<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1998
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
MICHIGAN COMMUNITY BANCORP LIMITED
(Name of small business issuer in its charter)
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<S> <C> <C>
MICHIGAN 6712 38-3390193
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
Organization)
</TABLE>
12900 HALL ROAD
STERLING HEIGHTS, MICHIGAN, 48313
(810) 739-6410
(Address and telephone number of principal executive offices and principal place
of business or
intended principal place of business)
DAVID A. MCKINNON
12900 HALL ROAD
STERLING HEIGHTS, MICHIGAN, 48313
(810) 739-6410
(Name, address and telephone number of agent for service)
COPIES TO:
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JUSTIN G. KLIMKO PAUL R. RENTENBACH
BUTZEL LONG DYKEMA GOSSETT PLLC
150 WEST JEFFERSON, SUITE 900 400 RENAISSANCE CENTER
DETROIT, MICHIGAN 48226 DETROIT, MICHIGAN 48243
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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 AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED TO BE REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, no par value.... 1,150,000 shares $15.00 $17,250,000 $5,089
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
------------------------------
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 SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED AUGUST , 1998
PROSPECTUS
1,000,000 SHARES
[MI COMM BANCORP LTD LOGO]
COMMON STOCK
------------------------
Michigan Community Bancorp Limited, a Michigan corporation (the "Company"),
is offering for sale 1,000,000 shares of its Common Stock (the "Common Stock").
The Company is organized to become a bank holding company and intends to own all
of the common stock of Lakeside Community Bank, a Michigan banking corporation
(in organization), to be located in Macomb County, Michigan ("LCB"), and North
Oakland Community Bank, a Michigan banking corporation (in organization) to be
located in Oakland County, Michigan ("NOCB") (collectively, the "Banks").
Neither the Company nor the Banks have conducted any 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. Fifth
Third/The Ohio Company (the "Managing Underwriter") has advised the Company that
it anticipates making a market in the Common Stock following completion of the
offering, although there can be no assurance that an active trading market will
develop. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Company expects that the
quotations for the Common Stock will be reported on the NASD OTC Bulletin Board
under the trading symbol "MCBL". Designated officers, directors and organizers
of the Company and the Banks, and their designated friends and family members
are expected to purchase approximately 150,000 shares of Common Stock at the
public offering price although none have irrevocably committed to purchase such
shares.
------------------------
THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A SIGNIFICANT AMOUNT OF
RISK. INVESTORS SHOULD NOT INVEST ANY FUNDS IN THE OFFERING UNLESS THEY CAN
AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" COMMENCING ON PAGE 7
FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMPANY'S COMMON
STOCK.
------------------------
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
------------------------
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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</TABLE>
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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................................ $15.00 $ $
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Total(2)................................. $15,000,000 $ $
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</TABLE>
(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 over-allotment option to
purchase up to 150,000 additional shares of Common Stock on the same terms
and conditions as set forth above. If the Underwriters exercise such option
in full, the total Price to Public, Underwriting Discounts, and Proceeds to
Company will be approximately $ , $ and $ ,
respectively. The Underwriters have agreed to limit Underwriting Discounts
to 2.5% of the public offering price for up to shares sold by
the Underwriters to the designated officers, directors and organizers of the
Company and the Banks and their designated friends and family members. If
shares are so purchased, total Underwriting Discounts will be
reduced by , and the Proceeds to Company will be increased by
$ . See "Underwriting."
(3) Before deducting offering expenses payable by the Company, estimated to be
$ .
------------------------
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 through the facilities of The Depository Trust Company
in New York, New York on or about October , 1998.
------------------------
[Fifth Third/The Ohio Co LOGO]
THE DATE OF THIS PROSPECTUS IS , 1998.
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.
<PAGE> 3
[INSERT MAP HERE]
[TO COME]
-------------------------
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 Kimberly A. Schauer,
Michigan Community Bancorp Limited, 12900 Hall Road, Sterling Heights, Michigan
48313.
-------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY OVER-ALLOT OR ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK INCLUDING STABILIZING BIDS. SEE "UNDERWRITING." IF COMMENCED, SUCH
TRANSACTIONS MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 4
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 Banks. Except as otherwise indicated, all information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
THE COMPANY
Michigan Community Bancorp Limited (the "Company") is a Michigan
corporation organized to own all the common stock of and operate Lakeside
Community Bank and North Oakland Community Bank ("LCB", "NOCB", or "Banks",
collectively). The Banks are organizing as Michigan banking corporations with
depository accounts to be insured by the Bank Insurance Fund of the Federal
Deposit Insurance Corporation (the "FDIC"). The Banks intend to provide a
focused core of commercial and consumer banking services, primarily to small to
medium-sized businesses, as well as individuals, by providing superior service
and convenience to customers. The Banks' lending activities will focus primarily
on commercial real estate loans and commercial term loans to businesses secured
by the assets of the borrower and, to a lesser extent, on commercial equipment
financing. The Banks' consumer service strategy is expected to focus on
providing single-family mortgage loans, home equity loans, and other forms of
consumer lending. LCB intends to offer its banking services throughout Macomb
County, Michigan, but primarily in Clinton Township, Macomb Township, Ray
Township, Shelby Township, Washington Township, Mt. Clemens, Sterling Heights
and Utica. NOCB intends to offer its banking services throughout Oakland County,
Michigan, but primarily in Rochester, Rochester Hills, Pontiac, Troy, Auburn
Hills, Oakland Township, Orion Township and Lake Orion Village. Completion of
the offering will be conditioned upon, among other things, the Company and the
Banks having received all necessary regulatory approvals and satisfying certain
conditions contained therein. Management anticipates commencing business in the
fourth quarter of 1998.
The Banks have received the approvals of the Financial Institutions Bureau
of the State of Michigan ("FIB"), subject to the satisfaction of certain
conditions that are customary in connection with such regulatory approvals.
These conditions will consist of matters including, but not limited to, LCB
receiving at least $4,550,000 of capital, and NOCB receiving at least $4,600,000
of capital. The required $9,150,000 of capital will be contributed to the Banks
from the proceeds of this offering promptly following its completion. The
remaining proceeds from this offering may be used to open a third community bank
or for working capital and other general corporate purposes. The Company and the
Banks expect to receive the approvals of the FDIC and the Board of Governors of
the Federal Reserve System prior to the completion of this offering.
REASONS FOR STARTING THE COMPANY
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 Banks' market areas. In many cases,
when these consolidations occurred, local boards of directors were dissolved and
local management relocated or in some cases terminated. Management believes that
locally owned and managed banks in Macomb and Oakland County dedicated to the
needs of local businesses and residents will fill a need for service and
convenience that is currently not being satisfied by the existing financial
institutions in Macomb and Oakland County.
In the opinion of the Company's management, a favorable opportunity exists
in the targeted market areas for a true community bank, a new commercial bank
which has local management and local directors. Management believes that such a
bank can be successful in attracting, as customers, small to medium-sized
businesses and individuals who wish to conduct business with a locally owned and
managed institution that demonstrates an active interest in their business and
financial affairs. Each Bank will seek to take advantage of this opportunity by
emphasizing local management, strong ties and active commitment to the
community.
3
<PAGE> 5
BUSINESS STRATEGY
The Company intends to emphasize experienced local management with a strong
commitment to the communities located within the primary market areas of the
Banks. The Company's strategy is to locate the Banks in communities that are
growing quickly and where there has been a significant impact from the
consolidation in the banking industry. These communities have a history of
community banking but no longer have as many community banks. Management
believes that the small and medium-sized industrial and commercial businesses
that are the target customers of the Banks are not being adequately served by
existing banks. Management also believes that it has chosen communities where
the officers and directors of the Company and the Banks are active in the
community and where community and business leaders are anxious to welcome a
locally owned and managed financial institution. The Company and the Banks will
be committed to providing outstanding customer service and banking products and
intend to compete aggressively for banking business through a systematic program
of directly calling on both customers and referral sources such as attorneys,
accountants, mortgage brokers, insurance agents and other business people, many
of whom are already known to its officers and directors.
With an experienced staff to provide personalized service, management
believes it will be able to generate competitively priced loans and deposits.
This experienced staff will have access to current software and database systems
selected to deliver high-quality products and provide responsive service to
clients. The Banks have entered 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 Banks
to remain at the forefront of technology while minimizing the costs of
delivering such products.
MARKET AREA
The market service area of LCB will be Macomb County, primarily Clinton
Township, Shelby Township, Washington Township, Sterling Heights, Ray Township,
Mt. Clemens and Utica. Macomb County is comprised of 27 cities, villages or
townships, ranks third in population out of Michigan's 83 counties and covers
482 square miles. According to statistical data compiled by the Department of
Planning and Economic Development of Macomb County, as of July 31, 1996, Macomb
County had approximately 15,000 business establishments and as of June 1998, had
an unemployment rate of 3.3%. Based on 1990 U.S. Census Data, Macomb County had
a median household income of $38,931. Macomb County is also a significant
banking market in the State of Michigan. According to available industry data,
as of June 30, 1997, total deposits in Macomb County, including banks, thrifts
and credit unions, were approximately $10.3 billion.
The service area of NOCB will be Oakland County, primarily Rochester,
Rochester Hills, Troy, Auburn Hills, Pontiac, Oakland Township, Orion Township
and Lake Orion Village. Oakland County is comprised of 61 cities, villages, and
townships, ranks second in population out of Michigan's 83 counties and covers
910 square miles. According to statistical data compiled by the Oakland County
Development and Planning Division, as of July 31, 1996, Oakland County had
approximately 38,440 business establishments, an unemployment rate as of January
1998 of 3.0%, and a median household income in 1997 of $57,360. Oakland County
is also a significant banking market in the State of Michigan. According to
available industry data, as of June 30, 1997, total deposits in Oakland County,
including banks, thrifts, and credit unions were approximately $18.7 billion.
The main office of LCB will be located at 43850 Schoenherr Road, Sterling
Heights, Michigan 48313 and the main office of NOCB will be located at 1467
North Rochester Road, Rochester Hills, Michigan 48307. The Company's offices are
located at 12900 Hall Road, Sterling Heights, Michigan 48313 and its telephone
number is (810) 739-6410.
4
<PAGE> 6
MANAGEMENT
THE COMPANY
The Company has assembled a management team and a Board of Directors with
strong and diversified business experiences in the Banks' market areas and a
shared vision and commitment to future growth and success. The officers and
directors currently assembled by the Company provide a wide range of business,
banking, government and investment knowledge and experience. See "Management."
David A. McKinnon, Chairman of the Board of Directors, President and Chief
Executive Officer of the Company, served as legal counsel to First National Bank
in Macomb County and to First State Bank of East Detroit. Mr. McKinnon also
served as a director of First National Bank in Macomb County and as an advisory
director of Old Kent Bank. Further, he was one of the original officers and
directors of Macomb Community Bank, a community bank organized in 1996 in Macomb
County, Michigan. Mr. McKinnon served as its Vice Chairman, and was involved in
managing all areas of Macomb Community Bank.
William L. Carley, Vice President, Treasurer and Chief Financial Officer of
the Company, served for ten years as a member of the senior management team, and
was chief financial officer for the National Bank of Royal Oak, a community bank
located in Oakland County, Michigan, that had assets of approximately $190
million at the time of its acquisition in 1993.
Gail L.M. DiFranco, Vice President - Operations of the Company, was a
member of the start-up team and served as operations officer for Macomb
Community Bank.
The Company's Board of Directors is comprised of individuals with broad
backgrounds in business, real estate, banking and government. Current directors
include Mr. McKinnon, Paul E. Baltzer Jr., a businessman, Gerald A. Tarquinio,
the past president and a director of National Bank of Rochester, a local
community bank located in Oakland County, Michigan, Phillip T. Hernandez, a
local businessman and past director of Macomb Community Bank, Joseph P. Lentine,
a local businessman, John W. Melstrom, a certified public accountant practicing
in Oakland County, Brian P. Palmer, a local businessman and real estate
developer, Robert R. Peleman, a medical doctor practicing in Macomb County and a
past director of Macomb Community Bank, David F. Shellenbarger, a local
businessman and Russell M. Shelton, a local businessman.
In addition to the individuals named above, the Company has also named the
following individuals as officers and directors of LCB and NOCB.
LAKESIDE COMMUNITY BANK
Frank D. Blowers, President, Chief Executive Officer and a director of LCB,
has over 30 years of banking experience, most recently as a Senior Vice
President with First of America Bank, N.A., where he was responsible for product
sales in a region with branches holding approximately $750 million in assets.
Additional directors of LCB include Jeff Tamaroff, a local businessman and Gary
Davison, a local certified public accountant.
NORTH OAKLAND COMMUNITY BANK
James T. Polson, President, Chief Executive Officer and a director of NOCB,
has over 26 years of banking experience with First of America Bank, N.A., most
recently as a Senior Vice President. As Senior Vice President, Mr. Polson was
responsible for the operations and customer service of approximately 500
branches located throughout Michigan, Illinois and Indiana. Additional directors
of NOCB include A. Frank Gerstenecker, former City Manager of Troy, Michigan for
26 years, Frederick Maibauer, a local medical doctor and Vernon Pixley, a local
businessman.
5
<PAGE> 7
THE OFFERING
Securities offered by the
Company....................... 1,000,000 shares of Common Stock.
Shares of Common Stock to be
outstanding after the
offering(1)................. 1,000,000 (1,150,000 if the over-allotment
option is exercised in full)
Use of proceeds by the
Company....................... Capitalization of the Banks and payment of
organization and pre-opening expenses and other
working capital. See "Use of Proceeds."
Proposed NASD OTC Bulletin
Board Symbol.................. MCBL
- ---------------
(1) Does not include 44,664 shares of Common Stock issuable upon the exercise of
outstanding stock options granted pursuant to the Company's 1998
Non-Employee Director Stock Option Plan and 1998 Employee Stock Option Plan.
6
<PAGE> 8
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 entire
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 the 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 Banks have any operating history. The business
of the Company and the Banks is subject to the risks inherent in the
establishment of a new business enterprise. Because the Company has only
recently been formed, the Banks have not commenced operations and the Banks 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 a proposed investment, would be available to the purchasers of
securities issued by a financial institution with a history of operations.
SIGNIFICANT LOSSES EXPECTED
As a result of the 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 Banks, and thus the Company, will operate at a loss
during the start-up period of the Banks. The Company does not expect the Banks
to be profitable for at least the first two years of operations. Cumulative
losses during the first two years of operations are projected to exceed $1.6
million and could be higher. There can be no assurance that the Banks or the
Company will ever operate profitably. If the Company does not reach
profitability and recover its accumulated operating losses and the
non-recoverable market 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 Banks expect to commence business during the
fourth quarter of 1998, 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 Banks 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. In the event that the Company and the Banks
commence operations, there can be no assurance that the Company or the Banks
will continue to have sufficient capital to sustain and expand operations.
EXPOSURE TO LOCAL ECONOMY
The Company's success and profitability is directly dependent on the
success and profitability of the Banks. The operations of LCB and NOCB will be
materially dependent upon and sensitive to the economy of their market areas in
southeastern Michigan. Adverse economic developments can impact the
collectibility of loans and have a negative effect on the Company's earnings and
financial condition. The economies of Macomb and Oakland County include many
businesses that manufacture products for, or provide goods or services to, the
automobile industry. No assurance can be made that future economic changes will
not have a significant adverse effect on the Company.
GOVERNMENT REGULATION AND MONETARY POLICY
Prior to completion of this offering the Company and the Banks will have
received all regulatory approvals required to organize and establish the Banks,
subject to the satisfaction of certain conditions. These conditions include,
among other things, that: (i) beginning paid-in capital of NOCB will not be less
than $4.6 million and beginning paid-in-capital of LCB will not be less than
$4.55 million; (ii) each Bank will
7
<PAGE> 9
maintain a ratio of Tier 1 leverage capital to total assets for the first three
years after commencing business of at least 8.0% and an adequate valuation
reserve; (iii) each Bank will have its financial statements audited by a public
accountant for at least the first three years; (iv) each Bank will file its
Certificate of Paid in Capital and Surplus with the FIB and notify the FIB of
its opening date so the FIB can conduct a customary pre-opening investigation;
and (v) any changes in executive management of each Bank will be submitted to
the bank regulatory agencies in advance for their approval. Regulatory capital
requirements imposed on the Banks may have the effect of constraining future
growth, absent the infusion of additional capital.
The Company and each of the Banks will be subject to extensive state and
federal government supervision and regulation. Existing state and federal
banking laws will subject the Banks to substantial limitations with respect to
loans, purchase of securities, payment of dividends and many other aspects of
their banking business. 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. Many of these regulations are intended to protect
depositors, the public, and the FDIC, not shareholders. There can be no
assurance that future legislation or government policy will not adversely affect
the banking industry, the operations of the Banks, or shareholders. The burden
imposed by federal and state regulations may place banks in general, and the
Company and the Banks specifically, at a competitive disadvantage compared to
less regulated competitors. Federal economic and monetary policy may affect the
Banks' ability to attract deposits, make loans and achieve satisfactory interest
rate spreads. See "Supervision and Regulation."
NO ASSURANCE OF DIVIDENDS
It is anticipated that no dividends will be paid by the Company on the
Common Stock for the foreseeable future. The Company will be largely dependent
upon the dividends paid by the Banks to provide funds to pay cash dividends if
and when such dividends are declared. No assurance can be given that future
earnings of the Banks, and resulting dividends to the Company, will be
sufficient to permit the legal payment of dividends to 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. See "Dividend Policy."
DEPENDENCE UPON SUBSIDIARY OPERATIONS
The Company is organized to become a bank holding company and will be
substantially dependent upon dividends from the Banks, for funds to pay its
expenses, including debt repayment, and to pay cash dividends to shareholders.
The Banks are subject to regulatory limitations upon the payment of dividends
and receipt of dividends from the Banks cannot be assured. Further, no cash
dividends are anticipated from the Banks during the initial years of operation.
COMPETITION
The Company and the Banks will face strong competition for deposits, loans
and other financial services from other community banks, regional banks,
out-of-state national 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 Banks will compete are not subject to the
same degree of regulation as the Banks. Many of the financial institutions
aggressively compete for business in the proposed market areas of the Banks.
Most of these competitors have been in business for many years, have established
customer bases, are larger, have substantially higher lending limits than the
Banks will have in the foreseeable future, and will be able to offer certain
services that the Banks do 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
Banks, 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 will be available from the
8
<PAGE> 10
Banks. See "Business - Market Area" and "Business - Competition." Additionally,
recent legislation regarding interstate branching and banking may act to
increase competition in the future from larger out-of-state banks. See
"Supervision and Regulation."
DEPENDENCE ON MANAGEMENT
The Company and the Banks are, and for the foreseeable future will be,
dependent primarily upon the services of David A. McKinnon, the Chairman of the
Board, Chief Executive Officer and President of the Company, Frank D. Blowers,
President of LCB James T. Polson, President of NOCB, William L. Carley, Vice
President and Chief Financial Officer of the Company and Gail L.M. DiFranco,
Vice President - Operations of the Company. If the services of these individuals
were to become unavailable to the Company or the Banks for any reason, or if the
Company or the Banks were unable to hire highly qualified and experienced
personnel either to replace Mr. McKinnon, Mr. Blowers, Mr. Polson, Mr. Carley or
Ms. DiFranco or to adequately staff the anticipated growth of the Company or
Banks, the operating results of the Company and the Banks would be adversely
affected. The Company and the Banks do not have employment agreements with, or
key man life insurance for, these or any other 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 Banks, purchase leasehold improvements, equipment and
other assets for the Banks' operations, provide working capital for general
corporate purposes and pay initial operating expenses. Further, as management is
currently considering the possibility of opening a third bank within the first
year of operation, some of the proceeds of the offering may be used to finance
such a third bank. In addition, while there are no current plans, the Company
may, if the opportunity arises, use some of the proceeds to finance acquisitions
of branches of other institutions or expansion into other lines of business
closely related to banking. 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 Banks do not have an operating history, none of the
Banks' customers will have an established credit history with the Banks.
Management will attempt to minimize credit exposure by carefully monitoring the
concentration of 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 general per customer
lending limit of each Bank is expected to initially be approximately $500,000,
subject to a higher lending limit of $1.5 million in specific cases with
approval by two-thirds of the respective Banks' Board of Directors. Accordingly,
the size of the loans which the Banks can offer to potential customers is less
than the size of loans which most of the Banks' competitors with larger lending
limits are able to offer. This limit initially may affect the ability of the
Banks to seek relationships with the area's larger businesses. The Banks 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 Banks will be successful in attracting or maintaining customers seeking
larger loans or that the Banks will be able to engage in participations of such
loans on terms favorable to the Banks.
IMPACT OF INTEREST RATES AND ECONOMIC CONDITIONS
The results of operations for financial institutions, including the Banks,
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.
The Banks' profitability will be partly 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
9
<PAGE> 11
generally narrowed due to changing market conditions and competitive pricing
pressure. There can be no assurance that such factors will not continue to exert
such pressure or that high interest rate spreads will return. Although economic
conditions in the Banks' target market areas have been generally favorable,
there can be no assurance that such conditions will continue to prevail. Like
most banking institutions, the net interest spread and margin will be affected
by general economic conditions and other factors that influence market interest
rates and the Banks' ability to respond to changes in such rates. At any given
time, the Banks' assets and liabilities will be such that they are affected
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 Banks' 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 providing better service to 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 operation of the Banks. Many of the Company'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 Banks. There can be no assurance that the
Banks 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."
RELIANCE ON TECHNOLOGY, NEED TO BE YEAR 2000 COMPLIANT
The Company will be dependent on technology to operate efficiently and
profitably. The Company has required each of its technology vendors to represent
that their technology is compliant for the Year 2000. In the event that any of
its technology or that of its vendors is not Year 2000 compliant, the Company's
business and results of operations could be materially adversely effected as it
may not be able to properly service or maintain customer records.
ANTI-TAKEOVER PROVISIONS
Chapters 7A and 7B of the Michigan Business Corporation Act (the "MBCA")
provide for super majority voting and impose other requirements on certain
business combinations with interested shareholders and limit voting rights of
certain acquirers of control shares. 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. The Company's
Articles of Incorporation (i) provide for a Board of Directors that is divided
into three classes of directors, (ii) require the Company's Board of Directors
to consider a variety of factors when evaluating any proposal involving a
potential merger or business combination for the Company, including the social
and economic impact of such a proposal on the Company, its employees, customers,
vendors and the communities in which the Company and its subsidiaries operate or
are located and (iii) require the affirmative vote of holders of at least
two-thirds of the voting stock of the Company to change any of such provisions
of the Articles of Incorporation. These provisions may have the effect of
delaying or preventing a change in control of the Company. 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."
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<PAGE> 12
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide for the indemnification of
its officers and directors to the fullest extent permitted by law in connection
with any actual or threatened civil, criminal, administrative or investigative
action, suit or proceeding in which a director or officer in his or her capacity
as a director, officer, employee, agent or fiduciary of the Company or of any
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise where the director or officer was serving at the request of the
Company. 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 $15.00 per share was determined by the
Company in consultation with the Managing Underwriter. This price is not based
upon earnings or any history of operations and should not be construed as
indicative of the present or anticipated future value of the Common Stock. Prior
to the offering, there has been no public trading market for the Common Stock.
The price at which these shares are being offered to the public may be greater
than the market price for the Common Stock following the offering. The Managing
Underwriter has advised the Company that, upon completion of the offering, it
intends to use reasonable efforts to initiate quotations of the Common Stock on
the NASD OTC Bulletin Board and to act as a market maker of 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 Banks or any market
maker. Market makers on the NASD OTC Bulletin Board are not required to maintain
a continuous two sided market, are required to honor firm quotations for only a
limited number of shares, and are free to withdraw firm quotations at any time.
Even with a market maker, factors such as the limited size of the offering, the
lack of earnings history 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 an active and liquid market develops, there can be
no assurance that such 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.
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<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered hereby are estimated to be $ ($ if the
Underwriter's over-allotment option is exercised in full), after deduction of
the underwriting discounts, but before deducting estimated offering expenses of
$ . The Underwriters have agreed to limit underwriting discounts to
% of the public offering price for the first shares sold by
the Underwriters to the designated officers, directors and organizers of the
Company and the Banks and their designated friends or family members. Such
persons have provided non-binding expressions of interest to purchase
approximately shares. If such persons purchase
shares, underwriting discounts will be reduced by $ ,
and net proceeds to the Company will be increased by $ .
The Company expects to contribute at least $4.55 million of the net
proceeds to LCB by purchasing all of the common stock to be issued by LCB. The
Company expects to contribute at least $4.6 million of the net proceeds to NOCB
by purchasing all of the common stock to be issued by NOCB. This purchase of
stock is intended to provide the Banks with the capital required by regulators
to commence operations. Currently, organizational expenses and other pre-opening
expenses, are being financed on an interim basis from interest free loans of
approximately $387,500 made to the Company by members of its Board of Directors
and other organizers. It is anticipated that the entire amount of these interest
free loans will be repaid by the Company from the proceeds of this offering
promptly following its completion. In addition, the Company expects to repay
approximately $350,000 which is currently outstanding on its line of credit. The
line of credit was primarily used to prepay the lease on the bank building to be
used by NOCB. Pre-opening interest income may offset some of these 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 Banks. The remaining proceeds
of this offering will also be available to finance a possible third bank or the
possible acquisition of branches or expansion into other lines of business
closely related to banking.
Of the proceeds contributed to the Banks, approximately $948,000 will be
used for leasehold improvements and related architectural and engineering
services. In addition, $476,000 of the proceeds contributed to the Banks will be
used to purchase furniture, fixtures and equipment and other necessary assets
for the operation of the Banks. The balance of the proceeds contributed to the
Banks will be used to make investments in loans and other securities and to pay
expenses.
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DIVIDEND POLICY
The Company initially expects that profits earned by the Banks or the
Company, if any, will be retained to finance the growth of the Company and the
Banks and that no cash dividends will be paid for the foreseeable future. After
the Banks achieve profitability, recover their operating deficit, and fund
adequate reserves for loan and lease losses, the Company may consider the
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 Banks 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 Banks are restricted as to the maximum amount of
dividends they may pay on their Common Stock. A Michigan chartered 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
chartered 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 chartered 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 Banks 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 Banks for its cash needs, including funds for
acquisitions, payment of dividends by the Company, and the payment of operating
expenses.
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<PAGE> 15
CAPITALIZATION
The following table sets forth the capitalization of the Company as of July
31, 1998, and as adjusted to reflect the sale of the 1,000,000 shares of Common
Stock offered hereby and the application of the estimated net proceeds. See "Use
of Proceeds."
<TABLE>
<CAPTION>
JULY 31, 1998
---------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
<S> <C> <C>
Short-term debt............................................. $ 652,500 $ --
========= ===========
Shareholders' equity:
Preferred Stock, no par value - 1,000,000 shares
authorized; no shares issued and outstanding........... -- --
Common Stock, no par value, $5 stated value - 9,000,000
shares authorized; 1 share issued and outstanding and
1,000,000 shares issued and outstanding, as
adjusted(2)............................................ $ 5 $ 5,000,000
Additional paid-in capital.................................. 10 8,820,000
Accumulated deficit(3)...................................... (248,482) (248,482)
--------- -----------
Total shareholders' equity.................................. (248,467) 13,571,518
--------- -----------
Total capitalization........................................ $ 404,033 $13,571,518
========= ===========
</TABLE>
- ---------------
(1) Adjusted to reflect the estimated net proceeds from the shares offered
hereby (assuming no exercise of the Underwriters' over-allotment option).
See "Use of Proceeds."
(2) Does not include 44,664 shares issuable pursuant to options granted under
the Company's 1998 Non-Employee Director Stock Option Plan and the Company's
1998 Employee Stock Option Plan.
(3) The accumulated deficit as of July 31, 1998, was comprised primarily of
organizational expenses, pre-opening expenses related principally to fees
and expenses incurred in the regulatory application process and office
occupancy costs and supplies. The accumulated deficit is expected to
increase further as anticipated initial operating losses are incurred.
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<PAGE> 16
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 Macomb and Oakland County, where the
Banks will be located. In the past, several of the financial institutions within
the primary market area of the Banks have either been acquired by, or merged
with, larger financial institutions or out-of-state financial institutions. When
these consolidations occurred, local boards of directors were dissolved and
local management relocated or terminated. As a result, many policy and credit
decisions have been 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 will be able to
be more responsive to customer requests, provide customized financial products
and services, and offer the personal attention of the senior banking officers to
customers. The Banks will seek to take advantage of this opportunity by
emphasizing local management in their marketing plans and the ties and
commitments to their market area.
After the offering, the Company will own all of the issued and outstanding
stock of the Banks. Following completion of the offering and before commencement
of operations, each Bank intends to complete the furnishing of its main office,
training their staff and the purchase, lease and installation of equipment
necessary to transact 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 January
28, 1998, and organized to acquire all of the issued and outstanding stock of
the Banks and to engage in the business of a bank holding company under the
federal Bank Holding Company Act of 1956, as amended. On July 23, 1998, the
Commissioner of the FIB issued orders approving the applications to establish
the Banks. [On 1998, the Banks' applications for FDIC deposit
insurance were approved.] These approvals were issued subject to the
satisfaction of certain conditions that the Company believes are customary in
transactions of this type, including conditions relating to capitalization of
the Bank and continuing capital adequacy. In August 1998 the Banks filed
applications for FDIC deposit insurance. The Company and the Banks expect to
receive the required FDIC and Federal Reserve Board approvals in September 1998
and to satisfy such conditions and commence business during the fourth quarter
of 1998. See "Risk Factors - Delay in Commencing Operations" and "Risk
Factors - Government Regulation and Monetary Policy."
BUSINESS STRATEGY
The Company intends to emphasize local management and strong commitment to
the communities located within the primary market areas of the Banks. The
Company's strategy is to locate the Banks in communities that are growing
quickly and where there has been a significant impact from the consolidation in
the banking industry. These communities have a history of community banking but
no longer have as many community banks. Management believes that the small and
medium-sized industrial and commercial businesses that are the target customers
of the Banks are not being adequately served by existing banks. Management also
believes that it has chosen communities where the officers and directors of the
Company and the Banks are active in the community and where community and
business leaders are anxious to welcome a locally owned and managed financial
institution. The Company and the Banks will be committed to providing
outstanding customer service and banking products and intend to compete
aggressively for banking business through a systematic program of directly
calling on both customers and referral sources such as attorneys, accountants,
mortgage brokers, insurance agents and other business people, many of whom are
known to the officers and directors. The Banks intend 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 is
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<PAGE> 17
to emphasize local management and strong commitment to the communities located
within the primary market areas of the Banks. The team assembled to manage the
Company and the Banks have been selected based on their business and banking
experience in the primary market areas of the Banks.
BUSINESS FINANCIAL SERVICES. The Banks intend to offer products and
services consistent with the goal of attracting small to medium-sized business
customers as well as a variety of individuals. Commercial loans will be offered
primarily on a secured basis and to a limited extent on an unsecured basis. Such
loans 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 their
banking business, the Banks 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 Banks will be subject to written policies,
reviewed and approved at least annually by the Banks' Boards of Directors,
pursuant to federal law and regulations. The policies address loan portfolio
diversification and prudent underwriting standards, loan administration
procedures, and documentation, approval and reporting requirements. In addition,
federal regulations impose supervisory loan-to-value ratios applicable to each
type of loan secured by real estate.
The Banks will generally look to a borrower's business operations as the
principal source of repayment and will also seek security interests in the
inventory, accounts receivable or other personal property of the borrower, and
personal guaranties. Although the Banks intend to be aggressive in seeking new
loan growth, they also intend to stress high credit quality.
The Banks will actively pursue business checking accounts by offering
competitive rates, telephone banking, and other convenient services to its
business customers. In some cases the Banks may require business borrowers to
maintain minimum balances. The Management of the Banks also intend to establish
relationships with one or more correspondent banks and other independent
financial institutions to provide other services requested by customers,
including loan participation where the requested loan amount exceeds the legal
lending limit of the Banks.
CONSUMER FINANCIAL SERVICES. The retail banking strategy of the Banks will
initially focus on providing attractive products and services, including
telephone banking and automated bill paying services to individuals in the
respective market areas. Management believes that by offering these banking
products, which allow customers to bank 24 hours a day from any point at their
convenience, the Banks can attract new deposits and loans without the necessity
of expensive brick and mortar branch operations.
In addition, the Banks will originate residential real estate loans in the
form of first mortgages and home equity loans. The Banks intend to apply to the
Federal National Mortgage Association for approval as a seller-servicer of
residential mortgage loans. The Banks intend to sell most of the residential
mortgages into the secondary market. Most adjustable rate home equity loans will
be retained by the Banks as part of their loan portfolios.
The Banks intend to offer other consumer lending services, including credit
cards, auto loans, boat loans and other personal loan products on both a secured
and unsecured basis.
With an experienced staff to provide personalized service, management
believes it will be able to generate competitively priced loans and deposits.
This experienced staff will have access to current software and database systems
selected to deliver high-quality products and provide responsive service to
clients. The Banks have entered 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 Banks
to remain at the forefront of technology while minimizing the costs of
delivering such products.
INVESTMENTS. The principal investment of the Company will be its purchase
of all of the common stock of the Banks. 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
states or
16
<PAGE> 18
political subdivisions thereof, bankers' acceptances or certificates of deposit
of U.S. commercial banks, or commercial paper of U.S. issuers rated in the
highest category by a nationally-recognized investment rating service. Although
the Company is permitted to make limited portfolio investments in equity
securities and to make equity investments in subsidiary corporations engaged in
certain non-banking activities, which may include real estate-related
activities, such as mortgage banking, community development, real estate
appraisals, arranging equity financing for commercial real estate, and owning
and operating real estate used substantially by the Banks or acquired for its
future use, the Company has no present plans to make any such equity investment
The Company's Board of Directors may alter the Company's investment policy
without shareholder approval. See "Supervision and Regulation."
The Banks may invest their funds in a variety of debt instruments and may
participate in the federal funds market with other depository institutions.
Subject to certain exceptions, the Banks are prohibited from investing in equity
securities. Under one such exception, in certain circumstances and with the
prior approval of the FDIC, a Bank can invest up to 10% of its total assets in
the equity securities of a subsidiary corporation engaged in certain real
estate-related activities. The Banks have no present plans to make such an
investment. Real estate acquired by the Banks in satisfaction of or in
foreclosure upon loans may be held by the Banks, subject to a determination by a
majority of the respective Bank's Board of Directors as to the advisability of
retaining the property, for a period not to exceed 60 months after the date of
acquisition or such longer period as the appropriate regulators may approve. The
Banks are also permitted to invest an aggregate amount not in excess of
two-thirds of the capital and surplus of the Banks in such real estate as is
necessary for the convenient transaction of its business. The Banks have no
present plans to make any such investment. The Board of Directors of each Bank
may alter the Bank's investment policy without shareholder approval.
MARKET AREA
LAKESIDE COMMUNITY BANK. The principal market areas anticipated to be
served by LCB will be Macomb County, primarily Sterling Heights, Clinton
Township, Utica, Mt. Clemens, Macomb Township, Washington Township and Ray
Township. Macomb County is one of the fastest growing counties in Michigan and
has a stable and diverse economic base. Macomb County, which is comprised of 27
cities, villages or townships, ranks third in population out of Michigan's 83
counties and 47th out of 3,100 counties nationally. With a current population of
over 700,000, Macomb County covers 482 square miles and is home to over 15,000
businesses employing 615,083 people with combined payrolls in 1993 of $18.8
billion.
Macomb County is also a large banking market. According to available
industry data, as of June 30, 1997 total deposits in this market, including
banks, thrifts and credit unions, were approximately $10.3 billion. The
principal market areas in Macomb County to be served by LCB have a population of
345,310 and median incomes ranging from $25,716 to $47,930 based on 1990 census
data.
NORTH OAKLAND COMMUNITY BANK. The principal market areas anticipated to be
served by NOCB will be Oakland County, primarily Rochester, Rochester Hills,
Troy, Auburn Hills, Pontiac, Oakland Township, Avon Township, Orion Township and
Lake Orion Village. Oakland County is also one of the fastest growing counties
in Michigan. Oakland County, which is comprised of 61 cities, villages or
townships, ranks second in population out of Michigan's 83 counties and ranks as
the third wealthiest county in the United States among counties with populations
exceeding one million people. With a current population of over 1,100,000,
Oakland County covers 910 square miles and is home to over approximately 38,440
businesses employing 654,000 people with combined payrolls in 1995 of $21.7
billion.
Oakland County is also a large banking market. According to available
industry data as of June 30, 1997, total deposits in this market including
banks, thrifts and credit unions were approximately $18.7 billion.
The principal market areas in Oakland County to be served by NOCB have a
population of 281,475, with median incomes ranging from $37,868 to $73,944,
based on 1995 data provided by Oakland County.
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<PAGE> 19
COMMUNITY INVOLVEMENT
In order to assure that the Banks are true community banks, the Company has
sought local community leaders to serve as members of the board of directors of
each bank.
LAKESIDE COMMUNITY BANK. The following individuals have agreed to serve on
the Board of Directors of Lakeside Community Bank:
Paul "Bud" E. Baltzer, Jr. is President of Pebco Sales, Inc. a business
located in Clinton Township, Michigan primarily engaged in the representation of
manufacturers in the installation and design of specialized industrial products.
