a price per Share of $9.30. The over-allotment option
may be exercised only to cover over-allotments in the sale of the
Firm Shares by the Underwriters 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. The number
of Optional Shares to be purchased by each Underwriter shall be
determined by multiplying the number of Optional Shares to be sold
by the Company pursuant to such notice of exercise by a fraction,
the numerator of which is the number of Firm Shares to be
purchased by such Underwriter as set forth opposite its name on
Exhibit A and the denominator of which is 1,300,000 (subject to
such adjustments to eliminate any fractional share purchases as
Roney & Co. at its discretion may make).
(d) Roney & Co. represents and warrants to the Company that
each Underwriter has authorized Roney & Co. to accept delivery of
its Shares and to make payment and to accept receipt therefor.
Roney & Co., individually and not as the representative of the
Underwriters, may (but shall not be obligated to) make payment for
any Shares to be purchased by any Underwriter whose funds shall
not have been received by Roney & Co. by the Firm Shares Closing
Date (as defined in Section 2 below) or the Optional Shares
Closing Date (as defined in Section 2 below), as the case may be,
for the account for such Underwriter, but any such payment shall
not relieve such Underwriter from any of its obligations under
this Agreement. Roney & Co. represents and warrants that it has
been authorized by each of the other Underwriters to enter into
this Agreement on its behalf and to act for it in the manner
herein provided.
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<PAGE> 3
2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm Shares to
Roney & Co., for the respective accounts of the Underwriters, 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 Underwriters 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
Underwriters 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 be the Firm Shares
Closing Date) specified in the notice referred to in Section 1(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 1(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 Underwriters propose
to make a public offering of their respective portions 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 Underwriters
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 Underwriters and agrees with
the Underwriters as follows:
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<PAGE> 4
(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.
_________), 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 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
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<PAGE> 5
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
any of the Underwriters, specifically for use in connection with
the preparation thereof.
(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) Crowe, Chizek & Company, 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, Mercantile Bank of West
Michigan, 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 ________, 1997, pursuant to Order No.
BT-___________, 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
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<PAGE> 6
contained in the FIB Order have been satisfied, except those
conditions relating to paid-in capital of the Bank, maintenance of
capital ratios and valuation reserves, the Certificate of Paid-In
Capital and Surplus, and completion of the Commissioner's
preopening investigation. 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 __________, 1997 (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 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.
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<PAGE> 7
(i) The Company has a valid and enforceable leasehold
interest in the real property located at 216 North Division
Avenue, Grand Rapids, 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.
(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
7
<PAGE> 8
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.
(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 1997 Employee Stock Option Plan (the "Stock
Option Plan"). 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.
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<PAGE> 9
(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 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 150 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 Plan 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 l(b), above, except with respect to Gerald R. Johnson,
Jr. who may resell one share of Common Stock to the Company.
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<PAGE> 10
5. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligation of the
Underwriters 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 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., as representative of
the Underwriters, shall have received the favorable opinion of
Dickinson, Wright, Moon, Van Dusen & Freeman, counsel for the
Company, dated the Firm Shares Closing Date or the Optional Shares
Closing Date, as the case may be, addressed to the Underwriters
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 bank 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;
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<PAGE> 11
(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 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 (including requirements of
reasonableness and good faith in the exercise of rights and
remedies), whether applied by a court of equity or a court
of law in an action at law or in equity, or by the
discretionary nature of specific performance, injunctive
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 or limited by applicable laws or the policies
embodied in them;
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<PAGE> 12
(viii) the Company is conveying to the respective
Underwriters good and valid title to the Shares that are
issued in their names, free and clear of any adverse claims,
except to the extent any respective Underwriter has notice
of any adverse claim;
(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 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;
(x) the statements in the Registration Statement and
the Prospectus, insofar as they are descriptions of
corporate documents, stock option plans, contracts, or
agreements 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;
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<PAGE> 13
(xii) to the best of such counsel's knowledge, after
due inquiry, no consent, approval, authorization or order of
any court or governmental 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 Underwriters 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 qualifications in its opinion as are reasonably 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 a
representative of the Underwriters 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 and Prospectus and does not assume any
responsibility for the accuracy or
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<PAGE> 14
completeness of the statements in the Registration Statement 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., as
representative of the Underwriters, 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., as representative of
the Underwriters, shall have received a certificate signed by the
Chairman of the Board, and the President or Secretary 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., as
representative of the Underwriters, shall have received a "blue
sky" memorandum of Dickinson, Wright, Moon, Van Dusen & Freeman,
counsel for the Company, addressed to Roney & Co. and in form and
scope reasonably satisfactory to Roney & Co., as representative of
the Underwriters, concerning compliance with the blue sky or
securities laws of the states listed in Exhibit C 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 reasonably 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., as
representative of the Underwriters, 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 C, 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 Underwriters'
participation in the same.
If any condition to the Underwriters' 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., as
representative of the Underwriters, may terminate this Agreement pursuant to
Section 9(c) hereof or, if Roney & Co., as representative of the Underwriters,
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
15
<PAGE> 16
writing, (i) when the Registration Statement and any
post-effective amendment thereto becomes effective, (ii)Eof 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 Underwriters such number of copies of each
preliminary prospectus as may reasonably be requested by Roney &
Co., as representative of the Underwriters, and, as soon as the
Registration Statement, or any amendment or supplement thereto,
becomes effective, deliver to each Underwriter three signed copies
of the Registration Statement, including exhibits, and all
post-effective amendments thereto and deliver to the Underwriters
such number of copies of the Prospectus, the Registration
Statement and supplements and amendments thereto, if any, without
exhibits, as Roney & Co., as representative of the Underwriters,
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 C. 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 such statements or
reports at such times as are or may reasonably be required by
16
<PAGE> 17
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. and, upon request of Roney & Co., to each
of the other Underwriters, 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 than $___________ from the
proceeds of the offering and, in all other material
17
<PAGE> 18
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, which are
required to be complied with prior to the Bank commencing the
business of banking; 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 or to fail to satisfy
any such requirement or condition 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 Underwriters, 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 photocopying of the
Underwriting Agreement and related agreements including, without
limitation, the Dealer Agreement and Agreement Among Underwriters;
(2) the issuance of the Shares and the preparation and delivery of
certificates for the Shares to the Underwriters; (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 C, including the fees and
disbursements of counsel in connection with such registration and
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 Underwriters of
copies
18
<PAGE> 19
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 Underwriters; (8) the inclusion
of the Shares on the OTC Bulletin Board; and (9) the Underwriters'
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 $20,000). Upon a successful completion of the
offering, the Underwriters will credit 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 150 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 Plan as
described in the Prospectus.
(o) For not less than 3 fiscal years after the Effective
Date, unless Roney & Co. shall otherwise consent in writing, (i)
timely file with the Commission all reports required by Section
15(d) of the Exchange Act and not seek suspension of the duty to
file such reports, and (ii) not less frequently than annually
prepare a proxy statement and annual report which conform
substantially to the requirements of Commission Regulation 14A and
distribute such proxy statement and annual report to record and
beneficial owners substantially in the manner which would be
required by Commission Regulation 14A if applicable.
(p) Use its best efforts to cause itself and the Bank to
commence their businesses as described in the Prospectus not later
than December 31, 1997.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Underwriters and each person, if any, who controls the
Underwriters 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
19
<PAGE> 20
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 Underwriters (or any person
controlling the Underwriters) 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 Underwriters 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 Underwriters specifically for use
therein. The Company shall not be liable hereunder to an
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) Each Underwriter severally 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 Underwriters, 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 any of the Underwriters specifically for
use therein; provided, however, that the obligation of each
Underwriter to indemnify the Company (including any controlling
person, director or officer thereof) hereunder shall be limited to
the total price at which the Shares purchased by that Underwriter
hereunder were offered to the public. The Underwriters 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
20
<PAGE> 21
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.
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 Underwriters 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 Underwriters may be subject, in such proportion so that the
Underwriters are 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 Underwriters be responsible for any amount in excess of the underwriting
discount applicable to the Shares
21
<PAGE> 22
purchased by the Underwriters 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 Underwriters within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution
as the Underwriters, and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, each officer 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:
(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 Underwriters 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
22
<PAGE> 23
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, 1997, 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 Underwriters (other than for obligations assumed in Section 6
hereof), and the Underwriters shall not be under any liability to the Company;
provided, however, that if 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 this Agreement, or for any
reasons provided in subparagraphs (b) (other than (b)(6)) and (c) above, the
Company will reimburse the Underwriters 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 $40,000 (including
the $20,000 advance below) incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder. The Underwriters acknowledge receipt of a $20,000
advance from the Company. If this Agreement is terminated for any reason, the
Underwriters shall be entitled to retain such advance as reimbursement for
their 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 $20,000, the Underwriters shall pay such difference to the
Company. If this Agreement is not terminated, the $20,000 shall be credited at
closing against the underwriting discount.
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
23
<PAGE> 24
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 Underwriters 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 Underwriters 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 Underwriters
pursuant to this Agreement.
11. MISCELLANEOUS. This Agreement has been and is made for the benefit of
the Underwriters, the Company and their respective successors and assigns, and,
to the extent expressed herein, for the benefit of persons controlling the
Underwriters 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 Underwriters merely because of such purchase.
If any action or proceeding shall be brought by any Underwriter or the
Company in order to enforce any right or remedy under this Agreement, the
Underwriters 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 the Underwriters, c/o Roney & Co., at One Griswold, Detroit, Michigan 48226
(facsimile No. (313) 963-2303) (with a copy to Donald J. Kunz, Honigman Miller
Schwartz and Cohn, 2290 First National Building, Detroit, Michigan 48226
(facsimile No. (313) 962-0176)); and to the Company at 216 N. Division Avenue,
Grand Rapids, Michigan 49503, Attention: Gerald R. Johnson, Jr., Chairman of
the Board and Chief Executive Officer (facsimile No. (616) _________) (with a
copy to Jerome M. Schwartz, Dickinson, Wright, Moon, Van Dusen & Freeman, 500
Woodward Avenue, Suite 4000, Detroit, Michigan 48226 (facsimile No. (313)
223-3598)).
The laws of the State of Michigan shall govern this Agreement, its
construction, and the determination of any rights, duties or remedies of the
parties arising out of or relating to this Agreement. The parties acknowledge
that the United States District Court for the Eastern District of Michigan or
the Michigan Circuit Court for the County of Wayne shall have exclusive
jurisdiction over any case or controversy arising out of or relating to this
Agreement and that all litigation arising out of or relating to this Agreement
shall be commenced in the United States District Court for the Eastern District
of Michigan or in the Wayne County (Michigan) Circuit Court.
24
<PAGE> 25
Please confirm that the foregoing correctly sets forth the agreement
between us.
Very truly yours,
MERCANTILE BANK CORPORATION
By: __________________________
Gerald R. Johnson, Jr.
Its: Chief Executive Officer
Confirmed by Roney & Co.,
as representative for, and on behalf of,
the Underwriters named on Exhibit A:
RONEY & CO., L.L.C.
By:_______________________________
John C. Donnelly
Director, Corporate Finance
25
<PAGE> 26
EXHIBIT A
26
<PAGE> 27
EXHIBIT B
<TABLE>
<CAPTION>
Number Relationship
of of Person to
Name Shares to the Company
------------------ ------ ---------------------------
<S> <C> <C>
Peter A. Cordes 25,000 Director
C. John Gill 25,000 Director
David M. Hecht 50,000 Director
Gerald R. Johnson 50,000 Chairman of the Board,
Chief Executive Officer and
Director
Lawrence R. Larsen 13,500 Director
Calvin D. Murdock 15,000 Director
Bruce Visser 50,000 Organizer
Dale J. Visser 50,000 Director
Robert M. Wynalda 50,000 Director
</TABLE>
<PAGE> 28
EXHIBIT C
States
Florida
Indiana
Michigan
Ohio
<PAGE> 1
EXHIBIT 3.1
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES - CORPORATION, SECURITIES
& LAND DEVELOPMENT BUREAU
Date Received Effective Date
---------------------- -------------------------
Corporate Identification Number -
---------------------------
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
OF
MERCANTILE BANK CORPORATION
These Articles of Incorporation are signed by the incorporator for the
purpose of forming a profit corporation pursuant to the provisions of Act 284,
Public Acts of 1972, as amended, as follows:
ARTICLE I.
Name
The name of the corporation is Mercantile Bank Corporation.
ARTICLE II
Corporate Purpose
The purpose or purposes for which the corporation is formed are to serve
as a bank holding company registered under the Bank Holding Company Act of
1956, being 12 U.S.C. Sections 1841 to 1850 (as amended from time to time, and
including any successor statutes) and to engage in any activity within the
purposes for which corporations may be formed under the Business Corporation
Act of Michigan.
<PAGE> 2
ARTICLE III
Capital Stock
The total number of shares of all classes of stock which the corporation
shall have authority to issue is 10,000,000 shares which shall be divided into
two classes as follows;
(1) 1,000,000 shares of Preferred Stock (Preferred Stock); and
(2) 9,000,000 shares of Common Stock (Common Stock).
The designations and the powers, preferences and relative, participating
optional or other special rights, and the qualifications limitations or
restrictions of the above classes of stock shall be as follows:
A. PREFERRED STOCK
1. Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration or considerations as the Board of
Directors may determine.
2. The Board of Directors is expressly authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock in one
or more series, 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 restriction thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors, and as are not stated and expressed in these
Articles of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) the following:
(a) The designation of such series 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.
(b) The dividend rate or rates on the shares of such series and the
preference or relation which such dividends shall bear to the dividends
payable on any other class of capital stock or on any other series of
Preferred Stock, the terms and conditions upon which and the periods in
respect of which dividends shall be payable, whether and upon what condition
such dividends shall be cumulative and, if cumulative, the date or dates
from which dividends shall accumulate.