Mr. Baltzer is active in the community and is treasurer of Epiphany Lutheran
Church and a member of the Construction Association of Michigan.
Frank D. Blowers was most recently employed by First of America Bank, N.A.
as a Senior Vice President where he was responsible for product sales for a
region with branches that held approximately $750 million in assets. Mr. Blowers
has over 30 years of banking experience and previously served as Senior Vice
President for Security Bank, St. Clair Shores, Michigan.
Gary Davison is owner of Davison & Associates, P.C., a Troy, Michigan based
accounting firm with numerous clients located in the target market areas of LCB.
Mr. Davison was previously a partner with Grant Thornton in Southfield,
Michigan.
Phillip T. Hernandez is President of Efficient Sanitation, a division of
Waste Management, Inc. located in Clinton Township, Michigan. Mr. Hernandez is a
member of the Board of Directors of Mt. Clemens General Hospital and a past
director of Macomb Community Bank.
Joseph S. Lentine is Vice President of Golden Dental Plans, Inc. a dental
delivery system company located in Warren, Michigan and President of LeCom,
Inc., a communications contracting firm located in Warren, Michigan.
David A. McKinnon is an attorney with the law firm of David A. McKinnon
P.C. located in Sterling Heights, Michigan. Mr. McKinnon previously served as
Vice Chairman of the Board of Directors of Macomb Community Bank.
Brian P. Palmer is President of Palmer Holdings Limited, a real estate
development company located in Rochester Michigan, and Americom, Inc., a
telephone service company located in Rochester, Michigan. Mr. Palmer is active
in a number of church and community activities.
Robert R. Peleman, M.D., is head of the anesthesiology department at St.
Joseph's Hospital, Clinton Township, Michigan. Mr. Peleman is a past director of
Macomb Community Bank, a member of the Board of Directors of St. Joseph's Mercy
Foundation and the past secretary of the Mt. Clemens Medical Association.
Jeff Tamaroff is President of Jeffrey Buick-Nissan, Tamaroff Dodge and
Tamaroff Buick, automobile dealerships located in Roseville, Michigan.
Gerald A. Tarquinio is the former President, Chief Executive Officer and a
Director of National Bank of Rochester (now a part of First of America Bank,
N.A.).
NORTH OAKLAND COMMUNITY BANK. In addition to Messrs. McKinnon and
Tarquinio, the following individuals have agreed to serve on the board of
directors of North Oakland Community Bank:
A. Frank Gerstenecker was City Manager of Troy, Michigan for 26 years. Mr.
Gerstenecker is currently a consultant to the Michigan Municipal League.
Frederick Maibauer, M.D., is Chief of Staff, Crittenton Hospital,
Rochester, Michigan and associated with Rochester Hills Orthopaedics, P.C.
John W. Melstrom, is an accountant and partner in the certified public
accounting firm of Fenner, Melstrom & Dooling located in Auburn Hills, Michigan.
Mr. Melstrom works with businesses in NOCB's market area and is active in the
community and serves on a variety of community boards.
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<PAGE> 20
Vernon Pixley is the President of the Pixley Funeral Home, Rochester,
Michigan.
James T. Polson has held various positions with First of America Bank, N.A.
most recently as a Senior Vice President and Branch Administration Manager where
he was responsible for the operations and services of approximately 500 branches
located throughout Michigan, Illinois and Indiana.
David F. Shellenbarger is President of Macro Computer Products, Inc., a
Rochester, Michigan based software/systems integration company which provides
imaging services to financial institutions.
Russell M. Shelton is Chief Executive Officer and President of Shelton
Pontiac-Buick, Inc., an automobile dealership located in Rochester Hills,
Michigan. Mr. Shelton is the 1998 President of the Detroit Automobile Dealers
Association.
COMPETITION
There are many thrifts, credit unions and bank offices located within the
respective primary market areas of the Banks. Most are branches of larger
financial institutions which, in management's view, are managed with a
philosophy of strong centralization. In addition, there are other community
banks in the Company's target market area. The Banks will face competition from
the thrifts, credit unions, and other banks as well as finance companies,
insurance companies, mortgage companies, securities brokerage firms, and other
providers of financial services. Most of the Banks' competitors have been in
business a number of years, have established customer bases, are larger and have
a higher lending limit than will the Banks. The Banks will compete for loans
principally through their ability to communicate effectively with customers and
understand and quickly meet their needs. Management believes that its personal
service philosophy will enhance its ability to compete favorably in attracting
individuals and small businesses. The Banks will actively solicit retail
customers and will compete for deposits by offering customers competitive
interest rates, personal attention, professional service, courier service, and
computerized banking.
BANK PROPERTIES
The Company has entered into a ten year lease for approximately 6,000
square feet in a one story building located at 43850 Schoenherr, Sterling
Heights, Michigan. Of the 6,000 square feet leased, 4,000 will be used as the
main office of LCB. The Company intends to move to the same location and utilize
the remaining 2,000 square feet for its headquarters. The Company has agreed to
pay monthly rent of approximately $8,400 for the first five years and $8,900 for
the remaining five years. The facility will contain an automated teller machine
("ATM") , a drive through teller window and teller stations inside the building.
The Company expects that the space provided by this building will be adequate
for the needs of LCB and the Company for the foreseeable future.
The Company is also leasing an approximately 3,100 square foot former bank
building located at 1467 North Rochester Road, Rochester Hills, Michigan until
December 31, 2004 to be used as the main office of NOCB. The Company has prepaid
the entire amount of the lease payments by making a payment of $250,000 and has
agreed to make monthly ground lease payments of $600 until December 31, 2004.
The facility contains an ATM, a drive through teller window and teller stations
inside the building. The Company expects that the space provided by this
building will be adequate for the needs of NOCB for the foreseeable future.
EMPLOYEES
Initially, the Company is expected to have approximately five full-time
employees, including the Chief Executive Officer/President, the Chief Financial
Officer, Vice President - Operations, and two support persons. In addition, the
Banks are assembling a staff of experienced professionals. LCB is expected to
have approximately six full-time employees when it commences operations and
seven full-time employees within the first few months of operation. NOCB is
expected to have approximately seven full-time employees when it commences
operations and eight full-time employees within the first few months of
operation.
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<PAGE> 21
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 Banks are likely to have adequate funds to meet
their cash requirements for the next twelve months. The Banks plan to spend
approximately $948,000 for leasehold improvements and approximately $476,000 for
the purchase of fixtures and equipment prior to commencing operations. 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, however, the
Banks may require additional staff or equipment depending on growth and the need
to continue to provide a high quality service alternative to larger banks.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and senior officers of the Company as of the date hereof, and
their contemplated positions with the Banks upon completion of the offering, are
as follows:
<TABLE>
<CAPTION>
POSITION WITH THE COMPANY POSITION
NAME AGE AND YEAR TERM EXPIRES (IF A DIRECTOR) WITH THE BANKS
---- --- ------------------------------------- --------------
<S> <C> <C> <C>
David A. McKinnon........... 49 Chairman, President, CEO, Director Chairman (LCB/NOCB)
(2001)
William L. Carley........... 52 Vice-President, Treasurer and Chief --
Financial Officer
Gail L.M. DiFranco.......... 45 Vice President - Operations --
Paul E. Baltzer, Jr......... 49 Director (1999) Director (LCB)
Phillip T. Hernandez........ 49 Director (2000) Director (LCB)
Joseph S. Lentine........... 38 Director (2001) Director (LCB)
John W. Melstrom............ 57 Director (2000) Director (NOCB)
Brian P. Palmer............. 48 Director (2000) Director (LCB)
Robert R. Peleman........... 40 Director (1999) Director (LCB)
Russell M. Shelton.......... 49 Director (1999) Director (NOCB)
David F. Shellenbarger...... 51 Director (2001) Director (NOCB)
Gerald A. Tarquinio......... 61 Director (2000) Director (LCB/NOCB)
Frank D. Blowers............ 50 -- President, Director (LCB)
James T. Polson............. 48 -- President, Director (NOCB)
</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 Banks or the Company, is
subject to prior notice and disapproval by the FDIC at any time during the first
two years of operations, if there has been a change in control during the last
two years, if the Banks are not in compliance with applicable minimum capital
requirements, are otherwise in a troubled condition, or when the FDIC has
determined that such prior notice is appropriate.
The Company's Articles of Incorporation provide that the number of
directors are as determined from time to time by a vote of two-thirds of the
Board of Directors. The Board of Directors has presently fixed the number of
directors at 10. 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 each Bank will be
elected annually by its sole shareholder, the Company.
20
<PAGE> 22
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.
EXPERIENCE OF DIRECTORS AND OFFICERS
Michigan Community Bancorp Limited
David A. McKinnon (Chairman of the Board/Chief Executive
Officer/President). Since July 1987, Mr. McKinnon has been an attorney with the
law firm of David A. McKinnon P.C. located in Sterling Heights, Michigan. From
October 1995 until December 1997, Mr. McKinnon served as Vice Chairman of the
Board of Directors of Macomb Community Bank. From 1990 until 1995, Mr. McKinnon
served on the Board of Directors and as legal counsel for First National Bank in
Mt. Clemens, located in Mt. Clemens, Michigan. From 1985 until 1991, Mr.
McKinnon was legal counsel for the First State Bank of East Detroit, located in
East Detroit, Michigan. Mr. McKinnon holds a J.D. from Thomas M. Cooley Law
School and a B.A. in economics from Wayne State University.
William L. Carley (Vice President, Treasurer and Chief Financial Officer).
Since 1995, Mr. Carley has been controller of Detroit Rolling Door & Gate, Inc.
From 1993 until 1994, Mr. Carley was Assistant Vice President and Financial
Planning Officer for Citizens Commercial & Savings Bank located in Flint,
Michigan. From 1983 until 1993, Mr. Carley was Vice President and Chief
Financial Officer for National Bank of Royal Oak located in Royal Oak, Michigan.
Mr. Carley has attended the Graduate School of Banking at the University of
Wisconsin and holds a B.A. in Business Administration from Northwood University.
Gail L.M. DiFranco (Vice President - Operations). From April 1996 until
February 1998, Ms. DiFranco was Assistant Vice President - Operations for Macomb
Community Bank located in Clinton Township, Michigan. From October 1994 until
April 1996, Ms. DiFranco was an Accounting Assistant at Dawson & Dawson, P.C.,
located in St. Clair Shores, Michigan a workers' compensation insurance fund
administrator. Ms. DiFranco holds an Associates Degree in Business Accounting
from Macomb Community College.
Paul "Bud" E. Baltzer (Director). Since June, 1973, Mr. Baltzer has been
President of Pebco Sales, Inc., Clinton Township, Michigan, a sales, design,
warehousing and manufacturing company supplying rubber products and flexible
components for piping and ducting service primarily to clients in the pollution
control and automotive paint finishing business.
Phillip T. Hernandez (Director). Since 1991, Mr. Hernandez has served as
President of the Efficient Sanitation Division of Waste Management of Michigan,
Inc., Clinton Township, Michigan, an environmental waste service company.
Joseph S. Lentine (Director). Since 1984, Mr. Lentine has served as Vice
President of Marketing and Office Administration for Golden Dental Plans, Inc.,
Warren, Michigan, a state-licensed dental care delivery system company. In
addition, since 1979, Mr. Lentine has served a President of LeCom, Inc., Warren,
Michigan, a communications contracting firm.
John W. Melstrom (Director). Since 1968, Mr. Melstrom has been a partner
with the certified public accounting firm of Fenner, Melstrom, Dooling LLP,
Auburn Hills, Michigan.
Brian P. Palmer (Director). Since 1992, Mr. Palmer has served as President,
Chief Executive Officer and Director of Palmer Holdings Limited, a management
services firm located in Rochester Hills, Michigan. In addition, Mr. Palmer,
since 1991, has served as President, Chief Executive Officer and a director of
Americom Telemanagement, Inc. a telecommunications firm located in Rochester,
Michigan. Mr. Palmer, since 1994, has been Manager of Palmer Properties, L.L.C.,
a real estate property management firm and since 1997, has been co-manager of
Amerivest Management, L.L.C., a real estate development firm based in Romeo,
Michigan. Mr. Palmer also serves as a on the Board of Trustees for Bruce
Township, in Macomb County, Michigan.
21
<PAGE> 23
Robert R. Peleman (Director). Since 1987, Mr. Peleman has been employed as
an anesthesiologist with Macomb Anesthesia P.C., Mt. Clemens, Michigan, and as
head of the anesthesiology department at St. Joseph's Hospital in Mt. Clemens,
Michigan
Russell M. Shelton (Director). Since 1967, Mr. Shelton has been Chief
Executive Officer and President of Shelton Pontiac-Buick, Inc., an automobile
dealership located in Rochester Hills, Michigan.
David F. Shellenbarger (Director). Since 1981, Mr. Shellenbarger has been
President of Macro Computer Products, Inc., a computer products company located
in Rochester Hills, Michigan, which provides imaging services to financial
institutions.
Gerald A. Tarquinio (Director). During the period from 1988 until 1995, Mr.
Tarquinio was a Vice President/Commercial Loan Group Manager for First of
America Bank, N.A. located in Rochester, Michigan. From 1981 until 1988 Mr.
Tarquinio was President, Chief Executive Officer and Director of the National
Bank of Rochester.
Lakeside Community Bank
Frank D. Blowers (President and Director of LCB). From July 1992 until
August 1997, Mr. Blowers was employed by First of America Bank, N.A., most
recently as a Senior Vice President with responsibilities for Northern Michigan
operations. Mr. Blowers also has had a variety of southeastern Michigan regional
responsibilities. From 1983 until 1992, Mr. Blowers served as a Senior Vice
President for Security Bank, St. Clair Shores, Michigan.
North Oakland Community Bank
James T. Polson (President and Director of NOCB). From 1972 until 1998 Mr.
Polson held various positions with First of America Bank, N.A. most recently as
Vice President and Branch Administration Manager where he was responsible for
the operations and services of approximately 500 branches located throughout
Michigan, Illinois and Indiana.
BOARD COMMITTEES
The Company's Board of Directors has established a Compensation Committee.
The Compensation Committee is responsible for establishing base salaries and
administering the incentive compensation and bonus plans for officers and key
employees of the Company and the Banks. The Compensation Committee also
administers the 1998 Non-Employee Director Stock Option Plan and the 1998
Employee Stock Option Plan. The members of the Compensation Committee are
Messrs. Baltzer, Peleman and Shelton.
The Company's Board of Directors has established an Audit Committee. The
Audit Committee is responsible for reviewing with management the financial
controls, accounting, audit and reporting activities of the Company. The Audit
Committee reviews the qualifications of the Company's independent auditors,
makes recommendations to the Board of Directors regarding the selection of
independent auditors, reviews the scope, fees and results of any audit and
reviews non-audit services provided by the independent auditors. The members of
the Audit Committee are Messrs. Melstrom, Shellenbarger and Tarquinio.
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
In the first year of operation, no compensation is expected to be paid to
any directors of the Company for their services. The directors of each Bank will
be compensated at the rate of $100 per meeting attended. Depending on the
structure and operation of the Company, the operations of the Banks and other
factors, the Company's Board of Directors may thereafter determine that
reasonable fees or compensation for directors are appropriate. In that event, it
is likely that directors of the Company would receive compensation, such as
meeting fees, which would be consistent with the compensation paid to directors
of financial institution holding companies of similar size. Non-Employee
directors are eligible to participate in the Company's 1998 Non-Employee
Director Stock Option Plan.
22
<PAGE> 24
The Executive Officers have chosen to join the Company or the Banks at
compensation levels below those earned in their previous positions or in
comparison to market rates for similar positions. Their interest in accepting a
lower base level of compensation is to aid the Company and the Banks in
achieving earlier profitability by reducing operating expenses. The annual
compensation for Mr. McKinnon for the first year of operations will be $150,000,
Mr. Carley's compensation will be $55,000 and Ms. DiFranco's compensation for
the first year will be $45,000. The Presidents of LCB and NOCB, Mr. Blowers and
Mr. Polson, will each be compensated at the rate of $95,000, respectively for
the first year of operations. Compensation in subsequent years for executive
officers will be determined by the Compensation Committee. The Banks' officers
and employees will be eligible to participate in the Company's 1998 Employee
Stock Option Plan and in any benefit plan adopted for Bank employees. The Banks
expect to adopt a 401(k) plan for their employees promptly after commencing
operations. Neither the Company nor the Banks have an employment agreement with
any officer.
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors has adopted, and the sole shareholder of the Company
has approved, a 1998 Non-Employee Director Stock Option Plan (the "Non-Employee
Plan"). The adoption of the Non-Employee Plan is intended to promote the best
interests of the Company and its shareholders by attracting and motivating
highly qualified individuals to serve as directors and to allow them to acquire
an ownership interest in the Company, thus aligning their interests with those
of the shareholders of the Company. The following is a summary of the principal
provisions of the Non-Employee Plan.
ADMINISTRATION. The Non-Employee Plan will be administered by the
Compensation Committee of the Company as appointed by the Board of Directors.
The Compensation Committee will interpret the Non-Employee Plan, prescribe,
amend and rescind rules and regulations relating to the Non-Employee Plan and
make all other determinations necessary or advisable for the administration of
the Non-Employee Plan.
SHARES. The total number of shares of Common Stock available for grants
under the Non-Employee Plan cannot exceed 73,000 shares of Common Stock (subject
to adjustment for certain events).
OPTION AGREEMENT. Each option granted under the Non-Employee Plan will be
evidenced by an Agreement for Participants in accordance with the terms of the
Non-Employee Plan. Each Agreement for Participants will specify the exercise
price, the term of the option, the date or dates on which the option becomes
exercisable, the number of shares to which the option relates and such other
terms as the Compensation Committee determines.
EXERCISE PRICE. The exercise price for the options will be equal to the
fair market value per share of the Common Stock on the grant date. Fair Market
Value means, for purposes of the Non-Employee Plan, the average between the
published closing bid and asked prices of the Common Stock on the NASD OTC
Bulletin Board or if the Common Stock has become listed on The Nasdaq National
Market or another national securities exchange, the average of the high and low
price as quoted by the exchange. If the Common Stock is not quoted on either the
NASD OTC Bulletin Board or the Nasdaq Stock Market or any nationally recognized
stock exchange, a value determined by any fair and reasonable means prescribed
by the Compensation Committee. For purposes of the grant of options under the
Non-Employee Plan, and not for any other purpose, the Compensation Committee has
determined that $15 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
Compensation Committee, except that the maximum duration may not exceed ten
years from the date of grant. The unexercised portion of each option
automatically expires three months after the person who was granted the options
ceases to be an employee and one year following the death or permanent
disability of the employee.
ADJUSTMENTS. The total amount of Common Stock for which options may be
granted under the Non-Employee Plan will be appropriately adjusted for any
increase or decrease in the number of outstanding shares of Common Stock
resulting from payment of a stock dividend, stock split, recapitalization or
otherwise.
23
<PAGE> 25
CHANGE IN CONTROL. In the event of a change in control (as defined in the
Non-Employee Plan) of the Company, each option then outstanding shall
immediately become exercisable in full.
TERMINATION AND AMENDMENT. An option may not be granted pursuant to the
Non-Employee Plan after December 31, 2001. The Board of Directors may amend or
modify the Non-Employee Plan at any time, but no amendment or modification,
without the approval of the holders of a majority of the voting power of the
Company shall materially increase the benefits accruing to the participants
under the Non-Employee Plan, materially increase the amount of Common Stock for
which grants may be made under the Non-Employee Plan, or materially change the
provisions relating to the eligibility of individuals to whom grants may be made
under Non-Employee Plan. No amendment or termination of the Non-Employee Plan
may adversely affect any option granted under the Non-Employee Plan without the
consent of the optionee.
1998 EMPLOYEE STOCK OPTION PLAN
The Board of Directors has adopted, and the sole shareholder of the Company
has approved, the Employee Stock Option Plan (the "Employee Plan"). The Employee
Plan's adoption is intended to closely associate the interests of the management
of the Company and the Banks with shareholders by reinforcing the relationship
between optionees' rewards and shareholder gains; to provide management with an
equity ownership in the Company commensurate with the Company's performance, as
reflected in increased shareholder value; to maintain competitive compensation
levels; and to provide an incentive to management for continuous employment with
the Corporation. Pursuant to the Employee Plan, options may be granted that
qualify under the Internal Revenue Code as incentive stock options or as stock
options that do not qualify as incentive stock options. The following is a
summary of the principal provisions of the Employee Plan.
ADMINISTRATION. The Employee Plan will be administered by the Compensation
Committee of the Company as appointed by the Board of Directors. The
Compensation Committee will interpret the Employee Plan, prescribe, amend and
rescind rules and regulations relating to the Employee Plan and make all other
determinations necessary or advisable for the administration of the Employee
Plan.
SHARES. The total number of shares of Common Stock available for grants
under the Employee Plan cannot exceed 29,000 shares of Common Stock (subject to
adjustment for certain events).
OPTION AGREEMENT. Each option granted under the Employee Plan will be
evidenced by either an Incentive Stock Option Agreement or a Nonqualified Stock
Option Agreement in accordance with the terms of the Employee Plan. Each stock
option agreement will specify the exercise price, the term of the option, the
date or dates on which the option becomes exercisable, the number of shares to
which the option relates and such other terms as the Compensation Committee
determines.
OPTION PRICE. The option price will be equal to the fair market value per
share of the Common Stock on the grant date. Fair Market Value means, for
purposes of the Employee Plan, the average between the published closing bid and
asked prices of the Common Stock on the NASD OTC Bulletin Board or if the Common
Stock has become listed on The Nasdaq National Market or another national
securities exchange, the average of the high and low price as quoted by the
exchange. If the Common Stock is not quoted on either the NASD OTC Bulletin
Board or the Nasdaq Stock Market or any nationally recognized stock exchange, a
value determined by any fair and reasonable means prescribed by the Compensation
Committee. For purposes of the grant of options under the Non-Employee Plan, and
not for any other purpose, the Compensation Committee has determined that $15
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
Compensation Committee, except that the maximum duration may not exceed ten
years from the date of grant. The unexercised portion of each option
automatically expires three months after the person who was granted the options
ceases to be an employee and one year following the death or permanent
disability of the employee.
ADJUSTMENTS. The total amount of Common Stock for which options may be
granted under the Employee Plan will be appropriately adjusted for any increase
or decrease in the number of outstanding shares of Common Stock resulting from
payment of a stock dividend, stock split, recapitalization or otherwise.
24
<PAGE> 26
CHANGE IN CONTROL. In the event of a change in control (as defined in the
Employee Plan) of the Company, each option then outstanding shall immediately
become exercisable in full.
TERMINATION AND AMENDMENT. An option may not be granted pursuant to the
Employee Plan after December 31, 2007. The Board of Directors may amend or
modify the Employee Plan at any time, but no amendment or modification, without
the approval of the holders of a majority of the voting power of the Company
shall materially increase the benefits accruing to the participants under the
Employee Plan, materially increase the amount of Common Stock for which grants
may be made under the Employee Plan, or materially change the provisions
relating to the eligibility of individuals to whom grants may be made under
Employee Plan. No amendment or termination of the Employee Plan may adversely
affect any option granted under the Employee Plan without the consent 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 will
recognize taxable compensation income to the extent that the fair market value
of the shares of Common Stock exceeds the option price. The Company is entitled
to a tax deduction for such amounts at the date of exercise. If any stock
received upon the exercise of a non-qualified option is later sold, any excess
of the sale price over the fair market value of the stock at the date of
exercise is taxable to the optionee.
No taxable income results to the optionee upon the exercise of an incentive
stock option if the incentive stock option is exercised during the period of the
optionee's employment or within three months thereafter, except in the case of
disability or death. However, the amount by which the fair market value of the
stock acquired pursuant to an incentive stock option exceeds the option price is
a tax preference item which may result in the imposition on the optionee of an
alternative minimum tax. If no disposition of the shares is made within two
years from the date the incentive stock option was granted and one year from the
date of exercise, any profit realized upon disposition of the shares may be
treated as a long-term capital gain by the optionee. A disposition prior to such
time will be taxable as described in the preceding paragraph. 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 these holding periods.
As of August 15, 1998, the Company had nine outstanding option agreements
to purchase an aggregate of 29,997 shares of its Common Stock pursuant to the
Non-Employee Plan at an exercise price of $15.00 per share. As of August 15,
1998, the Company had three outstanding option agreements to purchase an
aggregate of 14,667 shares of its Common Stock pursuant to the Employee Plan at
an exercise price of $15.00 per share.
25
<PAGE> 27
RELATED PARTY TRANSACTIONS
LOANS FROM ORGANIZERS
Over the past several months, several organizers of the Company have made
interest free loans of $387,500 to the Company to cover organizational and other
pre-opening expenses of the Banks and the Company. All of these loans will be
repaid by the Company from the net proceeds of the offering. Immediately after
the completion of this offering, the organizers intend to exercise options
granted to each of them and apply the proceeds from the repayment of such loans
to pay the exercise price for their option shares. Each of the organizers of the
Company is also a member of the Company's or one of the Banks' Board of
Directors.
SERVICES FROM ORGANIZERS
Since the Company's inception, David A. McKinnon, one of the organizers of
the Company, has provided legal services to the Company. The Company has paid
approximately $81,000 for such legal services.
OPTION GRANTS
On May 19, 1998, the Company granted options to purchase 3,333 shares of
Common Stock at an exercise price of $15.00 pursuant to the Non-Employee Plan to
each of Paul E. Baltzer, Jr., Phillip T. Hernandez, Joseph S. Lentine, John W.
Melstrom, Brian P. Palmer, Robert R. Peleman, David F. Shellenbarger, Russell M.
Shelton and Gerald A. Tarquinio. On the effective date of this offering, 70% of
the options vest, on the first anniversary of the effective date of this
offering an additional 15% of the options vest, on the second anniversary of the
effective date of this offering an additional 5% of the options vest and on the
third anniversary of the effective date of this offering all of the options are
vested.
On May 19, 1998, the Company granted options to purchase 6,667 shares of
Common Stock at an exercise price of $15.00 pursuant to the Employee Plan to
David A. McKinnon. On the effective date of this offering, 70% of the options
vest, on the first anniversary of the effective date of this offering an
additional 15% of the options vest, on the second anniversary of the effective
date of this offering, an additional 5% of the options vest and on the third
anniversary of the effective date of this offering all of the options are
vested.
On May 19, 1998, the Company granted options to purchase 4,000 shares of
Common Stock at an exercise price of $15.00 pursuant to the Employee Plan to
each of Frank D. Blowers and James T. Polson. On the effective date of this
offering, 70% of the options vest, on the first anniversary of the effective
date of this offering an additional 15% of the options vest, on the second
anniversary of the effective date of this offering an additional 5% of the
options vest and on the third anniversary of the effective date of this offering
all of the options are vested.
BANKING TRANSACTIONS
It is anticipated that certain of the directors and officers and the
businesses with which they are associated will have banking and other
transactions with the Company and the Banks 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 the 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 Banks. Transactions between the Company or the Banks, and any
officer, director, principal shareholder, or other affiliate of the Company or
the Banks will be on terms no less favorable to the Company or the Banks than
could be obtained on an arms-length basis from unaffiliated independent third
parties, and will be approved by a majority of the Company's or the Banks'
independent directors who do not have an interest in the transaction and who
have had access, at the Company's or the Bank's expense, to the Company's legal
counsel or independent legal counsel.
26
<PAGE> 28
INDEMNIFICATION
The Articles of Incorporation of the Company provide for the
indemnification of directors and officers of the Company, including reasonable
legal fees, incurred by such directors and officers while acting for or on
behalf of the Company as a director or officer, subject to certain limitations.
See, "Description of Capital Stock -- Indemnification of Directors and
Officers." The scope of such indemnification otherwise permitted by Michigan law
may be limited in certain circumstances by federal law and regulations. See
"Supervision and Regulation." The Company intends to purchase directors' and
officers' liability insurance for directors and officers of the Company and the
Banks.
27
<PAGE> 29
PRINCIPAL SHAREHOLDERS
The Company has issued only one share of Common Stock held by David
McKinnon. Upon completion of this offering, this share will be repurchased by
the Company for the same price Mr. McKinnon paid for it. 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 dated the date of this Prospectus (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). All share numbers are
provided based upon such directions from the Company and non-binding expressions
of interest supplied by the persons listed below:
<TABLE>
<CAPTION>
NUMBER OF SHARES TO BE PERCENTAGE OF
BENEFICIALLY OWNED OUTSTANDING SHARES
NAME AND ADDRESS(4) AFTER OFFERING(1)(2) AFTER OFFERING(3)
------------------- ---------------------- ------------------
<S> <C> <C>
David A. McKinnon........................................ 6,750 *
William L. Carley........................................ -- *
Gail L.M. DiFranco....................................... -- *
Paul E. Baltzer, Jr...................................... 5,083 *
Phillip T. Hernandez..................................... 4,416 *
Joseph S. Lentine........................................ 5,666 *
John W. Melstrom......................................... 4,416 *
Brian P. Palmer.......................................... 4,416 *
Robert P. Peleman........................................ 12,083 1.2%
Russell M. Shelton....................................... 4,416 *
David F. Shellenbarger................................... 4,416 *
Gerald A. Tarquinio...................................... 3,000 *
Frank D. Blowers......................................... 4,883 *
James T. Polson.......................................... 3,467 *
Directors and executive officers of the Company as a
group (14 persons)..................................... 63,012 6.0%
</TABLE>
- ---------------
Notes:
* less than 1.0%.
(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 shares that such person has the right to acquire within 60 days of
the effective date of this offering pursuant to the Company's 1998
Non-Employee Director Stock Option Plan and 1998 Employee Stock Option Plan.
(3) Percentages shown are based on the 1,000,000 shares offered hereby plus the
number of shares that each named person or group has the right to acquire
within 60 days of August 14, 1998; and in each case assumes no exercise of
the Underwriters' over-allotment option.
(4) c/o Michigan Community Bancorp Limited, 12900 Hall Road, Suite 395, Sterling
Heights, Michigan 48313.
Depending upon their individual circumstances at the time of the offering,
each person may purchase a greater or fewer number of shares than indicated, and
in fact, may elect not to purchase any shares.
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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 Banks 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 FIB, the Michigan Department of Consumer and
Industry Services, the Internal Revenue Service, and state taxing authorities.
The effect of such statutes, regulations and policies can be significant, and
cannot be predicted with certainty.
Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments, reserves against deposit, 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 Banks 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 Banks, and the public, rather than
shareholders of the Banks or the Company.
The Federal Reserve Board, FDIC and the other federal banking agencies have
broad enforcement powers, including the power to terminate deposit insurance,
impose substantial fines and other civil and criminal penalties and appoint a
conservator or receiver. Failure to comply with applicable laws, regulations and
supervisory agreements could subject the Company or its banking subsidiaries, as
well as officers, directors and other institution-affiliated parties of these
organizations, to administrative sanctions and potentially substantial civil
money penalties. The appropriate federal banking agency may appoint the FDIC as
conservator or receiver for a banking institution (or the FDIC may appoint
itself, under certain circumstances) if any one or more of a number of
circumstances exist, including, without limitation, the fact that the banking
institution is undercapitalized and has no reasonable prospect of becoming
adequately capitalized; fails to become adequately capitalized when required to
do so; fails to submit a timely and acceptable capital restoration plan; or
materially fails to implement an accepted capital restoration plan.
The following references to statutes and regulations are intended to
summarize certain government regulation of the business of the Company and the
Banks, and are qualified by reference to the text of such statutes and
regulations. Any change in government regulations may have a material effect on
the business of the Company and the Banks.
THE COMPANY
GENERAL. When the Company becomes the sole shareholder of the Banks, 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 Banks and to commit
resources to support the Banks 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 FIB either to restore its
capital by a special assessment upon its shareholders, or to liquidate 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 bankruptcy by a bank holding company,
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
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payment. This priority would also apply to guarantees of capital plans under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA").
INVESTMENTS AND ACTIVITIES. 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 engaged in any activity other
than banking or managing or controlling banks, or 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, securities brokerage, and
consumer and commercial finance company operations. As a result of recent
amendments to the BHCA, certain types of acquisitions may be effected by bank
holding companies that satisfy certain statutory criteria concerning management,
capitalization, and regulatory compliance, provided that written notice is given
to the Federal Reserve Board within 10 business days after the transaction. For
other acquisitions, 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.
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 such 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.
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 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
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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 1,000,000 shares of Common
Stock offered hereby at $15.00 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.
In September 1996, the federal bank regulatory agencies 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
Banks. Most of the Company's revenues will be received by it in the form of
dividends or interest paid by the Banks. The Banks are subject to statutory
restrictions on their ability to pay dividends. See "The Banks -- 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 Banks 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 the FDICIA impose further restrictions on the payment of dividends
by insured banks which fail to meet specified capital levels.
In addition to the restrictions on dividends imposed by the Federal Reserve
Board, 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."
POTENTIAL LIABILITY FOR UNDERCAPITALIZED SUBSIDIARIES. Bank regulators are
required to take "prompt corrective action" to resolve problems associated with
insured depository institutions whose capital declines below certain levels. In
the event an insured depository institution becomes "undercapitalized," it must
submit a capital restoration plan. The capital restoration plan will not be
accepted by the regulators unless each company having control of the
undercapitalized institution guarantees the subsidiary's compliance with the
capital restoration plan up to a certain specified amount. Any such guarantee
from a depository institution's holding company is entitled to a priority of
payment in bankruptcy.
The aggregate liability of the holding company of an undercapitalized bank
is limited to the lesser of 5% of the institution's assets at the time it became
undercapitalized or the amount necessary to cause the institution to be
"adequately capitalized." The bank regulators have greater power in situations
where an institution becomes "significantly" or "critically" undercapitalized or
fails to submit a capital restoration plan. For example, a bank holding company
controlling such an institution can be required to obtain prior Federal
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Reserve Board approval of proposed dividends, or might be required to consent to
a consolidation or to divest the troubled institution or other affiliates.
THE BANKS
GENERAL. Upon completion of their organization each of the Banks will be a
Michigan banking corporation, and their deposit accounts will be insured by the
Bank Insurance Fund (the "BIF") of the FDIC. As BIF-insured, Michigan-chartered
banks, each of the Banks will be subject to the examination, supervision,
reporting and enforcement jurisdiction of the FIB, 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 FDIC-insured institutions, each of the Banks 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 adequately capitalized (as defined
by the FDIC) and considered substantial supervisory concern pay the highest
premium. Risk classification of all insured institutions is made by the FDIC for
each semi-annual assessment period.
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, (i) 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 (ii) 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, FDIC-insured, 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 Banks' formation, the Banks will be required to have an initial
capitalization sufficient to provide a ratio of Tier 1 capital to total
estimated assets of at least % at the end of the third year of operations.
PROMPT CORRECTIVE ACTION. FDICIA establishes a system of prompt corrective
action to resolve the problems of undercapitalized institutions. Under this
system, federal depository institution regulators are required to take certain
mandatory supervisory actions, and may take certain discretionary supervisory
actions against undercapitalized institutions, the severity of which depends
upon the institution's degree of capitalization. In addition, subject to a
narrow exception, FDICIA generally requires the federal depository institution
regulators to appoint a receiver or conservator for an institution that is
critically undercapitalized.
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As mandated by FDICIA, the federal banking regulators have specified by
regulation the relevant capital measures at which an insured depository
institution is deemed well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Pursuant to the FDIC's regulations implementing the prompt
corrective action provisions of FDICIA, a bank will be deemed to be (i) well
capitalized if the bank has a total risk-based capital ratio of 10% or greater,
a Tier 1 risk-based capital ratio of 6% or greater and a leverage ratio of 5% or
greater; (ii) adequately capitalized if the bank has a total risk-based capital
ratio of 8% or greater, a Tier 1 risk-based capital ratio above 4%, or a
leverage ratio of greater than 4% (3% for the most highly rated banks); (iii)
undercapitalized if the bank has a total risk-based capital ratio of less than
8%, a Tier 1 risk-based capital ratio of less than 4%, and a leverage ratio of
less than 4%; (iv) significantly undercapitalized if the bank has a total
risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of
less than 3% or a leverage ratio of less than 3%; and (v) critically
undercapitalized if the bank has a ratio of tangible equity to total assets of
2% or less.
Subject to certain exceptions, these capital ratios are generally
determined on the basis of Call Reports submitted by each depository institution
and the reports of examination by each institution's appropriate federal
depository institution regulatory agency.
Depending upon the capital category to which an institution is assigned,
the regulators' corrective powers include: requiring the submission of a capital
restoration plan (which must include a holding company guarantee of
performance); placing limits on asset growth and restrictions on activities;
requiring the institution to issue additional capital stock (including
additional voting stock) or to be acquired; restricting transactions with
affiliates; restricting the interest rate the institution may pay on deposits;
ordering a new election of directors of the institution; requiring that senior
executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks; requiring the holding company to
divest certain subsidiaries including the institution; requiring the institution
to divest certain subsidiaries; prohibiting the payment of principal or interest
on subordinated debt; and ultimately, appointing a receiver or conservator for
the institution.