(c) Whether the shares of such series shall be redeemable, and, if
redeemable, whether redeemable for cash, property or rights, including
securities of any other corporations, 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
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<PAGE> 3
shares shall be redeemable, including the manner of selecting shares of
such series for redemption if less than all shares are to be redeemed.
(d) The rights to which the holders of shares of such series shall be
entitled, and the preferences, if any, over any other series (or of any
other series over such series), upon the voluntary or involuntary
liquidation, dissolution, distribution or winding up of the corporation,
which rights may vary depending on whether such liquidation, dissolution,
distribution or winding up is voluntary or involuntary, and, if voluntary,
may vary at different dates.
(e) 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.
(f) Whether the shares of such series shall be convertible into, or
exchangeable for, at the option of either the holder or the corporation or
upon the happening of a specified event, shares of any other class or of any
other series of any class of capital stock of the corporation, and, if so
convertible or exchangeable, the times, prices, rates, adjustments, and
other terms and conditions of such conversion or exchange.
(g) The voting powers, full and/or limited, if any, of the shares of
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 having
similar provisions) shall be entitled to vote separately as a single class,
for the election of one or more directors, or additional directors of the
corporation in case of dividend arrearages or other specified events, or
upon other matters.
(h) 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 powers, preferences or rights of any such other
series.
(i) Any other preferences, privileges and powers and relative,
participating, option 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.
3. Unless and except to the extent otherwise required by law or provided
in the resolution or resolutions of the Board of Directors creating any series
of Preferred Stock pursuant to this Section A, the holders of the Preferred
Stock shall have no voting power with respect to any matter whatsoever. In no
event shall the Preferred Stock be entitled to more than one vote in respect of
each share of stock.
4. Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the corporation, or which have been issued and
reacquired in any manner, may, upon
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<PAGE> 4
compliance with any applicable provisions of the Business Corporation Act
of the State of Michigan, be given the status of authorized and unissued shares
of Preferred Stock and may be reissued by the Board of Directors as part of the
series of which they were originally a part or may be reclassified into and
reissued as part of a new series or as a part of any other series, all subject
to the protective conditions or restrictions of any outstanding series of
Preferred Stock.
B. COMMON STOCK
1. Except as otherwise required by law or by any amendment to these
Articles of Incorporation, each holder of Common Stock shall have one vote for
each share of stock held by him of record on the books of the corporation on
all matters voted upon by the shareholders.
2. Subject to the preferential dividend rights, if any, applicable to
shares of Preferred Stock and subject to applicable requirements, if any, with
respect to the setting aside of sums for purchase, retirement or sinking funds
for Preferred Stock, the holders of Common Stock shall be entitled to receive,
to the extent permitted by law, such dividends as may be declared from time to
time by the Board of Directors.
3. In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution in
full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled to receive
all of the remaining assets of the corporation of whatever kind available for
distribution to shareholders ratably in proportion to the number of shares of
Common Stock held by them respectively. The Board of Directors may distribute
in kind to the holders of Common Stock such remaining assets of the corporation
or may sell, transfer or otherwise dispose of all or any part of such remaining
assets to any other corporation, trust or entity, or any combination thereof,
and may sell all or any part of the consideration so received and distribute
any balance thereof in kind to holders of Common Stock. The merger or
consolidation of the corporation into or with any other corporation, or the
merger of any other corporation into it, or any purchase or redemption of
shares of stock of the corporation of any class, shall not be deemed to be a
dissolution, liquidation of winding up of the corporation for the purposes of
this paragraph.
4. Such numbers of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance (i) upon conversion of
any shares of Preferred Stock or any obligation of the corporation convertible
into shares of Common Stock which is at the time outstanding or issuable upon
exercise of any options or warrants at the time outstanding and (ii) upon
exercise of any options, warrants or rights at the time outstanding to purchase
shares of Common Stock.
ARTICLE IV
Board of Directors
A. Number, Election and Term of Directors. The business and affairs of
the corporation shall be managed by or under the direction of a Board of
Directors. The number of directors of the
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<PAGE> 5
corporation shall be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors of the
corporation, except that the minimum number of directors shall be fixed at no
less than 6 and the maximum number of directors shall be fixed at no more than
15. The directors shall be divided into three classes, designated Class I,
Class II and Class III. Each class shall consist, as nearly equal in
number as possible, of one-third of the total number of directors constituting
the entire Board of Directors. Initially, Class I directors shall be elected
for a one-year term, Class II directors for a two-years term and Class III
directors for a three-year term. At each succeeding annual meeting of
shareholders, beginning in 1998, successors of the class of directors whose
term expires at that annual meeting shall be elected for a three-year term. If
the number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in each
class as nearly equal as possible.
B. Shareholder Nomination of Director Candidates. Nominations for
election to the Board of Directors of the corporation at a meeting of
shareholders may be made by the Board of Directors, on behalf of the Board of
Directors by any nominating committee appointed by the Board of Directors, or
by any shareholder of the corporation entitled to vote for the election of
directors at the meeting. Nominations, other than those made by or on behalf
of the Board of Directors, shall be made by notice in writing delivered to or
mailed, postage prepaid, and received by the Secretary of the corporation at
least 60 days but no more than 90 days prior to the anniversary date of the
immediately preceding Annual Meeting of Shareholders. The notice shall set
forth (i) the name and address of the shareholder who intends to make the
nomination; (ii) the name, age, business address and, if known, residence
address of each nominee; (iii) the principal occupation or employment of each
nominee; (iv) the number of shares of stock of the corporation which are
beneficially owned by each nominee and by the nominating shareholder; (v) any
other information concerning the nominee that must be disclosed by nominees in
a proxy solicitation pursuant to Regulation 14A of the Securities Exchange Act
of 1934 (or any subsequent provisions replacing such Regulation); and (vi) the
executed consent of each nominee to serve as a director of the corporation, if
elected. The chairman of the meeting of shareholders may, if the facts
warrant, determine that a nomination was not made in accordance with the
foregoing procedures, and if the chairman should so determine, the chairman
shall so declare to the meeting and the defective nomination shall be
disregarded.
C. Newly Created Directorships and Vacancies. Newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum, or by a
sole remaining director. Any director of any class chosen to fill a vacancy in
such class shall hold office for a term that shall coincide with the remaining
term of that class, but in no case will a decrease in the number of directors
shorten the term of any incumbent director. A director shall hold office until
the next annual meeting for the year in which his or her term expires and until
such director's successor shall have been elected and qualified.
D. Removal. Any director may be removed from office only for cause and
only by the affirmative vote of the holders of at least a majority of the
voting power of all the shares of the corporation entitled to vote generally in
the election of directors, voting together as a single class.
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<PAGE> 6
E. Preferred Stock. Notwithstanding the foregoing paragraphs, whenever
the holders of any one or more classes or series of Preferred Stock issued by
the corporation shall have the right, voting separately by class or series, to
elect directors at an annual or special meeting of shareholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of the Articles of Incorporation applicable
thereto. The then authorized number of directors of the corporation shall be
increased by the number of additional directors to be elected, and such
directors so elected shall not be divided into classes pursuant to this Article
unless expressly provided by such terms.
F. Amendment or Repeal. Notwithstanding anything contained in these
Articles of Incorporation or the By-laws of the corporation to the contrary,
the affirmative vote of the holders of at least 66 2/3% of the voting power of
all the shares of the corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter,
amend, repeal or adopt any provision inconsistent with the purpose and intent
of this Article.
ARTICLE V
Directors' Liability
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) a violation of Section 551(1) of the Michigan Business
Corporation Act, or (iv) for any transaction from which the director derived
any improper personal benefit. If the Michigan Business Corporation Act is
amended after the date of these Articles of Incorporation to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Michigan Business
Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the shareholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or
modification.
ARTICLE VI
Indemnification
Directors and officers of the corporation shall be indemnified as of right
to the fullest extent now or hereafter permitted by law in connection with any
actual or threatened civil, criminal, administrative or investigative action,
suit or proceeding (whether brought by or in the name of the corporation, a
subsidiary, or otherwise) arising out of their service to the corporation or a
subsidiary, or to another organization at the request of the corporation or a
subsidiary. Persons who are not directors or officers of the corporation may
be similarly indemnified in respect of such service to the extent authorized at
any time by the Board of Directors of the corporation. The
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<PAGE> 7
corporation may purchase and maintain insurance to protect itself and any such
director, officer or other person against any liability asserted against him
and incurred by him in respect of such service whether or not the corporation
would have the power to indemnify him against such liability by law or under
the provisions of this paragraph. The provisions of this paragraph shall
be applicable to directors, officers and other persons who have ceased to
render such service, and shall inure to the benefit of the heirs, executors,
and administrators of the directors, officers and other persons referred to in
this paragraph.
ARTICLE VII
Shareholder Action
Except as otherwise required by law, any action required or permitted to
be taken on or after September 30, 1997 by any shareholders of the corporation
must be effected at a duly called annual or special meeting of such
shareholders and may not be effected by any consent in writing by such
shareholders. Except as may be otherwise required by law, special meetings of
shareholders of the corporation may be called only by the Board of Directors or
the Chairman of the Board. Notwithstanding anything contained in these
Articles of Incorporation or the By-laws of the corporation to the contrary,
the affirmative vote of at least 66 2/3% of the voting power of all the shares
of the corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required to alter, amend or adopt
any provision inconsistent with the purpose and intent of this Article.
ARTICLE VIII
Registered Office and Agent
The address of the initial registered office of the corporation is: 500
Woodward Avenue, Suite 4000, Detroit, Michigan 48226. The name of the
resident agent is: Jerome M. Schwartz.
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<PAGE> 8
ARTICLE IX
Incorporator
The name and address of the incorporator of the corporation is as follows:
Jerome M. Schwartz
Dickinson, Wright, Moon, Van Dusen & Freeman
500 Woodward Avenue, Suite 4000
Detroit, Michigan 48226
I, the incorporator, sign my name this 15th day of July, 1997.
/s/ Jerome M. Schwartz
---------------------------------
Incorporator, Jerome M. Schwartz
Fees remitted by and document to be returned to:
Jerome M. Schwartz
Dickinson, Wright, Moon, Van Dusen and Freeman
500 Woodward Avenue, Suite 4000
Detroit, Michigan 48226
8
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
MERCANTILE BANK CORPORATION
ARTICLE I.
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office shall be in the City of
Grand Rapids, State of Michigan.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Michigan as the board of
directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
SECTION 1. TIMES AND PLACES OF MEETINGS. All meetings of the shareholders
shall be held at such times and places, within or without the State of
Michigan, as may be fixed from time to time by the board of directors. If no
designation of the place of a meeting is made, such meeting shall be held at
the principal office of the Corporation in Grand Rapids, Michigan.
SECTION 2. ANNUAL MEETINGS. Annual meetings of the shareholders shall be
held each year at such time on such business day in the month of April as may
be designated by the board of directors, or if no such designation is made, at
10 a.m. on the third Tuesday in April, or if that day is a legal holiday, then
on the next succeeding business day at such place and hour as shall be fixed by
the board of directors.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by resolution of a majority of the board of directors or by the Chairman
of the Board and shall be held on a date fixed by the board of directors or the
Chairman of the Board.
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<PAGE> 2
SECTION 4. NOTICE OF MEETINGS. Written notice of each meeting of
shareholders, stating the time, place and purposes thereof, shall be given to
each shareholder entitled to vote at the meeting not less than ten (10) nor
more than sixty (60) days before the date fixed for the meeting. Notice of a
meeting need not be given to any shareholder who signs a waiver of notice
before or after the meeting. Attendance of a shareholder at a meeting shall
constitute both (a) a waiver of notice or defective notice except when the
shareholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to holding the meeting or transacting any business
because the meeting has not been lawfully called or convened, and (b) a waiver
of objection to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, except when the
shareholder objects to considering the matter when it is presented.
SECTION 5. SHAREHOLDER LIST. The officer or agent who has charge of the
stock ledger of the Corporation shall prepare and make a complete list of the
shareholders entitled to vote at each meeting, arranged by class or series of
shares in alphabetical order, showing the address of and the number of shares
registered in the name of each shareholder. The list shall be produced and
kept at the time and place of the meeting and may be inspected during the whole
time of the meeting by any shareholder who is present at the meeting.
SECTION 6. QUORUM. Unless a greater or lesser quorum is provided in the
Articles of Incorporation or by law, shares entitled to cast a majority of the
votes at a meeting constitute a quorum at the meeting. Except when the holders
of a class or series of shares are entitled to vote separately on an item of
business, shares of all classes and series entitled to vote shall be combined
as a single class and series for the purpose of determining a quorum. When the
holders of a class or series of shares are entitled to vote separately on an
item of business, shares of that class or series entitled to cast a majority of
the votes of that class or series at a meeting constitute a quorum of that
class or series at the meeting, unless a greater or lesser quorum is provided
in the Articles of Incorporation or by law. If there is no quorum, the officer
of the Corporation presiding as chairman of the meeting shall have the power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present, when any business may be transacted
which might have been transacted at the meeting as first convened had there
been a quorum. However, if the adjournment is for more than thirty (30) days,
or if after the adjournment the board fixes a new record date for the adjourned
meeting, notice of the time, place and purposes of such meeting shall be given
to each shareholder of record on the new record date. Once a quorum is
determined to be present, the shareholders present in person or by proxy at
such meeting may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum. If a meeting is
adjourned solely for the purpose of receiving the results of voting by
shareholders, such meeting need not be reconvened. If not reconvened, such
meeting shall stand adjourned pending submission of the results of voting to
the Secretary of the Corporation, whereupon such meeting shall stand adjourned
until the next regular or special meeting of shareholders.
SECTION 7. VOTE REQUIRED. When a quorum is present at a meeting, any
action to be taken by a vote of the shareholders, other than the election of
directors, shall be authorized by a
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majority of the votes cast by the holders of shares entitled to vote on the
action, unless a greater vote is required by the Articles of Incorporation
or express provision of statute. Except as otherwise provided by the Articles
of Incorporation, directors shall be elected by a plurality of the votes cast
at an election.
SECTION 8. VOTING RIGHTS. Except as otherwise provided by the Articles of
Incorporation or the resolution or resolutions of the board of directors
creating any class of stock, each shareholder shall at every meeting of the
shareholders be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such shareholder. Each proxy to
vote shall be in writing and signed by the shareholder or his or her duly
authorized representative, and no proxy shall be voted after three years from
its date, unless the proxy provides for a longer period.
SECTION 9. CONDUCT OF MEETINGS. Meetings of shareholders generally shall
follow accepted rules of parliamentary procedure, subject to the following:
(a) The chairman of the meeting shall have absolute authority over
matters of procedure, and there shall be no appeal from the ruling of the
chairman. If, in his or her absolute discretion, the chairman deems it
advisable to dispense with the rules of parliamentary procedure as to any
meeting of shareholders or part thereof, he or she shall so state and
shall clearly state the rules under which the meeting or appropriate part
thereof shall be conducted.
(b) If disorder should arise which, in the absolute discretion of
the chairman, prevents the continuation of the legitimate business of the
meeting, the chairman may quit the chair and announce the adjournment of
the meeting, and upon his or her so doing, the meeting is immediately
adjourned without the necessity of any vote or further action of the
shareholders.
(c) The chairman may require any person who is not a bona fide
shareholder of record on the record date, or a validly appointed proxy of
such a shareholder, to leave the meeting.
(d) The chairman may introduce nominations, resolutions or motions
submitted by the board of directors for consideration by the shareholders
without a motion or second. Except as the chairman shall direct, a
resolution or motion not submitted by the board of directors shall be
considered for a vote only if proposed by a shareholder of record on the
record date or a validly appointed proxy of such a shareholder, and
seconded by such a shareholder or proxy other than the individual who
proposed the resolution or motion.
(e) Except as the chairman shall direct, no matter may be presented
to the meeting which has not been submitted in writing to the Secretary
for inclusion in the agenda at least 10 days before the date of the
meeting.
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(f) When all shareholders present at a meeting in person or by proxy
have been offered an opportunity to vote on any matter properly before a
meeting, the chairman may at his or her discretion declare the polls to
be closed, and no further votes may be cast or changed after such
declaration. If no such declaration is made by the chairman, the polls
shall remain open and shareholders may cast additional votes or change
votes until the inspectors of election have delivered their final report
to the chairman.
(g) When the chairman has declared the polls to be closed on all
matters then before a meeting, the chairman may declare the meeting to be
adjourned pending determination of the results by the inspectors of
election. In such event, the meeting shall be considered adjourned for
all purposes, and the business of the meeting shall be finally concluded
upon delivery of the final report of the inspectors of election to the
chairman at or after the meeting.
(h) When the chairman determines that no further matters may
properly come before a meeting, he or she may declare the meeting to be
adjourned, without motion, second, or vote of the shareholders.
(i) When the chairman has declared a meeting to be adjourned, unless
the chairman has declared the meeting to be adjourned until a later date,
no further business may properly be considered at the meeting even though
shareholders or holders of proxies representing a quorum may remain at
the site of the meeting.
SECTION 10. INSPECTORS OF ELECTION. The board of directors or, if they
shall not have so acted, the chairman, may appoint at or prior to any meeting
of shareholders one or more persons (who may be directors or employees of the
Corporation) to serve as inspectors of election. The inspectors so appointed
shall determine the number of shares outstanding and the voting power of each,
the shares represented at the meeting, the existence of a quorum, the validity
and effect of proxies, and shall receive votes or ballots, hear and determine
challenges and questions arising in connection with the right to vote, count
and tabulate votes or ballots, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all shareholders.
SECTION 11. VOTING. When any vote is taken by written ballot at any
meeting of shareholders, an unrevoked proxy submitted in accordance with its
terms shall be accepted in lieu of, and shall be deemed to constitute, a
written ballot marked as specified in such proxy.
ARTICLE III.
RECORD DATE
SECTION 1. FIXING OF RECORD DATE BY BOARD. For the purpose of
determining the shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or to express consent to or dissent
from any corporate action in writing without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend or the
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distribution or allotment of any rights or evidences of interests arising out
of any change, conversion or exchange of capital stock, or for the purpose of
any other action, the board of directors may fix, in advance, a date as the
record date for any such determination of shareholders. Such date shall not be
more than sixty (60) days nor less than ten (10) days before the date of any
such meeting, nor more than sixty (60) days prior to the effectuation of any
other action proposed to be taken. Only shareholders of record on a record
date so fixed shall be entitled to notice of, and to vote at, such meeting or
to receive payment of any dividend or the distribution or allotment of any
rights or evidences of interests arising out of any change, conversion or
exchange of capital stock.
SECTION 2. PROVISION FOR RECORD DATE IN THE ABSENCE OF BOARD ACTION. If
a record date is not fixed by the board of directors: (a) the record date for
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day next preceding the
day on which the meeting is held; and (b) the record date for determining
shareholders entitled to express consent to corporate action in writing,
without a meeting, when no prior action by the board of directors is necessary,
shall be the day on which the first written consent is expressed; and (c) the
record date for determining shareholders for any other purpose shall be the
close of business on the day on which the resolution of the board relating
thereto is adopted.
SECTION 3. ADJOURNMENTS. When a determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders has been made as
provided in this Article, the determination applies to any adjournment of the
meeting, unless the board fixes a new record date for the adjourned meeting.
ARTICLE IV.
DIRECTORS
SECTION 1. NUMBER AND QUALIFICATION OF DIRECTORS. Each director shall be
at least twenty-one (21) years of age. A director need not be a shareholder, a
citizen of the United States, or a resident of the State of Michigan. The
number of directors shall be fixed by resolution of the board of directors as
provided in the Articles of Incorporation.
SECTION 2. VACANCIES. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors shall be filled in the
manner provided in the Articles of Incorporation.
SECTION 3. POWERS. The business and affairs of the Corporation shall be
managed by its board of directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders.
SECTION 4. FEES AND EXPENSES. The directors may be paid their expenses,
if any, of attendance at each meeting of the board of directors and may
be paid a fixed sum for attendance at
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each meeting of the board of directors or a stated salary as director. No
such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
SECTION 5. RESIGNATION AND REMOVAL. Any director may resign at any time
and such resignation shall take effect upon receipt of written notice thereof
by the Corporation, or at such subsequent time as set forth in the notice of
resignation. Directors may be removed only as provided by statute or the
Articles of Incorporation.
ARTICLE V.
MEETINGS OF DIRECTORS
SECTION 1. PLACE OF MEETINGS. The board of directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Michigan.
SECTION 2. FIRST MEETING OF NEWLY ELECTED BOARD. The first meeting of
each newly elected board of directors shall be held immediately following the
annual meeting of shareholders, and no notice of such meeting shall be
necessary to the newly elected directors to legally constitute the meeting,
provided a quorum shall be present. In the event such meeting is not held
immediately following the annual meeting of shareholders, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the board of directors, or as
shall be specified in a written waiver signed by all of the directors.
SECTION 3. REGULAR MEETINGS. Regular meetings of the board of directors
may be held with or without notice at such time and at such place as shall from
time to time be determined by the board.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board may be called
by the Chairman of the Board or the President on two (2) days' notice to each
director, either personally, by mail, by telegram or by facsimile transmission;
special meetings shall be called by the Chairman of the Board or the President
in like manner and on like notice on the written request of two (2) directors.
SECTION 5. PURPOSE NEED NOT BE STATED. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice of such meeting.
SECTION 6. QUORUM. At all meetings of the board of directors a majority
of the total number of directors shall constitute a quorum for the transaction
of business, and the acts 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, except
as may be otherwise specifically provided by statute or by the Articles of
Incorporation. If a quorum is not present at any meeting of the board of
directors, the directors
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present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present.
SECTION 7. ACTION WITHOUT A MEETING. Unless otherwise restricted by the
Articles of Incorporation or these Bylaws, any action required or permitted to
be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if, before or after the action, all members of
the board or of such committee, as the case may be, consent thereto in writing
and such written consent is filed with the minutes or proceedings of the board
or committee.
SECTION 8. MEETING BY TELEPHONE OR SIMILAR EQUIPMENT. Members of the
board of directors or any committee designated by the board of directors may
participate in a meeting of such board, or committee, by means of conference
telephone or similar communications equipment by means through which all
persons participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section shall constitute presence
in person at the meeting.
SECTION 9. WAIVER OF NOTICE. Attendance of a director at or participation
in a meeting of the board of directors or any committee constitutes a waiver of
notice of the meeting, except where a director attends a meeting for the
express purpose of objecting, at the beginning of the meeting or upon his or
her arrival, to the meeting or the transaction of any business because the
meeting has not lawfully been called or convened, and the person does not
thereafter vote for or assent to any action taken at the meeting. Notice of
any meeting of the board or a committee need not be given to any person
entitled thereto who waives such notice in writing, either before or after the
meeting.
ARTICLE VI.
COMMITTEES OF DIRECTORS
SECTION 1. COMMITTEES. The board of directors may from time to time
appoint committees, whose membership shall consist of such members of the board
of directors as it may deem advisable, to serve at the pleasure of the board.
The board of directors may also appoint directors to serve as alternates for
members of each committee in the absence or disability of regular members. The
board of directors may fill any vacancies in any committee as they occur.
SECTION 2. EXECUTIVE COMMITTEE. The Executive Committee, if there is
one, shall have and may exercise the full powers and authority of the board of
directors in the management of the business affairs and property of the
Corporation during the intervals between meetings of the board of directors.
The Executive Committee shall also have the power and authority to declare
distributions and dividends and to authorize the issuance of stock.
SECTION 3. AUDIT COMMITTEE.
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(a) Function. The Audit Committee shall perform the function of an audit
committee for the Corporation and may perform such function for any
subsidiary of the Corporation. The Audit Committee, except as otherwise
specified by the board of directors, shall have the following duties and
responsibilities:
(i) causing a suitable examination of the financial records
and operations of the Corporation and each of its subsidiaries to
be made by the internal auditor of the Corporation;
(ii) recommending to the board of directors the employment of
independent public accountants who fulfill the requirements
established by Section 36 of the Federal Deposit Insurance Act, as
amended, and any regulations issued pursuant to such act by the
Federal Deposit Insurance Corporation or any successor of such
corporation;
(iii) reviewing with the independent public accountants and
management of the Corporation and its subsidiaries the bases for
reports required by Section 36 of the Federal Deposit Insurance
Act, as amended, and any regulations issued pursuant to such act by
the Federal Deposit Insurance Corporation or any successor of such
corporation;
(iv) reviewing examination reports of the Corporation prepared
by regulatory authorities and such other information concerning
examination reports of the Corporation's subsidiaries as the
committee deems advisable; and
(v) reporting to the board of directors at least once each
calendar year concerning the results of examinations made and such
conclusions and recommendations as the Audit Committee deems
advisable.
(b) Eligibility of Members. Directors who fulfill all of the following
conditions shall be eligible to serve on the Audit Committee:
(i) members may not be current employees of the Corporation or
any of its subsidiaries; and
(ii) members must satisfy the requirements established by
Section 36 of the Federal Deposit Insurance Act, as amended, and
any regulations issued pursuant to such act by the Federal Deposit
Insurance Corporation or any successor of such corporation.
(c) Authorized Actions. The Audit Committee shall have the power to take
and effect such actions as it deems necessary or advisable in the
performance of its duties. The committee may engage counsel and other
consultants to assist the committee in performing its duties. Such
counsel and other consultants may but need not be otherwise engaged by
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the Corporation unless otherwise prohibited by applicable laws or
regulations.
SECTION 4. COMPENSATION COMMITTEE.
(a) Function. The Compensation Committee shall perform the function of a
compensation committee for the Corporation. The Compensation Committee, except
as otherwise specified by the board of directors, shall have the following
duties and responsibilities:
(i) making recommendations to the board of directors regarding
benefit plans of the Corporation;
(ii) submitting recommendations to the board of directors
regarding compensation and personnel policies and programs of the
Corporation;
(iii) submitting recommendations to the board of directors
regarding the compensation of the Chief Executive Officer, and
individual salaries of other executive officers; and
(iv) preparing an annual report that may be submitted to the
Corporation's shareholders concerning the compensation policy of
the Corporation and the committee's compensation decisions during
the previous fiscal year.
(b) Eligibility of Members. Directors who are not current employees of
the Corporation or any of its subsidiaries shall be eligible to serve on the
Compensation Committee.
SECTION 5. NOMINATING COMMITTEE. The Nominating Committee, if there is
one, shall consider candidates for the board of directors, propose to the board
of directors candidates for directors for submission to the shareholders at the
annual meeting, and review the retirement policy for directors and make
recommendations to the board of directors concerning this policy.
SECTION 6. OTHER COMMITTEES. The board of directors may designate such
other committees as it may deem appropriate, and such committees shall exercise
the authority delegated to them.
SECTION 7. MEETINGS. Each committee provided for above shall meet as
often as its business may require and may fix a day and time for regular
meetings, notice of which shall not be required. Whenever the day fixed for a
meeting shall fall on a holiday, the meeting shall be held on the following
business day or on such other day as the chairman of the committee may
determine. Special meetings of committees may be called by any member, and
notice thereof may be given to the members by telephone, telegram, letter or
facsimile transmission. A majority of the members of a committee shall
constitute a quorum for the transaction of the business of the committee. A
record of the proceedings of each committee shall be kept and presented to the
board of directors.
SECTION 8. SUBSTITUTES. In the absence or disqualification of a member of
a committee,
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the members thereof present at a meeting and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another member
of the board to act at the meeting in place of such absent or disqualified
member.
ARTICLE VII.
OFFICERS AND TITLED POSITIONS
SECTION 1. APPOINTMENT OF OFFICERS. The board of directors at its first
meeting after the annual meeting of shareholders, or as soon as practicable
after the election of directors in each year, shall appoint from its number a
Chairman of the Board. The board of directors shall also appoint a President,
a Secretary, and a Treasurer, all of whom shall be officers of the Corporation.