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 banking corporations organized under Michigan law, the Banks
will be restricted as to the maximum amount of dividends they may pay on their
Common Stock. The Banks may not pay dividends except out of net profits after
deducting losses and bad debts. The banks may not declare or pay a dividend
unless they have a surplus amounting to at least 20% of its capital after the
payment of the dividend. If the Banks have a surplus less than the amount of
their capital they 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 Banks 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 Banks 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 Banks have no present
intentions to issue preferred stock.
The Federal Deposit Insurance Act, as amended ("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 an assessment due to the FDIC. In addition, payment of dividends by
the Banks may be prevented by the applicable federal regulatory authority if
such payment is determined, by reason of the financial condition of a 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.
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CROSS-GUARANTEE PROVISIONS. The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") contains a "cross-guarantee" provision which
generally makes commonly controlled insured depository institutions liable to
the FDIC for any losses incurred in connection with the failure of a commonly
controlled depository institution.
INSIDER TRANSACTIONS. The Banks are 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 Banks 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 either of the Banks maintain a correspondent relationship.
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 Banks 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."
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 was the
case prior to August 9, 1995, each depository institution is 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 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.
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CONSUMER BANKING. The business of the Banks will include making a variety
of types of loans to individuals. In making these loans, the Banks 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 Banks,
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. 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 Banks,
and their directors and officers.
INTERSTATE BANKING AND BRANCHING. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Riegle-Neil Act"), substantially changed
the geographic constraints applicable to the banking industry. 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. 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 allowed 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 allowed and amended the Michigan Banking Code to permit, 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 or all 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.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act of 1977 ("CRA")
and the regulations issued thereunder are intended to encourage banks to help
meet the credit needs of their service area,
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including low and moderate income neighborhoods, consistent with the safe and
sound operations of the banks. These regulations also provide for regulatory
assessment of a bank's record in meeting the needs of its service area when
considering applications to acquire the assets and assume the liabilities of
another bank. FIRREA requires federal banking agencies to make public a rating
of a bank's performance under the CRA. In the case of a bank holding company,
the CRA performance record of the banks involved in the transaction are reviewed
in connection with the filing of an application to acquire ownership or control
of shares or assets of a bank or to merger with any other bank holding company.
An unsatisfactory record can substantially delay or block the transaction.
EFFECT ON ECONOMIC ENVIRONMENT. The policies of regulatory authorities,
including the monetary policy of the Federal Reserve Board, have a significant
effect on the operating results of bank holding companies and their
subsidiaries. Among the means available to the Federal Reserve Board to affect
the money supply are open market operations in U.S. Government securities,
changes in the discount rate on member bank borrowings, and changes in reserve
requirements against member bank deposits. These means are used in varying
combinations to influence overall growth and distribution of bank loans,
investments and deposits, and their use may affect interest rates charged on
loans or paid for deposits.
Federal Reserve Board monetary policies have materially affected the
operating results of commercial banks in the past and are expected to continue
to do so in the future. The nature of future monetary policies and the effect of
such policies on the business and earnings of the Company and its subsidiaries
cannot be predicted.
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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 and held
by David A. McKinnon. 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 shareholders. Holders of
Common Stock do not have preemptive rights. Issuances of Preferred Stock, if
any, will not be offered to members of the Board of Directors, except on the
same terms as are offered to the public, unless approved by a majority of the
Company's independent directors who do not have an interest in the transaction
and who have had access, at the Company's expense, to the Company's legal
counsel or independent legal counsel.
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 rights, qualifications, limitations, and
restrictions 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 any shares of
any other series, shall be subject to restrictions as to issuance, or as to the
powers, preferences or rights of any such other series; and (ix) any other
preferences, privileges and powers and relative, participating, optional or
other special rights and qualifications, limitations or restrictions.
COMMON STOCK
DIVIDEND RIGHTS. Subject to any prior rights of any holders of Preferred
Stock then outstanding, the holders of the Common Stock will be entitled to
dividends when, as and if declared by the Company's Board of Directors out of
funds legally available therefor. Under Michigan law, dividends may be legally
declared or paid only if after the distribution the corporation can pay its
debts as they come due in the usual course of business and the corporation's
total assets equal or exceed the sum of its liabilities plus (unless otherwise
provided for in the Articles of Incorporation) 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 dividend payments of the Banks. 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 Banks are not expected to be profitable during their start up
period, the Company does not expect to declare a dividend 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.
37
<PAGE> 39
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. Fifth Third National Bank will serve 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 or
Bylaws may delay, defer, prevent, or make it more difficult for a person to
acquire the Company or to change control of the Company's Board of Directors,
thereby reducing the Company's vulnerability to an unsolicited takeover attempt.
CLASSIFICATION OF THE BOARD OF DIRECTORS. The Company's Articles of
Incorporation provide for the Board of Directors to be divided into three
classes of directors, each class to be as nearly equal in number as possible.
Pursuant to the Articles of Incorporation, the Company's directors have been
divided into three classes. Three (3) Class I directors have been elected for a
term expiring at the 1999 annual meeting of shareholders, four (4) Class II
directors have been elected for a term expiring at the 2000 annual meeting of
shareholders, and three (3) Class III directors have been elected for a term
expiring at the 2001 annual meeting of shareholders (in each case until their
respective successors are elected and qualified). After expiration of their
initial terms, Directors of each class shall be elected for a new three year
term. For identification of the persons serving as Class I, Class II and Class
III directors, see "Management."
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 at any time with or without
cause but that removal without cause requires the affirmative vote, at a meeting
of the shareholders called for that purpose, by the holders of at least
two-thirds of the voting power of all the shares of the Company entitled to vote
generally in the election of directors. Removal with cause requires the
affirmative vote, and a meeting of shareholders called for that purpose, by the
holders of a majority of the voting power of all the shares of the Company
entitled to vote.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. The Company's Articles of
Incorporation provide that any vacancies on the Board of Directors for any
reason, may be filled by the Board of Directors only upon the affirmative vote
of two-thirds of the directors then remaining in office. Any director so 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 and until his successor is
duly elected and qualified (or until his earlier resignation or removal).
RECOMMENDATION OF OFFERS. The Company's Articles of Incorporation also
provide that the Board of Directors shall not approve, adopt or recommend any
offer of any person or entity, other than the Company, to make a tender or
exchange offer for any capital stock of the Company, to merge or consolidate the
Company with any other entity or to purchase or otherwise acquire all or
substantially all of the assets or business of the Company unless and until the
Board of Directors has first evaluated the offer and determined that it would
comply with all applicable laws and is in the best interests of the Company and
its shareholders. In evaluating compliance with laws, the Board is entitled to
rely upon an opinion of independent counsel and may test compliance in any
appropriate court or before any appropriate administrative agency. In analyzing
whether an offer is in the best interests of the Company and its shareholders,
the Board of Directors is required to consider all factors which it deems
relevant, including without limitation (i) the adequacy and fairness of the
consideration to be received under the offer by the Company and/or its
shareholders, considering historical trading prices of the Company's stock, the
price that might be achieved in a negotiated sale of stock, the price that might
be achieved in a negotiated sale of the Company as a whole, premiums over
trading prices which have in the past been proposed or offered for the
securities of other companies in similar offers and the future prospects for the
Company and its business; (ii) the potential social and economic impact of the
offer and its consummation on the Company, its employees, customers and vendors;
and (iii) the potential social and economic impact of the offer and its
consummation on the communities in which the Company and any subsidiaries
operate or are located.
38
<PAGE> 40
CERTAIN SHAREHOLDER ACTION. The Company's Bylaws provide that special
meetings of shareholders must be called only by the Board of Directors, the
Chairman of the Board of Directors or the President. 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
PROVISIONS. The Company's Articles of Incorporation and Bylaws require the
affirmative vote of the holders of at least two-thirds 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.
MICHIGAN FAIR PRICE ACT. Certain provisions of the MBCA establish a
statutory scheme similar to the supermajority and fair price provisions found in
many corporate charters (the "Fair Price Act"). The Fair Price Act provides that
a supermajority vote of 90% of the shareholders and no less than two-thirds of
the votes of noninterested shareholders must approve a "business combination."
The Fair Price Act defines a "business combination" to encompass any merger,
consolidation, share exchange, sale of assets, stock issue, liquidation, or
reclassification of securities involving an "interested-shareholder, or certain
"affiliates". An interested shareholder is generally any person who owns 10%
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, (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 and (iii) there has been five years between the date the
interested shareholder became an interested shareholder and the date the
business combination is consummated.
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 certain 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 acquirer voting power, alone or as part of a group, at
or above any of the following thresholds: 20%, 33% or 50%. Under the Control
Share Act an acquirer 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.
39
<PAGE> 41
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide indemnification rights to
directors, officers and certain other persons for liabilities and expenses
incurred in connection with their service on behalf of the Company.
The Articles require the Company to 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, by reason of the fact that the person is
or was a director or officer of the Company, or 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. Indemnification is provided for all
types of proceedings, whether civil, criminal, administrative or investigative
and whether formal or informal, including actions by or in the right of the
corporation (such as derivative actions). Indemnification is provided for
expenses (including actual and reasonable attorneys' fees), judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by the indemnified person in connection with such action, suit or proceeding. To
be entitled to indemnification, a person must have 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, must have had no reasonable cause to believe his or her
conduct was unlawful. In addition, no indemnification will be provided in
respect of any claim, issue or matter in which the 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.
The Articles provide that a person who has been successful, on the merits
or otherwise, in the defense of any action, suit or proceeding described above,
or in defense of any claim, issue or matter in the action, suit or proceeding,
will be indemnified against actual and reasonable expenses (including attorneys'
fees) incurred by in connection with the matter as well.
The Articles also provide for the payment by the Company of the expenses of
a person entitled to indemnification, in advance of the final disposition of the
proceeding, if the person furnishes the Company a written affirmation of his or
her good faith belief that he or she has met the applicable standard of conduct
described above and furnishes the corporation a written undertaking to repay the
advance if it is ultimately determined that he or she did not meet the standard
of conduct. The undertaking must be an unlimited general obligation of the
person receiving advances but need not be secured.
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.
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 money damages for any action taken or any
failure to take any action as a director, except liability for (i) the amount of
a financial benefit received by a director to which he or she is not entitled,
(ii) intentional infliction of harm on the corporation or the shareholders,
(iii) a violation of Section 551 of the MBCA relating to impermissible
distributions to shareholders or loans to directors, officers or employees, or
(iv) an intentional criminal act.
40
<PAGE> 42
SHARES ELIGIBLE FOR FUTURE SALE
As of August 15, 1998, the Company had one share of Common Stock
outstanding which is held by a member of the Board of Directors. Upon completion
of the offering, the Company expects to have 1,000,000 shares of its Common
Stock outstanding. The 1,000,000 shares of the Company's Common Stock sold in
the offering (plus any additional shares sold upon the Underwriters' exercise of
its over-allotment option) have been registered with the SEC 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 as
defined in Rule 144 of the Securities Act (collectively, "Affiliates").
Affiliates of the Company may generally only sell shares of the Common Stock
pursuant to Rule 144.
In general, under Rule 144 as currently in effect, an Affiliate of the
Company may sell shares of Common Stock within any three-month period in an
amount limited to the greater of l% 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.
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.
The Officers and Directors of the Company and the Banks has agreed not to sell
or otherwise dispose of any of their shares of Common Stock for a period of 180
days after the effective date of this offering without the prior written consent
of the Managing Underwriter. Nevertheless, sales of substantial amounts of
Common Stock in the public market could have an adverse effect on prevailing
market prices.
41
<PAGE> 43
UNDERWRITING
The Underwriters have agreed, subject to the terms and conditions of the
Underwriting Agreement, that they will purchase from the Company, on a firm
commitment basis, 1,000,000 shares of Common Stock. 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. (the "NASD").
The Underwriters are obligated to purchase all 1,000,000 shares of Common Stock
offered hereby, excluding shares covered by the over-allotment option granted to
the Underwriters, if any are purchased.
If the Underwriting Agreement is terminated, except in certain limited
cases, the Underwriting Agreement provides that the Company will reimburse the
Underwriters for all accountable out-of-pocket expenses incurred in connection
with the proposed purchase and sale of the shares of Common Stock. The Company
has advanced $25,000 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 are
less than $25,000, the Underwriters shall refund the excess to the Company.
The Company and the Underwriters have agreed that the Underwriters will
purchase the 1,000,000 shares of Common Stock offered hereunder at a price to
the public $ per share less an underwriting discount of $ per share.
However, the Underwriters have agreed to limit the underwriting discounts to
2.5% of the public offering price ($ per share) with respect to shares that
the Company directs to be sold to designated officers, directors and organizers
of the Company and the Banks and their designated friends and family members.
The Underwriters propose to offer the shares of Common Stock to selected dealers
who are members of the NASD at a price of $ 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 shares of Common Stock are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the Underwriters.
The Underwriters have informed the Company that they do not intend to make
sales to any accounts over which they exercise discretionary authority.
The Company has granted the Underwriters a 30-day over-allotment option to
purchase up to 150,000 additional shares of Common Stock on the same terms and
conditions set forth above solely to cover over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discounts, and Proceeds to Company will be approximately
$ , $ and $ , respectively.
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 its controlling persons
in connection with losses or claims arising out of any untrue statement of a
material fact contained in this Prospectus or in related documents filed with
the Securities and Exchange Commission ("SEC") 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 shares of Common Stock. The
price at which the shares are being offered to the public was determined in
consultation with the Managing 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 shares of Common Stock.
Several factors were considered in determining the initial offering price of the
shares of Common Stock, among them the size of the offering, the desire that the
security being offered be attractive to individuals and the Managing
Underwriters' experience in dealing with initial public offerings for financial
institutions.
42
<PAGE> 44
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by Butzel Long, Detroit, Michigan. Dykema Gossett PLLC, 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 Plante & Moran LLP, independent public accountants, as indicated
in their report with respect thereto.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words
"anticipate", believe", "estimate", "expect" and similar expressions as they
relate to the Company or its management are intended to identify such
forward-looking statements. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or contribute to
such differences include those discussed under the caption "Risk Factors."
ADDITIONAL INFORMATION
The Company has filed a Form SB-2 Registration Statement with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
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 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 World Trade Center, Suite 1300, New York New York 10048.
Copies of such materials can also be obtained on the SEC's Internet Website 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.
43
<PAGE> 45
MICHIGAN COMMUNITY BANCORP LIMITED
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditor's Report................................ F-2
Financial Statements........................................ F-3
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
</TABLE>
F-1
<PAGE> 46
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Michigan Community Bancorp Limited
We have audited the accompanying balance sheet of Michigan Community
Bancorp Limited (a Company in the development stage) as of July 31, 1998, and
the related statements of shareholder's equity, operations and cash flows for
the period from January 28, 1998 (inception) through July 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Michigan Community Bancorp
Limited (a Company in the development stage) as of July 31, 1998, and the
results of its operations and cash flows for the period from January 28, 1998
(inception) through July 31, 1998, in conformity with generally accepted
accounting principles.
PLANTE & MORAN, LLP
August 20, 1998
Bloomfield Hills, Michigan
F-2
<PAGE> 47
MICHIGAN COMMUNITY BANCORP LIMITED
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEET
JULY 31, 1998
<TABLE>
<S> <C>
ASSETS
Cash........................................................ $ 123,262
Deferred offering cost...................................... 3,000
Prepaid building lease (Note 4)............................. 246,795
Office equipment and leasehold improvement.................. 19,166
Other assets................................................ 17,000
---------
Total assets........................................... $ 409,223
=========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Accounts payable............................................ $ 5,190
Related party notes payable (Note 2)........................ 387,500
Line of credit (Note 3)..................................... 265,000
SHAREHOLDER'S EQUITY (DEFICIT)
Preferred stock, no par value; 1,000,000 shares
authorized, none issued................................ --
Common stock, $5 stated value, 9,000,000 shares
authorized, one share issued and outstanding........... 5
Additional paid in capital................................ 10
Deficit accumulated during development stage.............. (248,482)
---------
Total shareholder's deficit....................... (248,467)
---------
Total liabilities and shareholder's equity (deficit)........ $ 409,223
=========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 48
MICHIGAN COMMUNITY BANCORP LIMITED
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF SHAREHOLDER'S DEFICIT
PERIOD FROM JANUARY 28, 1998 (INCEPTION) TO JULY 31, 1998
<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 January 28, 1998............. $ -- $ -- $-- $ -- $ --
Issuance of common stock................ -- 5 10 -- 15
Net Loss................................ -- -- -- (248,482) (248,482)
-------- -------- --- --------- ---------
Balance at July 31, 1998................ $ -- $ 5 $10 $(248,482) $(248,467)
======== ======== === ========= =========
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 49
MICHIGAN COMMUNITY BANCORP LIMITED
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
PERIOD FROM JANUARY 28, 1998 (INCEPTION) TO JULY 31, 1998
<TABLE>
<S> <C>
INTEREST INCOME............................................. $ 892
ORGANIZATIONAL EXPENSE...................................... 121,055
PREOPENING EXPENSES
Salaries.................................................. 64,654
Employee benefits......................................... 12,051
Contract labor............................................ 17,813
Rent...................................................... 10,438
Other..................................................... 23,363
---------
Total preopening expenses.............................. 128,319
---------
LOSS BEFORE INCOME TAXES.................................... (248,482)
PROVISIONS FOR INCOME TAXES (Note 6)........................ --
---------
NET LOSS.................................................... $(248,482)
=========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 50
MICHIGAN COMMUNITY BANCORP LIMITED
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 28, 1998 (INCEPTION) TO JULY 31, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(248,482)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Increase in accounts payable........................... 5,190
Prepayment of building lease.............................. (246,795)
Increase in other assets............................... (17,000)
---------
Net cash used in operating activities................ (507,087)
CASH FLOWS FROM INVESTING ACTIVITIES --
Purchase of office equipment and leasehold (19,166)
improvements..........................................
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related party notes payable................. 387,500
Net increase in line of credit............................ 265,000
Deferred offering costs................................... (3,000)
Sale of common stock...................................... 15
---------
Net cash provided by financing activities.............. 649,515
---------
Net increase in cash........................................ 123,262
CASH -- beginning balance................................... --
---------
CASH -- ending balance...................................... $ 123,262
=========
</TABLE>
See Notes to Financial Statements.
F-6
<PAGE> 51
MICHIGAN COMMUNITY BANCORP LIMITED
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization -- Michigan Community Bancorp (the "Company") was incorporated
on January 28, 1998 as a bank holding company to establish and operate two new
banks, Lakeside Community Bank (LCB) in Sterling Heights, Michigan and North
Oakland Community Bank (NOCB) in Rochester Hills, Michigan. The Company intends
to raise a minimum of $13,820,000 in equity capital through the sale of
1,000,000 shares of the Company's common stock at $15 per share, net of
underwriting discounts and offering costs. Proceeds from the offering will be
used to capitalize the Banks, 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.
Deferred Offering Costs -- Deferred offering costs include legal,
consulting and accounting costs incurred in connection with the registration of
the Company's common stock. Those costs will be charged against the stock
proceeds or, if the offering is not successful, charged to expense at that time.
Organization and preopening costs -- Organization and preopening costs
represent incorporation costs, salaries, legal and accounting costs and other
costs relating to the organization. Management anticipates that organization and
preopening costs could reach $390,000 through commencement of operations.
NOTE 2 -- NOTES PAYABLE RELATED PARTIES
Non interest bearing demand notes payable in the amount of $387,000 are
outstanding to the Company's organizers. Management intends to repay the loans
from the proceeds of the common stock offering.
NOTE 3 -- LINE OF CREDIT
The Company has a line of credit with a bank that expires October 31, 1998
under which the Company may borrow up to $500,000. Interest accrues on the
outstanding balance at prime rate (8.5% at July 31, 1998) plus 1% and the line
of credit is guaranteed by the Company's Chairman of the Board and one other
Board member. In addition to the guarantees, the bank has obtained an assignment
of the Company's lease of the NOCB building.
NOTE 4 -- LEASE COMMITMENTS
The company has entered into an assignment of a lease for a building to be
utilized for NOCB's branch operations. The assignment required the prepayment of
the lease totaling $250,000 and an ongoing monthly rental payment of $600. The
prepayment of rent will be expensed over the lease assignment term, which
expires on December 31, 2004.
The future minimum lease payments under the assignment are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 7,200
2000........................................................ 7,200
2001........................................................ 7,200
2002........................................................ 7,200
2003........................................................ 7,200
Thereafter.................................................. 10,800
-------
$46,800
=======
</TABLE>
F-7
<PAGE> 52
MICHIGAN COMMUNITY BANCORP LIMITED
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1998
The Company is also negotiating a lease for its LCB location in Sterling
Heights. The Company is seeking a ten year sublease with monthly lease payments
approximating $8,400 to $8,900.
NOTE 5 -- STOCK OPTION PLANS
The Company has adopted a stock option plans for its employees and
nonemployee directors. The total number of shares that may be issued under the
two plans will not exceed 102,000 shares. The shares will be authorized but
unissued shares. At July 31, 1998, options have been granted to participants to
purchase 44,664 shares under the plans. The options granted will vest 70% upon
the effective date of Company's initial public stock offering.
NOTE 6 -- INCOME TAXES
At July 31, 1998, the Company had approximately $248,000 of net operating
loss carryforwards. The tax benefit of these carryforwards ($84,000) has been
offset by a valuation allowance.
NOTE 7 -- PREFERRED STOCK
The Company has authorized but not issued 1,000,000 shares of preferred
stock. Such stock will have preferences with respect to dividends and
liquidation and may have voting or other rights, or determined by the Board of
Directors.
NOTE 8 -- RELATED PARTY TRANSACTIONS
The Company utilizes the legal services of one of its Board members. Total
legal expenses incurred from inception through July 31, 1998 totalled $81,000.
F-8
<PAGE> 53
======================================================
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.......................... 7
Use of Proceeds....................... 12
Dividend Policy....................... 13
Capitalization........................ 14
Business.............................. 15
Management............................ 20
Related Party Transactions............ 26
Principal Shareholders................ 28
Supervision and Regulation............ 29
Description of Capital Stock.......... 37
Shares Eligible for Future Sale....... 41
Underwriting.......................... 42
Legal Matters......................... 43
Experts............................... 43
Forward-Looking Statements............ 43
Additional Information................ 43
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1999 (90 DAYS AFTER THE EFFECTIVE DATE OF THE
OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
1,000,000 SHARES
[MCB LOGO]
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
[FIFTH THIRD/THE OHIO CO LOGO]
, 1998
======================================================
<PAGE> 54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation require the Company to indemnify
any director, officer, former director or officer of the Company or any person
who may have served at the request of the Company as a director or officer of
another corporation in which the Company owns shares of capital stock, or of
which it is a creditor, against reasonable expenses (including attorneys' fees)
actually and necessarily incurred by such person in connection with the defense
of any civil, criminal or administrative action, suit or proceeding in which
such person is made a party or with which such person is threatened by reason of
being or having been or because of any act as a director or officer of the
Company within the course of such person's duties or employment, except in
relation to matters as to which such person is adjudged to be liable for
negligence or misconduct in the performance of such person's duties. The Company
may also reimburse any director or officer for the reasonable costs of
settlement of any such action, suit or proceeding, if it is found by a majority
of a committee composed of the directors not involved in the matter in
controversy (whether or not a quorum) that it was in the interests of the
Company that such settlement be made and that the director officer was not
guilty of negligence or misconduct. The right of indemnification will extend to
the estate, personal representative, guardian and conservator of any deceased or
former director or officer or person who would have been entitled to
indemnification. Such rights of indemnification and reimbursement will not be
deemed exclusive of any other rights to which such direct or officer may be
entitled under any statute, agreement, vote of shareholders, or otherwise.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 5,088
NASD filing fee............................................. 2,225
Printing expenses........................................... 30,000
Legal fees and expenses..................................... 130,000
Blue sky fees and expenses.................................. --
Accountants' fees and expenses.............................. 43,000
Miscellaneous............................................... 10,000
--------
Total..................................................... $210,323
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this registration statement, the
Company has issued the following securities that were not registered under the
Securities Act:
On January 28, 1998, the Company issued one share of its Common Stock, no
par value, to David A. McKinnon.
On May 19, 1998, the Company granted 3,333 options to purchase Common Stock
at an exercise price of $15.00 pursuant to the 1998 Non-Employee Director Stock
Option Plan to each of Paul E. Baltzer, Jr., Phillip T. Hernandez, Joseph S.
Lentine, John W. Melstrom, Brian P. Palmer, Robert R. Peleman, David F.
Shellenbarger, Russell M. Shelton and Gerald Tarquinio.
On May 19, 1998, the Company granted 6,667 options to purchase Common Stock
at an exercise price of $15.00 pursuant to the 1998 Employee Stock Option Plan
to David A. McKinnon.
On May 19, 1998, the Company granted 4,000 options to purchase Common Stock
at an exercise price of $15.00 pursuant to the 1998 Employee Stock Option Plan
to Frank D. Blowers and James T. Polson.
II-1
<PAGE> 55
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS
- ------- --------
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated
Articles of Incorporation and Restated Bylaws of the Company
defining rights of the holders of Common Stock of the
Company.
4.2* Specimen Stock Certificate.
5.1* Opinion of Butzel Long, counsel to the Company, as to the
legality of the shares being registered.
10.1 Sublease between the Company and Rite Aid of Michigan, Inc.
for property located at 43850 Schoenherr, Sterling Heights,
Michigan
10.2* Assignment and Acceptance of Lessee's Interest with Lessor's
Consent between the Company, First of America Bank, National
Association and North Hill Center, for property located at
1467 North Rochester Road, Rochester Hills, Michigan.
10.3 Data Processing Agreement between Lakeside Community Bank
and Rurbanc Data Services, Inc.
10.4 Data Processing Agreement between North Oakland Community
Bank and Rurbanc Data Services, Inc.
10.5 1998 Non-Employee Director Stock Option Plan
10.6.. 1998 Employee Incentive Stock Option Plan
10.7 Form of Stock Option Agreement
10.8 Credit Agreement between the Company and NBD Bank, N.A.
21.1 Subsidiaries of Registrant.
23.1* Consent of Butzel Long (included as Part of Exhibit 5.1).
23.2 Consent of Plante & Moran LLP
24.1 Power of Attorney (included on signature page).
27.1.. Financial Data Schedule
</TABLE>
- ---------------
* to be filed by amendment.
II-2
<PAGE> 56
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) The undersigned Registrant hereby undertakes to provide to the
Underwriters 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) That for purposes of determining any liability under the
Securities Act, 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 pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective; and
(3) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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 provisions described above or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 57
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registration has duly caused this registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Sterling Heights, State
of Michigan, on August 28, 1998.
MICHIGAN COMMUNITY BANCORP LIMITED
By: /s/ DAVID A. MCKINNON
------------------------------------
David A. McKinnon
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below under the heading "Signature" constitutes and appoints David A. McKinnon
as his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any or all amendments to this registration
Statement, and to file the same with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
foregoing, as fully for all intents and purpose as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID A. MCKINNON Chairman, President and Chief August 28, 1998
- --------------------------------------------- Executive Officer
David A. McKinnon
/s/ WILLIAM L. CARLEY Chief Financial and Principal August 28, 1998
- --------------------------------------------- Accounting Officer
William L. Carley
/s/ PAUL E. BALTZER JR. Director August 28, 1998
- ---------------------------------------------
Paul E. Baltzer Jr.
/s/ PHILLIP T. HERNANDEZ Director August 28, 1998
- ---------------------------------------------
Phillip T. Hernandez
/s/ JOSEPH S. LENTINE Director August 28, 1998
- ---------------------------------------------
Joseph S. Lentine
/s/ JOHN W. MELSTROM Director August 28, 1998
- ---------------------------------------------
John W. Melstrom
/s/ BRIAN P. PALMER Director August 28, 1998
- ---------------------------------------------
Brian P. Palmer
</TABLE>
II-4
<PAGE> 58
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director August , 1998
- ---------------------------------------------
Robert R. Peleman
/s/ RUSSELL M. SHELTON Director August 28, 1998
- ---------------------------------------------
Russell M. Shelton
/s/ DAVID F. SHELLENBARGER Director August 28, 1998
- ---------------------------------------------
David F. Shellenbarger
/s/ GERALD A. TARQUINIO Director August 28, 1998
- ---------------------------------------------
Gerald A. Tarquinio
</TABLE>
II-5
<PAGE> 59
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1 Restated Articles of Incorporation of the Company
3.2 Bylaws of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the Restated
Articles of Incorporation and Restated Bylaws of the Company
defining rights of the holders of Common Stock of the
Company
4.2* Specimen Stock Certificate
5.1* Opinion of Butzel Long, counsel to the Company, as to the
legality of the shares being registered
10.1 Sublease between the Company and Rite Aid of Michigan, Inc.
for property located at 43850 Schoenherr, Sterling Heights,
Michigan
10.2* Assignment and Acceptance of Lessee's Interest with Lessor's
Consent between the Company, First of America Bank, National
Association and North Hill Center, for property located at
1467 North Rochester Road, Rochester Hills, Michigan.
10.3 Data Processing Agreement between Lakeside Community Bank
and Rurbanc Data Services, Inc.
10.4 Data Processing Agreement between North Oakland Community
Bank and Rurbanc Data Services, Inc.
10.5 1998 Non-Employee Director Stock Option Plan
10.6 1998 Employee Incentive Stock Option Plan
10.7 Form of Stock Option Agreement
10.8 Credit Agreement between the Company and NBD Bank, N.A.
21.1 Subsidiaries of Registrant
23.1* Consent of Butzel Long (included as Part of Exhibit 5.1).
23.2 Consent of Plante & Moran LLP
24.1 Power of Attorney (included on signature page)
27.1 Financial Data Schedule
</TABLE>
- ---------------
* to be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
MICHIGAN COMMUNITY BANCORP LIMITED
1,000,000 SHARES*
COMMON STOCK
FORM OF UNDERWRITING AGREEMENT
_______, 1998
Fifth Third/The Ohio Company
as Representative of the Several
Underwriters Named in Schedule 1
155 East Broad Street
Columbus, Ohio 43215
Ladies and Gentlemen:
Michigan Community Bancorp Limited, a Michigan corporation (the
"Company"), hereby confirms its agreement with Fifth Third/The Ohio Company, an
Ohio corporation (the "Representative") and the several Underwriters named in
Schedule 1 (collectively, with the Representative, the "Underwriters") as set
forth below.
1. Securities. Subject to the terms and conditions herein contained, the
Company proposes to issue and sell to the Underwriters an aggregate of 1,000,000
shares of common stock of the Company (the "Firm Shares"). The Company also
proposes to issue and sell to the Underwriters not more than an aggregate of
150,000 additional shares of common stock of the Company, if requested by the
Underwriters as provided in Section 3 of this Agreement (the "Option Shares").
The Firm Shares and any Option Shares are collectively referred to in this
Agreement as the "Shares".
- ---------------
*Plus an option to purchase from the Company up to 150,000 shares to cover over-
allotments.
<PAGE> 2
2. Representations and Warranties of the Company.
The Company represents and warrants to and agrees with, each of the
Underwriters as follows:
(a) The Company has carefully prepared in conformity with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act") and the rules and regulations adopted by the Securities and Exchange
Commission (the "Commission") thereunder (the "Rules"), a registration
statement on Form SB-2 (File No. 333-_____), 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 the
Representative 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
2
<PAGE> 3
the Prospectus is first filed pursuant to Rule 424(b) of the Rules, when
any post-effective amendment of the Registration Statement shall become
effective, when any supplement to or pre-effective amendment of the
Prospectus is filed with the Commission and at each Closing Date, the
Registration Statement and the Prospectus (and any amendment thereof or
supplement thereto) will comply with the applicable provisions of the
Securities Act and the Exchange Act and the respective rules and
regulations of the Commission thereunder, and neither the Registration
Statement nor the Prospectus, nor any amendment thereof or supplement
thereto, will contain any untrue statement of a material fact or will omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Company
makes no representation or warranty as to the information contained in the
Registration Statement or the Prospectus or any amendment thereof or
supplement thereto in reliance upon and in conformity with information
furnished in writing to the Company through the Representative by or on
behalf of 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) Plante & Moran, LLP, whose report is filed with the Commission
as part of the Registration Statement, are, and during the periods covered
by their report were, independent public accountants as required by the
Securities Act and the Rules.
(e) The Company's only proposed subsidiaries are Lakeside Community
Bank ("LCB") and North Oakland Community Bank ("NOCB," and collectively
with LCB, the "Banks"). The Company and each of the Banks 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 any of the Banks have any properties
or conduct any business outside of the State of Michigan which would
require any 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 any of the Banks has any directly or indirectly held
subsidiary other than the Banks with respect to the Company. 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 LCB (the "LCB FIB
Application") and the application for permission to organize NOCB (the
"NOCB FIB Application," and collectively with the LCB FIB Application, the
"FIB Applications") were both approved by the Commissioner of the
Financial Institutions Bureau for the State of Michigan (the
"Commissioner") on ________, 1998, pursuant to Order No. __________ and
Order No. __________, respectively, subject to certain conditions
specified in the Order and
3
<PAGE> 4
supplemental correspondence from the Commissioner dated the same date. The
Orders and supplemental correspondence from the Commissioner are
collectively referred to in this Agreement as the "FIB Orders" All
conditions contained in the FIB Orders required to be satisfied before the
date of this Agreement have been satisfied. The application of each Bank
to the Federal Deposit Insurance Corporation (the "FDIC") to become an
insured depository institution under the provisions of the Federal Deposit
Insurance Act, as amended, (the "FDIC Applications") was approved by
[order/orders] of the FDIC dated __________ (the "FDIC Orders"), subject
to certain conditions specified in the FDIC Orders. All conditions
contained in the FDIC Orders 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 of the issued capital stock of each
of the Banks (the "Bank Holding Company Application") under the Bank
Holding Company Act of 1956, as amended, was approved on __________ (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 Applications, FDIC
Applications, 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 Orders, FDIC Orders
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 any of the Banks 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 principles 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 Intangibles of any other person.
4
<PAGE> 5
(i) The Company has valid and enforceable leasehold interests in the
real property described in the Prospectus, and such leasehold interests
are 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 any of the Banks 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 any of the Banks or the ownership of their respective
properties.
(k) The Company and each of the Banks 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 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 Banks 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 any of the Banks is in violation of any
term or provision of the articles of incorporation or bylaws of the
Company or the Banks. Neither the Company nor either of the Banks is in
violation of, nor is either of them required to take any action to avoid
any material violation of, any franchise, license, permit, judgment,
decree, order, statute, rule or regulation.
(o) Neither the execution, delivery or performance of this Agreement
by the Company nor the consummation of the transactions contemplated
hereby (including, without limitation, the issuance and sale by the
Company of the Shares) will give rise to a right to terminate or
accelerate the due date of any payment due under, or conflict with or
result in the breach of any term or provision of, or constitute a default
(or an event which with notice of 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 any of the Banks pursuant to the terms of, any
lease, indenture,
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<PAGE> 6
mortgage, note or other agreement or instrument to which the Company or
any of the Banks 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 any
of the Banks, except those which are immaterial in amount or effect.
(p) The Company has authorized capital stock as set forth in the
Prospectus. 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, Section 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 1998 Employee Stock Option Plan and the
1998 Nonemployee Stock Option Plan (collectively, the "Stock Option
Plans"). The Common Stock, the Shares and the Stock Options conform to all
statements in relation thereto contained in the Registration Statement and
the Prospectus.
(q) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, neither the
Company nor either of the Banks 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.
(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 with respect to the Shares and has
not instituted or, to the Company's knowledge, threatened to institute any
proceedings with respect to such an order.
(t) Neither the Company, nor any of the Banks, nor, to the Company's
knowledge any director, officer, agent, employee or other person
associated with the
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<PAGE> 7
Company or any of the Banks, acting on behalf of the Company or any of the
Banks, 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 any of the Banks 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 any
of the Banks 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 intends to apply its proceeds from the sale of the
Shares for the purposes set forth in the Prospectus under "Use of
Proceeds."
(y) The Company has obtained from all of its executive officers and
directors their written agreement that for a period of 180 days from the
date of the Effective Date, they will not offer to sell, sell, transfer,
contract to sell, or grant any option for the sale of or otherwise dispose
of, directly or indirectly, any shares of Common Stock of the Company (or
any securities convertible into or exercisable for such shares of Common
Stock).
3. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties, agreements and
covenants contained in this Agreement and subject to the terms and
conditions set forth in this Agreement, the Company agrees to sell to each
of the Underwriters, and each of the Underwriters, individually and not
jointly, agrees to purchase from the Company, at a purchase price equal to
$______ per Firm Share the number of shares set forth opposite the name of
such Underwriter in Schedule 1 to this Agreement. One or more certificates
in definitive form for the Firm Shares that the several Underwriters have
agreed to purchase under this Agreement, and in such denomination or
denominations and registered in such name or names as you request upon
notice to the Company at least 48 hours prior to the Firm Closing Date,
shall be delivered by or on behalf of the Company to you on the Closing
Date
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<PAGE> 8
for the respective accounts of the several Underwriters, against payment
by or on behalf of the Underwriters of the purchase price therefor by
certified or official bank checks drawn upon or by a New York Clearing
House bank and payable in next-day funds to the order of the Company or at
the option of the Underwriters, by wire transfer to the account of the
Company in same-day funds. Such delivery of, and payment for, the Firm
Shares shall be made at the offices of Fifth Third/The Ohio Company, 155
East Broad Street, Columbus, Ohio 43215, at 9:30 A.M., local time, on
__________, 1998, or at such other place, time or date as you and the
Company may agree upon or as you may determine pursuant to Section 9 of
this Agreement, such time and date of delivery against payment being
referred to in this Agreement as the "Firm Closing Date". The Company will
make such certificate or certificates for the Firm Shares available to you
for inspection at the offices of _______________ at least 24 hours prior
to the Firm Closing Date.
(b) On the basis of the representations, warranties, agreements and
covenants contained in this Agreement and subject to the terms and
conditions set forth in this Agreement, pursuant to directions from the
Company, the Underwriters will offer to sell to each of the persons named
in a list provided by the Company to the Underwriters (who may purchase to
the extent permitted by the Free-Riding and Withholding Interpretation
(the "Interpretation") under Rule 2110, Conduct Rules of the National
Association of Securities Dealers, Inc. (the "NASD")) the number of Shares
set forth opposite their respective names. To the extent such persons
offer to buy such Shares, the Underwriter agrees to purchase up to
________ of such Shares at a purchase price of $_____ per Firm Share. The
parties agree that the securities purchased and sold under this
subparagraph to the Company's employees and directors shall constitute
"issuer directed securities" under the Interpretation. The provisions of
this Section 1(b) shall not affect the Underwriters' right, with respect
to persons who are not employees or directors of the Company, to withdraw,
cancel or modify orders or to reject orders in whole or in part.
(c) For the sole purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Shares as
contemplated by the Prospectus, the Company hereby grants to the
Underwriters options to purchase, individually and not jointly, the Option
Shares in accordance with the provisions of this Agreement. The purchase
price to be paid for any Option Shares shall be the same as the price for
the Firm Shares set forth above in paragraph (a) of this Section 3. The
options granted hereby may be exercised as to all or any part of the
Option Shares from time to time within 30 days after the date of the
Prospectus (or, if such 30th day shall be a Saturday or a Sunday or a
holiday, on the next business day thereafter when the New York Stock
Exchange is open for trading). The Underwriters shall not be under any
obligation to purchase any of the Option Shares prior to the exercise of
such options. The Underwriters may from time to time exercise the options
granted hereby by giving notice in writing or by telephone (confirmed in
writing) to the Company setting forth the aggregate principal amount of
Option Shares as to which the Underwriters are then exercising the options
and the date and time for delivery of and payment for such Option Shares.
Any such date of delivery shall be determined by the
8
<PAGE> 9
Underwriters but shall not be earlier than two business days or later than
seven business days after such exercise of the options and, in any event,
shall not be earlier than the Firm Closing Date. The time and date set
forth in such notice, or such other time, date or both as the Underwriters
and the Company may agree upon or as the Underwriters may determine
pursuant to Section 9 of this Agreement, are called the "Option Closing
Date" in this Agreement with respect to such Option Shares. Upon exercise
of the options as provided in this Agreement, the Company shall become
obligated to sell to each of the Underwriters, and, on the basis of the
representations and warranties contained in this Agreement and subject to
the terms and conditions set forth in this Agreement, each of the
Underwriters, individually and not jointly, shall become obligated to
purchase from the Company, the same percentage of the Option Shares as to
which the Underwriters are then exercising the options as such Underwriter
is obligated to purchase of the aggregate number of Firm Shares. If the
options are exercised as to all or any portion of the Option Shares, one
or more certificates in definitive form for such Option Shares, and
payment therefor, shall be delivered on the related Option Closing Date in
the manner, and upon the terms and conditions, set forth in paragraph (a)
of this Section 3, except that reference therein to the Firm Shares and
the Firm Closing Date shall be deemed, for purposes of this paragraph (b),
to refer to such Option Shares and Option Closing Date, respectively.
(d) You have advised the Company that each Underwriter has
authorized you to accept delivery of its Firm Shares (and Option Shares,
if any of the options is exercised), to make payment and to give receipt
therefor.
4. Offering by the Underwriters. Upon your authorization of the release of
the Firm Shares, the Underwriters propose to offer their respective portions of
the Firm Shares for sale to the public upon the terms set forth in the
Prospectus.
5. Covenants.
The Company covenants and agrees with each of the Underwriters that
it will:
(a) Use its best efforts to cause the Registration Statement to
become effective and will notify the Representative immediately, and
confirm the notice in writing, (i) when the Registration Statement and any
post-effective amendment thereto becomes effective, (ii) of the issuance
by the Commission of any stop order or of the initiation, or the
threatening, of any proceedings for that purpose and (iii) of the receipt
of any comments form 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
9
<PAGE> 10
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 the Representative, 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 the Representative promptly and
prepare and file with the Commission an appropriate amendment or
supplement in form satisfactory to the Representative. 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 the Underwriters,
through the Representative, and, as soon as the Registration Statement, or
any amendment or supplement thereto, becomes effective, deliver to each of
the Underwriters three signed copies of the Registration Statement,
including exhibits, and all post-effective amendments thereto and deliver
to each of the Underwriters such number of copies of the Prospectus, the
Registration Statement and supplements and amendments thereto, if any,
without exhibits, as the Representative may reasonably request.
(d) Endeavor in good faith, in cooperation with the Representative
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 Schedule 3. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representative and its
counsel agree 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 the laws of such jurisdiction. The Company will
advise the Representative 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 the Representative, 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.
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<PAGE> 11
(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
the Underwriters the following:
(i) at the time they have been sent to shareholders of the
Company or filed with the Commission one copy 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, one copy 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 the
Underwriters with respect to the Company to comply with Rule 15c2-11
of the Rules and Section 4 of Schedule H of the NASD Bylaws; and
(iv) such additional documents and information with respect to
the Company and its affairs as the Representative may from time to
time reasonably request.
(h) Acquire all of the LCB's and NOCB's outstanding capital stock,
free and clear of all liens, encumbrances, or other claims or restrictions
whatsoever, for not less than $4.55 million and $4.6 million,
respectively, from the proceeds of the offering and, in all other material
respects, apply the net proceeds from the offering in the manner set forth
under "Use of Proceeds" in the Prospectus.
(i) Not file any amendment or supplement to the Registration
Statement or Prospectus after the effective date of the Registration
Statement to which the Representative 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 Securities
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.
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<PAGE> 12
(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 Orders, the FDIC Orders and the Federal Reserve
Board Approval;.
(m) Pay, or reimburse if paid by the Representative, whether or not
the transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of the
obligations of the Company under this Agreement, including those relating
to (1) the preparation, printing, filing and delivery of the Registration
Statement, including all exhibits thereto, each preliminary prospectus,
the Prospectus, all amendments of and supplements to the Registration
Statement and the Prospectus, and the printing of the Underwriting
Agreement and related agreements including, without limitation, the
Selected Dealer Agreement, (2) the issuance of the Shares and the
preparation and delivery of certificates for the Shares to the
Underwriter, (3) the registration or qualification of the Shares for offer
and sale under the securities or "blue sky" laws of the various
jurisdictions referred to in Schedule 3, 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 Underwriter of copies of each
preliminary prospectus, the Prospectus and all amendments of or
supplements to the Prospectus, and of the several documents required by
this Section to be so furnished, (5) the filing requirements and fees of
the NASD in connection with its review of the terms of the public offering
and the underwriting, (6) the furnishing (including costs of shipping and
mailing) of copies of all reports and information required by Section
5(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' accountable out-of-pocket expenses, including without
limitation, road show expenses and legal fees of counsel to the
Representative (provided that such legal fees payable by the Company shall
not exceed $50,000).
(n) Not, without the prior written consent of the Representative,
sell, contract to sell or grant any option for the sale of or otherwise
dispose of, directly or indirectly, or register with the Commission, any
shares of Common Stock of the Company (or any securities convertible into
or exercisable for such shares of Common Stock) within 180 days after the
date of the Prospectus, except as provided in this Agreement and except
for grants and exercises of Stock Options under the Stock Option Plans as
described in the Prospectus.
(o) For not less than three fiscal years after the Effective Date,
maintain the Exchange Act registration of the Common Stock, unless the
Company's shareholders direct the Company to re-register the Common Stock.
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<PAGE> 13
(p) Use its best efforts to cause itself and the Banks to commence
their respective businesses as described in the Prospectus not later than
December 31, 1998.
(q) Not, for one year after the Effective Date, issue any stock
options to purchase Common Stock under either of the Stock Option Plans,
or any other stock option plan of the Company, that have an exercise price
of less than $15.00 per share.
6. Expenses. The Company will pay all costs, expenses, fees and taxes
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated pursuant to Section 11 of this Agreement, including all
costs, expenses, fees and taxes incident to (1) the preparation, printing or
other production and filing of documents with respect to the transactions,
including any costs of printing the registration statement originally filed with
respect to the Shares and any amendment thereto (including, without limitation,
the Registration Statement), any Preliminary Prospectus and the Prospectus and
any amendment or supplement thereto, this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Underwriters' Questionnaire and
Power of Attorney, any blue sky memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection with the
offering of the Shares, (2) all arrangements relating to the delivery to the
Underwriters of copies of the foregoing documents, (3) the fees and
disbursements of the counsel, the accountants and any other experts or advisors
retained by the Company, (4) preparation, issuance and delivery to the
Underwriters of any certificates evidencing the Shares, including transfer
agent's and registrar's fees, (5) the registration or qualification of the
Shares under state securities and blue sky laws, including filing fees and the
reasonable legal fees and disbursements of counsel for the Underwriters relating
thereto or to the "Blue Sky" survey, (6) the filing fees of the Commission and
the National Association of Securities Dealers, Inc. relating to the Shares and
any listing fees relating to the Securities, (7) advertising approved by the
Company (which approval shall not be unreasonably withheld) relating to the
offering of the Shares (other than as shall have been specifically approved by
the Underwriters to be paid for by the Underwriters), and (8) the Company's
out-of-pocket expenses, including transportation, meals and lodging with respect
to the road shows and other selling efforts. If the sale of the Firm Shares
provided for in this Agreement is not consummated because any condition to the
obligations of the Underwriters set forth in Section 7 of this Agreement is not
satisfied, because this Agreement is terminated pursuant to Section 11 of this
Agreement, because of any failure, refusal or inability on the part of the
Company to perform all obligations and satisfy all conditions on its or their
part to be performed or satisfied under this Agreement (other than by reason of
a default by any of the Underwriters) or for any other reason (other than
because of the Underwriters' refusal (except for bona fide reasons related to
the Company, its officers, directors, employees or agents or market conditions)
or inability to perform), the Underwriters will account for their reasonable and
accountable expenses and the Company will reimburse the Underwriters
individually upon demand for all of their reasonable out-of-pocket expenses
(including counsel fees and disbursements of counsel) that shall have been
incurred by them in connection with the proposed purchase and sale of the
Shares. The Representative acknowledges receipt of $25,000 from the Company,
which has been paid as a good faith deposit to be applied against the Company's
reimbursement obligation to the Underwriters.
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<PAGE> 14
If the sale of Firm Shares is not consummated for the reasons described above,
the Representative shall refund to the Company the amount by which such good
faith deposit exceeds the actual out-of-pocket expenses of the Underwriters for
which they are entitled to reimbursement.
7. Conditions of the Underwriters' Obligations. The obligations 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., Columbus time, on the date of this Agreement or on such
later date and time as shall be consented to in writing by the
Representative; 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 the
Representative
(b) At each Closing Date, the Representative shall have received the
opinion of Butzel Long, 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 the Representative to the effect that:
(i) Each of the Company and the Banks (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,
except where the failure to so qualify would not have a material
adverse effect on the Company or the Bank.
(ii) Each of the Company and the Banks has full corporate
power and authority and all material authorizations, approvals,
orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies necessary to own or
lease their respective properties and conduct their respective
businesses as described in the Registration Statement and
Prospectus;
(iii) The Company has authorized capital stock as set forth in
the Prospectus; the Shares have been duly authorized and validly
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 subject to preemptive rights; the Shares
and the other capital stock and Stock Options of the Company conform
in all
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<PAGE> 15
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
Banks;
(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 Banks, and all such shares of stock so held
will be duly authorized and validly issued, 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;
(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, and 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 the
laws relating to or affecting enforcement of creditors' rights or by
general equity principles, whether applied in an action at law or in
equity, or by the discretionary nature of specific performance,
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;
(viii) The Company is conveying to the Underwriters good and
valid title to the Shares, free and clear of any liens,
encumbrances, security interests, restrictions, and adverse claims;
(ix) To the best of such counsel's knowledge, after due
inquiry, there are (A) no contracts or other documents which are
required to be 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 any of the
Banks, and (C) no statutes or regulations applicable to the Company
or any of the Banks, 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 any of the Banks and which are of
character required to be disclosed in the Registration Statement and
Prospectus which have not been so disclosed and properly described
therein;
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<PAGE> 16
(x) The statements in the Registration Statement and the
Prospectus, insofar as they are descriptions of corporate documents,
stock option plans, contracts, agreements or other documents
specifically identified in the Registration Statement or
descriptions of laws, regulations, or regulatory requirements, or
refer to compliance with law or to statements of law or legal
conclusions, are correct in all material respects;
(xi) To the best of such counsel's knowledge, after due
inquiry, the execution, delivery and performance of this Agreement,
the consummation of the transactions herein contemplated and the
compliance with the terms and provisions hereof by the Company will
not give rise to a right to terminate or accelerate the due date of
any payment due under, or conflict with or result in a breach of any
of the terms or provisions of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a
default) under, or require any consent under, or result in the
execution or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company or any of the Banks pursuant to
the terms of, any lease, indenture, mortgage, note or other
agreement or instrument to which the Company or any of the Banks 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 any of the Banks or any
statute or any order, rule, or regulation applicable to the Company
or any of the Banks 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 have a material
adverse effect to the Company or any of the Banks;
(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
Underwriter as contemplated by this Agreement, except such as have
been obtained;
(xiii) To the best of such counsel's knowledge, after due
inquiry, (A) neither the Company nor any of the Banks is in a 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 is a party; or (B) neither the
Company nor any of the Banks 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 any of
the Banks 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
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<PAGE> 17
which, in any such case, would be expected to have a material
adverse effect on 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 to be rendered) comply as to
form in all material respects with the requirements of the
Securities Act and the Rules; and
(xv) The Registration Statement is effective under the
Securities Act, and any required filing of the Prospectus pursuant
to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b) and, to the best of such counsel's
knowledge, after due inquiry, no stop order suspending the
effectiveness of the Registration Statement or any post-effective
amendment to the Registration Statement and no order directed any
document incorporated by reference in the Registration Statement or
the Prospectus or any amendment or supplement thereto has been
issued, and no proceedings for that purpose have been instituted or
threatened or are contemplated by the Commission.
In rendering the foregoing opinion, such counsel may rely upon
certificates of public officials (as to matters of fact and law) and
officers of the Company (as to matters of fact), and include customary
qualifications in its opinion as are acceptable to the Representative
Copies of all such certificates shall be furnished to counsel to the
Representative on the Closing Date.
In addition, such counsel shall state that they have participated in
conferences with officials of the Company and its independent auditors,
and representatives of the Representative and its counsel at which the
content of the Registration Statement and Prospectus and related matters
were discussed, and also had discussions with such officials of the
Company with a view toward a clear understanding on their part of the
requirements of the Securities Act with reference to the preparation of
registration statements and prospectuses. Such counsel did not
independently verify the accuracy or completeness of the statements made
in the Registration Statement and Prospectus; however, based on such
counsel's examination of the Registration Statement and the Prospectus and
on its participation in the above-mentioned conferences, nothing has come
to the attention of such counsel that gives them reason to believe that
the Registration Statement or Prospectus (other than financial statements
and notes, any related schedules or other financial information contained
in such Registration Statement or Prospectus as to which such counsel need
express no opinion or belief), at the time the Registration Statement
became effective, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (other than financial statement and notes, any related
schedules or other financial information contained in such Prospectus or
amendment or supplement thereto, as to which such counsel need express no
opinion or belief), as of the date of the opinion,
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<PAGE> 18
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) On or prior to each Closing Date, the Representative shall have
been furnished such documents, certificates and opinions as it may
reasonably require for the purpose of enabling it to review the matters
referred to in subsection (b) of this Section 7, 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 any of the Banks; (ii) there shall have been
no material transaction, not in the ordinary course of business, entered
into by the Company or any of the Banks except as set forth in the
Registration Statement and Prospectus, other than transactions referred to
or contemplated therein or to which the Representative has given its
written consent; (iii) neither the Company nor any of the Banks 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 any of the Banks before or by any court of Federal, state
or other commission, board or other administrative agency having
jurisdiction over the Company or any of the Banks, as the case may be,
which is expected to have a material adverse effect on the Company or any
of the Banks; 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, the Underwriters shall have received a
certificate signed by the Chief Executive and Chief Financial Officers 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.
(f) At or prior to each Closing Date, the Underwriters shall have
received a "blue sky" memorandum (upon which the Representative may rely)
of Dykema Gossett PLLC, counsel for the Underwriters, addressed to the
Representative and in form and scope reasonably satisfactory to the
Representative concerning compliance with the blue sky or securities laws
of the states designated by the Representative.
(g) All proceedings taken in connection with the sale of the Shares
as herein contemplated shall be reasonably satisfactory in form and
substance to the Representative and to counsel for the Representative, and
the Representative shall have received from
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<PAGE> 19
counsel for the Representative 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 7, and
with respect to such other related matters as the Representative may
require, if the failure to receive a favorable opinion with respect to
such other related matters would cause the Representative to deem it
inadvisable to proceed with the sale of the Shares.
(h) There shall have been duly tendered to the Representative
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 in which the Shares have been registered, 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 the Representative's knowledge or that
of the Company, shall be contemplated.
(j) The NASD, upon review of the terms of the public offering of the
Shares, shall not have objected to the Underwriter's participation in the
same.
If any condition to the Underwriter's obligations hereunder to be
fulfilled prior to or at the Firm Shares Closing Date or the Optional Shares
Closing Date, as the case may be, is not so fulfilled, the Representative may
terminate this Agreement pursuant to Section 11 hereof or, if the Representative
so elects, waive any such conditions which have not been fulfilled and/or extend
the time of their fulfillment.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter, their respective directors, officers, partners, agents and
employees and each other person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act (collectively, "Indemnitees") against any losses, claims,
damages or liabilities, joint or several, to which such Indemnitee may
become subject under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, relate to, or are caused by or based upon,
(1) any untrue statement or alleged untrue statement made by
the Company in this Agreement,
(2) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any
amendment thereto or any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto, or (B) any application or other
document, or any amendment or supplement thereto,
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<PAGE> 20
executed by the Company or based upon written information furnished
by or on behalf of the Company filed in any jurisdiction in order to
register or qualify the Shares under the securities or blue sky laws
thereof or filed with the Commission or any securities association
or securities exchange (each an "Application"),
(3) any omission or alleged omission to state in the
Registration Statement or any amendment thereto a material fact
required to be stated therein or necessary to make the statements
therein not misleading or any omission or alleged omission to state
in any Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, or any Application a 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, or
(4) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials used in
connection with the marketing of the Shares, including, without
limitation, slides, videos, films, and tape recordings, except to
the extent such materials were prepared by the Underwriters,
and will reimburse, as incurred, each Indemnitee for any legal or other
expenses reasonably incurred by such Indemnitee in connection with
investigating, defending against, or appearing as a third-party witness in
connection with, any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of,
is related to, or is caused by or based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or any
Application in reliance upon, and in conformity with, written information
furnished to the Company by any Underwriter expressly for use therein; and
provided, further, that the Company will not be liable to any Indemnitee
with respect to any such untrue statement or omission made in any
Preliminary Prospectus that is corrected in the Prospectus (or any
amendment or supplement thereto) if the person asserting any such loss,
claim, damage or liability purchased Shares from such Underwriter but was
not sent or given a copy of the Prospectus (as amended or supplemented),
other than the documents incorporated by reference therein, at or prior to
the written confirmation of the sale of such Shares to such person in any
case where such delivery of the Prospectus (as amended or supplemented) is
required by the Securities Act and where delivery of such Prospectus (as
amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability, unless such failure to deliver the
Prospectus (as amended or supplemented) was a result of noncompliance by
the Company with Section 5(d) or 5(e) of this Agreement. This indemnity
agreement will be in addition to any liability which the Company may
otherwise have. The Company will not, without the prior written consent of
the Underwriters (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be
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<PAGE> 21
sought hereunder (whether or not any such Indemnitee is a party to such
claim, action, suit or proceeding), unless (1) such settlement, compromise
or consent includes an unconditional release of all of the Indemnitees
from all liability arising out of such claim, action, suit or proceeding
and (2) the entire settlement amount and all costs of settlement and all
related costs are borne by the Company or another third party other than
any of the Indemnitees.
(b) Each Underwriter, individually and not jointly, will indemnify
and hold harmless the Company, each of its directors, each of its officers
who signed the Registration Statement and 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 against any losses, claims, damages
or liabilities to which the Company, any such director or officer of the
Company, or any such controlling person of the Company may become subject
under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of, relate to, or are caused by or are based upon,
(1) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto, or any Application, or
(2) any omission or alleged omission to state in the
Registration Statement or any amendment thereto a material fact
required to be stated therein or necessary to make the statements
therein not misleading or any omission or alleged omission to state
in any Preliminary Prospectus or any amendment or supplement
thereto, or any Application a 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,
in each case of (1) and (2) above to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in reliance upon, and in conformity with,
written information furnished to the Company by such Underwriter expressly
for use therein; and, subject to the limitation set forth immediately
preceding this clause, will reimburse, as incurred, any legal or other
expenses reasonably incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending
against any such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action (including any
governmental investigation), such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement of such
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<PAGE> 22
action; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8 and will not relieve it from any
liability under this Section 8 except to the extent the indemnifying party
is actually prejudiced by the failure to give such notice. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the parties to any such
action (including any impleaded parties) include both the indemnified
party and the indemnifying party or any officers, directors or controlling
persons of such indemnifying party and the indemnified party shall have
reasonably concluded that there may be one or more legal defenses
available to it and/or other indemnified parties which are different from
or additional to those available to the indemnifying party, the
indemnifying party shall not have the right to direct the defense of such
action on behalf of such indemnified party or parties and such indemnified
party or parties shall have the right to select separate counsel to defend
such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election so
to assume the defense thereof and approval by such indemnified party of
counsel appointed to defend such action in accordance with the foregoing,
the indemnifying party will not be liable to such indemnified party under
this Section 8 for any legal or other expenses, other than reasonable
costs of investigation, subsequently incurred by such indemnified party in
connection with the defense thereof, unless (1) the indemnified party
shall have employed separate counsel in accordance with the proviso to the
next preceding sentence (it being understood, however, that in connection
with such action the indemnifying party shall not be liable for the
expenses of more than (i) one separate counsel for all such actions, and
(ii) one local counsel in each jurisdiction in which such actions are
pending or threatened, all of which counsel shall be designated by you in
the case of indemnification under paragraph (a) of this Section 8,
representing the indemnified parties under such paragraph (a) who are
parties to such action or actions) or (2) the indemnifying party does not
promptly retain counsel reasonably satisfactory to the indemnified party
or (3) the indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying party. No
indemnifying party or indemnified party shall, without the prior written
consent of the other indemnifying or indemnified parties (which consent
shall not be unreasonably withheld), settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought hereunder
(whether or not any such person is a party to such claim, action, suit or
proceeding), unless (A) such settlement, compromise or consent includes an
unconditional release of all of the non-consenting parties from all
liability arising out of such claim, action, suit or proceeding and (B)
the entire settlement amount and all costs of settlement and all related
costs are borne by persons other than the non-consenting persons; provided
that with respect to indemnification under paragraph (a) of this Section
8, such consent will not be required if (i) in the indemnified party's
reasonable judgment the indemnifying party does not have the financial
ability and the intent
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<PAGE> 23
to satisfy its indemnification obligations described in this Section 8,
and (ii) the indemnified party notifies the indemnifying party in writing
at least 10 business days before it settles, compromises or consents to
the entry of any judgment in any such pending or threatened claim, action,
suit or proceeding.
(d) If the indemnity agreement provided for in the preceding
paragraphs of this Section 8 is unavailable or insufficient, for any
reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable
contribution, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (1) the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party on
the other from the offering of the Shares or (2) if the allocation
provided by the foregoing clause (1) is not permitted by applicable law,
not only such relative benefits but also the relative fault of the
indemnifying party or parties, on the one hand, and the indemnified party,
on the other hand, in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims,
damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by
the Company, on the one hand, and the Underwriters, on the other hand,
shall be deemed to be in the same proportion as the total proceeds from
the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth on the cover page of the
Prospectus. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the
Underwriters (but only if, in the case of the Underwriters, such
statements or omissions were made in reliance upon, and in conformity
with, written information furnished to the Company by such Underwriters
expressly for use therein), the parties' relative intents, knowledge,
access to information and opportunity to correct or prevent such statement
or omission, and any other equitable considerations appropriate in the
circumstances. The Company and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata
or per capita allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does
not take into account the equitable considerations referred to above in
this paragraph (d). Notwithstanding any other provision of this paragraph
(d), no Underwriter shall be obligated to make contributions under this
paragraph (d) that in the aggregate exceed the total public offering price
of the securities purchased by such Underwriter under this Agreement, less
the aggregate amount of any damages that such Underwriter has otherwise
been required to pay in respect of such untrue or alleged untrue statement
or omission or alleged omission, and no person 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. The Underwriters' obligations to
contribute under this paragraph (d) are individual in
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<PAGE> 24
proportion to their respective underwriting obligations and not joint. For
purposes of this paragraph (d), each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act shall have the same rights to contribution
as such Underwriter, and each director of the Company, each officer of the
Company who signed the Registration Statement and 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, shall have the same rights to
contribution as the Company.
9. Default of Underwriters. If any one or more of the Underwriters shall
fail or refuse to purchase the Firm Shares which it or they have agreed to
purchase under this Agreement and the aggregate principal amount of Firm Shares
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the total principal amount of Firm
Shares, each non-defaulting Underwriter shall be obligated severally, in the
proportion which the principal amount of Firm Shares set forth opposite its name
in Schedule 2 bears to the total principal amount of Firm Shares which all
non-defaulting Underwriters have agreed to purchase, or in such other proportion
as you may specify, to purchase the Firm Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase; provided
that in no event shall the principal amount of Firm Shares which any Underwriter
has agreed to purchase pursuant to Section 3 be increased pursuant to this
Section 9 by an amount in excess of one-ninth of such principal amount of Firm
Shares without the written consent of such Underwriter. If any one or more of
the Underwriters shall fail or refuse to purchase Firm Shares or Option Shares
under this Agreement and the principal amount of Firm Shares with respect to
which such default occurs is more than one-tenth of the total amount of Firm
Shares, and if arrangements satisfactory to you are not made within 36 hours
after such default for the purchase by other persons (who may include the
non-defaulting Underwriters) of the Shares with respect to which such default
occurs, this Agreement will terminate without liability on the part of any
nondefaulting Underwriters or the Company other than as provided in Section 10
of this Agreement. In any such case which does not result in the termination of
this Agreement, you shall have the right to postpone the Firm Closing Date or
the Option Closing Date, as the case may be, established as provided in Section
3 of this Agreement for not more than seven business days in order that any
necessary changes may be made in the Registration Statement, the Prospectus, the
other documents and the arrangements for the purchase and delivery of the Firm
Shares or Option Shares, as the case may be. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 9. Nothing herein shall relieve any defaulting Underwriter from
liability for its default.
10. Survival. The respective representations, warranties, agreements,
covenants, indemnities, contribution agreements and other statements of the
Company and the several Underwriters set forth in this Agreement or made by or
on behalf of them, respectively, pursuant to this Agreement shall remain in full
force and effect, regardless of (a) any investigation made by or on behalf of
the Company, any of its officers or directors, any Underwriter or any
controlling person referred to in Section 8 of this Agreement and (b) delivery
of and payment for the Shares. The respective agreements, covenants,
indemnities, limitations on liability and other statements set forth
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<PAGE> 25
in Sections 6, 8, 9 and 11 of this Agreement shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement.
11. Termination.
(a) This Agreement may be terminated with respect to the Firm Shares
or any Option Shares in your sole discretion by notice to the Company
given prior to the Firm Closing Date or the related Option Closing Date,
respectively, in the event that the Company shall have failed, refused or
been unable to perform all obligations on its part to be performed under
this Agreement on or before the Firm Closing Date or the Option Closing
Date, as applicable, or if any of the conditions in Section 7 shall not
have been fulfilled when and as required by this Agreement to be fulfilled
at or prior to the Firm Closing Date or such Option Closing Date,
respectively:
(1) the Company and the Banks, taken as a whole, shall have,
in your reasonable judgment, sustained any Material Adverse Change,
including any loss or interference with their respective businesses
or properties from fire, flood, hurricane, accident or other
calamity, or from any labor dispute or any legal or governmental
proceeding, to the extent resulting, in your reasonable judgment, in
a Material Adverse Change, or any adverse change, or any development
involving a prospective adverse change (including without limitation
a change in management or control of the Company), in the condition
(financial or otherwise), management, business, net worth, cash
flows or results of operations of the Company and the Banks, taken
as a whole, to the extent resulting, in your reasonable judgment, in
a Material Adverse Change, except in each case as described in or
contemplated by the Registration Statement and the Prospectus
(exclusive of any amendment or supplement thereto);
(2) trading in the Common Stock shall have been suspended by
the Commission or trading in securities generally on the New York
Stock Exchange, the American Stock Exchange or the over-the-counter
market shall have been suspended, or minimum or maximum prices shall
have been established on such exchange or market;
(3) a banking moratorium shall have been declared by federal,
Michigan or New York authorities;
(4) the FIB Orders, 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 the Representative's reasonable opinion;
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(5) there shall have been (A) an outbreak or major extension
of hostilities between the United States and any foreign power, (B)
an outbreak or major extension of any other insurrection or armed
conflict involving the United States or (C) any other calamity or
crisis or material adverse change in the general economic, political
or financial conditions so disrupting the U.S. financial markets
that, in your reasonable judgment, makes it impractical or
inadvisable to proceed with the public offering or the delivery of
the Shares as contemplated by the Registration Statement, as amended
as of the date of this Agreement;
(6) there shall have been enacted, published, decreed or
promulgated any federal, state or local statute, regulation, rule or
order of any court or other governmental authority which in your
reasonable judgment materially and adversely affects or is
reasonably likely to materially and adversely affect the business or
operations of the Company; or
(7) any actions shall have been taken by any federal, state or
local government or agency in respect of its monetary or fiscal
affairs which in your reasonable judgment has a material adverse
effect on the securities markets in the United States that, in your
reasonable judgment, makes it impractical or inadvisable to proceed
with the public offering or the delivery of the Shares as
contemplated by the Registration Statement, as amended as of the
date of this Agreement.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 6 and Section 8 of this Agreement.
12. Information Supplied by Underwriters. The statements set forth in the
last paragraph on the front cover page and under the heading "Underwriting" in
any Preliminary Prospectus or the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information furnished by any
Underwriter to the Company for the purposes of the last sentence of Section 2(b)
and of Section 8 of this Agreement. The Underwriters confirm that such
statements (to such extent) are correct.
13. Notices. All notices and communications under this Agreement shall be
in writing and, if sent to you or the Underwriters, shall be delivered or sent
by mail, telex or facsimile transmission and confirmed in writing to Fifth
Third/The Ohio Company, 155 East Broad Street, Columbus, Ohio 43215, Attention:
Thomas E. Murphy (with a copy to Dykema Gossett PLLC, 400 Renaissance Center,
Detroit, Michigan 48243, Attention: Paul R. Rentenbach); and if sent to the
Company, shall be delivered or sent by mail, telex or facsimile transmission and
confirmed in writing to the Company at 12900 Hall Road, Sterling Heights,
Michigan 48081, Attention: Chief Executive Officer (with a copy to Butzel Long,
150 W. Jefferson, #900, Detroit, Michigan 48226, Attention: Justin G. Klimko).
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14. Successors. This Agreement shall inure to the benefit of and shall be
binding upon the Underwriters and the Company, and their respective successors,
assigns and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions contained in this Agreement, this Agreement and all conditions
and provisions of this Agreement being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no other person except
that (a) the indemnities of the Company contained in Section 8 of this Agreement
shall also be for the benefit of the Indemnitees, including, without limitation,
any person or persons who control any Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, and (b) the
indemnities of the Underwriters contained in Section 8 of this Agreement shall
also be for the benefit of the directors of the Company, the officers of the
Company who have signed the Registration Statement and any person or persons who
control the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act. No purchaser of Shares from any Underwriter
shall be deemed a successor because of such purchase.
15. Applicable Law. The validity and interpretation of this Agreement, and
the terms and conditions set forth in this Agreement, shall be governed by and
construed in accordance with the laws of the State of Michigan, without giving
effect to any provisions relating to conflicts of laws.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Entire Agreement. This Agreement and the Letter of Intent provisions
which are incorporated in this Agreement are the parties' entire agreement
concerning its subject matter, and supersede all prior undertakings and
agreements.
[Signature Page on Next Page]
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If the foregoing correctly sets forth our understanding, please indicate
your acceptance of this Agreement in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company and each
of the Underwriters.
Very truly yours,
MICHIGAN COMMUNITY BANCORP LIMITED
By:
-----------------------------------------
David McKinnon, Chairman and President
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
FIFTH THIRD/THE OHIO COMPANY,
Acting on behalf of itself and as the
Representative of the other Underwriters
named in Schedule 1 attached hereto.
By:
----------------------------------
Curtis D. Miller
Senior Vice President
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SCHEDULE 1
Number of
Firm Shares
Underwriter to be Purchased
- ----------- ---------------
Fifth Third/The Ohio Company
---------
TOTAL 1,000,000
=========
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EXHIBIT 3.1
MICHIGAN COMMUNITY BANCORP LIMITED
RESTATED ARTICLES OF INCORPORATION
The following Restated Articles of Incorporation supersede the Articles
of Incorporation as amended and shall be the Articles of Incorporation for
Michigan Community Bancorp Limited (identification number 510-908), whose
original Articles of Incorporation were filed with the Corporation, Securities
and Land Development Bureau of the Michigan Department of Consumer and Industry
Services on January 28, 1998:
ARTICLE I
Section 1. Name. The name of the corporation is Michigan Community
Bancorp Limited.
ARTICLE II
Section 1. Purposes. The purpose or purposes for which the corporation
is organized is to engage in the business of a bank holding company pursuant to
and to be registered under the Bank Holding Company Act of 1956, being 12 U.S.C.
Section 1841 to 1850 and, without in any way being limited by the foregoing
specific purpose, to engage in any activity within the purposes for which
corporations may be organized under the Michigan Business Corporation Act, as
heretofore amended and as same may be amended from time to time.
ARTICLE III
Section 1. Authorized Shares. The total authorized capital stock is
shares is 9,000,000 shares of common stock and 1,000,000 shares of preferred
stock.
Section 2. Rights of Shares. Each share of common stock is entitled to
vote on all matters submitted to the shareholders of the corporation, and each
share of common stock shall have the same rights and preferences as each other
share. 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.
Section 3. Authority to Issue Preferred Stock and Determine Rights and
Preferences. 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,
<PAGE> 2
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.
ARTICLE IV
Section 1. Limitation of Liability of Directors. No director of the
corporation shall be personally liable to the corporation or its shareholders
for money damages for any action taken or any failure to take actions a
director, except liability for any of the following: (1) the amount of financial
benefit received by a director to which he or she is not entitled; (2)
intentional infliction of harm on the corporation or its shareholders; (3) a
violation of Section 551 of the MBCA, MCLA 450.1551, MSA 21.200(551); or (4) an
intentional criminal act. If the MBCA is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation, in addition to the limitation on personal liability
contained in these Restated Articles of Incorporation, shall be eliminated or
limited to the fullest extent permitted by the MBCA as so amended. No amendment
or repeal of Article IV shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with respect to any
acts or omissions of any director occurring before the effective date of any
such amendment or repeal.
ARTICLE V
Section 1. Obligation to Indemnify. The corporation shall indemnify
any person who was or is a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal
(including, but not limited to, any action by or in the right of the
corporation) by reason of the fact that the person is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, against expenses (including actual
and reasonable attorneys' fees), judgments, penalties, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation or its shareholders, and with respect to any
criminal action or proceeding, if the person had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent , shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person
reasonably believed to be in or not opposed to the
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best interests of the corporation or its shareholders, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful. However, indemnification shall not be made for any
claim, issue or matter in which such person had been found liable to the
corporation unless and only to the extent that the extent that the court in
which such action or suit was brought has determined upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, such person is fairly and reasonably entitled to indemnification for the
reasonable expenses incurred. The Corporation may purchase and maintain
insurance to protect itself and any such director, officer, or other person
against any liability asserted against him or her and incurred by him or her in
respect of such service, whether or not the Corporation would have the power to
indemnify him or her against such liability by law or under the provisions of
this Article or the provisions of applicable law. The provisions of this
Article shall be applicable to actions, suits, or proceedings arising from acts
or omissions occurring after the adoption hereof, and shall also apply to
directors, officers and other persons who have ceased to render such service
and shall inure to the benefit of the heirs, personal representatives and
administrators of the directors, officers and other persons referred to in this
Article. The right of indemnity provided pursuant to this Article shall not be
exclusive and the Corporation may provide indemnification to any person, by
agreement or otherwise, on such terms and conditions as the Board of Directors
may approve. Any agreement for indemnification of any director, officer,
employee or other person may provide indemnification rights which are broader
than or otherwise different from those set forth in, or provided pursuant to,
or in accordance with, this Article, not inconsistent with law. Any amendment,
alteration, modification, repeal or adoption of any provision in these Restated
Articles of Incorporation inconsistent with this Article shall not adversely
affect any indemnification right or protection of a director, officer or other
person hereunder existing at the time of such amendment, alteration,
modification, repeal or adoption.