The board of directors may also appoint and expressly designate such other
individuals as it may deem proper to be officers of the Corporation, with such
titles as the board of directors may deem appropriate. If the offices of
Chairman of the Board and President are held by a single person, that officer
shall be the Chief Executive Officer of the Corporation; if not, the board of
directors shall designate either the Chairman of the Board or the President to
be the Chief Executive Officer of the Corporation. The dismissal of an
officer, the appointment of an officer to fill the office of one who has been
dismissed or has ceased for any reason to be an officer, the appointment of any
additional officers, and the change of an officer to a different or additional
office, may be made by the board of directors at any later meeting. Any two or
more offices may be filled by the same person.
SECTION 2. APPOINTMENTS TO TITLED POSITIONS. The board of directors or
the Chief Executive Officer may from time to time appoint individuals to fill
titled positions. Holders of titled positions who may from time to time be
appointed pursuant to this Section shall hold such titles as are assigned by
the board of directors or the Chief Executive Officer and shall perform such
duties and exercise such authority as may be assigned by the board of directors
or the Chief Executive Officer. Dismissal of the holder of a titled position,
appointment of a replacement for a holder of a titled position, appointment of
any additional titled position holders, and change of a titled position holder
to a different or additional position, may be made by the board of directors or
the Chief Executive Officer. Any two or more titled positions may be filled by
the same person.
SECTION 3. AUTHORITY OF OFFICERS. The Chairman of the Board, the Chief
Executive Officer, the President, the Secretary, the Treasurer, and such other
persons as the board of directors shall have appointed and expressly designated
as officers shall be the only officers of the Corporation. Only the officers
of the Corporation shall have discretionary authority to determine the
fundamental policies of the Corporation. Holders of titled positions who have
not been expressly designated as officers of the Corporation in this Section or
by the board of directors shall not be officers of the Corporation regardless
of their titles.
SECTION 4. AUTHORITY OF TITLED POSITIONS. Holders of titled positions who
are not officers shall not have discretionary authority to determine
fundamental policies of the Corporation and shall not, by reason of holding
such titled positions, be entitled to have access to any files, records or
other information relating or pertaining to the Corporation, its business and
finances, or
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to attend or receive the minutes of any meetings of the board of directors or
any committee of the Corporation, except as and to the extent expressly
authorized and permitted by the board of directors or the Chief Executive
Officer.
SECTION 5. TERM OF SERVICE. Each officer and holder of a titled position
shall serve at the pleasure of the board. The board of directors may remove
any officer or holder of a titled position from that office or position for
cause or without cause. Any officer or holder of a titled position may resign
his or her office or position at any time, such resignation to take effect upon
receipt of written notice thereof by the Corporation unless otherwise specified
in the resignation.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of the shareholders and all meetings of the board of directors.
SECTION 7. PRESIDENT. The President shall, subject to the direction of
the board of directors, see that all orders and resolutions of the board are
carried into effect, and shall perform all other duties necessary or
appropriate to his or her office, subject, however, to his or her right and the
right of the directors to delegate any specific powers to any other officer or
officers of the Corporation. In case of the absence or inability to act of the
Chairman of the Board, the President shall exercise all of the duties and
responsibilities of the Chairman until the board shall otherwise direct.
SECTION 8. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, in
addition to his or her duties as Chairman of the Board or President, as the
case may be, shall have final authority, subject to the control of the board of
directors, over the general policy and business of the Corporation. The Chief
Executive Officer shall have the power, subject to the control of the board of
directors, to appoint, suspend or discharge and to prescribe the duties and to
fix the compensation of such agents and employees of the Corporation, other
than the officers appointed by the board, as he or she may deem necessary.
SECTION 9. VICE CHAIRMEN OF THE BOARD. Each Vice-Chairman of the Board
shall have such powers and perform such duties as may be assigned to him or her
from time to time by the board of directors or the Chief Executive Officer. In
case of the absence or inability to act of the Chairman of the Board and the
President, the duties of his or her office shall, unless otherwise specified by
these Bylaws, be performed by the Vice-Chairmen of the Board in the order of
their seniority or such other priority as may be established by the board or by
the Chief Executive Officer, unless and until the board shall otherwise direct,
and, when so acting, the duly authorized Vice-Chairman of the Board shall have
all the powers of, and shall be subject to the restrictions upon, the Chairman
of the Board or the President.
SECTION 10. VICE PRESIDENTS. Each Executive Vice President, Senior Vice
President, Vice President, Assistant Vice President and such other vice
presidents as may be designated by the board of directors shall have such
powers and perform such duties as may be assigned to him or her from time to
time by the board of directors or the Chief Executive Officer. In case of the
absence or inability to act of the President, and in the absence or inability
to act of the Vice-Chairmen of the
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Board, the duties of the President shall, unless otherwise specified by these
Bylaws, be performed by the Executive Vice Presidents, the Senior Vice
Presidents, the Vice Presidents, the Assistant Vice Presidents and then such
other vice presidents as may be designated by the board in the order of their
seniority or such other priority as may be established by the board or by
the Chief Executive Officer, unless and until the board shall otherwise direct,
and, when so acting, the duly authorized Executive Vice President, Senior Vice
President, Vice President or Assistant Vice President shall have all the powers
of, and shall be subject to the restrictions upon, the President. Executive
Vice Presidents, Senior Vice Presidents, Vice Presidents and Assistant - Vice
Presidents have the authority to sign or execute contracts and other documents
which shall be binding on the Corporation and to fulfill the terms thereof, but
such Executive Vice Presidents, Senior Vice Presidents, Vice Presidents and
Assistant Vice Presidents shall not have the discretionary policy-making
authority conferred upon the officers by these Bylaws unless expressly
designated as an officer by the board of directors.
SECTION 11. SECRETARY. The Secretary shall attend all sessions of the
board of directors and all meetings of the shareholders and shall record all
votes and the minutes of all proceedings in a book to be kept for that purpose.
The Secretary shall perform like duties for committees when required. He or
she shall give, or cause to be given, notice of all meetings of the
shareholders and meetings of the board of directors. He or she shall keep in
safe custody the seal of the Corporation and shall see that it is affixed to
all documents the execution of which, on behalf of the Corporation under its
seal, is necessary or appropriate, and when so affixed may attest the same. He
or she shall perform such other duties as may be prescribed by the board of
directors or the Chief Executive Officer.
SECTION 12. TREASURER. The Treasurer shall have custody of the corporate
funds and securities, except as otherwise provided by the board, shall cause to
be kept full and accurate accounts of receipts and disbursements in books
belonging to 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. He or she shall disburse the
funds of the Corporation as may be ordered by the board or directors, taking
proper vouchers for such disbursements, and shall render to the directors, at
the regular meetings of the board or whenever they may require it, an account
of all his or her transactions as Treasurer and of the financial condition of
the Corporation.
SECTION 13. ABSENCE. In the case of the absence or inability to act of
any officer or holder of any titled position, or for any other reason that the
board may deem sufficient, the board of directors or the Chief Executive
Officer may delegate for the time being the powers or duties of such officer or
holder of any titled position, to any other director or officer. To the extent
that the enumerated powers or duties do not involve participation in major
policy-making functions of the Corporation or the exercise of discretionary
authority to that end, said powers or duties may be delegated for the time
being to the holder of a titled position, but shall be exercised under the
supervision of an officer.
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ARTICLE VIII.
INDEMNIFICATION
SECTION 1. INDEMNIFICATION OTHER THAN IN ACTIONS BY OR IN THE RIGHT OF THE
CORPORATION. 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 Corporation) by reason of the fact that he or she is
or was a director or officer of the Corporation or a subsidiary, or, while
serving as such a director or officer, is or was serving at the request of the
Corporation or a subsidiary 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, shall be
indemnified by the Corporation against expenses (including attorneys' 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
Corporation or its shareholders, and, with respect to any criminal action or
proceeding, 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 he or she reasonably believed to be in or not
opposed to the best interests of the Corporation or its shareholders, or with
respect to any criminal action or proceeding, that he or she had reasonable
cause to believe that his or her conduct was unlawful. Persons who are not
directors or officers of the Corporation or a subsidiary may be similarly
indemnified in respect of such service to the extent authorized at any time by
the board of directors, except as otherwise provided by statute or the Articles
of Incorporation.
SECTION 2. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE
CORPORATION. Any person who was or is a party 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 he or she is or was a director or officer of the Corporation or a
subsidiary, or, while serving as such a director or officer, is or was serving
at the request of the Corporation or a subsidiary 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, shall be indemnified by the Corporation against expenses (including
attorneys' 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 Corporation or its shareholders.
Indemnification shall not be made for any claim, issue or matter in which such
person has been found liable to the Corporation except to the extent authorized
in Section 6 of this Article. Persons who are not directors or officers of the
Corporation or a subsidiary may be similarly indemnified in respect of such
service to the extent authorized at any time by the board of directors, except
as otherwise provided by statute or the Articles of Incorporation.
SECTION 3. EXPENSES. To the extent that a director or officer, or other
person whose
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indemnification is authorized by the board of directors, has been successful on
the merits or otherwise, including the dismissal of an action without
prejudice, in the defense of any action, suit or proceeding referred to in
Section 1 or 2 of this Article, or in the defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith
and any action, suit or proceeding brought to enforce the mandatory
indemnification provided in this Section.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
Section 1 or 2 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the person has met the
applicable standard of conduct set forth in this Article and upon an evaluation
of the reasonableness of expenses and amounts paid in settlement. Such
determination shall be made (a) by the board of directors by a majority vote of
a quorum consisting of directors who are not parties or threatened to be made
parties to such action, suit or proceeding, or if such a quorum cannot be
obtained, by a majority vote of a committee duly designated by the board
consisting solely of two or more directors not at the time parties or
threatened to be made parties to such action, suit or proceeding; (b)by
independent legal counsel (who may be the regular counsel of the Corporation)
in a written opinion, which counsel shall be selected as provided in (a) above,
provided that if a committee cannot be designated as provided in (a) above,
then the board shall select such independent counsel; (c) by all Independent
Directors (as that term is defined in the Michigan Business Corporation Act)
who are not parties or threatened to be made parties to such action, suit or
proceeding; or (d) by the shareholders, but shares held by directors, officers,
employees or agents who are parties or threatened to be made parties to such
action, suit or proceeding may not be voted. In designating a committee under
(a) above, or in the selection of independent legal counsel in the event a
committee cannot be designated pursuant to (b)above, all directors may
participate. The Corporation may indemnify a person for a portion of expenses
(including reasonable attorneys' fees), judgments, penalties, fees and amounts
paid in settlement for which the person is entitled to indemnification under
Section 1 or 2 of this Article, even though the person is not entitled to
indemnification for the total amount of such expenses, judgments, penalties,
fees and amounts paid in settlement.
SECTION 5. ADVANCING OF EXPENSES. Expenses incurred by any person who is
or was serving as a director or officer of the Corporation or a subsidiary in
defending a civil or criminal action, suit or proceeding described in Section 1
or 2 of this Article shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding if (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 1 or 2 of
this Article; (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 applicable standard of
conduct; and (c) a determination is made that the facts then known to those
making the determination would not preclude indemnification under the Michigan
Business Corporation Act. Persons who are or were not serving as a director or
officer of the Corporation or a subsidiary may receive similar advances of
expenses to the extent authorized at any time by the board of directors, except
as otherwise provided by statute or the Articles of Incorporation.
Determinations under this Section shall be
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made in the manner specified in Section 4 of this Article. Notwithstanding the
foregoing, in no event shall any advance be made in instances where the board
or independent legal counsel reasonably determines that such person
deliberately breached his or her duty to the Corporation or its shareholders.
SECTION 6. RIGHT TO INDEMNIFICATION UPON APPLICATION; PROCEDURE UPON
APPLICATION. A director, officer or other person who is a party or threatened
to be made a party to an action, suit or proceeding may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court may order
indemnification if it determines that the person is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances, whether
or not he or she met the applicable standard of conduct set forth in Section 1
or 2 of this Article or was adjudged liable as described in Section 2 of this
Article, provided, however, that if he or she was adjudged liable, his or her
indemnification shall be limited to reasonable expenses incurred.
SECTION 7. INDEMNIFICATION UNDER BYLAWS NOT EXCLUSIVE. The
indemnification or advancement of expenses provided by this Article shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under the Articles of Incorporation,
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent, and shall
inure to the benefit of the heirs, executors and administrators of such a
person. The total amount of expenses advanced or indemnified from all sources
shall, not exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses. All rights to indemnification
under this Article shall be deemed to be provided by a contract between the
Corporation and the director, officer, employee or agent who serves in such
capacity at any time while these Bylaws and other relevant provisions of the
general corporation law and other applicable law, if any, are in effect. Any
repeal or modification thereof shall not affect any rights or obligations then
existing.
SECTION 8. 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 or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability under the
provisions of this Article.
SECTION 9. MERGERS. For the purposes of this Article, references to the
"Corporation" include all constituent Corporations absorbed in a consolidation
or merger, as well as the resulting or surviving Corporation, so that any
person who is or was a director, officer, employee or agent of such constituent
Corporation, or is or was serving at the request of such constituent
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, shall stand in the same
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position under the provisions of this Article with respect to the resulting or
surviving Corporation as if he or she had served the resulting or
surviving Corporation in the same capacity.
SECTION 10. SAVINGS CLAUSE. If this Article or any portion thereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer or other person
whose indemnification is authorized by the board of directors as to expenses
(including attorneys' fees), judgments, fees and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, including a grand jury proceeding and an
action by the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated or by any other
applicable law.
ARTICLE IX.
SUBSIDIARIES
SECTION 1. SUBSIDIARIES. The board of directors, the Chairman of the
Board, the Chief Executive Officer, the President, or any other officer
designated by the board of directors may vote the shares of stock owned by the
Corporation in any subsidiary, whether wholly or partly owned by the
Corporation, in such manner as they may deem in the best interests of the
Corporation, including, without limitation, for the election of directors of
any subsidiary corporation, or for any amendments to the charter or bylaws of
any such subsidiary corporation, or for the liquidation, merger or sale of
assets of any such subsidiary corporation. The board of directors, the Chief
Executive Officer, or any other officer designated by the board of directors
may cause to be elected to the board of directors of any such subsidiary
corporation such persons as they shall designate, any of whom may, but need not
be, directors, officers, or other employees or agents of the Corporation.
SECTION 2. SUBSIDIARY OFFICERS NOT EXECUTIVE OFFICERS. The officers of
any subsidiary corporation shall not, by virtue of holding such title and
position, be deemed to be officers of the Corporation, nor shall any such
officer of a subsidiary corporation, unless he or she is also a director or
officer of the Corporation, be entitled to have access to any files, records or
other information relating or pertaining to the Corporation, its business and
finances, or to attend or receive the minutes of any meetings of the board of
directors or any committee of the Corporation, except as and to the extent
expressly authorized and permitted by the board of directors or the Chief
Executive Officer.
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ARTICLE X.
CERTIFICATES OF STOCK
SECTION 1. FORM. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation
by, the Chairman of the Board, a Vice Chairman of the Board, the President, an
Executive Vice President, a Senior Vice President, or a Vice President and the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Corporation, certifying the number of shares owned by him or her in the
Corporation. The certificate may but need not be, sealed with the seal of the
Corporation, or a facsimile thereof.
SECTION 2. FACSIMILE SIGNATURES. Where a certificate is signed (a) by a
transfer agent or an assistant transfer agent, or (b) by a transfer clerk
acting on behalf of the Corporation and a registrar, the signatures of the
Chairman of the Board, Vice Chairman of the Board, President, Executive Vice
President, Senior Vice President, Vice President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary may be facsimiles. In case any
officer(s) or any holder(s) of a titled position who has signed, or whose
facsimile signature(s) has been used on, any certificate shall cease to be such
officer(s) or holder(s) before such certificate has been delivered by the
Corporation, such certificate may nevertheless be issued and delivered as
though the person(s) who signed such certificate or whose facsimile
signature(s) appears thereon continued to be such officer(s) or holder(s) of
such titled position.
SECTION 3. LOST CERTIFICATES. The officers may direct a new certificate
to be issued in place of any certificate theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the officers may, in their discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or-his or her legal representative, to advertise the same in such
manner as it shall require and/or to give the Corporation a bond in such sum as
they may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen
or destroyed.
SECTION 4. REGISTERED OWNER. The Corporation shall be entitled to
recognize the exclusive rights of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares; the Corporation shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Michigan.
17
<PAGE> 18
ARTICLE XI.
GENERAL PROVISIONS
SECTION 1. CHECKS. Any signature on any check, demand or note may be
signed by the facsimile signature of any person authorized by the board of
directors to sign under this Section 1 of Article XI. If any officer who has
signed or whose facsimile signature has been used shall cease to be such
officer, such document may nevertheless be signed by means of such facsimile
signature and delivered as though the person who signed such document or whose
facsimile signature has been used thereon had not ceased to be such officer.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the board of directors.
SECTION 3. SEAL. The corporate seal shall have inscribed thereon the name
of the Corporation and the words "Corporate Seal, Michigan." The seal may be
used by causing it or a facsimile thereof to be impressed, affixed, reproduced
or otherwise.
SECTION 4. VOTING SECURITIES. The Chairman of the Board, the Chief
Executive Officer, the President, or any officer designated by the board of
directors shall have full power and authority on behalf of the Corporation to
attend and to act and to vote, or to execute in the name or on behalf of the
Corporation a proxy authorizing an agent or attorney-in-fact for the
Corporation to attend and to act and to vote, at any meetings of security
holders of corporations in which the Corporation may hold securities, and at
such meetings he or she and his or her duly authorized agent or
attorney-in-fact shall possess and may exercise any and all rights and powers
incident to the ownership of such securities and which, as the owner thereof,
the Corporation might have possessed and exercised if present.
SECTION 5. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Articles of Incorporation, if
any, may be declared by the board of directors at any regular or special
meeting pursuant to law. Dividends may be paid in cash, in property, or in
shares of capital stock, subject to the provisions of the Articles of
Incorporation.
SECTION 6. RESERVES. Before payment of any dividends, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interests
of the Corporation, and the directors may modify or abolish any such reserve in
the manner in which it was created.
18
<PAGE> 19
ARTICLE XII.
AMENDMENTS
These Bylaws may be amended, altered, changed, added to or repealed by the
shareholders at any regular or special meeting of the shareholders if notice of
such action be contained in the notice of such meeting, or by the board of
directors at any regular or special meeting of the board of directors.
19
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
CERTIFICATE IS TRANSFERABLE
IN BOSTON AND NEW YORK CUSIP
-------------------
MERCATILE BANK CORPORATION SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF MICHIGAN
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF MERCATILE BANK
CORPORATION
transferable only on the books of the Corporation in person or by attorney upon
surrender of this certificate properly endorsed. This certificate is issued by
the Corporation and accepted by the holder subject to all of the terms and
conditions contained in the Articles of Incorporation and By-Laws of the
Corporation and is not valid unless countersigned by the Transfer Agent.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
<TABLE>
<S> <C> <C>
FACSIMILE OF
NEED SIGNATURE
DATED:
COUNTERSIGNED AND REGISTERED
STATE STREET BANK AND TRUST COMPANY CHAIRMAN AND CHIEF EXECUTIVE OFFICER
(BOSTON) [CORPORATE SEAL OF MICHIGAN] FACSIMILE OF
TRANSFER AGENT AND REGISTRAR NEED SIGNATURE
AUTHORIZED OFFICER SECRETARY
</TABLE>
<PAGE> 2
MERCANTILE BANK CORPORATION
The Corporation will furnish to each shareholder upon request and
without charge a full statement of the designation, relative rights,
preferences and limitations of the shares of each class of stock of this
Corporation authorized to be issued, the designation, relative rights,
preferences, and limitations of each series thereof so far as the same have
been prescribed and the authority of the Board of Directors of this Corporation
to designate and prescribe the relative rights, preferences and limitations of
other series.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT- Custodian
------------- --------------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of survivorship Act
and not as tenants in common -----------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
----------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------------
- -----------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
________________________________________________________________________shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
------------------------------
---------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 5
DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN
500 WOODWARD AVENUE, SUITE 4000
DETROIT, MICHIGAN 48226-3425
TELEPHONE: (313) 223-3500
FACSIMILE: (313) 223-3598
August 5, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street
Washington, D.C. 20549
RE: MERCANTILE BANK CORPORATION
Gentlemen:
We are acting as counsel to Mercantile Bank Corporation, a Michigan
corporation (the "Company") in connection with the proposed issuance and sale
by the Company of shares of its common stock ("Common Stock"). The Common
Stock is described in a registration statement on Form SB-2 (the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
Based upon our examination of such corporate records and other documents
and certificates as we deemed it necessary to examine, it is our opinion that:
1. The Company is a corporation
validly existing under the laws of the
State of Michigan; and
2. The Common Stock, when issued
and sold by the Company, will be legally
issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement and to the use of our firm name under the caption "Legal
Matters" in the related Prospectus. In giving such consent, we do not concede
that we are experts within the meaning of the Act or the rules or regulations
thereunder or that this consent is required by Section 7 of the Act.
Very truly yours,
/s/ Dickinson, Wright, Moon, Van Dusen & Freeman
<PAGE> 1
EXHIBIT 10.1
MERCANTILE BANK CORPORATION
1997 EMPLOYEE STOCK OPTION PLAN
-----------------------
As adopted by the Board of Directors
on July 22, 1997
-----------------------
ARTICLE I - PURPOSE
The purpose of the 1997 Employee Stock Option Plan (the "Plan") of
Mercantile Bank Corporation (the "Company") is to enable key employees of the
Company or any Subsidiary to participate in the Company's future growth and
profitability by offering them long-term performance-based incentive
compensation. The Plan also provides a means through which the Company and its
Subsidiaries can attract and retain key employees.
ARTICLE II - DEFINITIONS
2.1 The following terms have the meaning described below when
used in the Plan:
(a) "Board of Directors" shall mean the board of directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
as it may be further amended from time to time.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Mercantile Bank Corporation.
(e) "Fair Market Value" on a particular date shall mean (i) if the Common
Stock is quoted on the OTC Bulletin Board (the "Bulletin Board"), the mean
between the closing high bid and low asked quotations for such day (or, in the
event that the Common Stock was not quoted on such day, the most recent
preceding business day on which the Common Stock was quoted) of the Common
Stock on the Bulletin Board, (ii) if the Common Stock is quoted on The Nasdaq
Stock Market ("Nasdaq"), the mean between the closing high bid and low asked
quotations for such day of the Common Stock on Nasdaq, or (iii) if neither
clause (i) nor (ii) is applicable, a value determined by any fair and
reasonable means prescribed by the Board of Directors.
<PAGE> 2
(f) "Incentive Stock Option" shall mean a stock option granted under
Article VI that is intended to meet the requirements of Section 422 of the
Code.
(g) "Non-Qualified Stock Option" shall mean a stock option granted under
Article VI that is not intended to be an Incentive Stock Option.
(h) "Option" shall mean an Incentive Stock Option or
Non-Qualified Stock Option.
(i) "Participant" shall mean an eligible employee who has been
granted an Option.
(j) "Subsidiary" shall mean a corporation a majority of the outstanding
voting capital stock of which is owned by the Company.
ARTICLE III - ADMINISTRATION
3.1 Stock Option Plan Administration. The Board of Directors of the
Company shall administer the Plan. The Board of Directors shall have full
power and authority to grant to eligible employees (as determined by the Board
of Directors) Options under Article VI of the Plan, to interpret the provisions
of the Plan and any agreements relating to Options granted under the Plan, and
to administer the Plan. In making determinations of eligibility for the Plan,
the Board of Directors 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 Board of Directors may deem relevant.
(b) Decisions of Board of Directors. All decisions made by the Board of
Directors pursuant to the provisions of the Plan shall be final, conclusive and
binding on all persons, including the Company, its shareholders and employees,
and beneficiaries of employees.
ARTICLE IV - SHARES SUBJECT TO THE PLAN
4.1 (a) Number of Shares. Subject to adjustment as provided for in
Section 4.1(b), the maximum number of shares of Common Stock with respect to
which Options may be granted shall be 130,000 shares of Common Stock. Shares
of Common Stock shall be made available from the authorized but unissued shares
of the Company (including shares reacquired by the Company). If an Option
granted under the Plan shall expire or terminate for any reason, the shares
subject to, but not delivered, under such Option shall be available for other
Options to be issued under the Plan.
(b) Adjustments. All as may be deemed appropriate by the Board of
Directors, the aggregate number of shares of Common Stock which may be issued
under the Plan, the number of shares covered by each outstanding Option, and
the price per share in each Option, may be proportionately adjusted for any
increase or decrease in the number of issued
2
<PAGE> 3
shares of Common Stock of the Company resulting from a subdivision or
consolidation of shares or any other capital adjustment, a stock split, the
payment of a stock dividend, or other increase or decrease in such shares
effected without receipt of consideration by the Company.
ARTICLE V - ELIGIBILITY
5.1 The persons eligible to participate in the Plan and receive Options
under the Plan are officers and other key employees of the Company and its
Subsidiaries, including directors who are full time employees, as determined by
the Board of Directors.
ARTICLE VI - STOCK OPTIONS
6.1 Grant of Options. Subject to the limitations of the Plan, the
Board of Directors, after such consultation with and consideration of the
recommendations of management as the Board of Directors considers desirable,
shall select from eligible employees Participants to be granted Options and
determine the time when each Option shall be granted and the number of shares
subject to each Option. Options may be either Incentive Stock Options or
Non-Qualified Stock Options. More than one Option may be granted to the same
person. The Board of Directors may not grant a Participant Incentive Stock
Options which in the aggregate are first exercisable during any one calendar
year with respect to Common Stock the aggregate Fair Market Value of which
(determined as of the time of grant) exceeds $100,000.
6.2 Option Agreements. Each Option under the Plan shall be evidenced
by an option agreement that shall be signed by an officer of the Company and
the Participant and shall contain such provisions as may be approved by the
Board of Directors. Any such option agreement may be amended from time to time
as approved by the Board of Directors and the Participant, provided that the
terms of such option agreement after being amended conform to the terms of the
Plan.
6.3 Option Price. The price at which shares of Common Stock may be
purchased upon exercise of an Option shall be not less than one hundred percent
(100%) of the Fair Market Value of such shares on the date such Option is
granted.
6.4 Exercise of Options.
(a) The period during which each Option may be exercised shall be
fixed by the Board of Directors at the time such Option is granted, but such
period in no event shall expire later than ten (10) years from the date the
Option is granted.
(b) Subject to the terms and conditions of the option agreement and
unless canceled prior to exercise, each Option shall be exercisable in whole or
in part in installments at such time or times as the Board of Directors may
prescribe and specify in the applicable option agreement.
3
<PAGE> 4
(c) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment shall be made in cash or through the delivery of shares of Common
Stock of the Company with a value equal to the total option price or a
combination of cash and shares. Any shares so delivered shall be valued at
their Fair Market Value on the exercise date. No Participant shall be deemed
to be a holder of any shares subject to any Option prior to the issuance of
such shares upon exercise of such Option.
6.5 Ten-Percent Shareholder Rule. If a Participant owns more than ten
percent (10%) of the total combined voting power of all classes of the Company
or of any Subsidiary's stock at the time an Incentive Stock Option is granted
to such Participant, the option price to such Participant shall not be less
than one hundred ten percent (110%) of the Fair Market Value per share of the
Common Stock on the date of grant, and such Incentive Stock Option by its terms
shall not be exercisable after the expiration of five (5) years from the date
of grant.