Section 2. Expenses of Successful Defense. To the extent that a person
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 of this Article V, or in defense of any
claim, issue or matter in the action, suit or proceeding, the person shall be
indemnified against actual and reasonable expenses (including attorneys' fees)
incurred by such person in connection with the action, suit or proceeding and
any action, suit or proceeding brought to enforce the mandatory indemnification
provided by this Section 2.
Section 3. Definition. For the purposes of Section 1 of this Article V,
"other enterprises" shall include employee benefit plans; "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit plan;
and "serving at the request of the corporation" shall include any service as a
director, officer, employee, or agent of the corporation which imposes duties
on, or involves services by, the director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner the person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be
considered to have acted in a manner "not opposed to the best interests of the
corporation or its shareholders" as referred to in Section 1.
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Section 4. Contract Right; Limitation on Indemnity. The right to
indemnification conferred in this Article V shall be a contract right, shall
apply to services of a director or officer as an employee or agent of the
corporation as well as in such person's capacity as a director or officer from
the date he became or becomes such director or officer, and any repeal or
modification of this section shall not adversely affect any right or protection
existing at the time of such repeal or modification. Except as provided in
Section 2 of this Article V, the corporation shall have no obligations under
this Article V to indemnify any person in connection with any proceeding, or
part thereof, initiated by such person without authorization by the Board of
Directors.
Section 5. Determination That Indemnification is Proper. Any
indemnification under Section 1 of this Article V (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the person is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
Section 1 and upon an evaluation of the reasonableness of expenses and amount
paid in settlement. Such determination and evaluation shall be made in any of
the following ways:
(a) by a majority vote of a quorum of the Board consisting of
directors who are not parties or threatened to be made parties to such
action, suit or proceeding;
(b) if the quorum described in clause (a) above is not obtainable,
then by a majority vote of a committee of directors duly designated by the
Board of Directors and consisting solely of two or more directors who are not
at the time parties or threatened to be made parties to the action, suit or
proceeding;
(c) by independent legal counsel in a written opinion which counsel
shall be selected in one of the following ways: (i) by the Board of Directors
or its committee in the manner prescribed in subparagraph (a) or (b); or (ii)
if a quorum of the Board of Directors cannot be obtained under subparagraph
(a) and a committee cannot be designated under subparagraph (b), by the Board
of Directors; or
(d) by the shareholders, but shares held by directors or officers
who are parties or threatened to be made parties to the action, suit or
proceeding may not be voted.
Section 6. Proportionate Indemnity. If a person is entitled to
indemnification under Section 1 of this Article V for a portion of expenses,
including attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement, but not for the total amount thereof, the corporation shall
indemnify the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is entitled to be
indemnified.
Section 7. Expense Advance. The corporation shall pay or reimburse the
reasonable expenses incurred by a person referred to in Section 1 of this
Article V who is a party or threatened to be made a party to an action, suit, or
proceeding in advance of final disposition of the proceeding if (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
and (b) the person furnishes the corporation a written undertaking executed
personally, or on his or her
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behalf, to repay the advance if it is ultimately determined that he or she did
not meet the standard of conduct. The undertaking shall be an unlimited general
obligation of the person on whose behalf advances are made but need not be
secured.
Section 8. Non-Exclusivity of Rights. The indemnification or
advancement of expenses provided under this Article V is not exclusive of other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under a contractual arrangement with the corporation. However, the
total amount of expenses advanced or indemnified from all sources combined shall
not exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
Section 9. Indemnification of Employees and Agents of the Corporation.
The corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the corporation to the fullest extent of the provisions
of this Article V with respect to the indemnification and advancement of
expenses of directors and officers of the corporation.
Section 10. Former Directors and Officers. The indemnification provided
in this Article V continues as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such person.
Section 11. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the corporation would have
power to indemnify him against such liability under these Bylaws or the laws of
the State of Michigan.
Section 12. Changes in Michigan Law. In the event of any change of the
Michigan statutory provisions applicable to the corporation relating to the
subject matter of this Article V of these Bylaws, then the indemnification to
which any person shall be entitled hereunder shall be determined by such changed
provisions, but only to the extent that any such change permits the corporation
to provide broader indemnification rights than such provisions permitted the
corporation to provide prior to any such change.
Section 13. Enforcement of Rights. Any indemnification or payment in
advance of final disposition under this Article V shall be made promptly, and in
any event within 30 days, after written request to the corporation by the person
seeking such indemnification or payment. The rights granted by this Article V
shall be enforceable by such person in any court of competent jurisdiction.
Section 14. Amendment or Repeal of Article V. No amendment or repeal of
this Article V shall apply to or have any effect on any director or officer of
the corporation for or with respect to any acts or omissions of such director or
officer occurring prior to such amendment or repeal.
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ARTICLE VI
Section 1. Authority and Size of Board. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The number of the directors of the Corporation that shall constitute
the Board of Directors shall be determined from time to time by resolution
adopted by the affirmative vote of at least two-thirds of the Corporation's
Directors.
Section 2. Classification of Board and Filling of Vacancies. Subject to
applicable law, the directors shall be divided into three (3) classes, each
class to be as nearly equal in number as possible. The term of office of
directors of the first class shall expire at the annual meeting of shareholders
to be held in 1999 and until their respective successors are duly elected and
qualified, or until their resignation or removal. The term of office of
directors of the second class shall expire at the annual meeting of shareholders
to be held in 2000 and until their respective successors are duly elected and
qualified, or until their resignation or removal. The term of office of
directors of the third class shall expire at the annual meeting of shareholders
to be held in 2001 and until their respective successors are duly elected and
qualified, or until their resignation or removal. Subject to the foregoing, at
each annual meeting of shareholders, commencing at the annual meeting to be held
in 1999, the successors to the class of directors whose term shall then expire
shall be elected to hold office for a term expiring at the third succeeding
annual meeting and until their successors shall be duly elected and qualified,
or until their resignation or removal. Any vacancies in the Board of Directors
for any reason, and any newly created directorships resulting from any increase
in the number of directors, may be filled by the affirmative vote of two-thirds
of all of the directors then remaining in office, although less than a quorum,
and any director so chosen shall hold office until the next election of the
class for which the director was chosen and until his successor shall be duly
elected and qualified or until his resignation or removal. No decrease in the
number of directors shall shorten the term of any incumbent director.
Section 3. Removal of Directors. Notwithstanding any other provisions
of these Restated Articles of Incorporation or the Bylaws of the Corporation,
any one or more directors of the Corporation may be removed at any time, with or
without cause. Removal for cause shall require the affirmative vote, at a
meeting of the shareholders called for that purpose, of the holders of a
majority of the voting power of the then outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors (the
"Voting Stock"), voting together as a single class. Removal of any director
without cause shall require the affirmative vote or consent of holders of at
least two-thirds of the voting power of the Voting Stock, voting together as a
single class.
ARTICLE VII
Section 1. Matters to be Evaluated. The Board of Directors of this
Corporation shall not approve, adopt or recommend any offer of any person or
entity, other than the Corporation, to make a tender or exchange offer for any
capital stock of the Corporation, to merge or consolidate the Corporation with
any other entity or to purchase or otherwise acquire all or
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substantially all of the assets or business of the Corporation unless and until
the Board of Directors shall have first evaluated the offer and determined that
the offer would be in compliance with all applicable laws and that the offer is
in the best interests of the Corporation and its shareholders. In connection
with its evaluation as to compliance with laws, the Board of Directors may seek
and rely upon an opinion of legal counsel independent from the offeror and it
may test such compliance with laws in any state or federal court or before any
state or federal administrative agency which may have appropriate jurisdiction.
In connection with its evaluation as to the best interests of the Corporation
and its shareholders, the Board of Directors shall consider all factors which it
deems relevant, including without limitation: (i) the adequacy and fairness of
the consideration to be received by the Corporation and/or its shareholders
under the offer considering historical trading prices of the Corporation's
stock, the price that might be achieved in a negotiated sale of stock, the price
that might be achieved in a negotiated sale of the Corporation as a whole,
premiums over trading prices which have been proposed or offered with respect to
the securities of other companies in the past in connection with similar offers
and the future prospects for this Corporation, its business; (ii) the potential
social and economic impact of the offer and its consummation on this
Corporation, its employees, customers and vendors; and (iii) the potential
social and economic impact of the offer and its consummation on the communities
in which the Corporation and any subsidiaries operate or are located.
ARTICLE VIII
Section 1. Application of Chapter 7A of Michigan Business Corporation
Act. The Corporation shall be governed by and subject to Chapter 7A of the
Michigan Business Corporation Act (Act No. 284 of the Public Acts of 1972), as
heretofore amended and as same may be amended from time to time hereafter. Any
previous election by the Corporation to opt out of the coverage of Chapter 7A is
hereby revoked.
ARTICLE IX
Section 1. Action Without Meeting. Any action required or permitted by
the MBCA to be taken at an annual or special shareholders meeting may be taken
without a meeting, without prior notice, and without a vote, if consents in
writing, setting forth the action so taken, are signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take the action at a meeting at which all shares
entitled to vote on the action were present and voted. The written consents
shall bear the date of signature of each shareholder who signs the consent. No
written consents shall be effective to take the corporate action referred to
unless, within 60 days after the record date for determining shareholders
entitled to express consent to or dissent from a proposal without a meeting,
written consents signed by a sufficient number of shareholders to take the
action are delivered to the corporation. Delivery shall be to the corporation's
registered office, to its principal place of business, or to an officer or agent
of the corporation having custody of the minutes of the proceedings of its
shareholders. Delivery made to the Corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. Prompt notice
of the corporate action taken without a meeting by less than unanimous written
consent shall be given to shareholders who have not consented in writing.
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ARTICLE X
Section 1. Compromise or Arrangement. When a compromise or arrangement
or a plan of reorganization of this corporation is proposed between this
corporation and its creditors or any class of them or between this corporation
and its shareholders or any class of them, a court of equity jurisdiction within
the state, on application of this corporation or of a creditor or shareholder of
it, or on application of a receiver appointed for the corporation, may order a
meeting of the creditors or class of creditors or of the shareholders or class
of shareholders to be affected by the proposed compromise or arrangement or
reorganization, to be summoned in the manner that the court directs. If a
majority in number representing 3/4 in value of the creditors or class of
creditors, or of the shareholders or class of shareholders to be affected by the
proposed compromise or arrangement or a reorganization, agree to a compromise or
arrangement or a reorganization of this corporation as a consequence of the
compromise or arrangement, the compromise or arrangement and the reorganization,
if sanctioned by the court to which the application has been made, shall be
binding on all the creditors or class of creditors, or on all the shareholders
or class of shareholders, and also on this corporation.
ARTICLE XI
Section 1. Registered Office and Resident Agent. The address of the
initial registered office is: 12900 Hall Road, Suite 395, Sterling Heights,
Michigan 48313. The name of the initial resident agent at the registered office
is Frank D. Blowers.
Section 2. Amendment, Repeal, etc. Notwithstanding any other provision
to the contrary in these Restated Articles of Incorporation or the Bylaws of the
Corporation, in each case as amended from time to time (and notwithstanding the
fact that a lesser percentage may be specified by law, these Restated Articles
of Incorporation or the Bylaws of the corporation), the affirmative vote of the
holders of two-thirds or more of the outstanding shares of capital stock
entitled to vote for the election of directors, voting together as a single
class, shall be required to amend, repeal or adopt any provision inconsistent
with Articles IV, V, VI, VII or VIII of these Restated Articles of Incorporation
(other than an amendment to Articles IV or V which has the effect of broadening
the limitation on liability or indemnification provisions contained in those
Articles).
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The undersigned, David A. McKinnon, President of Michigan Community
Bancorp Limited, certifies that these Restated Articles of Incorporation were
duly adopted on the 25th day of August, 1998, in accordance with the provisions
of Section 642 of the Michigan Business Corporation Act, as amended, and were
duly adopted by the written consent of all the shareholders entitled to vote in
accordance with Section 407(2) of the Act.
-----------------------------------
David A McKinnon, President
Dated: August 25, 1998
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EXHIBIT 3.2
BYLAWS
OF
MICHIGAN COMMUNITY BANCORP LIMITED
ARTICLE I
OFFICES
1.1. PRINCIPAL OFFICE. The principal office of the corporation shall be
at such place as the Board of Directors shall from time to time determine.
1.2. OTHER OFFICES. The corporation also may have offices at such other
places as the Board of Directors from time to time determines or the business of
the corporation requires.
ARTICLE II
SEAL
2.1. SEAL. The corporation may have a seal in such form as the Board of
Directors may from time to time determine. The seal may be used by causing it or
a facsimile to be impressed, affixed or otherwise reproduced.
ARTICLE III
CAPITAL STOCK
3.1. ISSUANCE OF SHARES. The shares of capital stock of the corporation
shall be issued in such amounts, at such times, for such consideration and on
such terms and conditions as the Board shall deem advisable, subject to the
Articles of Incorporation and any requirements of the laws of the State of
Michigan.
3.2. CERTIFICATES FOR SHARES. The shares of the corporation shall be
represented by certificates signed by the Chairman of the Board of Directors (if
such office is filled), President or a Vice President of the corporation, and
also may be signed by the Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary of the corporation, and may be sealed with the seal of the corporation
or a facsimile thereof. The signatures of the officers may be facsimiles if the
certificate is countersigned by a transfer agent or registered by a registrar
other than the corporation itself or its employee. In case an officer who has
signed or whose facsimile signature has been placed upon a certificate ceases to
be such officer before the certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of
issuance. A certificate representing shares shall state upon its face that the
corporation is formed under the laws of the State of Michigan, the name of the
person to whom it is issued, the number and class of shares, and the designation
of the series, if any, which the certificate represents, and such other
provisions as may be required by the laws of the State of Michigan.
<PAGE> 2
3.3. TRANSFER OF SHARES. The shares of the capital stock of the
corporation are transferable only on the books of the corporation upon surrender
of the certificate therefor, properly endorsed for transfer, and the
presentation of such evidences of ownership and validity of the assignment as
the corporation may require.
3.4. REGISTERED SHAREHOLDERS. The corporation shall be entitled to
treat the person in whose name any share of stock is registered as the owner
thereof for purposes of dividends and other distributions in the course of
business, or in the course of recapitalization, merger, plan of share exchange,
reorganization, sale of assets, liquidation or otherwise and for the purpose of
votes, approvals and consents by shareholders, and for the purpose of notices to
shareholders, and for all other purposes whatever, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on the part
of any other person, whether or not the corporation shall have notice thereof,
save as expressly required by the laws of the State of Michigan.
3.5. LOST OR DESTROYED CERTIFICATES. Upon the presentation to the
corporation of a proper affidavit attesting the loss, destruction or mutilation
of any certificate or certificates for shares of stock of the corporation, the
Board of Directors shall direct the issuance of a new certificate or
certificates to replace the certificates so alleged to be lost, destroyed or
mutilated. The Board of Directors may require as a condition precedent to the
issuance of new certificates any or all of the following: (a) presentation of
additional evidence or proof of the loss, destruction or mutilation claimed; (b)
advertisement of loss in such manner as the Board of Directors may direct or
approve; (c) a bond or agreement of indemnity, in such form and amount and with
such sureties, or without sureties, as the Board of Directors may direct or
approve; or (d) the order or approval of a court or judge.
ARTICLE IV
SHAREHOLDERS AND MEETINGS OF SHAREHOLDERS
4.1. PLACE OF MEETINGS. All meetings of shareholders shall be held at
the principal office of the corporation or at such other place as shall be
determined by the Board of Directors and stated in the notice of meeting.
4.2. ANNUAL MEETING. The annual meeting of shareholders of the
corporation shall be held on such date, and at such times as the Board of
Directors may select. Directors shall be elected at each annual meeting and such
other business, as may properly come before the meeting, shall be considered.
The Board of Directors acting by resolution may postpone and reschedule any
previously scheduled annual meeting of shareholders. Any annual meeting of
shareholders may be adjourned by the Chairman of the meeting or pursuant to a
resolution of the Board of Directors.
4.3. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the Board of Directors, the Chairman of the Board of Directors (if
such office is filled), or by the President. At any special meeting of
shareholders, the business which may be transacted shall be limited to that
which was specifically stated in the notice of such special meeting provided to
shareholders.
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4.4. NOTICE OF MEETINGS. Except as otherwise provided by statute,
written notice of the time, place and purposes of a meeting of shareholders
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each shareholder of record entitled to vote at the meeting, either
personally or by mailing such notice to his or her last address as it appears on
the books of the corporation. No notice need be given of an adjourned meeting of
the shareholders provided the time and place to which such meeting is adjourned
are announced at the meeting at which the adjournment is taken and at the
adjourned meeting only such business is transacted as might have been transacted
at the original meeting. However, if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record on the new record date entitled to notice as
provided in this Bylaw.
4.5. RECORD DATES. The Board of Directors may fix in advance a date as
the record date for the purpose of determining shareholders entitled to notice
of and to vote at a meeting of shareholders or an adjournment thereof, or to
express consent or to dissent from a proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of a dividend or
allotment of a right, or for the purpose of any other action. The date fixed
shall not be more than 60 nor less than 10 days before the date of the meeting,
nor more than 60 days before any other action. In such case only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to notice of and to vote at such meeting or adjournment thereof, or to
express consent or to dissent from such proposal, or to receive payment of such
dividend or to receive such allotment of rights, or to participate in any other
action, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation, or otherwise, after any such record date. Nothing in
this Bylaw shall affect the rights of a shareholder and his transferee or
transferor as between themselves.
4.6. LIST OF SHAREHOLDERS. The Secretary of the corporation or the
agent of the corporation having charge of the stock transfer records for shares
of the corporation shall make and certify a complete list of the shareholders
entitled to vote at a shareholders' meeting or any adjournment thereof. The list
shall be: arranged alphabetically within each class and series, with the address
of, and the number of shares held by, each shareholder; produced at the time and
place of the meeting; subject to inspection by any shareholder during the whole
time of the meeting; and prima facie evidence as to who are the shareholders
entitled to examine the list or vote at the meeting.
4.7. QUORUM. Except in circumstances requiring a greater quorum by the
Articles of Incorporation or by the laws of the State of Michigan, the
shareholders present at a meeting in person or by proxy who, as of the record
date for such meeting, were holders of a majority of the outstanding shares of
the corporation entitled to vote at the meeting shall constitute a quorum at the
meeting. Whether or not a quorum is present, a meeting of shareholders may be
adjourned by a vote of the shares present in person or by proxy. When the
holders of a class or series of shares are entitled to vote separately on an
item of business, this Bylaw applies in determining the presence of a quorum of
such class or series for transaction of such item of business.
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4.8. PROXIES. A shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
other persons to act for the shareholder by proxy. A proxy shall be in a form
with such signatures or other proof of authenticity as may be required by
Michigan Business Corporation Act (MCLA 450. 1101, et seq), as heretofore
amended and as amended from time to time hereafter, and shall not be valid after
the expiration of three years from its date unless otherwise provided in the
proxy. A proxy is revocable at the pleasure of the shareholder executing it
except as otherwise provided by the laws of the State of Michigan.
4.9. INSPECTORS OF ELECTION. The Board of Directors, or the Chairman
presiding at any shareholders' meeting, may appoint one or more inspectors. If
appointed, the inspectors shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum and the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine challenges or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the person presiding at the meeting,
the inspectors shall make and execute a written report to the person presiding
at the meeting of any of the facts found by them and matters determined by them.
The report shall be prima facie evidence of the facts stated and of the vote as
certified by the inspectors.
4.10. CONDUCT OF BUSINESS. The Chairman of the Board of Directors, or
such other person who shall be designated by him or her or by the Board of
Directors to preside at a meeting of the shareholders, shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her to be
proper.
(a) At any annual meeting of shareholders, only such business shall
be conducted as shall have been brought before the meeting (a) by or at the
direction of the Board of Directors or (b) by any shareholder of the
corporation who is entitled to vote with respect thereto and who complies
with the notice procedures set forth in this Section 4.10. For business to be
properly brought before an annual meeting by a shareholder, the shareholder
must submit written notice to the Secretary of the corporation either by
personal delivery or by U.S. mail, certified or registered. To be timely, a
shareholder's notice must be delivered to or received by the Secretary not
less than sixty (60) days prior to the anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than twenty (20) days, notice by the
shareholder to be timely must be so delivered or received not later than the
close of business on the later of the sixtieth (60th) day prior to such
annual meeting or the tenth (10th) day following the day on which notice of
the annual meeting was first mailed. A shareholder's notice to the Secretary
shall set forth as to each matter such shareholder intends to bring before
the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on
the corporation's books, of the shareholder proposing such business, (iii)
the class and number of shares of voting stock that are beneficially owned by
such shareholder, and (iv) any material interest of such shareholder in the
proposed business to be brought before
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the annual meeting. Notwithstanding anything to the contrary contained in
these Bylaws, no business shall be brought before or conducted at an annual
meeting except in accordance with the provisions of this Section 4.10. The
person presiding at the annual meeting shall, if the facts so warrant,
determine and declare to the meeting in accordance with the provisions of
this Section 4.10 whether or not the proposed business is properly brought
before the meeting, and, if he or she should so determine that it is not
properly brought before the meeting, the proposed business shall not be
transacted.
(b) At any special meeting of the shareholders, only such business
shall be conducted as shall have been brought before the meeting by or at the
direction of the Board of Directors.
4.11. VOTING. Each outstanding share is entitled to one vote on each
matter submitted to a vote, unless otherwise provided in the Articles of
Incorporation. Votes shall be cast in writing, signed by the shareholder or
shareholder's proxy. Except as otherwise provided by the Articles of
Incorporation, directors shall be elected by a plurality of the votes cast at
any election.
ARTICLE V
DIRECTORS
5.1. ANNUAL MEETING. The Board of Directors shall meet each year for
the purpose of electing officers and considering such other business that may
properly be brought before the meeting; provided that, if less than a majority
of the directors appear at the annual meeting of the Board of Directors, the
holding of such annual meeting shall not be required and the matters which might
have been taken up therein may be taken up at any later special or annual
meeting, or by written consent.
5.2. REGULAR AND SPECIAL MEETINGS. Regular meetings of the Board of
Directors may be held at such times and places as the Board of Directors may
from time to time determine. Special meetings of the Board may be called by the
Chairman of the Board of Directors (if such office is filled) or the President
and shall be called by the President or Secretary upon the written request of
any two directors.
5.3. NOTICES. No notice shall be required for annual or regular
meetings of the Board of Directors or for adjourned meetings, whether regular or
special. Two days' written notice, or 24-hour telephonic notice, shall be given
for special meetings of the Board of Directors, and such notice shall state or
recite the time, place and purpose or purposes of the meeting.
5.4. EXECUTIVE AND OTHER COMMITTEES.
(a) The Board of Directors may, by resolution passed by a majority
of the whole Board, appoint three or more members of the Board as an
executive committee to exercise all powers and authorities of the Board in
management of the business and affairs of the corporation, except that the
committee shall not have power or authority to: (a) amend the Articles of
Incorporation; (b) adopt an agreement of merger or consolidation; (c)
recommend to shareholders the sale, lease or exchange of all or substantially
all of the corporation's
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property and assets; (d) recommend to shareholders a dissolution of the
corporation or revocation of a dissolution; (e) amend these Bylaws; (f) fill
vacancies in the Board of Directors; or (g) unless expressly authorized by
the Board of Directors, declare a dividend or authorize the issuance of
stock.
(b) The Board of Directors from time to time may, by like
resolution, appoint such other committees of one or more directors to have
such authority as shall be specified by the Board of Directors in the
resolution making such appointments. The Board of Directors may designate one
or more directors as alternate members of any committee who may replace an
absent or disqualified member at any meeting thereof.
5.5. DISSENTS. A director who is present at a meeting of the Board of
Directors, or a committee thereof of which the director is a member, at which
action on a corporate matter is taken is presumed to have concurred in that
action unless the director's dissent is entered in the minutes of the meeting or
unless the director files a written dissent to the action with the person acting
as secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation promptly after
the adjournment of the meeting. Such right to dissent does not apply to a
director who voted in favor of such action. A director who is absent from a
meeting of the Board, or a committee thereof of which he is a member, at which
any such action is taken is presumed to have concurred in the action unless he
files his written dissent with the Secretary of the corporation within a
reasonable time after he has knowledge of the action.
5.6. COMPENSATION. The Board of Directors, by affirmative vote of a
majority of directors in office and irrespective of any personal interest of any
of them, may establish reasonable compensation of directors for services to the
corporation as directors or officers.
ARTICLE VI
NOTICES, WAIVERS OF NOTICE AND MANNER OF ACTING
6.1. NOTICES. All notices of meetings required to be given to
shareholders, directors or any committee of directors may be given by mail,
telecopy, telegram, radiogram or cablegram to any shareholder, director or
committee member at his or her last address as it appears on the books of the
corporation. Such notice shall be deemed to be given at the time when the same
shall be mailed or otherwise dispatched. Telephonic notice may be given for
special meetings of the Board as provided in Section 5.3.
6.2. WAIVER OF NOTICE. Notice of the time, place and purpose of any
meeting of shareholders, directors or committee of directors may be waived by
telecopy, telegram, radiogram, cablegram or other writing, either before or
after the meeting, or in such other manner as may be permitted by the laws of
the State of Michigan. Attendance of a person at any meeting of shareholders, in
person or by proxy, or at any meeting of directors or of a committee of
directors, constitutes a waiver of notice of the meeting except as follows:
(a) In the case of a shareholder, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting
business at the meeting, or unless with
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respect to consideration of a particular matter at the meeting that is not
within the purpose or purposes described in the meeting notice, the
shareholder objects to considering the matter when it is presented.
(b) In the case of a director, unless he or she at the beginning of
the meeting, or upon his or her arrival, objects to the meeting or the
transaction of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting.
6.3. ACTION WITHOUT A MEETING.
(a) Any action required or permitted at any meeting of directors
or committee of directors may be taken without a meeting, without prior
notice and without a vote, if all of the directors or committee members
entitled to vote thereon consent thereto in writing before or after the
action is taken.
(b) Any action required or permitted at any meeting of shareholders
may be taken without a meeting as provided in the Articles of Incorporation.
ARTICLE VII
OFFICERS
7.1. NUMBER. The Board of Directors shall appoint a President, a
Secretary and a Treasurer and may appoint a Chairman of the Board of Directors,
and one or more Vice Presidents, Assistant Secretaries or Assistant Treasurers.
Any two or more of the above offices, except those of President and Vice
President, may be held by the same person. No officer shall execute, acknowledge
or verify an instrument in more than one capacity if the instrument is required
by law, the Articles of Incorporation or these Bylaws to be executed,
acknowledged, or verified by one or more officers.
7.2. TERM OF OFFICE, RESIGNATION AND REMOVAL. An officer shall hold
office for the term for which he or she is appointed and until his or her
successor is appointed, or until his or her resignation or removal. An officer
may resign by written notice to the corporation. The resignation is effective
upon its receipt by the corporation or at a subsequent time specified in the
notice of resignation. An officer may be removed by the Board with or without
cause. The appointment of a person to serve as an officer of the corporation
does not of itself create contract rights.
7.3. VACANCIES. The Board of Directors may fill any vacancies in any
office occurring for whatever reason and at whatever time.
7.4. AUTHORITY. All officers, employees and agents of the corporation
shall have such authority and perform such duties in the conduct and management
of the business and affairs of the corporation as may be designated by the Board
of Directors and these Bylaws.
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ARTICLE VIII
DUTIES OF OFFICERS
8.1. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of
Directors, if such office is filled, shall be the chief executive officer of the
corporation and shall preside at all meetings of the shareholders and of the
Board of Directors at which the Chairman is present. The Chairman shall see that
all orders and resolutions of the Board of Directors are carried into effect,
and the Chairman shall have the general powers of supervision and management
usually vested in the chief executive officer of a corporation, including the
authority to vote all securities of other corporations and business
organizations held by the corporation.
8.2. PRESIDENT. If the office of Chairman is filled, the President
shall be the chief operating officer of the corporation and shall have the
general powers of supervision and management over the day-to-day operations of
the corporation. In the absence or disability of the Chairman of the Board of
Directors, or if that office has not been filled, the President also shall
perform the duties of the Chairman of the Board as set forth in these Bylaws.
8.3. VICE PRESIDENTS. The Vice Presidents, in order of seniority, as
determined by the Board of Directors, shall, in the absence or disability of the
President perform the duties and exercise the powers of the President and shall
perform such other duties as the President may from time to time prescribe.
8.4. SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and of shareholders and shall record all votes and minutes of all
proceedings in a book to be kept for that purpose, shall give or cause to be
given notice of all meetings of the shareholders and of the Board of Directors,
and shall keep in safe custody the seal of the corporation and, when authorized
by the Board of Directors, affix the same to any instrument requiring it, and
when so shall be attested by the signature of the Secretary, or by the signature
of the Treasurer or an Assistant Secretary. The Secretary may delegate any of
the duties, powers and authorities of the Secretary to one or more Assistant
Secretaries, unless such delegation is disapproved by the Board of Directors.
8.5. TREASURER. The Treasurer shall have the custody of the corporate
funds and securities; shall keep full and accurate accounts of receipts and
disbursements in books of the corporation; and shall deposit all moneys and
other valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
render to the President and directors, whenever they may require it, an account
of his or her transactions as Treasurer and of the financial condition of the
corporation. The Treasurer may delegate any of his or her duties, powers and
authorities to one or more Assistant Treasurers, unless such delegation is
disapproved by the Board of Directors.
8.6. ASSISTANT SECRETARIES AND TREASURERS. The Assistant Secretaries,
in order of their Seniority, shall perform the duties and exercise the powers
and authorities of the Secretary in case of the Secretary's absence or
disability. The Assistant Treasurers, in the order of their seniority, shall
perform the duties and exercise the powers and authorities of the Treasurer in
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case of the Treasurer's absence or disability. The Assistant Secretaries and
Assistant Treasurers shall also perform such duties as may be delegated to them
by the Secretary and Treasurer, respectively, and also such duties as the Board
of Directors may prescribe.
ARTICLE IX
SPECIAL CORPORATE ACTS
9.1. ORDERS FOR PAYMENT OF MONEY. All checks, drafts, notes, bonds,
bills of exchange and orders for payment of money of the corporation shall be
signed by such officer or officers or such other person or persons as the Board
of Directors may from time to time.
9.2. CONTRACTS AND CONVEYANCES. The Board of Directors of the
corporation may in any instance designate the officer and/or agent who shall
have authority to execute any contract, conveyance, mortgage, proxy or other
instrument on behalf of the corporation, or may ratify or confirm any execution.
When the execution of any instrument has been authorized without specification
of the executing officers or agents, the Chairman of the Board of Directors, the
President or any Vice President, and the Secretary or Assistant Secretary or
Treasurer or Assistant Treasurer, may execute the same in the name and on behalf
of this corporation and may affix the corporate seal thereto.
ARTICLE X
BOOKS AND RECORDS
10.1. MAINTENANCE OF BOOKS AND RECORDS. The proper officers and agents
of the corporation shall keep and maintain such books, records and accounts of
the corporation's business and affairs, minutes of the proceedings of its
shareholders, Board and committees, if any, and such stock ledgers and lists of
shareholders, as the Board of Directors shall deem advisable, and as shall be
required by the laws of the State of Michigan and other states or jurisdictions
empowered to impose such requirements. Books, records and minutes may be kept
within or without the State of Michigan in a place which the Board shall
determine.
10.2. RELIANCE ON BOOKS AND RECORDS. In discharging his duties, a
director or an officer of the corporation, when acting in good faith, may rely
upon information, opinions, reports, or statements (including financial
statements and other financial data) if prepared or presented by any of the
following:
(a) One or more directors, officers, or employees of the
corporation, or of a business organization under joint control or common
control, whom the director or officer reasonably believes to be reliable and
competent in the matters presented.
(b) Legal counsel, public accountants, engineers, or other persons
as to matters the director or officer reasonably believes are within the
person's professional or expert competence.
(c) A committee of the Board of Directors of which he or she is not
a member if the director or officer reasonably believes the committee merits
confidence.
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A director or officer is not entitled to rely on the information set
forth above if he or she has knowledge concerning the matter in question that
makes reliance otherwise permitted unwarranted.
ARTICLE XI
CONTROL SHARES AND CONTROL SHARE ACQUISITIONS
11.1. CONTROL SHARE ACQUISITIONS. If the corporation is or becomes
subject to Chapter 7B of the Michigan Business Corporation Act, as heretofore
amended and as amended from time to time hereafter ("Chapter 7B"), then
effective on the first day on which the corporation has one hundred (100) or
more shareholders of record, shares of capital stock of the corporation
constituting "control shares" acquired in "control share acquisitions" (as
defined in Chapter 7B) shall have the same voting rights as were accorded such
shares before the "control share acquisition" only to the extent specifically
granted by resolution approved by the shareholders of the corporation in
accordance with Chapter 7B.
11.2. REDEMPTION OF CONTROL SHARES. Control shares as to which all of
the following conditions are met may be redeemed by the corporation, upon
approval by the Board of Directors, at any time after such conditions have been
met:
(a) either (i) an acquiring person statement has been filed with the
corporation, a meeting of the shareholders has been held at which voting
rights of the control shares have been submitted to the shareholders for a
vote, and the shareholders do not grant full voting rights to the control
shares, or (ii) if an acquiring person statement has not been filed with the
corporation with respect to a control share acquisitions and the redemption
is completed during the period ending sixty (60) days after the last
acquisition of control shares or the power to direct the exercise of voting
power of control shares, by the acquiring person; and
(b) the consideration to be paid in redemption of the control shares
consists of cash, property or securities of the corporation, or any
combination thereof, including shares of capital stock of the corporation or
debt obligations of the corporation; and
(c) the price to be paid for the control shares does not exceed the
fair value of the shares, as determined by the Board of Directors, which
value shall not be less that the highest price paid per share by the
acquiring person in the control share acquisition.
11.3. PROCEDURES. The Board of Directors may, by resolution, adopt
procedures for the giving of notice of such redemption to the acquiring person
and for the delivery of certificates representing the control shares to be
acquired in exchange for the corporation's payment of fair value therefor.
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ARTICLE XII
AMENDMENTS
12.1. AMENDMENTS. These Bylaws and any Article or provision thereof may
be amended or repealed, in whole or in part, by majority vote of the Board of
Directors, provided that notice of the meeting at which such amendment or repeal
is to be acted upon includes notice of the proposed amendment or repeal;
provided further, that notwithstanding any other provision to the contrary in
the Corporation's Articles of Incorporation or these Bylaws, in each case as
amended from time to time (and notwithstanding the fact that a lesser percentage
may be specified by law, the Corporation's Articles of Incorporation or these
Bylaws), the affirmative vote of the holders of two-thirds or more of the
outstanding shares of capital stock entitled to vote for the election of
directors, voting together as a single class, shall be required to amend, repeal
or adopt any provision inconsistent with Articles IV, V or XI of these Bylaws.
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EXHIBIT 10.1
SUBLEASE
THIS SUBLEASE (this "Sublease"), made on this ____ day of July, 1998,
by and between RITE AID OF MICHIGAN, INC., having an address of P.O. Box 3165,
Harrisburg, Pennsylvania, 17105, Attention: Secretary ("Landlord") and LAKESIDE
COMMUNITY BANK, a Michigan corporation, having an address of 12900 Hall Road,
Suite 395, Sterling Heights, Michigan 48313, Attention: Frank Blowers,
President/CEO ("Tenant").
RECITALS:
A. Landlord entered into a Lease with S.F.S. Enterprises, a Michigan
co-partnership and predecessor-in-interest to American United Life Insurance
Company ("Prime Landlord"), as lessor, dated December 7, 1995, as amended by a
Lease Amendment dated April 18, 1996 and a Second Lease Amendment dated August
8, 1996 (the "Prime Lease"), leasing approximately 11,180 square feet of space
(as more particularly described in the Prime Lease, the "Landlord's Premises")
located in a shopping center known as Lakeview Square Shopping Center located at
43850 Schoenherr Road, Sterling Heights, Michigan (the "Center"), to which Prime
Lease reference is hereby made as if the same were herein set forth in full and
at length.
B. Landlord and Tenant have agreed that Landlord shall sublet a portion
of the Landlord's Premises consisting of approximately 5,980 square feet, as
depicted on Exhibit "A" attached hereto (the "Subleased Premises") to Tenant.