6.6 Non-Transferability of Options. No Option or any rights with
respect thereto shall be subject to any debts or liabilities of a Participant,
nor be assignable or transferable except by Will or the laws of descent and
distribution, nor be exercisable during the Participant's lifetime other than
by the Participant, nor shall Common Stock be issued to or in the name of one
other than the Participant; provided, however, that an Option may after the
death or disability of a Participant be exercised pursuant to Section 6.7; and
provided further that any Common Stock issued to a Participant hereunder may at
the request of the Participant, and with the consent of the Company, be issued
in the names of the Participant and one other person, as joint tenants with
right of survivorship and not as tenants in common, or in the name of a trust
for the benefit of the Participant or for the benefit of the Participant and
others.
6.7 Termination of Employment; Death and Disability. Subject to the
condition that no Option may be exercised in whole or in part after the
expiration of the option period specified in the applicable option agreement:
(a) Except as hereinafter provided, an Option may be exercised by the
Participant only while such Participant is in the employ of the Company or a
Subsidiary. In the event that the employment of a Participant 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.
(b) In the event of the permanent disability of a Participant as
determined by the Board of Directors, an Option which is otherwise exercisable
may be exercised by the Participant's legal representative or guardian. In the
event of the death of the Participant, an Option which is otherwise exercisable
may be exercised by the person or persons whom the Participant shall have
designated in writing on forms prescribed by and filed with the Board of
Directors ("Beneficiaries"), or, if no such designation has been made, by the
person or persons to
4
<PAGE> 5
whom the Participant's rights shall have passed by Will or the laws of descent
and distribution ("Successors"). The Board of Directors may require an
indemnity and/or such evidence or other assurances as the Board of Directors in
its sole and absolute discretion may deem necessary in connection with an
exercise by a legal representative, guardian, Beneficiary or Successor.
ARTICLE VII - GENERAL PROVISIONS
7.1 Change in Control.
(a) In the case of a Change in Control (as defined below) of the
Company, unless the Board of Directors determines otherwise, each Option then
outstanding shall become exercisable in full immediately prior to such Change
in Control.
(b) Any determination by the Board of Directors made pursuant to
subsection (a) above may be made as to all outstanding Options or only as to
certain Options specified by the Board of Directors and any such determinations
shall be made in cases covered by subparagraphs 7.1(c)(i) and (ii) below prior
to or as soon as practicable after the occurrence of such event and in the
cases covered by subparagraphs 7. 1 (c) (iii) or (iv) prior to the occurrence
of such event.
(c) A Change in Control shall occur if:
(i) Any "person" or "group of persons" as such terms are
defined in Section 13(d) and 14(c) of the Securities Exchange Act of 1934 (the
"Exchange Act") directly or indirectly purchases or otherwise becomes the
"beneficial owner" (as defined in the Exchange Act) or has the right to acquire
such beneficial ownership (whether or not such right is exercised immediately,
with the passage of time or subject to any condition) of voting securities
representing forty percent (40%) or more of the combined voting power of all
outstanding voting securities of the Company,
(ii) During any period of two consecutive calendar years the
individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least the majority of the
members thereof unless (1) there are five or more directors then still in
office who were directors at the beginning of the period and (2) the election
or the nomination for election by the Company's shareholders of each new
director was approved by at least two-thirds (2/3) of the directors then still
in office who were directors at the beginning of the period,
(iii) The shareholders of the Company shall approve an agreement
to merge or consolidate the Company with or into another corporation as a
result of which less than fifty percent (50%) of the outstanding voting
securities of the surviving or resulting entity are or are to be owned by the
former shareholders of the Company (excluding from former shareholders a
shareholder who is or as a result of the transaction in question, becomes an
affiliate as defined in Rule 12b-2 under the Exchange Act of any party to such
consolidation or merger), or
5
<PAGE> 6
(iv) The shareholders of the Company shall approve the sale of
all or substantially all of the Company's business and/or assets to a person or
entity that is not a wholly-owned subsidiary of the Company.
7.2 No Right of Continued Employment. Neither the establishment of
the Plan, the granting of Options or any action of the Company or of the Board
of Directors shall be held or construed to confer upon any person any legal
right to be continued in the employ of the Company or its Subsidiaries, each of
which expressly reserves the right to discharge any employee whenever the
interest of any such company in its sole discretion may so require without
liability to such company or the Board of Directors, except as to any rights
that may be expressly conferred upon such employee under the Plan.
7.3 No Segregation of Cash or Shares. The Company shall not be
required to segregate any shares of Common Stock that may at any time be
represented by Options, and the Plan shall constitute an "unfunded" plan of the
Company. No employee shall have rights with respect to shares of Common Stock
prior to the delivery of such shares. The Company shall not, by any provisions
of the Plan, be deemed to be a trustee of any Common Stock or any other
property and the liabilities of the Company to any employee pursuant to the
Plan shall be those of a debtor pursuant to such contract obligations as are
created by or pursuant to the Plan, and the rights of any employee, former
employee or beneficiary under the Plan shall be limited to those of a general
creditor of the Company.
7.4 Delivery of Shares. No shares shall be delivered pursuant to any
exercise of an Option under the Plan unless the requirements of such laws and
regulations as may be deemed by the Board of Directors to be applicable thereto
are satisfied. All certificates for shares of Common Stock delivered under the
Plan shall be subject to such stock-transfer orders and other restrictions as
the Board of Directors may deem advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Common Stock is then listed, and any applicable Federal
or state securities law, and the Board of Directors may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.
7.5 Governing Law. The Plan and all determinations made and action
taken pursuant thereto shall be governed by the laws of the State of Michigan
and construed in accordance therewith.
7.6 Payments and Tax Withholding. The delivery of any shares of
Common Stock under the Plan shall be for the account of the Company and any
such delivery or distribution shall not be made until the recipient shall have
made satisfactory arrangements for the payment of any applicable withholding
taxes.
6
<PAGE> 7
ARTICLE VIII - AMENDMENT AND TERMINATION
8.1 Amendment or Termination. The Board of Directors may amend or
terminate the Plan provided, however, that no such amendment or termination
shall adversely affect any Option then in effect unless the prior approval of
the Participant so affected is obtained and provided further that any amendment
to the Plan shall be subject to shareholder approval to the extent necessary to
satisfy the requirements of Section 16 under the Exchange Act. No Option may
be granted under the Plan after July 1, 2002.
ARTICLE IX - EFFECTIVENESS OF PLAN
9.1 The Plan was adopted by the Board of Directors on July 22, 1997
subject to the approval by the sole shareholder of the Company and was approved
by such shareholder on July 22, 1997.
ARTICLE X - SEVERABILITY
10.1 If any provision of the Plan, or any term or condition of any
Option granted thereunder, is invalid, such provision, term, condition
or application shall to that extent be void (or, in the discretion of the Board
of Directors, such provision, term or condition may be amended so as to avoid
such invalidity or failure), and shall not affect other provisions, terms or
conditions or applications thereof, and to this extent such provisions, terms
and conditions are severable.
7
<PAGE> 1
EXHIBIT 10.2
LEASE
THIS LEASE is entered into as of AUGUST 6, 1997, by and between DIVISION
AVENUE PARTNERS, L.L.C., a Michigan limited liability company of Grand Rapids,
Michigan ("Landlord"), and MERCANTILE BANK OF WEST MICHIGAN, a Michigan
corporation ("Tenant").
1. PREMISES
For the rent and in consideration of the agreements contained in this
Lease, Landlord leases to Tenant and Tenant rents from Landlord the warehouse
and office space, comprising approximately eleven thousand one hundred (11,100)
square feet located at 216 N. Division, Grand Rapids, Kent County, Michigan
(the "Building"), as more particularly described on Exhibit A attached hereto
together with that portion of the parking lot lying contiguous to, and south of
the Building, identified on Exhibit A attached hereto, containing approximately
twenty-four (24) parking spaces, together with all of the easements, rights,
privileges and appurtenances thereunto belonging and together with all of the
improvements presently constructed thereon in their present condition and
together with all fittings and fixtures of every kind whatsoever now or
hereafter owned by Landlord and used or procured for use in connection with the
operations and maintenance of said improvements (all of the foregoing are
hereinafter referred to as the "Premises"). This Lease is not subject to any
conditions, covenants, easements, restrictions or right-of-ways, nor are the
Premises encumbered with the leasehold interest of any other party except for
the leasehold interest of Brian's Books which occupies 1,850 square feet of the
Premises, and which Landlord warrants is terminable upon sixty days notice in
writing, which notice was given on July 22, 1997.
2. ACCEPTANCE OF PREMISES
The Landlord represents to Tenant that the Premises are in good condition,
and Tenant agrees to accept the Premises in the condition in which it is on the
date that this Lease is executed.
3. TERM
The term of this Lease shall commence upon the date Tenant's contractors
are ready to commence making of improvements to the Premises, but no later than
September 1, 1997. The foregoing notwithstanding, the term of this Lease with
respect to that portion of the Premises occupied by Brian's Books shall
commence when Brian's Books vacates the Premises. Landlord shall use its
best efforts to cause Brian's Books to vacate the Premises in a timely manner,
including commencement and diligent prosecution of an eviction proceeding, if
necessary. The term of this Lease shall end on August 31, 2007.
<PAGE> 2
Tenant shall have the option to extend the term of this lease for four (4)
successive 5-year periods by delivering notice, in writing, to Landlord at
Landlord's address or otherwise where designated by Landlord, no later than 12
months prior to the end of the term of this lease, or any extension. Such
extension or extensions shall be upon the same terms and conditions as herein
set forth and such extension shall be treated as if a part of the original term
of this Lease.
4. USE
It is understood and agreed between the parties that the Premises during
the continuance of this Lease shall be used and occupied only for lawful
purposes and uses in connection with Tenant's business as it is presently
constituted, and for no other purpose or purposes without the prior written
consent of Landlord. Tenant shall not use the Premises or permit the Premises
to be used for the doing of any act or anything that constitutes the violation
of any law, order, ordinance, or regulation of any governmental authority and
any rules, regulations, standards or guidelines issued pursuant to any of the
aforesaid. Tenant shall not, in any manner, deface or injure the Premises, or
permit any objectionable noise or odor, or any hazardous substances, material,
contaminate or waste to be released, emitted, or spilled or permit anything to
be done on the Premises intending to create a health hazard or a nuisance or to
disturb others or to injure the reputation of the Premises.
5. RENT
(a) Tenant agrees to pay to Landlord as rent for the Premises
during the term of this Lease the sum of twelve thousand four
hundred eighty-seven dollars and fifty cents ($12,487.50) each
month, commencing on the 1st day of October, 1997, and on the same
day of each month thereafter, payable to Landlord at the address
of Landlord or such other place as may be designated in writing by
Landlord. Past due payments of rent shall bear interest at the
rate of 18% per annum. The foregoing notwithstanding, rent (to be
prorated on the basis of area) with respect to that portion of the
Premises occupied by Brian's Books shall not commence until such time as
Brian's Books has vacated the Premises.
(b) Commencing with the due date of the first monthly rent
payment of the second lease year and every lease year thereafter
the rent shall be increased by the greater of three percent (3%)
of the rent for the preceding lease year, or by the same
percentage as there is an increase in the "Consumer Price Index
for All Urban Consumers (United States) (1984=100)", or any
successor Consumer Price Index, as published by the Bureau of
Labor Statistics, United States Department of Labor (the "Index").
On such date, if rent is to be increased by the percentage
increase in the Index, rent shall be subject to increase (but not
decrease) based upon the following formula:
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First, the figure shown by such Index for the date of
calculation shall be divided by the figure shown by
such Index for the Lease commencement date or the date
of the last rent adjustment (as applicable), and the
integer one (1) shall be subtracted from the quotient
so obtained.
Second, the fraction obtained in step one shall be
multiplied by the amount of the annual rent for the
most recently concluded lease year; and
Third, the product obtained in step two shall be added
to the annual rent for the most recently concluded
lease year and the sum so obtained shall be the new
annual rent until the next adjustment made pursuant to
this Lease.
6. TAXES
(a) Tenant shall pay, before any penalty or interest
attaches, all real estate taxes, special assessments, water
charges, sewer service charges, and other governmental charges of
any kind whatsoever, levied or assessed against or with respect to
the Premises at any time during the term of this Lease, and shall,
upon written request, furnish to Landlord duplicate receipts
therefore. In the event Tenant fails to make payment as required
under this Section, Landlord shall be entitled to make payment
directly to the appropriate governmental subdivision. Tenant
agrees that it will, on demand, reimburse Landlord for the amount
of such payment. For purposes of this paragraph, real property
taxes shall be prorated on a calendar year basis for the first and
last calendar years of this Lease.
(b) Tenant shall pay before any penalty or interest attaches,
all personal property taxes levied or assessed against the
personal property of Tenant located upon the Premises, and shall,
upon written request, furnish to Landlord duplicate receipts
thereof.
(c) Tenant shall have the right to contest the amount or
validity, in whole or in part, of any tax, assessment or charge
described in (a) or (b) above by appropriate proceedings
diligently conducted in good faith.
(d) Tenant shall have a right to seek a reduction in the
valuation of the Premises assessed for tax purposes and to
prosecute any action or proceeding heretofore commenced by Tenant.
To the extent to which any tax refund payable as a result of any
such proceeding which Tenant may institute, or payable by reason
of the compromise or settlement of any such proceeding, may be
based upon a payment made by Tenant and shall not relate to a
period as to which apportionment thereof has been made with
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Landlord, Tenant shall be authorized to collect the same, subject
to Tenant's obligation to reimburse Landlord forthwith for any
expenses and fees incurred by Landlord in connection therewith.
Landlord may at its own expense and for its and Tenant's benefit,
if it shall so desire, endeavor at any time or times to obtain a
lowering of the assessed valuation upon the Premises or any part
thereof for the purpose of reducing taxes thereon, and in such
event, Tenant will cooperate in effecting such a reduction. If
required by law in order to so contest such tax, assessment,
valuation or charge, Landlord shall join in such proceedings or
permit the same to be brought in its name. Landlord shall not
ultimately be subjected to any liability for the payment of any
costs or expenses in connection with any proceedings brought by
Tenant, and Tenant will indemnify and save harmless Landlord from
any such costs and expenses, including, without limitation,
reasonable attorneys fees.