WITNESSETH: That in consideration of the rents, covenants and
agreements herein contained, Landlord hereby subleases to Tenant, and Tenant
hereby subrents from Landlord, the Subleased Premises. This Sublease is made
upon the following terms and conditions:
ARTICLE I - CONDITION OF THE PREMISES
(a) Tenant accepts possession of the Subleased Premises in an AS-IS
condition, without representation or warranty of any kind from Landlord as to
the condition of the Subleased Premises or its fitness for the particular use to
which Tenant expects to put the Subleased Premises.
(b) Tenant shall, at its expense, perform all work which is necessary
to prepare the Subleased Premises for the conduct of business by Tenant in the
manner contemplated by this Sublease and to bring the Subleased Premises into
compliance with all Governmental Requirements (hereinafter defined). All work
performed by Tenant shall be performed in a good and workmanlike manner in
accordance with plans
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and specifications approved in advance by Landlord and Prime Landlord and
otherwise in compliance with all Governmental Requirements and Insurance
Underwriters' Requirements (hereafter defined) and subject to all requirements
and conditions set forth in the Prime Lease. All improvements incorporated by
Tenant in the Subleased Premises (other than trade fixtures) shall be considered
permanent improvements to the Subleased Premises and shall be the property of
Landlord.
ARTICLE II - TERM
The term of this Sublease shall commence on the date hereof (the
"Commencement Date"). The term shall expire, if not sooner terminated, at 11:59
p.m. on the date which is ten (10) years after the Rent Commencement Date, as
hereinafter defined, (the "Expiration Date").
ARTICLE III - QUIET ENJOYMENT
So long as Tenant complies with the terms, covenants and conditions of
this Sublease on Tenant's part, Tenant shall have the peaceful and quiet use of
the Subleased Premises, subject to the terms, covenants and conditions of this
Sublease, without interference by Landlord or anyone claiming rights in the
Subleased Premises by, through or under Landlord.
ARTICLE IV - RENT AND TAXES
SECTION 4.01. MINIMUM ANNUAL RENT.
(a) During the five (5) year period commencing on the date which is
ninety (90) days after the execution of this Sublease by both parties (the "Rent
Commencement Date"), Tenant shall pay Landlord annual minimum rent in the amount
of ONE HUNDRED THOUSAND SEVEN HUNDRED THREE and 20/100 ($100,703.20) DOLLARS
payable in equal monthly installments of EIGHT THOUSAND THREE HUNDRED NINETY-ONE
and 93/100 ($8,391.93) DOLLARS.
(b) During the five (5) year period commencing on the fifth anniversary
of the Rent Commencement Date, Tenant shall pay Landlord annual minimum rent in
the amount of ONE HUNDRED SIX THOUSAND SIX HUNDRED EIGHTY-THREE and 20/100
($106,683.20) DOLLARS payable in equal monthly installments of EIGHT THOUSAND
EIGHT HUNDRED NINETY and 27/100 ($8,890.27) DOLLARS.
(c) Tenant shall pay these sums in advance, on or before the first
(lst) day of each calendar month, during the term hereof, commencing on the Rent
Commencement Date. If the Rent Commencement Date falls on a date other than the
first day of a month minimum rent shall be prorated for the balance of such
month on a per diem basis. If any installment of rent due hereunder is not paid
in good funds and received by Landlord within five (5) days after when such
payment was due, Tenant
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agrees to pay without further demand of notice, in addition to rents and other
charges due hereunder, a late charge equal to five (5%) percent of the amount
outstanding.
SECTION 4.02. TAXES.
In addition to all other sums due from Tenant hereunder, beginning on
the Commencement Date, Tenant shall pay to Landlord as additional rent an amount
equal to 53 % of the amounts charged to Landlord by Prime Landlord pursuant to
the Prime Lease with respect to real estate taxes and assessments against the
Subleased Premises and the Center pursuant to Article 9 of the Prime Lease,
which amounts shall be paid within ten (10) days of receiving a bill therefore
from Landlord.
SECTION 4.03. RENT PAYMENTS.
(a) Whenever under the terms of this Sublease any sum of money is
required to be paid by Tenant to Landlord in addition to the minimum rental
herein reserved, whether or not such sum is herein designated as "additional
rent" or provision is made for the collection of said sum as additional rent,
such sum shall, nevertheless, be deemed to be additional rent, and shall be
collectible as rent. All minimum rent required to be paid hereunder and all
other payments fixed herein as to amount and time of payment shall be paid
without prior demand, and all minimum rent, and additional rent shall be paid
without any setoff, abatement, recoupment or deduction. Any payment by Tenant of
a lesser amount of minimum or additional rental than is due shall be applied to
such category of arrearage as Landlord may designate irrespective of any
contrary designation by Tenant and to the oldest, most recent or other portion
of the same due as Landlord may determine; and Landlord's acceptance of any such
partial payment shall not be deemed and accord any satisfaction and shall be
without prejudice to Landlord's right to pursue any other remedies.
(b) All rent payable, and all statements deliverable by Tenant to
Landlord under this Sublease shall be paid and delivered to Landlord c/o Rite
Aid Corporation, Subtenants Accounts Receivable, P.O. Box 460, Camp Hill, PA
17001, or at such other address as Landlord may hereafter designate in writing
to Tenant.
ARTICLE V - INTENTIONALLY OMITTED
ARTICLE VI - PERMITTED USE
The Subleased Premises shall be used and occupied during the term
hereof solely as a bank. Tenant shall not, either directly or indirectly, during
the term of this Sublease, authorize or permit the sale of health and/or beauty
aids or prescription drugs at, on or in the Subleased Premises. In addition,
Tenant agrees not to use the
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Subleased Premises for any use which would violate the terms and provisions of
the Prime Lease.
In the event of a breach of any of the covenants of this Article,
Landlord shall be entitled, in addition to any other remedy available to it, to
sue for damages, terminate this sublease and/or obtain injunctive or other
equitable relief.
ARTICLE VII - COMMON AREAS
SECTION 7.01. TENANT'S RIGHT TO USE COMMON AREAS. Landlord hereby assigns to
Tenant Landlord's rights under the Prime Lease during the term of this Sublease,
to use the common areas of the Center (as more particularly described in the
Prime Lease, the "Common Areas"), which use shall be under and subject to the
terms and conditions of the Prime Lease and such rules and regulations as may be
prescribed from time to time by Prime Landlord; and Prime Landlord shall have
exclusive management and control over the Common Areas.
SECTION 7.02. MAINTENANCE OF COMMON AREAS. Under the Prime Lease, Prime Landlord
is obligated to maintain the Common Areas. Tenant shall have the right to
enforce Prime Landlord's Common Area maintenance obligations during the term of
this Sublease as if Tenant were the lessee under the Prime Lease. Tenant shall
look solely to Prime Landlord for satisfaction of such obligations.
SECTION 7.03. COMMON AREA MAINTENANCE CHARGES. In addition to all other sums due
from Tenant hereunder, beginning on the Commencement Date, Tenant shall pay to
Landlord as additional rent an amount equal to 53 % of the amount due from
Landlord to Prime Landlord with respect to Common Area services (as described in
the Prime Lease) pursuant to Article 6 (c) of the Prime Lease, in accordance
with the Prime Lease within ten (10) days of receiving invoice for such charges
from Landlord.
ARTICLE VIII - ASSIGNMENT AND SUBLETTING
SECTION 8.01. RESTRICTIONS ON ASSIGNMENT. Tenant shall not assign this Sublease
or further sublease all or any part of the Subleased Premises, nor permit other
persons to occupy or conduct business in the Subleased Premises or any part
thereof, nor grant any license, concession management contract or franchise for
all or any part of the Subleased Premises without the prior written consent of
Landlord, which Landlord may withhold in its sole and absolute subjective
discretion. Any assignment by operation of law, attachment or assignment for the
benefit of creditors shall, at Landlord's option, be inoperative. If Tenant is a
corporation, any transfer of any of Tenant's issued and outstanding capital
stock or any issuance of additional capital stock, as a result of which the
majority of the issued and outstanding capital stock of Tenant is held by a
corporation, firm or person or persons who do not hold a majority of the issued
and outstanding capital stock of Tenant on the date hereof, shall be deemed a
prohibited
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assignment under this Section 8.01. If Tenant is a partnership, any transfer of
any interest in the partnership or any other change in the composition of the
partnership which results in a change in the management of Tenant from the
person or persons managing the partnership on the date hereof, shall be deemed a
prohibited assignment under this Section 8.01.
SECTION 8.02. NO WAIVER. Without Landlord's prior written consent, any attempted
assignment or sublet of all or any part of the Subleased Premises shall be null
and void. If Landlord at any time consents in writing to any assignment or
sublease as defined in and prohibited by Section 8.01, in addition to any other
consideration that may pass between the parties in connection therewith, Tenant
and any such assignee or sublessee shall be deemed to have covenanted not to
make any further assignment or sublease contrary to the provisions of Section
8.01, and such covenant shall be deemed to have been made as of the date of such
consent and shall take effect prospectively from the date hereof.
ARTICLE IX - REPAIRS
SECTION 9.01. REPAIRS BY PRIME LANDLORD. The Prime Lease requires Prime Landlord
to, inter alia, maintain the structural components of the Subleased Premises, as
more particularly described in Article 12 of the Prime Lease. Tenant shall have
the right to enforce Prime Landlord's repair obligations under the Prime Lease
as if Tenant were the Lessee under the Prime Lease. Tenant shall look solely to
Prime Landlord to enforce these repair obligations.
SECTION 9.02. REPAIRS BY TENANT.
(a) Saving and excepting the repairs for which Prime Landlord is
responsible under the Prime Lease, Tenant at its expense shall promptly make all
repairs and perform all maintenance in and to the Subleased Premises that are
necessary or desirable in order to keep the Subleased Premises in compliance
with the terms of the Prime Lease and in good order and repair and in safe,
clean, dry and tenable condition. Tenant shall keep the Leased Premises and the
sidewalk area adjacent thereto in a clean and sanitary condition, free from
vermin and escaping odors.
(b) If Tenant refuses or neglects to repair property as required herein
and to the reasonable satisfaction of Landlord as soon as reasonably possible
after written demand, Landlord may make such repairs without liability to Tenant
for any loss or damage that may accrue to Tenant's merchandise, fixtures, or
other property or to Tenant's business by reason thereof, and, upon completion
thereof, Tenant shall pay Landlord's costs plus ten (10%) percent for making
such repairs as additional rent. If Tenant does not pay the foregoing sums
within ten (10) days of Landlord's request therefore, such sums shall accrue
interest at the rate of fifteen (15%) per cent per annum from the date such sums
were advanced by Landlord.
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ARTICLE X - UTILITIES
Beginning with the date Landlord tenders possession of the Subleased Premises to
Tenant, Tenant shall pay, when due or when billed by Prime Landlord or by
Landlord, all charges for utility service furnished to the Subleased Premises,
including, without limitation, water, sewer, heat, air conditioning, gas,
electricity and telephone. Landlord shall not be liable to Tenant for damages
because of any interruption in utility services, and Tenant shall not be
entitled to claim a constructive eviction due to such interruption.
ARTICLE XI - TENANT'S OPERATIONS, ALTERATIONS, SIGNS AND LAW
COMPLIANCE
SECTION 11.01. RULES AND REGULATIONS. Tenant shall at all times comply with the
rules and regulations to be adopted from time to time by Prime Landlord. All
such rules and regulations shall be deemed covenants of this Sublease to be
performed and observed by Tenant.
SECTION 11.02. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the Subleased Premises or affecting any utility system servicing
the Subleased Premises or other parts of the Center, without the prior written
consent of Landlord or Prime Landlord. Any alterations, additions or
improvements by Tenant shall immediately become the property of Landlord and
remain upon the Subleased Premises at the end of the term unless Landlord
notifies Tenant to restore the Subleased Premises to its original condition, in
which event Tenant shall comply with such requirement prior to the expiration of
the term. Before undertaking any alterations permitted hereunder or consented to
by Landlord hereunder, Tenant shall obtain and furnish to Landlord an
endorsement to the public liability insurance policy required to be carried by
Tenant under Section 13.02 hereof to cover liabilities incurred in connection
with any work undertaken by Tenant.
SECTION 11.03. SIGNS. Except for signage which has been approved by Landlord in
advance, Tenant shall not, without Landlord's prior written consent, place,
suffer to be placed or maintain any sign, billboard, marquee, awning,
decoration, placard, lettering, advertising matter or other thing of any kind,
whether permanent or temporary, on the exterior of the Subleased Premises. All
signage for the Subleased Premises must comply with the requirements of the
Prime Lease and all Governmental Requirements. In the event of any violation of
this Section 11.03 by Tenant, Landlord may take such action as it sees fit to
abate such violation, and Tenant shall pay to Landlord all expenses incurred by
Landlord in connection therewith.
SECTION 11.04. COMPLIANCE WITH LAWS AND INSURANCE REQUIREMENTS. Tenant shall
promptly comply with all laws, rules, regulations, requirements and
recommendations of governmental bodies and public authorities (collectively
"Governmental Requirements")
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and of the local board of fire underwriters rating bureau or other fire
insurance rating organization for the area in which the Subleased Premises are
situated and of Prime Landlord's or Landlord's insurers, pertaining to the
Subleased Premises or the use and occupancy thereof, or to fire preventive,
warning and extinguishing apparatus (collectively "Insurance Underwriter's
Requirements"). Tenant shall not do or suffer to be done, or keep or suffer to
be kept anything in or about the Subleased Premises which will contravene any of
Prime Landlord's or Landlord's insurance policies covering the Center or any
part thereof (including, without limitation fire, casualty, liability, boiler
and rent insurance) or which will prevent Prime Landlord or Landlord from
procuring such policies in companies reasonably acceptable to Prime Landlord or
Landlord, or which will impair Prime Landlord's or Landlord's rights to collect
on any insurance policy; and if anything done, omitted to be done or suffered to
be done by Tenant (including, without limitation, failure to occupy the
Subleased Premises) or kept, suffered by Tenant to be kept in or about the
Subleased Premises shall cause the rate of any such insurance on the Subleased
Premises or on any other part of the Center to be increased above the rate
applicable to the least, hazardous type of retail occupancy legally permitted in
the Center or shall cause any policy of Prime Landlord's or Landlord's to be
canceled or result in the disturbance of an insurance recovery, then Tenant will
pay the increase in premium promptly upon Prime Landlord's or Landlord's demand
or indemnify Prime Landlord or Landlord for any loss to the extent that
insurance proceeds are insufficient to fully cover such loss, as the case may
be.
ARTICLE XII - MECHANIC'S LIENS AND OTHER LIENS
If any mechanic's or other lien is filed against the Subleased Premises
or any part of the Center by reason of any labor, material or service furnished
or alleged to have been furnished to Tenant or for any change, alteration,
addition or repair to the Subleased Premises made by Tenant, Tenant shall cause
such lien to be released of record by payment, bond or otherwise allowed by law,
at Tenant's expense, within five (5) days after the filing thereof; and Tenant
shall, at its expense, defend any proceeding for the enforcement of any such
lien, discharge any judgment thereon and save Prime Landlord and Landlord
harmless from all losses and expenses incurred by Landlord or Prime Landlord if
either elects to defend or participate in the defense of such proceeding. Tenant
shall not permit the Subleased Premises to be subjected to any statutory lien by
reason of any act or omission on the part of Tenant or any of its approved
concessionaires, licensees or subtenants or their respective agents, servants,
employees or contractors; and in the event that any such lien attaches to the
Subleased Premises or the Center, Tenant shall discharge the same promptly by
payment, bond or otherwise as allowed by law, at its own expense, within five
(5) days after the filing thereof.
ARTICLE XIII - PUBLIC LIABILITY AND INSURANCE
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SECTION 13.01. INDEMNITY OF LANDLORD. Tenant shall defend, indemnify and save
Landlord harmless from and against any and all claims, actions, demands,
damages, liability and expenses, including counsel fees for injury to the
property of others and injury or death of persons, which is caused by or arises
out of or in connection with Tenant's use or occupancy of the Subleased Premises
or the Common Areas, or any thing, matter or condition of, on or pertaining to
the Subleased Premises, or any act or omission of Tenant, its agents, employees,
servants or contractors, or out of breach by Tenant of any term, covenant or
condition of this Sublease to be performed or observed by Tenant.
SECTION 13.02. LIABILITY INSURANCE. Commencing with the date Landlord tenders
possession of the Subleased Premises to Tenant, Tenant shall, at its expense,
maintain comprehensive general public liability insurance in amounts and
pursuant to policies required to be maintained by Landlord under the Prime
Lease.
SECTION 13.03. CARRIER RATING. All insurance required under this Sublease shall
name Landlord and Prime Landlord as additional insureds and shall be written
with insurance companies licensed to do business in Michigan and rated by Best's
Manual A+ as to general policy holders rating, and AAAAA as to financial rating,
and shall contain an endorsement requiring thirty (30) days prior written notice
to Landlord of any modification, cancellation or surrender.
SECTION 13.04. DELIVERY OF POLICIES. Prior to taking possession of the Subleased
Premises, Tenant shall deliver to Landlord the original insurance policies
required to be carried under this Sublease bearing a notation by the insurer or
its agents that the premium is paid; and renewal certificates of each such
policy shall be delivered to Landlord at least thirty (30) days prior to the
expiration of any policy term bearing a notation the renewal premium has been
paid.
SECTION 13.05. PAYMENT OF PRIME LANDLORD INSURANCE CHARGES. In addition to all
other sums due from Tenant to Landlord hereunder, Tenant shall pay to Landlord
as additional rent an amount equal to the amounts charged to Landlord by Prime
Landlord pursuant to the Prime Lease for premiums for all insurance covering the
Center, including without limitation, (a) Fire and Extended Coverage, (b)
general liability, and (c) business interruption insurance, which amount shall
be paid within ten (10) days of Landlord's request therefor.
ARTICLE XIV - LICENSES AND PERMITS
Tenant shall be responsible for obtaining all permits respecting
Tenant's use and occupancy of the Subleased Premises, and shall pay all
privilege charges, occupancy permit fees, license fees or other charges or taxes
which are imposed on or with respect to the Subleased Premises or the use and
occupancy thereof.
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ARTICLE XV - TENANT'S PROPERTY
(a) Tenant shall carry standard fire and extended coverage insurance on
its trade fixtures, merchandise and other personal property in the Subleased
Premises for their full replacement value consistent with the policies and such
insurance which Landlord is required to maintain under the Prime Lease. Landlord
shall not be liable to Tenant for any damage to any such property or to any
property required to be insured by Tenant from any cause, unless (i) such damage
is due to Landlord's gross negligence or willful misconduct and (ii) such damage
is caused by an occurrence which is not an insured hazard under the standard
fire and extended coverage insurance which is available for insuring such
property of Tenant at the time of the loss.
(b) Landlord shall not be liable to Tenant for damage to Tenant's
property due to the negligence or intentional acts of any other tenant in the
Center or to any condition existing on or emanating from the Subleased Premises
of any other tenant which is caused by such tenant or its agents or contractors,
nor shall Tenant be entitled to an abatement of rent or to claim an actual or
constructive eviction, whole or partial, permanent or temporary, by reason of
any such condition on or emanating from such other tenant's premises.
ARTICLE XVI - LANDLORD'S ENTRY ON PREMISES
Prime Landlord, Landlord and their respective representatives may enter
the Subleased Premises at any time to inspect the Subleased Premises, to enforce
the provisions of this Sublease, to make repairs required of them hereunder or
under the Prime Lease, to rectify defaults of Tenant pursuant to the rights
granted to Landlord hereunder, to make repairs to the Subleased Premises or
other premises in the Center, to check the temperature in the Subleased Premises
and to repair any utility lines or system or systems servicing other parts of
the Center or to rectify any condition in the Subleased Premises adversely
affecting other occupants of the Center. Prime Landlord and/or Landlord may
bring upon the Subleased Premises all things necessary to perform any work done
in the Subleased Premises pursuant to this Article. If the Subleased Premises
shall not be open for business at any time Prime Landlord or Landlord deems it
necessary to enter therein, Prime Landlord or Landlord may enter the Subleased
Premises by means of a master key, or by force, and Tenant hereby waives all
claims against Prime Landlord and Landlord or their agents which may arise by
reason of any such entry. Nothing herein contained shall be deemed or construed
to impose upon Prime Landlord or Landlord any obligation or responsibility
whatsoever for the care, maintenance or repair of the Subleased Premises, except
as otherwise specifically provided in this Sublease.
ARTICLE XVII - DEFAULTS AND REMEDIES
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SECTION 17.01. ABATEMENT OF TENANT'S DEFAULTS. If Tenant defaults in the
performance or observance of any term, covenant or condition to be performed or
observed by it under this Sublease, and such default continues for more than
five (5) days after written notice thereof, Landlord may take action to rectify
such default on Tenant's behalf, and Landlord may rectify such default on
Tenant's behalf immediately and without such notice if immediate action is
reasonably believed to be required in order to avoid injury or damage to persons
or property (including Landlord's property). Landlord may enter the Subleased
Premises to rectify such defaults. All money advanced and costs and expenses
incurred by Landlord in rectifying any default (including Landlord's reasonable
legal fees) together with interest thereon at the rate of fifteen percent (I5 %)
per annum from the date advanced until the date paid by Tenant, shall be repaid
by Tenant to Landlord on demand.
SECTION 17.02. LANDLORD'S REMEDIES. If the rent payable hereunder is not paid
when due, or if Tenant shall otherwise be in breach of or in default under this
Sublease, or if a petition is filed by or against Tenant under any federal or
state law pertaining to bankruptcy, insolvency, or an arrangement with
creditors, Landlord may, in any such event, at its option, enter the Subleased
Premises and declare this Sublease and the tenancy hereby created terminated,
and in the event of such entry and/or termination, Landlord shall be entitled to
the benefit of all remedies granted to Prime Landlord under the Prime Lease
together with the benefit of all provisions of the public general laws of the
State of Michigan and the public local laws of the City of Sterling Heights
pertaining to the speedy recovery of lands and tenements. Notwithstanding such
reentry and termination, Tenant shall remain liable for rent or damages which
may be due or sustained prior thereto. Additionally, Tenant shall pay as
liquidated damages, the amount of the rent reserved under this Sublease for the
balance of the term, less the amount, if any received by Landlord during such
period from others to whom the Subleased Premises may have been re-rented on
such terms and conditions as Landlord, in its sole discretion, determines, after
deducting all expenses incurred by Landlord in the repossession and reletting of
the Subleased Premises. In any action by Landlord against Tenant under this
Sublease, Tenant waives all statutory and equitable rights of redemption. The
rights and remedies of Landlord provided for herein shall be cumulative and
shall be in addition to every other right or remedy provided for herein or now
or hereafter existing at law or in equity, by statute or otherwise. The exercise
at the beginning of the exercise by Landlord of any one or more rights or
remedies shall not preclude the simultaneous or later exercise by Landlord of
any or all other rights and remedies.
ARTICLE XVIII - RECORDING; NO REDEMPTION
This Sublease shall not be recorded. Tenant waives all rights of
redemption or any similar or other rights under any statute or judicial decision
to redeem the premises or to redeem its interest under this Sublease after the
occurrence of an event of default.
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ARTICLE XIX - NOTICES
All notices from either party to the other under this Sublease shall be
sent by telegram or by registered or certified mail, return receipt requested,
hand delivered with signed receipt or by reliable overnight courier. Whenever in
this Sublease reference is made to a notice to be given such notice shall be
deemed to be given when mailed, wired or hand delivered to the proper notice
address of the party to be notified.
Notices to Landlord shall be addressed to it at the address above
indicated. Notices to Tenant shall be addressed to it at the Subleased Premises
or at the address of Tenant first set forth above. Either party may, from time
to time, designate a different address for receiving notices, by giving the
other party notice of the change of address in the manner above specified.
ARTICLE XX - MISCELLANEOUS PROVISIONS
SECTION 20.01. TERMINATION OF SUBLEASE. This Sublease shall terminate upon any
termination of the Prime Lease. Tenant agrees that Landlord shall have no
liability for any loss, cost, damage or expense caused by or in connection with
the termination of this Sublease by virtue of the termination of the Prime
Lease.
SECTION 20.02. SUCCESSORS AND ASSIGNS. This Sublease and the covenants, terms
and conditions herein contained shall inure to the benefit of and be binding
upon Landlord, its successors and assigns, and shall be binding upon and inure
to the benefit of Tenant and its permitted successors and assigns. As used
herein the term "Tenant" includes its permitted successors and assigns, and the
term "Landlord" includes its successors and assigns. The term "agents" and
"employees" as used with respect to Tenant, shall include sublessees,
concessionaires, franchisees and licensees of Tenant approved by Landlord, and
the agents, servants and employees of such sublessees, concessionaires,
franchisees and licensees.
SECTION 20.03. ENTIRE AGREEMENT. This Sublease contains the final agreement
between the parties hereto. Landlord shall not have any obligation not expressly
set forth herein; and neither party shall be bound by any promises or
representations prior to the date hereof which are not expressly set forth
herein.
SECTION 20.04. CAPTIONS; DELETIONS; DEFINITIONS. The headings and captions used
in this Sublease are for convenience only and are not a part of this Sublease.
If any printed provision of this Sublease is deleted by the parties, such
deletion may not be utilized in interpreting the rights of the parties
hereunder; but each party shall have all rights which it would have had, at law
or otherwise, if such deleted provision had never been printed herein.
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SECTION 20.05. OBLIGATIONS SURVIVING TERMINATION. If this Sublease is terminated
for any reason other than default of Tenant, all liabilities of the parties
shall be adjusted as of the effective date of termination. Any termination
hereof by reason of a default of the Tenant shall not affect any obligation or
liability of Tenant under this Sublease which accrued prior to the effective
date of termination, and all such obligations and liabilities of Tenant shall
survive such termination.
SECTION 20.06 COMPLIANCE WITH PRIME LEASE. This Sublease is expressly subject
and subordinate to the Prime Lease. Except as may be inconsistent with the terms
hereof, all of the terms, covenants and conditions contained in the Prime Lease
shall be applicable to this Sublease with the same force and effect as if
Landlord were the lessor under the Prime Lease and Tenant were the lessee
thereunder. Tenant shall neither do nor permit anything to be done which would
cause or result in Landlord being in breach of or in default under the Prime
Lease or which would cause or result in the Prime Lease being terminated or
forfeited by reason of any right of termination or forfeiture reserved or vested
in Prime Landlord. Tenant shall indemnify and hold Landlord harmless from and
against any and all damages, liabilities, actions, suits, proceedings, losses,
costs and expenses, including attorneys' and experts' fees, which Landlord may
incur or expend arising out of or in connection with the use or occupancy of the
Subleased Premises by Tenant, Tenant's employees, contractors, agents or
invitees, and/or any breach by Tenant of or any default by Tenant under this
Sublease. Tenant acknowledges and agrees that it has reviewed and is familiar
with the terms of the Prime Lease.
SECTION 20.07. PARTIAL INVALIDITY. If any term, covenant or condition of this
Sublease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Sublease, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and every other term, covenant or condition of this Sublease
shall be valid and enforced to the fullest extent permitted by law.
SECTION 20.08. BROKERS. Tenant represents and warrants that it has not dealt
with any broker in respect to this Sublease, except for Ludwig and Karas, Inc.
who shall be paid a commission by Landlord for their services in connection with
the negotiation of this Sublease pursuant to a separate agreement with Landlord.
Tenant shall defend, indemnify and save Landlord harmless against all demands,
claims and liabilities arising out of any dealings between Tenant and any broker
other than Ludwig and Karas, Inc. in respect of this Sublease.
SECTION 20.09. SURRENDER OF PREMISES. At the expiration of the tenancy hereby
created, or upon any reentry by Landlord into the Subleased Premises after a
default by Tenant, Tenant shall surrender the Subleased Premises in the same
condition as the Subleased Premises were upon the commencement of the term of
this Sublease, reasonable wear and tear excepted, and shall deliver all keys for
the Subleased
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Premises to Landlord at the place then fixed for the payment of rent, and shall
inform Landlord of all combinations on locks, safes and vaults, if any, in the
Subleased Premises. Tenant shall remove all of its trade fixtures and inventory
and any alterations, additions or improvements which Landlord requires to be
removed pursuant to Section 11.02, before surrendering the Subleased Premises as
aforesaid, and shall repair any damage to the Subleased Premises caused by such
removal. Tenant's obligations to observe or perform this covenant shall survive
the expiration or other termination of the term of this Sublease.
SECTION 20.10. CONDITION PRECEDENT. Landlord's obligations hereunder are
contingent upon Landlord, using reasonable efforts, obtaining written consent
from Prime Landlord to the terms and provisions of this Sublease.
SECTION 20.11. INSOLVENCY. Notwithstanding any other provisions contained in
this Sublease, in the event (a) Tenant or its successors or assignees shall
become insolvent or bankrupt, or if it or their interests under this Sublease
shall be levied upon or sold under execution, or other legal process, or (b) the
depository institution then operating on the Subleased Premises is closed, or is
taken over by any depository institution supervisory authority ("Authority"),
Landlord may, in either such event, terminate this Sublease only with the
concurrence of any Receiver or Liquidator appointed by such Authority; provided,
that in the event this Sublease is terminated by the Receiver or Liquidator, the
maximum claim of Landlord, for rent, damage, or indemnity for injury resulting
from the termination, rejection, or abandonment of the unexpired Sublease shall
by law in no event exceed an amount equal to all accrued and unpaid rent to the
date of termination.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease
under their respective hands and seals as of the day and year first above
written.
ATTEST/WITNESS: LANDLORD:
RITE AID OF MICHIGAN, INC.
_______________________________ By:_________________________(SEAL)
Tyrone A. Powell
Authorized Representative
TENANT:
LAKESIDE COMMUNITY BANK
_______________________________ By:_________________________(SEAL)
Name:
Title:
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JOINDER AND CONSENT OF PRIME LANDLORD
The undersigned, Prime Landlord (as defined in the foregoing Sublease),
hereby joins in this document for the purpose of consenting to the sublet of the
Subleased Premises by Landlord to Tenant and the use of the Subleased Premises
by Tenant in accordance with the terms specified herein.
PRIME LANDLORD:
Date: _________________, 1998 By:_________________________
Name:
Title:_____________________
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EXHIBIT 10.3
RDSI BANKING SYSTEMS
DATA PROCESSING AGREEMENT
FIVE (5) YEAR AGREEMENT
PREPARED FOR:
LAKESIDE COMMUNITY BANK
STERLING HEIGHTS, MICHIGAN
AGREEMENT PERIOD:
JUNE 01, 1998 THROUGH MAY 31, 2003
FIVE (5) YEAR AGREEMENT
<PAGE> 2
RURBANC DATA SERVICES
DATA PROCESSING AGREEMENT
This Agreement dated March 24, 1998 is entered between Rurbanc Data Services,
Inc., a wholly owned subsidiary of Rurban Financial Corporation, an Ohio
Corporation located at 401 Clinton Street, Defiance, Ohio 43512 (thereafter
referred to as "RDSI"), and
LAKESIDE COMMUNITY BANK
12900 Hall Road, Suite 395
STERLING HEIGHTS, MICHIGAN 48313
(hereinafter referred to as "Bank.")
This Agreement sets forth the basic contractual terms for providing an
electronic data processing service in accordance with the stipulations and rates
hereinafter set forth, and provided by RDSI to the Bank.
I. PURPOSE OF THE AGREEMENT
The Bank agrees that RDSI may perform certain services for the Bank in
the schedule(s) attached hereto, and RDSI agrees to performing such services
pursuant to the terms and conditions of this Agreement. RDSI shall receive data
from the Bank via data communication lines or ground courier for processing, and
shall process such data, producing reports and/or journals daily for the Bank.
It is agreed that if source documents are ever in transit, via ground courier,
between the Bank and RDSI, the responsible party should maintain adequate
insurance coverage and/or accept financial responsibility. The Bank agrees to
compensate RDSI for its services herein in accordance with the attached fee
schedules.
II. TERM OF THE AGREEMENT
This Agreement shall become effective June 01, 1998 and shall extend
for a period of Five (5) Years, continuous, day-to-day, which is the term of
this Agreement. However, at the request of the Bank, the term does not commence
until the "core" applications, (Demand Deposits, Savings, Certificates of
Deposit, Loans and Financial General Ledger Management Systems), have been
successfully converted and operational.
This Agreement shall automatically continue after the initial Term
unless terminated by either party upon at least 180 days prior written notice to
the other. The Bank's and RDSI's continuing obligations under the Agreement
including, without limitation, those relating to Ownership and Confidentiality
shall survive the termination of this Agreement. RDSI reserves the right to
reduce charges at any time, however,
<PAGE> 3
any increase will not become effective until thirty (30) days after prior
written notice has been given to the Bank. RDSI and the Bank have agreed that
during the first TWO (2) Years OF THIS Agreement, rates shall be fixed at such
rate(s) as described in the attached fee schedule(s).
III. RETURN OF BANK'S WORK
RDSI will process the Bank's items in connection with any service
agreed upon and will assure transmission or delivery to the Bank by 9:00 a.m. on
the next business day. The only exceptions granted for non-delivery on time,
will be those due to abnormal climatic conditions, equipment and software
failures, or other unforeseen contingencies not due to negligence and equipment
in effect throughout the period covered by this Agreement.
IV. CONVERSION
Expenses of the conversion will be paid by the Bank, such as quoted
conversion and training fees, equipment purchases and modifications,
communication equipment and lines. ITI formal training classes, new forms and
supplies and other conversion cost items as detailed in the attached RDSI
proposal. The RDSI conversion charge has been established at $5,000.00 plus any
expenses incurred due to deconversion from the Bank's existing processing
system, to be paid directly to RDSI upon completion of the first application
converted. RDSI assures the Bank that conversion of the "core" application
systems will be completed no later than thirty (30) days after commencement of
the first application. The bank will receive a 25% discount applied against the
first three (3) months' processing invoice from RDSI for each month the
conversion is delayed by RDSI, with an additional 25% discount for each
additional month the conversion is delayed thereafter. No discount penalty will
be applied if the Bank delays the conversion at the Bank's own request. Test
conversion procedures will be performed and provided prior to the actual
conversion and will require the Bank's approval to proceed.
V. COMPLIANCE WITH SECTION 5 OF THE BANK SERVICE CORPORATION ACT
RDSI hereby agrees it will be subject to regulations and examinations,
including auditing, to the same extent as if the services being provided by RDSI
were being performed by the Bank itself on its own premises.
VI. EXAMINATION OF RIGHTS
Each year RDSI will contract an outside accounting firm for the
purposes of performing a third party review. If the Bank wishes to participate
in the third party audit and review, cost will be divided equally among all RDAs
bank customers being
<PAGE> 4
processed according to asset size. The Bank still has the right to perform an
examination of RDAs independently at the Bank's own expense.
VII. CORRECTION OF ERRORS
RDAS shall have the right to reprocess the Bank's materials to correct
any errors for which RDSI may be responsible in full satisfaction of all Bank's
claims, provided the Bank has notified RDSI in writing of any claimed error
within thirty (30) days after receipt of service results and furnished
supporting documentation of such claim. All services furnished hereunder are
deemed acceptable to the Bank unless proper notice and proof of claim have been
made within the thirty (30) day period.
VIII. LIMITATION OF LIABILITY
A. RDSI shall be liable for loss, destruction or damage of Bank
supplied materials only if due to the negligence of RDSI, and
then only to the extent of restoring the loss, destroyed or
damaged materials; provided such restoration can be reasonably
performed by RDSI and the Bank furnishes RDSI with all source
data necessary for such restoration.
B. RDSI shall continue to maintain during the duration of this
Agreement an errors and omissions policy of insurance, in the
amount as set forth and contained in Section XII. Hereto.
C. RDSI shall not be liable for any incidental, special or
consequential damages of any nature whatsoever, such as, but
not limited to, loss of anticipated profits or other economic
loss in connection with, or arising out of the existence or
services provided for in this Agreement, or for specific
performance.
D. RDSI shall not be liable for failure to provide, or delays in
providing, services hereunder, if due to any cause beyond
RDSI's reasonable control, including but not limited to the
following: (1) mechanical failures or breakdowns of electronic
data processing equipment due to power failures dues to a
declared disaster; (2) shortages in supplies or materials from
RDSI's supplier, due to strike, riots, civil disturbances,
flood, fire, snow storms, acts of God, or any other act of
occurrences not under the controls of RDSI; (3) strikes,
riots, civil disturbances, war, law suits, or lockouts; (4)
fire, epidemics or other casualties; (5) windstorms,
earthquakes, tornadoes, floods, weather, or other acts of God;
(6) unusual delay in transportation beyond the control of
RDSI; (7) destruction of data communication lines; (8)
governmental regulations or interference, except to the extent
agreed to herein.
E. RDSI's total liability arising out of or any way connected to
its performance under this Agreement, including malfunction of
RDSI's equipment, failure or negligent of RDSI's employees and
agents, and defective programs, shall be limited to the
coverage as set forth under RDSI's errors and omissions
insurance policy. However, RDSI may remedy future claims,
<PAGE> 5
with the Bank's agreement, in the case where repetitive
processing services are being provided, to general money
damages in the amount not excess of the total amount paid by
the Bank for services for services performed by RDSI under
this Agreement during the period of ninety (90) days
immediately preceding the occurrence giving rise to any claims
by the Bank; claims exceeding this remedy may be submitted to
errors and omissions insurance coverage. In the case where
non-repetitive processing services are being supplied, RDSI's
total liability shall be limited to the general money damages
not to exceed the total amount paid for such services by the
Bank.