7. ALTERATIONS AND INSTALLATIONS DURING TERM AND REMOVAL OF IMPROVEMENTS
BY TENANT
(a) Tenant shall not, without the prior written approval of
Landlord, which approval shall not unreasonably be withheld, make
any material alterations, improvements, or additions to the
Premises. Any alteration, improvement or addition shall
conclusively be deemed material if it involves alterations,
improvements or additions exceeding in cost the sum of Ten
Thousand Dollars ($10,000.00). If Tenant desires to make any
material alterations, improvements, or additions to the Premises,
Tenant shall first submit to Landlord plans and specifications
therefore and obtain Landlord's written approval thereof, which
approval shall not unreasonably be withheld. Landlord shall not
withhold or delay its approval of any nonstructural alterations
unless, in the opinion of Landlord, Tenant's proposal would be
detrimental to the long term value of the Premises. Any such
approved alterations, improvements, or additions shall be made at
Tenant's sole expense with such contractor or contractors, as
shall be approved by Landlord, which approval shall not
unreasonably be withheld. Unless otherwise directed by Landlord in
writing, no alterations, improvements, additions or physical
changes made by Tenant, shall be removed by Tenant from the
Premises at the termination of the Lease with the exception of,
(i) Tenant's trade fixtures, (ii) those improvements identified on
Exhibit B, attached hereto, as from time-to-time supplemented by
mutual agreement of the parties. In the event the parties are
unable to agree upon a characterization of a particular asset as a
trade fixture, the matter shall be submitted to arbitration under
the auspices of the American Arbitration Association. All
alterations, improvements, or additions exclusive of those assets
enumerated above, shall immediately upon installation become
Landlord's property and shall be deemed to be a part of the
Premises.
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(b) Tenant shall, before making any improvements,
alterations, additions, installations or improvements, at its
expense, obtain all permits, approvals and certificates required
by any governmental or quasi-governmental bodies and (upon
completion) certificates of final approval therefore, and shall
deliver promptly, upon request, duplicates of all such permits,
approvals and certificates to Landlord, and Tenant agrees to carry
and will cause Tenant's contractors and sub-contractors to carry
such workers' compensation, general liability, and personal and
property damage insurance as Landlord may reasonably require.
(c) Nothing in this Lease shall authorize Tenant to, and
Tenant shall not, do any act which will in any way encumber the
title of Landlord to the Premises. If a lien is filed against the
Premises or Tenant's interest therein to secure payment of an
indebtedness or other obligation of the Tenant, Tenant shall,
within ten (10) days after receiving a request from the Landlord
that such lien be discharged, discharge such lien either by
payment of the indebtedness due the lien claimant or by filing a
bond (as provided by statute) as security therefor. If Tenant
fails to discharge such lien, Landlord shall have the right to
procure its discharge by filing such bond or making payment to
such lien claimant and Tenant shall reimburse Landlord for all
costs and expenses incurred by Landlord as additional rent upon
the first day that rent shall become due thereafter.
8. REPAIRS AND MAINTENANCE BY TENANT
(a) Tenant shall, at its expense, keep and maintain the
Premises, and each component of the Premises, and all of Tenant's
property upon the Premises, in good and clean operating condition.
Tenant's obligations shall include, but not be limited to,
roadway, parking, landscaping, exterior and structural
maintenance, reconstruction and repairs (including all necessary
replacements), the replacement of broken glass and the repair and
maintenance (including all necessary replacements) of the interior
portions and components of the Premises, such as the walls,
ceiling, heating, air conditioning, electrical, plumbing, dust
collecting and sprinkler systems, any building security system and
other interior components. Landlord shall be given notice of and
Tenant's plan for any major repair or replacement undertaken.
Tenant shall also, at its expense, remove snow, ice and rubbish
from the Premises.
(b) If Tenant does not renew the term of this Lease through
the full amortization period or acquire ownership of the Premises
at or before the termination of this Lease, Landlord agrees to
reimburse Tenant for the unamortized cost for the replacement of
any building elements treated for tax purposes as capital assets
and required to have been replaced by Tenant under the terms of
this Lease. Any such reimbursement shall be made by
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Landlord to Tenant no later than the date the Lease terminates.
The unamortized cost of any such replacements shall be agreed upon
by the parties. If the parties are unable to agree, the matter
shall be submitted to arbitration under the auspices of the
American Arbitration Association.
(c) If Landlord reasonably deems any unperformed cleaning
maintenance, repairs or replacements by Tenant necessary, it may
demand that Tenant make the same. If Tenant refuses or neglects to
do so or fails to complete the same within a reasonable time,
Landlord may make or cause such reasonable cleaning, maintenance,
repairs or replacements to be made and shall not be responsible to
Tenant for any loss or damage that may accrue to Tenant by reason
thereof. Tenant agrees that it will, on demand, pay to Landlord
the cost of any such cleaning, maintenance, repairs or
replacements.
9. UTILITIES
Charges for utilities used in or about the Premises, including, without
limitation, gas, electricity, light, heat, power and telephone or other
communication services, water and sewage, to be paid by Tenant as they are
incurred. Tenant shall furnish to Landlord upon demand receipts or other
satisfactory proof of payment of such charges.
10. INSURANCE
(a) Tenant, at its sole cost and expense, shall keep the
Premises with all improvements thereon insured under a policy or
policies of "all risk" fire and casualty coverage insurance, to
the full extent of their replacement costs, underwritten by such
carriers as Landlord shall approve, which approval shall not
unreasonably be withheld. Landlord shall be named as an
additional insured in such policy or policies. In the case of
damage, the proceeds of the policy shall be paid over jointly to
Landlord and Tenant, and applied to the restoration of the
Premises. The foregoing notwithstanding, if the Lease is
terminated under paragraph 12, as a consequence of the damage or
destruction of the Premises, the proceeds of the insurance shall
be paid over solely to Landlord.
(b) Tenant shall maintain, at its expense, public liability
and property damage insurance in the amounts of not less than one
million dollars ($1,000,000) for each occurrence, one million
dollars ($1,000,000) for each accident, and one million dollars
($1,000,000) for property damage, which insurance shall name
Landlord as additional insured.
(c) With respect to the insurance to be provided by Tenant in
this Paragraph, policies or certificates of insurance, in form and
substance satisfactory to Landlord and written by companies
acceptable to Landlord,
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shall be furnished to Landlord. Such policies shall be
non-cancelable unless ten (10) days prior written notice to
Landlord is given.
(d) All policies of insurance purchased by the parties with
respect to the Premises shall contain clauses or endorsements
under which the insurer waives all right of subrogation against
Landlord or Tenant, as the case may be, or any of their agents,
employees, invitees and licensees, with respect to losses payable
under any such policy or policies.
11. INDEMNIFICATION
The Tenant agrees to indemnify and save harmless the Landlord against and
from any and all claims by or on behalf of any person or persons, firm or
firms, corporation or corporations arising from the conduct or management of or
from any work or thing whatsoever done (other than by Landlord or its
contractors or the agents or employees of either) in and on the premises during
the term of this Lease and during the period of time, if any, prior to the term
commencement date that the Tenant may have been given access to the premises
for the purpose of making improvements, and will further indemnify and save the
Landlord harmless against and from any and all claims arising from any
condition of the premises due to or arising from any act or negligence of the
Tenant or any of its agents, contractors, servants, employees, licensees or
invitees, and from and against all costs, expenses and liabilities incurred in
or in connection with any such claim or claims or action or proceeding brought
thereon; and in case any action or proceeding be brought against the Landlord
by reason of any such claim, the Tenant, upon notice from the Landlord, agrees
to resist or defend such action or proceeding and to employ counsel therefor
reasonably satisfactory to the Landlord.
12. DAMAGE OR DESTRUCTION OF PREMISES
Landlord and Tenant agree that if at any time during the continuance of
this Lease the Premises shall be destroyed or so injured by fire, or by other
casualty as to be unfit for occupancy, and such destruction or injury can
reasonably be repaired within one hundred eighty (180) days from the date of
such destruction or injury, then Tenant shall not be entitled to surrender
possession of said Premises; but in case of any such destruction or injury,
Tenant shall immediately commence the restoration of the Premises and shall
complete the same with all reasonable speed. The restoration of the Premises
shall be performed by contractors approved in advance by Landlord. If the
Premises shall be so destroyed or injured by fire or other casualty that such
destruction or injury, cannot reasonably be repaired within one hundred eighty
(180) days from the date of such destruction or injury either Landlord or
Tenant shall have the option, upon written notice given to the other within
thirty (30) days from the date of destruction or injury, to terminate this
Lease. In the event of such a termination, Landlord shall be entitled to all
insurance proceeds with respect to the Premises. Tenant shall be entitled to
make use of the proceeds of insurance upon the Premises to pay for the
restoration of the Premises. If the insurance proceeds are inadequate to
restore the Premises as nearly as possible to the
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condition existing immediately prior to such occurrence it shall be the
obligation of the Tenant to pay the additional cost required. Irrespective of
the tenantability of the Premises rent shall not abate. If the Lease is
terminated under the terms of this paragraph 12, Tenant shall be relieved of
the obligation to repair the Premises and to make future payments of rent.
13. EMINENT DOMAIN
In the event the Premises or any part thereof shall be taken for public or
quasi-public use or condemned under eminent domain, then if and when there is
an actual taking of physical possession of the Premises or of any part thereof
which shall render the remainder unfit for use by Tenant as hereinafter
defined, Tenant shall have the right to terminate this Lease. The Premises
shall be deemed to be unfit for use by Tenant if the area of such portion
remaining after such taking is less than reasonably sufficient to accommodate
the activities of Tenant conducted from the Premises immediately prior to such
taking. If Tenant elects to terminate this Lease as provided above, it shall
give written notice to Landlord within thirty (30) days after the entry of the
final order of the court authorizing the taking or appropriation or the date of
settlement, as the case may be. If the term of this Lease is terminated by
Tenant, Tenant shall be entitled to receive that portion of any award of
damages specifically allocated in the final order to the loss of its leasehold
estate or costs of relocation. The balance of any award of damages shall be
the property of Landlord.
In the event of any such taking which does not result in the termination
of this Lease, rent shall abate in proportion to the value of the Premises
taken.
14. DEFAULT
(a) Events of Default. In the event of any default by Tenant
in the payment of any rent provided for herein on the day it
becomes due and payable, and if such default continues for ten
(10) days, after notice, in writing, is given by Landlord to
Tenant , or if default shall be made or suffered by Tenant in any
of the other covenants and conditions of this Lease required to be
kept or performed by Tenant (other than payment of rent), and if
Tenant fails to commence to cure such default or defaults within
ten (10) days after written notice thereof given by Landlord to
Tenant, specifying the default or defaults complained of, and
thereafter to diligently cure such default or defaults; or, if
Tenant shall become insolvent or make an assignment for the
benefit of creditors, file, or have filed against it, a petition
in bankruptcy, which shall not be vacated, set aside or dismissed
within thirty (30) days, or seek the benefit of any bankruptcy,
composition or insolvency law or act, of if Tenant shall be
adjudged a bankrupt, or if Tenant's leasehold interest herein
shall be levied on execution, or a receiver be appointed for
Tenant, whether by virtue of state or Federal law; then Landlord
may, in addition to any other remedy, re-enter into and repossess
the Premises and remove Tenant and every other occupant, and may
relet the Premises or any part
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thereof for any term, either shorter, longer, or the same, at a
higher, lower, or the same rental, making such alterations as may
be necessary, and the Lease shall terminate.
(b) Expenses of Default. If Landlord shall, on any such
default by Tenant, obtain possession of the Premises by re-entry,
summary proceedings, or otherwise, Tenant shall pay to Landlord
all expenses incurred in obtaining possession of the Premises,
including reasonable attorneys fees, all expenses and commissions
which may be paid for the reletting of the same, and all other
damages resulting from Tenant's default.
(c) Termination of Lease. No termination of this Lease
pursuant to this Section or repossession of the Premises or any
part thereof shall relieve Tenant of its liabilities and obligations
under this Lease, all of which shall survive any such termination
or repossession. Tenant shall pay to Landlord, as and for
liquidated and agreed damages for Tenant's default, (i) the then
present value of the rent and other sums and charges to be paid
by Tenant until what would have been the end of the term in the
absence of such termination or repossession (the "Scheduled Amount"),
less (ii) the then present value of the net proceeds, if any, of the
reletting of the Premises (including any parts thereof), for any
periods within such term, after deducting all of Landlord's expenses
in connection with such reletting, including, without limitation,
all repossession costs, brokerage and management commissions,
operating expenses, legal expenses, attorney fees, alteration costs
and expenses of preparation of such reletting (the "Reletting Amount").
The Tenant shall be entitled to the benefit of all Reletting Amounts,
whenever arising or determined, and Landlord shall promptly pay to
Tenant any overpayments that are made to Landlord under the prior
sentence as additional Reletting Amounts are determined. Landlord
shall use reasonable efforts to re-let the Premises and otherwise
mitigate damages. Exercise of any remedy hereunder by the Landlord
shall not exclude the right to exercise any other remedy hereunder,
but in no event will Landlord be entitled to be paid more than once
for the same loss.
15. ACCESS
Landlord shall have the right to enter upon the Premises at all reasonable
hours for the purpose of inspecting the same.
16. SIGNS AND ADVERTISING
Tenant shall have the right to install, maintain and display upon the
Premises such inside and outside signs as Tenant may reasonably deem necessary
or desirable for the carrying on of its business at Tenant's expense; provided,
however, that it is Tenant's obligation to comply with any and all applicable
laws or ordinances affecting the placing, location, size and type of signs.
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17. SUBORDINATION; ATTORNMENT; ESTOPPEL CERTIFICATE
(a) This Lease shall, at the option of Landlord or its
lenders, be subject and subordinate to the interests of the
holders of any notes secured by mortgages on the Property or the
Premises, now or in the future, and to all renewals,
modifications, consolidations, replacements and extensions
thereof. While the provisions of this section are self-executing,
Tenant shall execute such documents as may be desired by Landlord
or any mortgagee to affirm or give notice of such subordination.
In turn, Tenant shall be entitled to receive the customary
non-disturbance agreement from each such lender whereby the lender
agrees to recognize Tenant's rights under this Lease following
foreclosure so long as Tenant is not in default hereunder.
(b) Tenant shall attorn to any foreclosing mortgagee, or to
any purchaser of the Property or the Premises at any foreclosure
sale, or sale in lieu of foreclosure, for the balance of the Term
on all the terms and conditions herein contained.
(c) At the request of Landlord, Tenant shall within ten (10)
days, deliver to Landlord, Tenant shall within ten (10) days,
deliver to Landlord, or anyone designated by Landlord, a
certificate stating and certifying to such information as may
reasonably be requested to verify the state of the Landlord-Tenant
relationship established by this Lease.
18. RIGHT OF FIRST REFUSAL
(a) Landlord agrees that if at any time during the term of
this Lease, Landlord shall receive a bonafide offer (the "Offer"),
acceptable to Landlord for the sale of the Premises, Landlord,
prior to acceptance thereof, will give Tenant, with respect to the
Offer, written notice thereof, and a copy of the Offer, including
the name and address of the proposed purchaser, Tenant shall have
the option of first refusal for thirty (30) days after receipt of
such notice, within which to elect to purchase the Premises on the
terms of the Offer. If Tenant shall elect to purchase the
Premises, it shall provide written notice of such election to
Landlord within said 30-day period, and upon such notice having
been given, the transaction shall be closed on the terms of the
Offer, except that any such closing shall be no longer than 90
days after the date of Tenant's notice to Landlord. Tenant's
rights under this paragraph shall terminate upon the termination
of this Lease for any reason.
(b) James B. Peterson and Nancy M. Peterson ("Peterson"), the
owners of one hundred percent (100%) of the membership interests
in Landlord, do hereby grant to Tenant a right of first refusal to
purchase their membership interests in the event they receive a
bonafide offer (the "Offer")
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acceptable to them for the sale of more than fifty percent (50%)
of their membership interest. Upon the receipt of an Offer
acceptable to Peterson, Peterson will give Tenant, with respect to
the Offer, written notice thereof, including the name and address
of the proposed purchaser, and Tenant shall have the option of
first refusal for thirty (30) days after receipt of such notice,
within which to elect to purchase Peterson's membership interest
upon the terms of the Offer. If Tenant shall elect to purchase
the membership interest of Peterson, it shall provide written
notice of such election to Peterson within said thirty (30) day
period, and upon such notice having been given, the transaction
shall be closed upon the terms of the Offer except that any such
closing shall be no longer than ninety (90) days after the date of
Tenant's notice to Peterson. Tenant's right under this paragraph
shall terminate upon the termination of this Lease for any reason.
The foregoing notwithstanding, Peterson shall have the right to
make gifts of any portion of their membership interest in Landlord
to family members or to any Inter-vivos Trust established by
Peterson, so long as the transferred interests shall remain subject to
Tenant's right of first refusal.
19. OPTION TO PURCHASE
(a) If this Lease is not terminated by Landlord for a default
by Tenant, and if Landlord should refuse to extend the term of
this Lease upon the same terms and conditions as herein set forth
following the exercise by Tenant of its rights to extend under
paragraph 3 hereof, and for continuing and successive five (5)
year terms, Tenant shall have the option to purchase the Premises
for its fair market value minus, (i) the unamortized cost of any
capital improvements exclusive of trade fixtures made to the
Premises by Tenant, and (ii) the amount of all Landlord's
indebtedness and other obligations of Landlords secured by a lien
on all or any part of the Premises which is not discharged by
Landlord prior to the Closing. Fair market value shall be
determined by an appraiser mutually agreed upon by the parties.
If the parties are unable to agree upon an appraiser then each
party shall select an appraiser and the two parties selected shall
select a third. The average value of the appraisals of the two
appraisals most closely approximately one another shall control
for purposes of determining fair market value. If the parties are
unable to agree upon the unamortized cost of capital improvements,
the matter shall be submitted to arbitration under the auspices
of the American Arbitration Association.
(b) Tenant shall exercise its option to purchase by
delivering notice in writing, to Landlord, no later than
forty-five (45) days following the date Tenant has given notice in
writing of Landlord's refusal to extend the term of the Lease
beyond the period described in subparagraph (a).
(c) At the closing which shall occur no later than sixty (60)
days after Tenant exercises its option to purchase, Landlord shall
convey title to
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the Premises to Tenant by warranty deed subject only to easements
and restrictions of record.
(d) The purchase price of the Premises shall be payable in
immediately available funds at the closing.
20. HOLDING OVER
It is agreed that, in the event Tenant holds over after the termination of
the term of this Lease, the tenancy shall be from month-to-month in the absence
of a written agreement to the contrary.
21. ASSIGNMENT AND SUBLETTING
Tenant shall not, without Landlord's prior written consent, which consent
shall not be unreasonably withheld, have the right to sublease the Premises or
assign Tenant's rights under this Lease. Notwithstanding any such sublease or
assignment, Tenant and all assignees and sublessees shall remain liable for the
performance of all of Tenant's obligations contained in this Lease. Any
assignee or sublessee will be required to execute an instrument in writing
assuming all of Tenant's obligations and liabilities to Landlord.
Notwithstanding any other provision of this Lease, Tenant may at any time
and for any period, sublease all or any portion of the Premises to Mercantile
Bank Corporation (which is or will be an affiliate of the Tenant), or any other
entity or entities, at least a majority of which is owned directly or
indirectly, by Mercantile Bank Corporation.
22. ESTOPPEL AGREEMENT
Tenant shall, without charge and at any time and from time to time, within
ten (10) days after request by the Landlord, certify by written instrument,
duly executed, acknowledged and delivered to any mortgagee, assignee of any
mortgagee or purchaser, or any proposed mortgagee, proposed assignee or
proposed purchaser, or any other person, firm or corporation specified by
Landlord:
(a) That this Lease is unmodified and in full force and
effect (or, if there have been modifications, that the same is in
full force and effect as modified and stating the modifications);
(b) Whether or not there are then existing, to the best of
its knowledge, any set-offs or defenses against the enforcement of
any of the agreements, terms, covenants or conditions hereof upon
the part of Tenant to be performed or complied with (and, if so,
specifying the same); and
(c) The dates, if any, to which the rental(s) and other
charges hereunder have been paid in advance.
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23. SURRENDER OF PREMISES
The Tenant shall surrender the Premises to the Landlord at
the expiration of this Lease in like condition as when taken, reasonable use
and wear thereof and damage by the elements excepted.
24. ENVIRONMENTAL LAWS; INDEMNIFICATION
(a) At all times during the term hereof or any extension or
renewal thereof, Tenant shall comply with the requirements of all
applicable Federal, State and local environmental, health, safety
and sanitation laws, ordinances, codes, rules and regulations and
orders of any regulatory and administrative authority with respect
thereto.
(b) Tenant agrees to indemnify, defend and hold harmless
Landlord from and against all loss, liability, damage and expense,
including costs associated with administrative and judicial
proceedings and attorney's fees, ever suffered or incurred by
Landlord on account of (i) Tenant's failure to comply with any
environmental, health, safety or sanitation law, code, ordinance,
rule or regulation or any interpretation or order of any
regulatory or administrative authority with respect thereto; (ii)
any release by Tenant or its agents of petroleum products, or
hazardous materials or substances on, upon, into or from the
Premises that was caused by Tenant; and (iii) any and all damage
to natural resources or real property and/or harm or injury to
persons resulting or alleged to have resulted from such failure
by Tenant to comply and/or such release of petroleum products, or
hazardous materials or substances that was caused by Tenant.
(c) Landlord agrees to indemnify, defend and hold Tenant
harmless from and against all loss, liability, damage and expense,
including costs associated with administrative and judicial
proceedings and attorney's fees, ever suffered or incurred by
Tenant on account of (i) any failure to comply with the
requirements of all applicable Federal, State and local
environmental, health, safety and sanitation laws, ordinances,
codes, rules and regulations of any regulatory and administrative
authority having occurred prior to the commencement date of this
lease; (ii) any release of petroleum products or hazardous
materials or substances on, upon, into or from the Premises having
occurred prior to the commencement date of this Lease; and (iii)
any and all damages to natural resources or real property and/or
harm or injury to persons resulting or alleged to have resulted
from such failure to comply and/or such release of petroleum
products or hazardous materials or substances.
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25. TERMINATION OF LEASE FOR OTHER CAUSES
Notwithstanding any other provisions contained in this Lease, in the event
(i) Tenant or its successors or assignees shall become insolvent or bankrupt,
or if it or their interests under this Lease shall be levied upon or sold under
execution or other legal process, or (ii) the depository institution then
operating on the Premises is closed, or is taken over by any depository
institution supervisory authority ("Authority"), Landlord may, in either such
event, terminate this Lease only with the concurrence of any Receiver or
Liquidator appointed by such Authority; provided, that in the event this Lease
is terminated by the Receiver or Liquidator, the maximum claim of Landlord for
rent, damages, or indemnity for injury resulting from the termination,
rejection, or abandonment of the unexpired Lease shall by law in no event be in
an amount equal to all accrued and unpaid rent to the date of termination.
26. NOTICES
Any notice to be given hereunder shall be deemed duly served if mailed by
certified mail addressed, if to Tenant, at its business address, or if to
Landlord, to its business address, and the customary certified mail receipt
shall be conclusive evidence of such service. Either party hereto may change
its address to which said notice shall be sent by giving written notice of such
change to the other party hereto as here provided.
27. MISCELLANEOUS
QUIET ENJOYMENT. If Tenant shall pay the rents and perform all of the
covenants and conditions of this Lease by it to be paid and performed, Tenant
shall, during the term hereof, peaceably and quietly have, hold and enjoy the
full possession of the Premises, the tenements, hereditaments, and
appurtenances, appertaining, or belonging thereto, and the rights and
privileges granted herein without interference or hindrance by Landlord, or by
any person holding under or through Landlord.
REMEDIES CUMULATIVE. All rights and remedies of Landlord herein
enumerated shall be cumulative and none shall exclude any other right or remedy
allowed by law or equity, and said rights and remedies may be exercised and
enforced concurrently and whenever and as often as occasion therefore arises.
ENTIRE AGREEMENT. This writing constitutes the entire agreement between
the parties hereto. No oral or written prior or contemporaneous agreements
shall have any force or effect, nor shall any subsequent agreements have any
force or effect unless signed and embodied in writing.
SEVERABILITY. Any provision or portion of any provision of this Lease
which is found to be illegal or void shall be treated as if it had never been a
part hereof and shall have no effect whatsoever on the entire agreement or
provisions hereof.
14
<PAGE> 15
CONSTRUCTION. This Lease shall be interpreted, construed, enforced and
performed pursuant to the laws of the State of Michigan.
BINDING EFFECT. The covenants and agreement herein contained shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective representatives, successors, assigns, lessees and sublessees.
CAPTIONS. The captions of this Lease shall not be considered part of this
Lease but shall be considered as descriptive only.
GENDER. Any references herein to the neuter gender shall be deemed also
to refer to the masculine and feminine and any references herein to the
singular shall also be deemed to refer to the plural.
[SIGNATURE BLOCK FOLLOWS]
15
<PAGE> 16
IN WITNESS WHEREOF, the parties, by their authorized representatives, have
executed this Lease on the day and year first written above.
WITNESSES: LANDLORD:
DIVISION AVENUE PARTNERS, L.L.C.
/s/ SHEILA L. TURBET /s/ JAMES B. PETERSON
- -------------------- ---------------------------------
James B. Peterson MEMBER
/s/ NANCY M. PETERSON
/s/ ROBERT B. KAMINSKI ---------------------------------
- ---------------------- Nancy M. Peterson MEMBER
INDIVIDUALLY:
/s/ JAMES B. PETERSON
---------------------------------
James B. Peterson
/s/ NANCY M. PETERSON
---------------------------------
Nancy M. Peterson
TENANT:
MERCANTILE BANK OF WEST
MICHIGAN (a Michigan banking
corporation in formation), by
Mercantile Bank Corporation, a
Michigan corporation
/s/ GERALD R. JOHNSON, JR.
By: ---------------------------
Gerald R. Johnson, Jr.
Its: Chairman of the Board and
Chief Executive Officer
16
<PAGE> 17
EXHIBIT A
Legal Description of the Leased Premises
City of Grand Rapids, Michigan
KENT COUNTY
216 Division Avenue North
Grand Rapids, MI 49503
The South 15 feet of Lot 12, all of Lots 13 and 16, and the North 1/2
of Lot 17, Block 23; Dexter Fraction in the City of Grand Rapids, Kent
County, Michigan, as recorded in Liber 39 of Plats, Page 12. This
parcel contains 23,800 square feet (0.546 Acres).
17
<PAGE> 18
EXHIBIT B
IMPROVEMENTS
Office Equipment
Furniture
Partitions and Office Dividers whether or not affixed to the Premises
Vault and Safety Deposit Boxes
Automatic Teller Machines
18
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
-------------------------------
Mercantile Bank of West Michigan, a Michigan banking corporation, is in the
process of being organized and will become a subsidiary of the Company.
<PAGE> 1
EXHIBIT 23.2
Consent of Crowe, Chizek and Company LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report dated July 22, 1997 on the
financial statements of Mercantile Bank Corporation for the period ended July
21, 1997, to be included within this Registration Statement on Form SB-2 and
Prospectus of Mercantile Bank Corporation. We also consent to the use of our
name as "Experts" in the Prospectus.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
August 5, 1997
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-15-1997
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