F. RDSI warrants that the services provided under this
Agreement comply with all existing applicable Federal, State
and Local laws, regulations and guidelines. If after the date
hereof, any modifications to those services shall be required
by law or by any governmental regulatory authority having
authority over the Bank's business, RDSI shall, upon ninety
(90) days advance written notice to the Bank and to RDSI,
conform the services to be in compliance with such modified
laws or governmental regulations. Except as otherwise provided
in this Agreement, RDSI shall not be liable for any other
express or implied warranty, including any warranty of
merchantability or fitness.
G. RDSI agrees to (1) monitor for and detect service
deficiencies, (2) take prompt action to determine the cause of
and to correct the deficiencies, (3) shoulder the costs of
correcting the deficiencies and (4) provide substitute
services until such time as the deficiencies are corrected.
Moreover, the fees due RDSI under this Agreement may be
adjusted for so long as the specific deficiencies exist so
that RDSI will have an economic incentive to correct
deficiencies promptly and to prevent deficiencies in the first
instance. The adjustment in fees due RDSI will be adjusted for
such deficiencies in accordance with Section VIII. Limitation
of Liability.
IX. OWNERSHIP AND CONFIDENTIAL
A. It is understood that the Bank is the legal owner of
all data and records relative to itself, which may be in the
possession RDSI and may be obtained by the Bank via machine
readable form at a reasonable charge determined by RDSI, as
stated in Section XVIL Deconversion Considerations, of this
Agreement. RDSI is the owner of all programs and
documentation
B. RDSI and the Bank each agree that all information including,
but not limited to business methods, internal operation data
omer records, communicated to it by the other either before
or after the effective date of this Agreement, was and shall
be received in strict confidence, shall be used only for the
purposes of this Agreement, and that no such information
shall be disclosed by the recipient party without the prior
written consent of the other party, and each agrees that each
party will prevent the disclosure to outside parties of the
terms and provisions hereof, except as may be necessary by
reasons of legal, accounting, or regulatory requirements
beyond the reasonable control of RDSI or the Bank, as the
case may be.
C. This Agreement absolutely prohibits either party from
disclosing confidential information of the other, with the
usual exceptions of disclosure required by law or court order
or disclosure of information already in the public domain
through no fault of either party to the Agreement. Both
parties agree to notify the other of any breach of
confidentiality.
D. RDSI and the Bank agree to indemnify and hold harmless the
other from any direct loss, damage cost or expense which the
other may sustain or incur by reason of any wrongful use by
RDSI or the Bank, as the case may be, or confidential
information of the other obtained in the course of the
performance of this Agreement. In no event, shall such
indemnification extend to claims by or information
communicated by third parties not subject to this Agreement.
E. RDSI agrees that it will comply with all applicable Federal,
State and Local laws and regulations governing the use of
disclosure of information provided by the Bank.
F. RDSI shall establish and maintain reasonable safeguards
against the destruction or loss of the Bank's data in the
possession of RDSI.
G. RDSI will notify the Bank of any system changes that will
effect the Bank's procedures, reports, etc.
H. RDSI and the Bank each agree that all Bank information,
including hard copy report media as well as on-line data, and
all Bank customer data, shall be held in strict confidence,
and shall be used only for purposes of this Agreement, and
that no such information shall be disclosed by the recipient
party without the prior written consent of the Bank, and each
agrees to take all reasonable precautions to prevent the
disclosure to outside parties of the terms of this Agreement.
However, disclosure required by law may be excepted from the
general prohibition against disclosure and the Bank, the
Bank's parent company and the Bank's counsel may decide
whether the Agreement or its terms must be disclosed.
I. Upon the occurrence of any default under this Agreement,
remedies upon default as outlined in Section XI. Of this
Agreement will apply.
X. PAYMENTS AND BILLING
The Bank agrees to pay RDSI for services performed hereunder in
accordance with the changes set forth in this Agreement. RDSI shall
invoice during the first ten (10) days of each month for services
performed during the prior month. Payment by the Bank shall be net ten
(10) days from the invoice date. Any invoice aged thirty-one (31) days
from the date is subject to a service charge of one percent (1%) of the
unpaid balance. No late charge will be imposed by RDSI to the Bank in
the case of amounts past due that are reasonably in dispute.
XI. DEFAULT: REMEDIES UPON DEFAULT AND ARBITRATION
A. Any of the following events will constitute a default under
this Agreement: (1) nonpayment of any amounts due RDSI by the
Bank; (2) nonperformance of any of the Bank's or RDSI's other
material obligations; (3) if any representation or warranty of
the Bank or RDSI proves to be false in any material respect;
(4) if the Bank or RDSI commits an act of bankruptcy or
becomes insolvent or the subject of any proceeding under the
Bankruptcy Act; (5) if any substantial part of the Bank's
property becomes subject to any levy, seizure, assignment,
application or sale for or by any creditor or government
agency; or (6) failure of the RDSI backup disaster recovery
contingency plan to be implemented as a result of a service
disrupting disaster, causing the inability of RDSI, in
accordance to this Agreement, to perform data processing
services for the Bank for an unreasonable length of time, in
excess of twenty-four (24) to forty-eight (48) hours.
B. Upon the occurrence of any default under this Agreement, RDSI
and the Bank, at its option provided at least thirty (30) days
(or such longer period as may be required by the applicable
regulatory authorities) prior written notice has been given to
the other and such default has not been cured within such
period, may terminated this Agreement. In addition, RDSI or
the Bank shall have all other rights and remedies available to
it under this Agreement or by operation of law or otherwise.
C. Upon the occurrence of default under this Agreement as stated
in paragraph A. (6)(, of this section, if service provided by
RDSI to the Bank is disrupted for an extended period of time,
exceeding forty-eight (48)
<PAGE> 6
hours, resulting from the failure of the RDSI disaster
recovery contingency plan, being implemented in response to an
actual disaster, the Bank may terminate this Agreement and
take action to protect itself by seeking alternative data
processing services.
D. RDSI believes its systems and equipment to be Year 2000
compliance and will make every effort to test all RDSI systems
and equipment to assure functionality. Failure of RDSI to be
Year 2000 compliance would be in violation of bank regulations
and would constitute a default under this Agreement.
E. ARBITRATION. Any dispute, controversy or claim arising out
of, connected with, or relating to this Agreement, or the
breach, termination, validity or enforceability of any
provision of this Agreement, will be resolved by final and
binding arbitration by a panel of three arbitrators in
accordance with and subject to the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") then in
effect. Following notice of a party's election to require
arbitration, each party will within thirty (30) days select
one (1) arbitrator, and those two arbitrators will within
thirty (30) days thereafter select a third arbitrator. If the
two arbitrators are unable to agree on a third arbitrator
within thirty (30) days, the AAA will within thirty (30) days
thereafter select such arbitrator. Discovery as permitted by
the Federal Rules of Civil Procedure then in effect will be
allowed in connection with arbitration to the extent
consistent with the purpose of the arbitration and as allowed
by the arbitrators. Judgment upon the award rendered in any
arbitration may be entered in any court of competent
jurisdiction, or application may be made to such court for
judicial acceptance of the award and an enforcement, as the
law of the state having jurisdiction may require or allow.
During any arbitration proceedings, RDSI shall continue to
provide services under this Agreement and the Bank shall
continue to make payments hereunder. The fact that arbitration
is or may be allowed will not impair the exercise of any
termination right under this Agreement.
F. CHANGE IN OWNERSHIP. RDSI and the Bank agree that in the event
that Rurbanc Data Services, Inc. (RDSI) has a change of
ownership (through merger, acquisition or sale of the
company), upon such occurrence, the Bank may exercise its
option, provided at least a six (6) month prior written notice
has been given to the other, may terminate this Agreement.
Change in the Bank ownership does not apply and will not
affect the terms of this Agreement.
G. This Agreement provides that RDSI and the Bank will use their
best efforts to resolve disputes expeditiously.
<PAGE> 7
H. If material deficiencies are found in RDSI's operation by
third party audit review or by bank regulatory examination
reports; or if RDSI's external auditors issue a qualified
going concern opinion on the financial statements of RDSI; or
if RDSI should be declared insolvent, and RDSI has not taken
action to remedy, these should also be considered events of
default.
XII. ERRORS AND OMISSIONS INSURANCE
RDSI will carry Errors and Omissions Insurance Coverage as follows:
Electronic Data Processing Errors and Omissions Declared Coverage:
Limit of Liability $1,000,000.00
Deductible of $1,000.00 per claim
Errors and Omissions Insurance Coverage is carried with:
Royal Insurance Company
9300 Arrowpoint Blvd.
Charlotte, NC 28217
RDSI agrees to provide the Bank notification in the event of a change in
insurance carriers or cancellation of the policy by the insurance carrier. RDSI
will provide the Bank with a fiscal year-end financial statement each year,
which is December 31st.
XIII. GENERAL
A. Bank acknowledges that it has not been induced to enter this
Agreement by any representation or warranty not set forth in
this Agreement. The capabilities, functions and operational
requirements are described in the RDSI Proposal, dated
February 04, 1998, supplied to the Bank by RDSI and contained
in Appendix A, which Appendix A is incorporated in the
Agreement by reference hereof. The services shall include, in
addition to the description contained in Appendix A, any
improvements, additions or modifications of the services which
RDSI provides to the Bank and materials related thereto and
all materials, documentation and technical information
provided to the Bank in written form and identified in
Appendix A for use in connection with the services. This
Agreement contains the entire agreement of the parties with
respect to its subject matter and supersedes all existing
agreements and all other oral, written or other communications
between them concerning this matter. This Agreement shall not
be modified in any way except by a writing signed by both
parties. Any and all additional services not previously
mentioned and made part of this Agreement that shall be
provided, shall become part of this Agreement by an Addendum
signed by both parties attached hereto.
<PAGE> 8
B. The Agreement may not be assigned by the Bank, in whole or
part, without the prior written consent of RDSI. This
Agreement shall binding upon and shall inure to the benefit of
RDSI and the Bank and their respective successors and
permitted assigns.
C. If any provisions of the Agreement (or any portion thereof)
shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired
thereby.
D. The Headings in this Agreement are intended for convenience of
reference and shall not affect its interpretation.
E. The individuals executing this Agreement on behalf of RDSI and
the Bank do each hereby represent and warrant that they are
duly authorized by all necessary action to execute this
Agreement on behalf of their respective principals.
F. In addition, it is agreed that an RDSI Customer Service
Representative shall be designated as the Bank's client
relations representative, and shall visit the Bank once every
six weeks.
G. This Agreement shall be governed and construed in accordance
with the laws of the State of Ohio.
H. If either party commences an action against the other to
enforce any of the terms of this Agreement, the action must be
brought in the State of Ohio in a court of competent
jurisdiction.
I. This Agreement provides that the Bank may request changes in
services, software and equipment as the Bank deems necessary,
the costs of which would presumably be borne by the Bank.
XIV. FILE BACK-UP AND DISASTER RECOVERY CONTINGENCY PLAN
A. This section of this Agreement is provided in summary form and
provides an attempt and best effort to inform the Bank of the
main points of RDSI's Disaster Recovery Contingency System and
Plan. RDSI's Disaster Recovery Contingency System and Plan is
an ever changing and growing plan and does not lend itself to
inclusion within this Agreement. RDSI will provide the Bank
with periodic updates and modifications to the plan as they
occur and are included within the plan and effect this
Agreement. The Bank is encouraged to review the RDSI Disaster
Recovery Plan in detail and at length at any time as deemed
necessary.
<PAGE> 9
B. RDSI agrees to provide MASTER and transaction file BACK-UP and
Disaster Recovery Contingency Plan, in order to secure and
limit any disruption to the Bank's data processing services as
provided by this Agreement.
C. All Master and Transaction Files (daily activity) are backed
up on a daily basis. The Transaction Files are backed up after
the day shift and after the nightly update. One copy of the
Transaction File is taken off-site, while a second copy is
maintained in an on-site vault. Master Files are backed up
each Wednesday and taken to off-site storage each Friday.
Since RDSI processes the Information Technology, Inc. (ITI)
Premier II Software, source code is no longer maintained at
RDSL. All on-site files are stored in the computer room in
locked fileproof cabinets. There is a manual operator log and
the Tape Librarian is responsible for logging, storing and
pulling tapes. Computer operators then mount and scratch tape
files prior to the beginning of the nightly operations.
D. A summary of the back-up tapes and files maintained in
off-site vault storage are as follows:
- UNISYS OPERATING SOFTWARE and UTILITIES
Backed up when changes occur - copy
maintained off-site.
- TRANSACTION FILE TAPES
Backed up daily - taken off-site daily.
Master Files
Backed up weekly - taken off-site weekly.
Source Code Programs
Maintained by ITI, Lincoln, Nebraska
E. RDSI and its management has secured a Disaster Recovery
Hotesite contractual agreement with SunGard Recovery Services,
Inc. 1285 Drummers Lane, Wayne, PA 19087, 1-610/314-8700 or
1-800/247-7832. RDSI is licensed at the Warminster, PA Mega
Center. Complete testing at the Warminster Center Facility,
including all applications, as well as capture testing is
conducted by RDSI personnel on an annual basis.
F. In addition, RDSI has developed and maintain a written
comprehensive Disaster Recovery Contingency Plan encompassing
RDSI's data processing operations, as well as communications
and imaging capture center and its service to the Bank. In the
event of a declared disaster emergency, the Bank's transaction
items may be picked up by RDSI
<PAGE> 10
personnel and ground courier or transmitted directly to
Warminster Mega Center where processing will be completed.
G. Hard copy reports may be delivered to the Bank by ground
courier or transmitted via dial-up communications or dedicated
data line communications. This process will continue until
service is restored at the RDSI Data Processing Center or
RDSI's Cold Site in Oklahoma, Ohio or Alternative Center
location. The actual RDSI Disaster Recovery Contingency Plan
may be reviewed in its entirety, by Bank personnel or
examiners, but the Plan must be reviewed in RDSI's secured
facilities. RDSI maintains power surge protection and an
Uninterrupted Power Supply (UPS) system on its Enterprise
Servers and computer equipment. IF RDSI and the SunGard
Recovery System Plan fails for any reason, RDSI will provide
the Bank copies of necessary files in order to assure the Bank
alternative servicing options.
H. The Bank agrees to have arrangements for back-up facilities
relating to the Bank's own internal operation and equipment,
in effect throughout the period covered by this Agreement
failure of said equipment is not the responsibility of RDSI.
I. RDSI maintain insurance coverage intended to cover data
processing equipment and media, extra expenses for emergency
processing, data reconstruction and emergency daily usage of
the Hotsite.
J. SunGard invoices RDSI monthly for the cost of the RDSI and
SunGard Recovery Contingency Plan, Hotsite membership and
testing resources and time. RDSI passes this cost directly
onto its customers, including the Bank via monthly data
processing invoices. The Bank's portion of this cost is
determined by asset size and actual number of accounts
processed, and its subject to change in direct relation to the
contractual agreement between RDSI and SunGard. These terms
may override the Line Item "Disaster Recovery Contingency Plan
Services" found on Addendum A Fee Schedule of this Agreement.
K. Declaration of Disaster. If RDSI center or equipment will be
operable within 48 hours of a loss, outage, disaster or
emergency, notification of the SunGard Recovery Center is not
required, however, RDSI reserves the right to declare a
disaster if center recovery is unsure. If outrage or loss of
equipment is expected to last beyond twenty-four (24) to
forty-eight (48) hours, the RDSI Management Team will notify
the SunGard Recovery Center and begin recovery procedures in
Warminster, PA.
L. RDSI assures the Bank that any individual service interruption
duration's be limited to a period of twenty-four (24) to
forty-eight (48) hours. Failure
<PAGE> 11
to comply by RDSI would constitute default under the terms of
this Agreement.
XV. INTERNAL REVENUE SERVICE
A. RDSI will process and provide, according to the Terms of this
Agreement, the required Internal Revenue Service magnetic
media or transmission reporting, as specified by the Internal
Revenue Service.
B. RDSI will make every reasonable effort to satisfy magnetic
media or transmission reporting requirements set forth by the
Internal Revenue Service and this Agreement. In an effort to
satisfy and verify all Internal Revenue Service requirements
RDSI will produce a magnetic media or transmission reporting
test, to be forwarded to the Internal Revenue Service in
December of each year for advance testing and verification by
the Internal Revenue Service.
C. In addition, if the Bank is levied a penalty by the Internal
Revenue Service, based upon information provided the IRS by
magnetic media as filed by RDSI, and it is determined that the
penalty levied was not a result of erroneous input by the
Bank, but from a magnetic media of transmission reporting
error, the Banks shall be held harmless, and RDSI will assume
responsibility to resolve the penalty with the Internal
Revenue Service. If the penalty stands, Section VII,
Limitation of Liability, shall be applied.
XVI. ON-LINE AVAILABILITY
A. RDSI will make every reasonable effort to have the On-Line
Inquiry Services available during the hours as indicated in
this Agreement as follows:
On Line Availability Schedule
-------------------- --------
8:00 a.m. - 7:00 p.m. Monday
8:00 a.m. - 7:00 p.m. Tuesday
8:00 a.m. - 7:00 p.m. Wednesday
8:00 a.m. - 7:00 p.m. Thursday
8:00 a.m. - 7:00 p.m. Friday
8:00 a.m. - 3:00 p.m. Saturday
Not Available Unless Previously Arranged Sunday
Not Available Unless Previously Arranged Scheduled Holidays
(Based on Federal Reserve
Holiday Schedule)
<PAGE> 12
B. RDSI will provide system updates nightly for the Bank. Monday
through Friday, based on the Federal Reserve Schedule.
Saturday's work will be posted or updated during Monday's
nightly update. In addition, Friday's actual reports should
not be expected to be delivered to the Bank until the
following Monday morning, delivery either by ground courier or
via the MACROFICHE Report Storage and Retrieval System or the
RECALL Optical Disk System. However, the on-line system will
be available to the Bank on Saturday, so that regular business
may be conducted.
C. RDSI assures on-line availability for balance verification and
transaction authorization to the RDSI Enterprise Server (host
computer) at least ninety-five (95%) of the processing time
each month (excluding scheduled down time for normal system
maintenance) provided the Bank's network and data
communications lines are available. The Bank shall be notified
at least one week in advance of any scheduled Enterprise
Server (host computer) downtime.
D. On a monthly basis, RDSI will ensure that its on-line
computing facilities are available for the processing of the
Bank's on-line transactions at a minimum of ninety-five (95%)
of the time, as prescribed by the Bank, measured over a
calendar month at the point of departure from the RDSI
Enterprise Server (host computer).
E. On-line response time is a direct function of the data
communication line speed and the Bank's internal network. RDSI
will assist the Bank in analyzing and maintaining an
acceptable and satisfactory response time and will assist the
Bank in improving the response time when necessary.
F. Customer Service is perceived as a significant benefit from
RDSI. RDSI will provide Bank responses to questions as
follows: (1) average response within two (2) hours of calling
the RDSI Customer Support Center; and (2) a resolution on
average of forty-eight (48) hours.
G. In the event of human error on the part of RDSI which could be
expected to create an impact on the Bank or the Bank's
customers, RDSI agrees to: (1) notify the Bank of the error
within four (4) hours during normal business hours; (2)
develop and implement a plan of action to be shared with the
Bank within eight (8) hours during normal business hours; (3)
resolve the error to limit the impact to the Bank, as soon as
commercially reasonably.
H. RDSI shall notify the Bank of any errors in the RDSI software
or operating system procedures when detected by or reported to
RDSI, that appear to impact the Bank. Such notification shall
include a plan for correction of the error.
<PAGE> 13
I. RDSI will provide the Bank two (2) weeks notices of any change
in routine operating procedures. Changes falling into this
category include but are not limited to: (1) persons to notify
in the event of a problem; (2) form of communications; (3)
change in processing or contact location; and (4) hours of
service; etc.
J. RDSI will notify the Bank, in writing, of any enhancements or
new releases of the RDSI software not less than one (1) week
prior to implementation of such changes. RDSI shall make
available to the Bank, in accordance with the published
curriculum, training adequate on all such changes not less
than one (1) week prior to implementation. Training usually is
only required should the changes be system releases and
upgrades requiring additional training or should the Bank
elect to use the new functionality. RDSI will determine if
training is necessary and notify the Bank of the scheduling.
XVII. DECONVERSION CONSIDERATIONS
A. Upon termination of this Agreement, the Bank may obtain data
files and records relative to itself for the purposes of
deconversion to an alternative data processing solution via
machine readable media based on the following Pricing
Agreement Schedule:
1. Magnetic Machine Readable Media - $150.00 per tape.
2. Bank agrees to purchase from RDSI all used special
form inventory previously purchased at RDSI's
expense, at cost..
3. All data processing line charges yet to be invoiced,
calculated to the estimated date of deconversion and
actual line disconnect order.
4. Programming and Software Deconversion Charges
- $1,500.00
5. Additional charges, if any, directly relating to the
deconversion, as assessed by Information Technology,
Inc. (ITI), Lincoln, Nebraska. These charges, if any,
as determined by ITI will be passed through directly
to the Bank.
6. Reports, trials, listings, etc. - $50.00 per report.
B. All deconversion charges as stated above should be paid by the
Bank to RDSI prior to the release of the final deconversion
magnetic readable media, however, RDSI will waive lien rights
in relationship to the Bank's data and good will.
C. RDSI agrees to waive the deconversion fees as previously
stated to the Bank in the event the Bank terminates the
Agreement due to RDSI's inability to restore service following
a declared disaster.
<PAGE> 14
XVIII. PRICING POLICIES
A. As previously stated within the Agreement, RDSI reserves the
right to reduce charges at any time, however, any increase
will not become effective until thirty (30) days, after prior
written notice has been given to the Bank. RDSI and the Bank
have agreed that during the first (1st) two (2) years of this
Agreement, rates shall be fixed at such rates as described in
the attached Addendum A - Fee Schedule. Most favored nation
provision exists and provides that the Bank's fee schedule are
no less favorable than those to any client.
B. It is also agreed that RDSI will not increase its fee
schedules in excess of six percent (6%) annually in years
three, four and five of this Agreement.
C. The only exceptions to this Pricing Agreement will be those
related to increased account and transaction volumes of the
Bank; new applications and services not presently utilized by
the Bank; increased number of terminals or workstations
supported; Saturday processing; and services not presently
covered by this Agreement. The Bank agrees to buy its own
paper supplies: ex: report paper, statements, checks, notice
paper, etc.
D. In addition, ground transportation (Courier Services) charges
if needed, are not covered in the pricing schedule and Terms
of Agreement contained within this Agreement. Transportation
charges will be calculated and invoiced based on allowable IRS
mileage and maintenance guidelines, plus salary
considerations, and are subject to change by RDSI. If ground
transportation ever becomes necessary RDSI will advise the
Bank, and obtain the Bank's approval before ground
transportation it utilized.
E. Future price increases relating to Saturday Processing may
supersede the price ceilings as previously stated. However, if
the Bank does not utilize Saturday Processing, price ceilings
referred to in this Agreement shall govern the pricing policy.
RDSI will provide nightly updates for the Bank, Monday through
Friday, based on the Federal Reserve Schedule. However,
On-Line Services will be available to the Bank on Saturdays,
based on the schedule as outlined in Section XVI of this
Agreement.
XIX. YEAR 2000 FUNCTIONALITY
RDSI represents and warrants that the services provided are, or will by
September 30, 1999, be, capable of supporting Year 2000 functionality and will
function in accordance with the specifications in a multi-century,
multi-millennium environment. For purposes of this section, "supporting Year
2000 functionality" shall mean that the services
<PAGE> 15
provided hereunder must provide fault-free performance in the processing of
dates and date-related data, including but not limited to calculating, comparing
and sorting individually and in combination with other RDSI products and
services. "Fault-free performance" shall mean the correct manipulation of data
containing dates prior to, through and beyond January 1, 2000 (including leap
year computations) without human intervention. Any modifications required to
conform the data processing services provided by RDSI to Year 2000 functionality
will be made by RDSI at their own expense. However, associated cost for
assistance and testing of the Bank's own data and files and equipment that may
be required by the various regulatory authorities will be the responsibility of
the Bank. Any such charges will be reviewed and authorized by the Bank with
prior written notice.
XX. NONSOLICITATION OF EMPLOYEES
HIRING OF EMPLOYEES. During the term of this Agreement and for a period of
twelve (12) months thereafter, RDSI and the Bank will not, without prior written
consent of the other, offer employment to or employ any person employed by the
other if the person was involve din providing or receiving services under this
Agreement.
XXI. PATENT INDEMNITY
Each of RDSI and the Bank shall indemnity, defend and hold harmless the other
from any and all claims, actions, damages, liabilities, costs and expenses,
including without limitation reasonable attorney's fees and expenses, arising
out of any claims of infringement of any United States letters patent, any trade
secret, or any copyright, trademark, service mark, trade name or similar
proprietary rights conferred by common law or by any law of the United States or
any state alleged to have occurred because of systems provided or work
performed. However, this indemnity will not apply unless the party seeking
indemnity informs the party from whom indemnification is sought full opportunity
to control the defense thereof, including without limitation any agreement
relating to settlement.
XXII. ENTIRE AGREEMENT AND NOTICES
A. This Agreement, together with all addendum's, appendices or
other attachments referenced herein, is complete and exclusive
statement of the Agreement between the parties, the Bank and
RDSI.
B. NOTICES. All notices by hand or in the United States mail,
first class (or in the case of a breach, registered or
certified, return receipt requested with proper postage,
registration and certification fees prepaid), addressed to the
party for whom intended at the respective addresses set forth
below, or such other address as may be designated, pursuant
hereto:
<PAGE> 16
If to RDSI: If to the Bank:
401 Clinton Street 12900 Hall Road, Ste. 395
Defiance, OH 43512 Sterling Heights, MI 48313
Attention: Mr. Jon A. Brenneman Attention: Mr. David McKinnon
Senior Vice President Chairman
Dated: RURBANC DATA SERVICES, INC.
----------------------
By:
--------------------------------
Title:
-----------------------------
LAKESIDE COMMUNITY BANK
STERLING HEIGHTS, MICHIGAN
By:
--------------------------------
Title:
-----------------------------
<PAGE> 1
EXHIBIT 10.4
RDSI BANKING SYSTEMS
DATA PROCESSING AGREEMENT
FIVE (5) YEAR AGREEMENT
Prepared For:
NORTH OAKLAND COMMUNITY BANK
STERLING HEIGHTS, MICHIGAN
(ROCHESTER HILLS, MICHIGAN)
AGREEMENT PERIOD:
JUNE 01, 1998 THROUGH MAY 31, 2003
FIVE (5) YEAR AGREEMENT
<PAGE> 2
RURBANC DATA SERVICES
DATA PROCESSING AGREEMENT
This Agreement dated March 24, 1998 is entered between Rurbanc Data Services,
Inc., a wholly owned subsidiary of Rurban Financial Corporation, an Ohio
Corporation located at 401 Clinton Street, Defiance, Ohio 43512 (thereafter
referred to as "RDSI"), and
NORTH OAKLAND COMMUNITY BANK
12900 Hall Road, Suite
395 (Rochester Hills, Michigan)
(hereinafter referred to as "Bank.")
This Agreement sets forth the basic contractual terms for providing an
electronic data processing service in accordance with the stipulations and rates
hereinafter set forth, and provided by RDSI to the Bank.
I. PURPOSE OF THE AGREEMENT
The Bank agrees that RDSI may perform certain services for the Bank in
the schedule(s) attached hereto, and RDSI agrees to performing such services
pursuant to the terms and conditions of this Agreement. RDSI shall receive data
from the Bank via data communication lines or ground courier for processing, and
shall process such data, producing reports and/or journals daily for the Bank.
It is agreed that if source documents are ever in transit, via ground courier,
between the Bank and RDSI, the responsible party should maintain adequate
insurance coverage and/or accept financial responsibility. The Bank agrees to
compensate RDSI for its services herein in accordance with the attached fee
schedules.
II. TERM OF THE AGREEMENT
This Agreement shall become effective June 01, 1998 and shall extend
for a period of Five (5) Years, continuous, day-to-day, which is the term of
this Agreement. However, at the request of the Bank, the term does not commence
until the "core" applications, (Demand Deposits, Savings, Certificates of
Deposit, Loans and Financial General Ledger Management Systems), have been
successfully converted and operational.
This Agreement shall automatically continue after the initial Term
unless terminated by either party upon at least 180 days prior written notice to
the other. The Bank's and RDSI's continuing obligations under the Agreement
including, without limitation, those relating to Ownership and Confidentiality
shall survive the termination of this Agreement. RDSI reserves the right to
reduce charges at any time, however,
<PAGE> 3
any increase will not become effective until thirty (30) days after prior
written notice has been given to the Bank. RDSI and the Bank have agreed that
during the first TWO (2) Years OF THIS Agreement, rates shall be fixed at such
rate(s) as described in the attached fee schedule(s).
III. RETURN OF BANK'S WORK
RDSI will process the Bank's items in connection with any service
agreed upon and will assure transmission or delivery to the Bank by 9:00 a.m. on
the next business day. The only exceptions granted for non-delivery on time,
will be those due to abnormal climatic conditions, equipment and software
failures, or other unforeseen contingencies not due to negligence and equipment
in effect throughout the period covered by this Agreement.
IV. CONVERSION
Expenses of the conversion will be paid by the Bank, such as quoted
conversion and training fees, equipment purchases and modifications,
communication equipment and lines. ITI formal training classes, new forms and
supplies and other conversion cost items as detailed in the attached RDSI
proposal. The RDSI conversion charge has been established at $5,000.00 plus any
expenses incurred due to deconversion from the Bank's existing processing
system, to be paid directly to RDSI upon completion of the first application
converted. RDSI assures the Bank that conversion of the "core" application
systems will be completed no later than thirty (30) days after commencement of
the first application. The bank will receive a 25% discount applied against the
first three (3) months' processing invoice from RDSI for each month the
conversion is delayed by RDSI, with an additional 25% discount for each
additional month the conversion is delayed thereafter. No discount penalty will
be applied if the Bank delays the conversion at the Bank's own request. Test
conversion procedures will be performed and provided prior to the actual
conversion and will require the Bank's approval to proceed.
V. COMPLIANCE WITH SECTION 5 OF THE BANK SERVICE CORPORATION ACT
RDSI hereby agrees it will be subject to regulations and examinations,
including auditing, to the same extent as if the services being provided by RDSI
were being performed by the Bank itself on its own premises.
VI. EXAMINATION OF RIGHTS
Each year RDSI will contract an outside accounting firm for the
purposes of performing a third party review. If the Bank wishes to participate
in the third party audit and review, cost will be divided equally among all RDAs
bank customers being
<PAGE> 4
processed according to asset size. The Bank still has the right to perform an
examination of RDAs independently at the Bank's own expense.
VII. CORRECTION OF ERRORS
RDAS shall have the right to reprocess the Bank's materials to correct
any errors for which RDSI may be responsible in full satisfaction of all Bank's
claims, provided the Bank has notified RDSI in writing of any claimed error
within thirty (30) days after receipt of service results and furnished
supporting documentation of such claim. All services furnished hereunder are
deemed acceptable to the Bank unless proper notice and proof of claim have been
made within the thirty (30) day period.
VIII. LIMITATION OF LIABILITY
A. RDSI shall be liable for loss, destruction or damage of Bank
supplied materials only if due to the negligence of RDSI, and
then only to the extent of restoring the loss, destroyed or
damaged materials; provided such restoration can be reasonably
performed by RDSI and the Bank furnishes RDSI with all source
data necessary for such restoration.
B. RDSI shall continue to maintain during the duration of this
Agreement an errors and omissions policy of insurance, in the
amount as set forth and contained in Section XII. Hereto.
C. RDSI shall not be liable for any incidental, special or
consequential damages of any nature whatsoever, such as, but
not limited to, loss of anticipated profits or other economic
loss in connection with, or arising out of the existence or
services provided for in this Agreement, or for specific
performance.
D. RDSI shall not be liable for failure to provide, or delays in
providing, services hereunder, if due to any cause beyond
RDSI's reasonable control, including but not limited to the
following: (1) mechanical failures or breakdowns of electronic
data processing equipment due to power failures dues to a
declared disaster; (2) shortages in supplies or materials from
RDSI's supplier, due to strike, riots, civil disturbances,
flood, fire, snow storms, acts of God, or any other act of
occurrences not under the controls of RDSI; (3) strikes,
riots, civil disturbances, war, law suits, or lockouts; (4)
fire, epidemics or other casualties; (5) windstorms,
earthquakes, tornadoes, floods, weather, or other acts of God;
(6) unusual delay in transportation beyond the control of
RDSI; (7) destruction of data communication lines; (8)
governmental regulations or interference, except to the extent
agreed to herein.
E. RDSI's total liability arising out of or any way connected to
its performance under this Agreement, including malfunction of
RDSI's equipment, failure or negligent of RDSI's employees and
agents, and defective programs, shall be limited to the
coverage as set forth under RDSI's errors and omissions
insurance policy. However, RDSI may remedy future claims,
<PAGE> 5
with the Bank's agreement, in the case where repetitive
processing services are being provided, to general money
damages in the amount not excess of the total amount paid by
the Bank for services for services performed by RDSI under
this Agreement during the period of ninety (90) days
immediately preceding the occurrence giving rise to any claims
by the Bank; claims exceeding this remedy may be submitted to
errors and omissions insurance coverage. In the case where
non-repetitive processing services are being supplied, RDSI's
total liability shall be limited to the general money damages
not to exceed the total amount paid for such services by the
Bank.
F. RDSI warrants that the services provided under this Agreement
comply with all existing applicable Federal, State and Local
laws, regulations and guidelines. If after the date hereof,
any modifications to those services shall be required by law
or by any governmental regulatory authority having authority
over the Bank's business, RDSI shall, upon ninety (90) days
advance written notice to the Bank and to RDSI, conform the
services to be in compliance with such modified laws or
governmental regulations. Except as otherwise provided in this
Agreement, RDSI shall not be liable for any other express or
implied warranty, including any warranty of merchantability or
fitness.
G. RDSI agrees to (1) monitor for and detect service
deficiencies, (2) take prompt action to determine the cause of
and to correct the deficiencies, (3) shoulder the costs of
correcting the deficiencies and (4) provide substitute
services until such time as the deficiencies are corrected.
Moreover, the fees due RDSI under this Agreement may be
adjusted for so long as the specific deficiencies exist so
that RDSI will have an economic incentive to correct
deficiencies promptly and to prevent deficiencies in the first
instance. The adjustment in fees due RDSI will be adjusted for
such deficiencies in accordance with Section VIII.
Limitation of Liability.
with the Bank's agreement, in the case where repetitive
processing services are being provided, to general money
damages in the amount not excess of the total amount paid by
the Bank for services for services performed by RDSI under
this Agreement during the period of ninety (90) days
immediately preceding the occurrence giving rise to any claims
by the Bank; claims exceeding this remedy may be submitted to
errors and omissions insurance coverage. In the case where
non-repetitive processing services are being supplied, RDSI's
total liability shall be limited to the general money damages
not to exceed the total amount paid for such services by the
Bank.
F. RDSI warrants that the services provided under this
Agreement comply with all existing applicable Federal, State
and Local laws, regulations and guidelines. If after the date
hereof, any modifications to those services shall be required
by law or by any governmental regulatory authority having
authority over the Bank's business, RDSI shall, upon ninety
(90) days advance written notice to the Bank and to RDSI,
conform the services to be in compliance with such modified
laws or governmental regulations. Except as otherwise provided
in this Agreement, RDSI shall not be liable for any other
express or implied warranty, including any warranty of
merchantability or fitness.
G. RDSI agrees to (1) monitor for and detect service
deficiencies, (2) take prompt action to determine the cause of
and to correct the deficiencies, (3) shoulder the costs of
correcting the deficiencies and (4) provide substitute
services until such time as the deficiencies are corrected.
Moreover, the fees due RDSI under this Agreement may be
adjusted for so long as the specific deficiencies exist so
that RDSI will have an economic incentive to correct
deficiencies promptly and to prevent deficiencies in the first
instance. The adjustment in fees due RDSI will be adjusted for
such deficiencies in accordance with Section VIII. Limitation
of Liability.
IX. OWNERSHIP AND CONFIDENTIAL
A. It is understood that the Bank is the legal owner of
all data and records relative to itself, which may be in the
possession RDSI and may be obtained by the Bank via machine
readable form at a reasonable charge determined by RDSI, as
stated in Section XVIL Deconversion Considerations, of this
Agreement. RDSI is the owner of all programs and
documentation
B. RDSI and the Bank each agree that all information including,
but not limited to business methods, internal operation data
and customer records, communicated to it by the other either
before or after the effective date of this Agreement, was and
shall be received in strict confidence, shall be used only
for the purposes of this Agreement, and that no such
information shall be disclosed by the recipient party without
the prior written consent of the other party, and each agrees
that each party will prevent the disclosure to outside
parties of the terms and provisions hereof, except as may be
necessary by reasons of legal, accounting, or regulatory
requirements beyond the reasonable control of RDSI or the
Bank, as the case may be.
C. This Agreement absolutely prohibits either party from
disclosing confidential information of the other, with the
usual exceptions of disclosure required by law or court order
or disclosure of information already in the public domain
through no fault of either party to the Agreement. Both
parties agree to notify the other of any breach of
confidentiality.
D. RDSI and the Bank agree to indemnify and hold harmless the
other from any direct loss, damage cost or expense which the
other may sustain or incur by reason of any wrongful use by
RDSI or the Bank, as the case may be, or confidential
information of the other obtained in the course of the
performance of this Agreement. In no event, shall such
indemnification extend to claims by or information
communicated by third parties not subject to this Agreement.
E. RDSI agrees that it will comply with all applicable Federal,
State and Local laws and regulations governing the use of
disclosure of information provided by the Bank.
F. RDSI shall establish and maintain reasonable safeguards
against the destruction or loss of the Bank's data in the
possession of RDSI.
G. RDSI will notify the Bank of any system changes that will
effect the Bank's procedures, reports, etc.
H. RDSI and the Bank each agree that all Bank information,
including hard copy report media as well as on-line data, and
all Bank customer data, shall be held in strict confidence,
and shall be used only for purposes of this Agreement, and
that no such information shall be disclosed by the recipient
party without the prior written consent of the Bank, and each
agrees to take all reasonable precautions to prevent the
disclosure to outside parties of the terms of this Agreement.
However, disclosure required by law may be excepted from the
general prohibition against disclosure and the Bank, the
Bank's parent company and the Bank's counsel may decide
whether the Agreement or its terms must be disclosed.
I. Upon the occurrence of any default under this Agreement,
remedies upon default as outlined in Section XI. Of this
Agreement will apply.
X. PAYMENTS AND BILLING
The Bank agrees to pay RDSI for services performed hereunder in
accordance with the changes set forth in this Agreement. RDSI shall
invoice during the first ten (10) days of each month for services
performed during the prior month. Payment by the Bank shall be net ten
(10) days from the invoice date. Any invoice aged thirty-one (31) days
from the date is subject to a service charge of one percent (1%) of the
unpaid balance. No late charge will be imposed by RDSI to the Bank in
the case of amounts past due that are reasonably in dispute.
XI. DEFAULT: REMEDIES UPON DEFAULT AND ARBITRATION
A. Any of the following events will constitute a default under
this Agreement: (1) nonpayment of any amounts due RDSI by the
Bank; (2) nonperformance of any of the Bank's or RDSI's other
material obligations; (3) if any representation or warranty of
the Bank or RDSI proves to be false in any material respect;
(4) if the Bank or RDSI commits an act of bankruptcy or
becomes insolvent or the subject of any proceeding under the
Bankruptcy Act; (5) if any substantial part of the Bank's
property becomes subject to any levy, seizure, assignment,
application or sale for or by any creditor or government
agency; or (6) failure of the RDSI backup disaster recovery
contingency plan to be implemented as a result of a service
disrupting disaster, causing the inability of RDSI, in
accordance to this Agreement, to perform data processing
services for the Bank for an unreasonable length of time, in
excess of twenty-four (24) to forty-eight (48) hours.
B. Upon the occurrence of any default under this Agreement, RDSI
and the Bank, at its option provided at least thirty (30) days
(or such longer period as may be required by the applicable
regulatory authorities) prior written notice has been given to
the other and such default has not been cured within such
period, may terminated this Agreement. In addition, RDSI or
the Bank shall have all other rights and remedies available to
it under this Agreement or by operation of law or otherwise.
C. Upon the occurrence of default under this Agreement as stated
in paragraph A. (6)(, of this section, if service provided by
RDSI to the Bank is disrupted for an extended period of time,
exceeding forty-eight (48)
<PAGE> 6
hours, resulting from the failure of the RDSI disaster
recovery contingency plan, being implemented in response to an
actual disaster, the Bank may terminate this Agreement and
take action to protect itself by seeking alternative data
processing services.
D. RDSI believes its systems and equipment to be Year 2000
compliance and will make every effort to test all RDSI systems
and equipment to assure functionality. Failure of RDSI to be
Year 2000 compliance would be in violation of bank regulations
and would constitute a default under this Agreement.
E. ARBITRATION. Any dispute, controversy or claim arising out of,
connected with, or relating to this Agreement, or the breach,
termination, validity or enforceability of any provision of
this Agreement, will be resolved by final and binding
arbitration by a panel of three arbitrators in accordance with
and subject to the Commercial Arbitration Rules of the
American Arbitration Association ("AAA") then in effect.
Following notice of a party's election to require arbitration,
each party will within thirty (30) days select one (1)
arbitrator, and those two arbitrators will within thirty (30)
days thereafter select a third arbitrator. If the two
arbitrators are unable to agree on a third arbitrator within
thirty (30) days, the AAA will within thirty (30) days
thereafter select such arbitrator. Discovery as permitted by
the Federal Rules of Civil Procedure then in effect will be
allowed in connection with arbitration to the extent
consistent with the purpose of the arbitration and as allowed
by the arbitrators. Judgment upon the award rendered in any
arbitration may be entered in any court of competent
jurisdiction, or application may be made to such court for
judicial acceptance of the award and an enforcement, as the
law of the state having jurisdiction may require or allow.
During any arbitration proceedings, RDSI shall continue to
provide services under this Agreement and the Bank shall
continue to make payments hereunder. The fact that arbitration
is or may be allowed will not impair the exercise of any
termination right under this Agreement.
F. CHANGE IN OWNERSHIP. RDSI and the Bank agree that in the event
that Rurbanc Data Services, Inc. (RDSI) has a change of
ownership (through merger, acquisition or sale of the
company), upon such occurrence, the Bank may exercise its
option, provided at least a six (6) month prior written notice
has been given to the other, may terminate this Agreement.
Change in the Bank ownership does not apply and will not
affect the terms of this Agreement.
G. This Agreement provides that RDSI and the Bank will use their
best efforts to resolve disputes expeditiously.
<PAGE> 7
H. If material deficiencies are found in RDSI's operation by
third party audit review or by bank regulatory examination
reports; or if RDSI's external auditors issue a qualified
going concern opinion on the financial statements of RDSI; or
if RDSI should be declared insolvent, and RDSI has not taken
action to remedy, these should also be considered events of
default.
XII. ERRORS AND OMISSIONS INSURANCE
RDSI will carry Errors and Omissions Insurance Coverage as follows:
Electronic Data Processing Errors and Omissions Declared Coverage:
Limit of Liability $1,000,000.00
Deductible of $1,000.00 per claim
Errors and Omissions Insurance Coverage is carried with:
Royal Insurance Company
9300 Arrowpoint Blvd.
Charlotte, NC 28217
RDSI agrees to provide the Bank notification in the event of a change in
insurance carriers or cancellation of the policy by the insurance carrier. RDSI
will provide the Bank with a fiscal year-end financial statement each year,
which is December 31st.
XIII. GENERAL
A. Bank acknowledges that it has not been induced to enter this
Agreement by any representation or warranty not set forth in
this Agreement. The capabilities, functions and operational
requirements are described in the RDSI Proposal, dated
February 04, 1998, supplied to the Bank by RDSI and contained
in Appendix A, which Appendix A is incorporated in the
Agreement by reference hereof. The services shall include, in
addition to the description contained in Appendix A, any
improvements, additions or modifications of the services which
RDSI provides to the Bank and materials related thereto and
all materials, documentation and technical information
provided to the Bank in written form and identified in
Appendix A for use in connection with the services. This
Agreement contains the entire agreement of the parties with
respect to its subject matter and supersedes all existing
agreements and all other oral, written or other communications
between them concerning this matter. This Agreement shall not
be modified in any way except by a writing signed by both
parties. Any and all additional services not previously
mentioned and made part of this Agreement that shall be
provided, shall become part of this Agreement by an Addendum
signed by both parties attached hereto.
<PAGE> 8
B. The Agreement may not be assigned by the Bank, in whole or
part, without the prior written consent of RDSI. This
Agreement shall binding upon and shall inure to the benefit of
RDSI and the Bank and their respective successors and
permitted assigns.
C. If any provisions of the Agreement (or any portion thereof)
shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remainder of this
Agreement shall not in any way be affected or impaired
thereby.
D. The Headings in this Agreement are intended for convenience of
reference and shall not affect its interpretation.
E. The individuals executing this Agreement on behalf of RDSI and
the Bank do each hereby represent and warrant that they are
duly authorized by all necessary action to execute this
Agreement on behalf of their respective principals.
F. In addition, it is agreed that an RDSI Customer Service
Representative shall be designated as the Bank's client
relations representative, and shall visit the Bank once every
six weeks.
G. This Agreement shall be governed and construed in accordance
with the laws of the State of Ohio.
H. If either party commences an action against the other to
enforce any of the terms of this Agreement, the action must be
brought in the State of Ohio in a court of competent
jurisdiction.
I. This Agreement provides that the Bank may request changes in
services, software and equipment as the Bank deems necessary,
the costs of which would presumably be borne by the Bank.
XIV. FILE BACK-UP AND DISASTER RECOVERY CONTINGENCY PLAN
A. This section of this Agreement is provided in summary form and
provides an attempt and best effort to inform the Bank of the
main points of RDSI's Disaster Recovery Contingency System and
Plan. RDSI's Disaster Recovery Contingency System and Plan is
an ever changing and growing plan and does not lend itself to
inclusion within this Agreement. RDSI will provide the Bank
with periodic updates and modifications to the plan as they
occur and are included within the plan and effect this
Agreement. The Bank is encouraged to review the RDSI Disaster
Recovery Plan in detail and at length at any time as deemed
necessary.
<PAGE> 9
B. RDSI agrees to provide MASTER and transaction file BACK-UP and
Disaster Recovery Contingency Plan, in order to secure and
limit any disruption to the Bank's data processing services as
provided by this Agreement.
C. All Master and Transaction Files (daily activity) are backed
up on a daily basis. The Transaction Files are backed up after
the day shift and after the nightly update. One copy of the
Transaction File is taken off-site, while a second copy is
maintained in an on-site vault. Master Files are backed up
each Wednesday and taken to off-site storage each Friday.
Since RDSI processes the Information Technology, Inc. (ITI)
Premier II Software, source code is no longer maintained at
RDSL. All on-site files are stored in the computer room in
locked fileproof cabinets. There is a manual operator log and
the Tape Librarian is responsible for logging, storing and
pulling tapes. Computer operators then mount and scratch tape
files prior to the beginning of the nightly operations.
D. A summary of the back-up tapes and files maintained in
off-site vault storage are as follows:
- UNISYS OPERATING SOFTWARE and UTILITIES
Backed up when changes occur - copy
maintained off-site.
- TRANSACTION FILE TAPES
Backed up daily - taken off-site daily.
Master Files
Backed up weekly - taken off-site weekly.
Source Code Programs
Maintained by ITI, Lincoln, Nebraska
E. RDSI and its management has secured a Disaster Recovery
Hotesite contractual agreement with SunGard Recovery Services,
Inc. 1285 Drummers Lane, Wayne, PA 19087, 1-610/314-8700 or
1-800/247-7832. RDSI is licensed at the Warminster, PA Mega
Center. Complete testing at the Warminster Center Facility,
including all applications, as well as capture testing is
conducted by RDSI personnel on an annual basis.
F. In addition, RDSI has developed and maintain a written
comprehensive Disaster Recovery Contingency Plan encompassing
RDSI's data processing operations, as well as communications
and imaging capture center and its service to the Bank. In the
event of a declared disaster emergency, the Bank's transaction
items may be picked up by RDSI
<PAGE> 10
personnel and ground courier or transmitted directly to
Warminster Mega Center where processing will be completed.
G. Hard copy reports may be delivered to the Bank by ground
courier or transmitted via dial-up communications or dedicated
data line communications. This process will continue until
service is restored at the RDSI Data Processing Center or
RDSI's Cold Site in Oklahoma, Ohio or Alternative Center
location. The actual RDSI Disaster Recovery Contingency Plan
may be reviewed in its entirety, by Bank personnel or
examiners, but the Plan must be reviewed in RDSI's secured
facilities. RDSI maintains power surge protection and an
Uninterrupted Power Supply (UPS) system on its Enterprise
Servers and computer equipment. IF RDSI and the SunGard
Recovery System Plan fails for any reason, RDSI will provide
the Bank copies of necessary files in order to assure the Bank
alternative servicing options.
H. The Bank agrees to have arrangements for back-up facilities
relating to the Bank's own internal operation and equipment,
in effect throughout the period covered by this Agreement
failure of said equipment is not the responsibility of RDSI.
I. RDSI maintain insurance coverage intended to cover data
processing equipment and media, extra expenses for emergency
processing, data reconstruction and emergency daily usage of
the Hotsite.
J. SunGard invoices RDSI monthly for the cost of the RDSI and
SunGard Recovery Contingency Plan, Hotsite membership and
testing resources and time. RDSI passes this cost directly
onto its customers, including the Bank via monthly data
processing invoices. The Bank's portion of this cost is
determined by asset size and actual number of accounts
processed, and its subject to change in direct relation to the
contractual agreement between RDSI and SunGard. These terms
may override the Line Item "Disaster Recovery Contingency Plan
Services" found on Addendum A Fee Schedule of this Agreement.
K. Declaration of Disaster. If RDSI center or equipment will be
operable within 48 hours of a loss, outage, disaster or
emergency, notification of the SunGard Recovery Center is not
required, however, RDSI reserves the right to declare a
disaster if center recovery is unsure. If outrage or loss of
equipment is expected to last beyond twenty-four (24) to
forty-eight (48) hours, the RDSI Management Team will notify
the SunGard Recovery Center and begin recovery procedures in
Warminster, PA.
L. RDSI assures the Bank that any individual service interruption
duration's be limited to a period of twenty-four (24) to
forty-eight (48) hours. Failure
<PAGE> 11
to comply by RDSI would constitute default under the terms of
this Agreement.
XV. INTERNAL REVENUE SERVICE
A. RDSI will process and provide, according to the Terms of this
Agreement, the required Internal Revenue Service magnetic
media or transmission reporting, as specified by the Internal
Revenue Service.
B. RDSI will make every reasonable effort to satisfy magnetic
media or transmission reporting requirements set forth by the
Internal Revenue Service and this Agreement. In an effort to
satisfy and verify all Internal Revenue Service requirements
RDSI will produce a magnetic media or transmission reporting
test, to be forwarded to the Internal Revenue Service in
December of each year for advance testing and verification by
the Internal Revenue Service.
C. In addition, if the Bank is levied a penalty by the Internal
Revenue Service, based upon information provided the IRS by
magnetic media as filed by RDSI, and it is determined that the
penalty levied was not a result of erroneous input by the
Bank, but from a magnetic media of transmission reporting
error, the Banks shall be held harmless, and RDSI will assume
responsibility to resolve the penalty with the Internal
Revenue Service. If the penalty stands, Section VII,
Limitation of Liability, shall be applied.
XVI. ON-LINE AVAILABILITY
A. RDSI will make every reasonable effort to have the On-Line
Inquiry Services available during the hours as indicated in
this Agreement as follows:
On Line Availability Schedule
-------------------- --------
8:00 a.m. - 7:00 p.m. Monday
8:00 a.m. - 7:00 p.m. Tuesday
8:00 a.m. - 7:00 p.m. Wednesday
8:00 a.m. - 7:00 p.m. Thursday
8:00 a.m. - 7:00 p.m. Friday
8:00 a.m. - 3:00 p.m. Saturday
Not Available Unless Previously Arranged Sunday
Not Available Unless Previously Arranged Scheduled Holidays
(Based on Federal
Reserve Holiday
Schedule)
<PAGE> 12
B. RDSI will provide system updates nightly for the Bank. Monday
through Friday, based on the Federal Reserve Schedule.
Saturday's work will be posted or updated during Monday's
nightly update. In addition, Friday's actual reports should
not be expected to be delivered to the Bank until the
following Monday morning, delivery either by ground courier or
via the MACROFICHE Report Storage and Retrieval System or the
RECALL Optical Disk System. However, the on-line system will
be available to the Bank on Saturday, so that regular business
may be conducted.
C. RDSI assures on-line availability for balance verification and
transaction authorization to the RDSI Enterprise Server (host
computer) at least ninety-five (95%) of the processing time
each month (excluding scheduled down time for normal system
maintenance) provided the Bank's network and data
communications lines are available. The Bank shall be notified
at least one week in advance of any scheduled Enterprise
Server (host computer) downtime.
D. On a monthly basis, RDSI will ensure that its on-line
computing facilities are available for the processing of the
Bank's on-line transactions at a minimum of ninety-five (95%)
of the time, as prescribed by the Bank, measured over a
calendar month at the point of departure from the RDSI
Enterprise Server (host computer).
E. On-line response time is a direct function of the data
communication line speed and the Bank's internal network. RDSI
will assist the Bank in analyzing and maintaining an
acceptable and satisfactory response time and will assist the
Bank in improving the response time when necessary.
F. Customer Service is perceived as a significant benefit from
RDSI. RDSI will provide Bank responses to questions as
follows: (1) average response within two (2) hours of calling
the RDSI Customer Support Center; and (2) a resolution on
average of forty-eight (48) hours.
G. In the event of human error on the part of RDSI which could be
expected to create an impact on the Bank or the Bank's
customers, RDSI agrees to: (1) notify the Bank of the error
within four (4) hours during normal business hours; (2)
develop and implement a plan of action to be shared with the
Bank within eight (8) hours during normal business hours; (3)
resolve the error to limit the impact to the Bank, as soon as
commercially reasonably.
H. RDSI shall notify the Bank of any errors in the RDSI software
or operating system procedures when detected by or reported to
RDSI, that appear to impact the Bank. Such notification shall
include a plan for correction of the error.
<PAGE> 13
I. RDSI will provide the Bank two (2) weeks notices of any change
in routine operating procedures. Changes falling into this
category include but are not limited to: (1) persons to notify
in the event of a problem; (2) form of communications; (3)
change in processing or contact location; and (4) hours of
service; etc.
J. RDSI will notify the Bank, in writing, of any enhancements or
new releases of the RDSI software not less than one (1) week
prior to implementation of such changes. RDSI shall make
available to the Bank, in accordance with the published
curriculum, training adequate on all such changes not less
than one (1) week prior to implementation. Training usually is
only required should the changes be system releases and
upgrades requiring additional training or should the Bank
elect to use the new functionality. RDSI will determine if
training is necessary and notify the Bank of the scheduling.
XVII. DECONVERSION CONSIDERATIONS
A. Upon termination of this Agreement, the Bank may obtain data
files and records relative to itself for the purposes of
deconversion to an alternative data processing solution via
machine readable media based on the following Pricing
Agreement Schedule:
1. Magnetic Machine Readable Media - $150.00 per tape.
2. Bank agrees to purchase from RDSI all used special
form inventory previously purchased at RDSI's
expense, at cost..
3. All data processing line charges yet to be invoiced,
calculated to the estimated date of deconversion and
actual line disconnect order.
4. Programming and Software Deconversion Charges -
$1,500.00
5. Additional charges, if any, directly relating to the
deconversion, as assessed by Information Technology,
Inc. (ITI), Lincoln, Nebraska. These charges, if any,
as determined by ITI will be passed through directly
to the Bank.
6. Reports, trials, listings, etc. - $50.00 per report.
B. All deconversion charges as stated above should be paid by the
Bank to RDSI prior to the release of the final deconversion
magnetic readable media, however, RDSI will waive lien rights
in relationship to the Bank's data and good will.
C. RDSI agrees to waive the deconversion fees as previously
stated to the Bank in the event the Bank terminates the
Agreement due to RDSI's inability to restore service following
a declared disaster.
<PAGE> 14
XVIII. PRICING POLICIES
A. As previously stated within the Agreement, RDSI reserves the
right to reduce charges at any time, however, any increase
will not become effective until thirty (30) days, after prior
written notice has been given to the Bank. RDSI and the Bank
have agreed that during the first (1st) two (2) years of this
Agreement, rates shall be fixed at such rates as described in
the attached Addendum A - Fee Schedule. Most favored nation
provision exists and provides that the Bank's fee schedule are
no less favorable than those to any client.
B. It is also agreed that RDSI will not increase its fee
schedules in excess of six percent (6%) annually in years
three, four and five of this Agreement.
C. The only exceptions to this Pricing Agreement will be those
related to increased account and transaction volumes of the
Bank; new applications and services not presently utilized by
the Bank; increased number of terminals or workstations
supported; Saturday processing; and services not presently
covered by this Agreement. The Bank agrees to buy its own
paper supplies: ex: report paper, statements, checks, notice
paper, etc.
D. In addition, ground transportation (Courier Services) charges
if needed, are not covered in the pricing schedule and Terms
of Agreement contained within this Agreement. Transportation
charges will be calculated and invoiced based on allowable IRS
mileage and maintenance guidelines, plus salary
considerations, and are subject to change by RDSI. If ground
transportation ever becomes necessary RDSI will advise the
Bank, and obtain the Bank's approval before ground
transportation it utilized.
E. Future price increases relating to Saturday Processing may
supersede the price ceilings as previously stated. However, if
the Bank does not utilize Saturday Processing, price ceilings
referred to in this Agreement shall govern the pricing policy.
RDSI will provide nightly updates for the Bank, Monday through
Friday, based on the Federal Reserve Schedule. However,
On-Line Services will be available to the Bank on Saturdays,
based on the schedule as outlined in Section XVI of this
Agreement.
XIX. YEAR 2000 FUNCTIONALITY
RDSI represents and warrants that the services provided are, or will by
September 30, 1999, be, capable of supporting Year 2000 functionality and will
function in accordance with the specifications in a multi-century,
multi-millennium environment. For purposes of this section, "supporting Year
2000 functionality" shall mean that the services
<PAGE> 15
provided hereunder must provide fault-free performance in the processing of
dates and date-related data, including but not limited to calculating, comparing
and sorting individually and in combination with other RDSI products and
services. "Fault-free performance" shall mean the correct manipulation of data
containing dates prior to, through and beyond January 1, 2000 (including leap
year computations) without human intervention. Any modifications required to
conform the data processing services provided by RDSI to Year 2000 functionality
will be made by RDSI at their own expense. However, associated cost for
assistance and testing of the Bank's own data and files and equipment that may
be required by the various regulatory authorities will be the responsibility of
the Bank. Any such charges will be reviewed and authorized by the Bank with
prior written notice.
XX. NONSOLICITATION OF EMPLOYEES
HIRING OF EMPLOYEES. During the term of this Agreement and for a period of
twelve (12) months thereafter, RDSI and the Bank will not, without prior written
consent of the other, offer employment to or employ any person employed by the
other if the person was involve din providing or receiving services under this
Agreement.
XXI. PATENT INDEMNITY
Each of RDSI and the Bank shall indemnity, defend and hold harmless the other
from any and all claims, actions, damages, liabilities, costs and expenses,
including without limitation reasonable attorney's fees and expenses, arising
out of any claims of infringement of any United States letters patent, any trade
secret, or any copyright, trademark, service mark, trade name or similar
proprietary rights conferred by common law or by any law of the United States or
any state alleged to have occurred because of systems provided or work
performed. However, this indemnity will not apply unless the party seeking
indemnity informs the party from whom indemnification is sought full opportunity
to control the defense thereof, including without limitation any agreement
relating to settlement.
XXII. ENTIRE AGREEMENT AND NOTICES
A. This Agreement, together with all addendum's, appendices or
other attachments referenced herein, is complete and exclusive
statement of the Agreement between the parties, the Bank and
RDSI.
B. NOTICES. All notices by hand or in the United States mail,
first class (or in the case of a breach, registered or
certified, return receipt requested with proper postage,
registration and certification fees prepaid), addressed to the
party for whom intended at the respective addresses set forth
below, or such other address as may be designated, pursuant
hereto:
<PAGE> 16
If to RDSI: If to the Bank:
401 Clinton Street 12900 Hall Road, Ste. 395
Defiance, OH 43512 Sterling Heights, MI 48313
Attention: Mr. Jon A. Brenneman Attention: Mr. David McKinnon
Senior Vice President Chairman
Dated: March 24, 1998 RURBANC DATA SERVICES, INC.
By:____________________________
Title:_________________________
NORTH OAKLAND COMMUNITY BANK
STERLING HEIGHTS, MICHIGAN
By:____________________________
Title:_________________________
<PAGE> 1
EXHIBIT 10.5
MICHIGAN COMMUNITY BANCORP LIMITED
1998 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
EFFECTIVE: _____________________
<PAGE> 2
MICHIGAN COMMUNITY BANCORP LIMITED
1998 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
EFFECTIVE: _____________________
TABLE OF CONTENTS
Page
----
ARTICLE 1 GENERAL PROVISIONS...............................................1
1.1 Purpose................................................................1
1.2 Definitions............................................................1
1.3 Administration.........................................................5
1.4 Stock..................................................................5
ARTICLE 2 STOCK OPTIONS FOR ELIGIBLE DIRECTORS.............................6
2.1 Grants of Options to Nonemployee Directors.............................6
2.2 Option Agreement.......................................................8
2.3 Exercise Price.........................................................8
2.4 Payment for Option Shares..............................................8
ARTICLE 3 TERMINATION......................................................9
3.1 General................................................................9
3.2 Post-Termination Exercise..............................................9
ARTICLE 4 ADJUSTMENTS AND CHANGE IN CONTROL...............................10
4.1 Adjustments...........................................................10
4.2 Change in Control.....................................................10
ARTICLE 5 MISCELLANEOUS...................................................10
5.1 Partial Exercise......................................................10
5.2 Rule 16b-3 Requirements...............................................10
5.3 Rights Prior to Issuance of Shares....................................11
5.4 Non-Assignability.....................................................11
5.5 Securities Laws.......................................................11
5.6 Termination and Amendment.............................................12
5.7 Effect on Services....................................................13
5.8 Use of Proceeds.......................................................13
5.9 Approval of Plan......................................................13
<PAGE> 3
MICHIGAN COMMUNITY BANCORP LIMITED
1998 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
EFFECTIVE: _____________________
Subject to shareholder approval, effective _____________________,
the plan described herein is hereby adopted as the Michigan Community Bancorp,
Limited 1998 Nonemployee Director Stock Option Plan (the "Plan").
ARTICLE 1
GENERAL PROVISIONS
1.1 PURPOSE. The purpose of this Plan is to promote the best
interests of the Corporation and its shareholders by attracting and motivating
highly qualified individuals to serve as directors and to encourage such
directors to acquire an ownership interest in the Corporation, thus identifying
their interests with those of shareholders.
1.2 DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:
(a) "Agreement" means the written agreement that sets forth the
terms of a Participant's Option.
(b) "Board" means the Board of Directors of the Corporation.
(c) "Change in Control" means the occurrence of any of the following
events:
(i) If any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), or group of persons acting in concert,
other than the Corporation, a Subsidiary or an employee benefit plan or
employee benefit plan trust
1
<PAGE> 4
maintained by the Corporation or a Subsidiary, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 of the Exchange Act,
except that a person also shall be deemed the beneficial owner of all
securities which such person may have a right to acquire, whether or not
such right is presently exercisable), directly or indirectly, of
securities of the Corporation representing twenty (20%) percent or more
of the combined voting power of the Corporation's then outstanding
securities ordinarily having the right to vote in the election of
directors; or
(ii) A liquidation or dissolution of the Corporation, sale
of substantially all of the assets of the Corporation or a merger,
consolidation or combination in which the Corporation is not the
survivor; or
(iii) The addition of new members to the Board within any
consecutive twenty-four (24) month period, which members constitute a
majority of the Board, unless a majority of the Board consists of
incumbent members of the Board in office prior to the commencement of
such twenty-four (24) month period, plus new members who were
recommended or appointed by a majority of the incumbent directors in
office immediately prior to the addition of such new members of the
Board.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(e) "Committee" means the Compensation Committee of the Corporation, or
other designated committee of the Corporation, which shall be comprised of two
or more disinterested members of the Board, as defined in Rule 16b-3.
2
<PAGE> 5
(f) "Common Stock" means shares of the Corporation's authorized
Common Stock.
(g) "Corporation" means Michigan Community Bankcorp, Ltd., a Michigan
corporation.
(h) "Director of the Corporation" means a member of the Board.
(i) "Director of a Subsidiary" means a member of the board of directors of a
Subsidiary.
(j) "Effective Date" means _____________________.
(k) "Eligible Director" means a Director of the Corporation or a
Director of a Subsidiary who is not an Employee of the Corporation.
(l) "Employee" means an employee of the
Corporation or its Subsidiaries who has an "employment relationship" with the
Corporation or its Subsidiaries, as defined in Treasury Regulation 1.421-7(h),
and the term "employment" means employment with the Corporation or its
Subsidiaries.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(n) "Expiration Date" means the date set forth in the Agreement relating
to an Option on which the right to exercise such Option shall expire, except as
otherwise provided in Article III below. Unless otherwise provided in the
Agreement, the Expiration Date for an Option shall be the seventh (7th)
anniversary of its Grant Date.
(o) "Fair Market Value" means, for purposes of determining the value of
Common Stock, the average between the published closing bid and asked prices of
the Common Stock on the NASD OTC Bulletin Board or if the Common Stock has
become listed on The Nasdaq Stock Market or a national securities exchange, then
on The
3
<PAGE> 6
Nasdaq Stock Market or such exchange instead; or if the Common Stock is
not quoted on either the NASD OTC Bulletin Board or the Nasdaq Stock Market or
any nationally recognized stock exchange, a value determined by any fair and
reasonable means prescribed by the Committee.
(p) "Grant Date" means the date on which an Option was automatically
awarded pursuant to Section 2.1(b) or the date on which a discretionary Option
was awarded pursuant to Section 2.1(d).
(q) "Initial Offering Price" means the price per share of
Common Stock received by the Company, excluding any underwriters' fees or
commissions in connection with its initial public offering of Common Stock.
(r) "Nonemployee Director" means a Director of the Corporation or a
Director of a Subsidiary who is not an Employee of the Corporation or its
Subsidiaries.
(s) "Nonqualified Stock Option" means an Option that is
not intended to meet the requirements of Section 422 of the Code.
(t) "Option" means a Nonqualified Stock Option to purchase Common Stock
granted under this Plan.
(u) "Participant" means each of the Nonemployee Directors participating
in this Plan from time to time.
(v) "Plan" means this Nonemployee Director Stock Option Plan, the terms
of which are set forth herein, and any amendments hereto.
(w) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as in effect
from time to time.
(x) "Subsidiary" or "Subsidiaries" means a corporation(s), of which more
than fifty (50%) percent of the outstanding voting
4
<PAGE> 7
stock is owned by the Corporation, either directly or indirectly through one or
more other Subsidiaries.
1.3 ADMINISTRATION. To the extent permitted by Rule 16b-3, the Plan
shall be administered by the Committee or another committee whose constituency
satisfies the requirements of Rule 16b-3 appointed by at least a majority of the
Board of Directors of the Corporation. The Committee shall interpret the Plan,
prescribe, amend and rescind rules and regulations relating to the Plan and make
all other determinations necessary or advisable for its administration. The
decision of the Committee on any question concerning the interpretation of the
Plan or its administration with respect to any Option granted under the Plan
shall be final and binding upon all Participants.
1.4 STOCK. The total number of shares of Common Stock available for
grants under the Plan shall not, in the aggregate, exceed 73,000 shares of
Common Stock, as adjusted from time to time in accordance with Article 4.
Shares subject to any unexercised portion of a terminated, forfeited, canceled
or expired Option granted hereunder shall be available for subsequent grants
under the Plan. In the event that an Option granted under the Plan is exercised
by the delivery of shares of Common Stock previously acquired upon the exercise
of Options issued under the Plan, the shares of Common Stock so delivered to
the Corporation or underlying such retained Options shall be available for
subsequent grants under this Plan.
5
<PAGE> 8
ARTICLE 2
STOCK OPTIONS FOR ELIGIBLE DIRECTORS
2.1 GRANTS OF OPTIONS TO NONEMPLOYEE DIRECTORS.
(a) Eligibility. All Nonemployee Directors who have been elected
by the shareholders at an annual meeting, who have been appointed by the
incorporator or who have been appointed to fill a vacancy on the Board (or the
board of directors of a Subsidiary) and are serving on the Board (or the board
of directors of a Subsidiary) at the time an Option is granted hereunder shall
be eligible to participate hereunder.
(b) Initial Options; Subsequent Options. On _______________,
the Corporation shall grant to each Nonemployee Director of the Corporation
serving on the Board on such date an Option to purchase the number of shares of
Common Stock listed on Schedule 2.1(b) at the Initial Offering Price (the
"Initial Option"). The Initial Options shall become exercisable at the following
times with respect to the percentage of shares listed:
PERCRENTAGE OF
EXERCISE DATE NUMBER OF
SHARES
Upon grant 70%
First anniversay of 85%
grant
Second anniversay of 95%
grant
Third anniversay of 100%
grant
Nonemployee Directors of the Corporation who are appointed or elected after
_______________ shall be granted an option ("Subsequent Option") on the first
day of the month following
6
<PAGE> 9
their appointment or election as a Director of the Corporation for a number of
shares which is equal to the amount set forth in the following table, and is
based on the time of their appointment or election in relation to the next
regular annual meeting of shareholders of the Corporation as follows:
YEAR OF FIRST NUMBER OF
ANNUAL MEETING OF OPTIONS
SHAREHOLDERS AFTER OF GRANTED
APPOINTMENT OR
ELECTION
1999 ________
shares
2000 ________
shares
2001 ________
shares
All Subsequent Options shall become exercisable at the following times with
respect to the percentage of shares listed:
PERCENTAGE OF
EXERCISE DATE NUMBER OF SHARES
Upon grant 70%
First anniversary of 85%
grant
Second anniversary of 95%
grant
Third anniversary of 100%
grant
The grant of Initial Options and Subsequent Options under this Section 2.1(b)
shall be automatic and nondiscretionary.
(c) No Discretion. Notwithstanding any provision in the Plan to
the contrary, the Committee shall have no discretion with
7
<PAGE> 10
respect to the terms of grants made to a Nonemployee Director of the Corporation
pursuant to Section 2.1(b), except to the extent such discretion would not
result in the grant or the Plan failing to qualify for the disinterested
director exemption provided under Rule 16b-3.
(d) Grant of Options to Directors of Subsidiaries. The
Committee, at any time and from time to time, subject to the terms and
conditions of this Plan, may grant Options to such Nonemployee Directors of a
Subsidiary and for such number of shares of Common Stock as it shall determine.
The Committee shall determine the general terms and conditions of exercise,
including any applicable vesting requirements. Each Option granted under this
Plan shall meet all of the terms and conditions of this Plan.
2.2 OPTION AGREEMENT. Each Option granted pursuant to this
Article 2 shall be evidenced by an Agreement for Participants in accordance with
the terms of the Plan and shall specify, among other things, the exercise price,
the term of the Option, the date or dates on which the Option becomes
exercisable, the number of shares to which the Option relates and such other
provisions as the Committee shall determine.
2.3 EXERCISE PRICE. The purchase price per share of Common Stock for the
Initial Option shall be the Initial Offering Price per share, which is deemed to
be the Fair Market Value of the Common Stock at such time of grant of such
Options. The purchase price per share of Common Stock for all Subsequent Options
and Discretionary Options granted pursuant to this Article 2 shall be equal to
the Fair Market Value per share of Common Stock on the Grant Date.
2.4 PAYMENT FOR OPTION SHARES. The purchase price for shares of Common
Stock to be acquired upon exercise of an Option granted
8
<PAGE> 11
hereunder shall be paid in full at the time of exercise in any of the following
ways: (a) in cash; (b) by certified check, bank draft or money order; (c) by
delivery to the Corporation of previously-acquired shares of the Corporation's
Common Stock with a Fair Market Value (determine on the last trading date
immediately preceding the date of exercise) equal to the exercise price; or (d)
by any combination of the foregoing.
ARTICLE 3
TERMINATION
3.1 GENERAL. The unexercised portion of each Option
automatically expires and is no longer exercisable on the earliest to occur of
the following: (a) seven (7) years after the Option is granted; (b) three (3)
months after the person who was granted the Option ceases to be a Nonemployee
Director, other than due to permanent disability, death or for cause; (c) one
(1) year following the death or permanent disability of the Nonemployee
Director; or (d) termination of the Nonemployee Director's service as such, for
cause.
3.2 POST-TERMINATION EXERCISE. During the period from the
Participant's termination of services as a Nonemployee Director until the
termination of the Option, the Participant, or the person or persons to whom the
Option shall have been transferred by will, by the laws of descent and
distribution or pursuant to a qualified domestic relations order may exercise
the Option only to the extent that such Option was exerciseable on the date of
the Participant's termination.
9
<PAGE> 12
ARTICLE 4
ADJUSTMENTS AND CHANGE IN CONTROL
4.1 ADJUSTMENTS. The total amount of Common Stock for which
Options may be granted under this Plan and the number of shares subject to any
such grants (both as to the number of shares of Common Stock and the Option
price) shall be appropriately adjusted for any increase or decrease in the
number of outstanding shares of Common Stock resulting from payment of a stock
dividend on Common Stock, a subdivision or combination of shares of Common
Stock, a stock split, a recapitalization of Common Stock or otherwise. The
foregoing adjustments and the manner of application of the foregoing provisions
shall be determined and made by the Committee. Any such adjustment may provide
for the elimination of any fractional share which might otherwise become subject
to an Option.
4.2 CHANGE IN CONTROL. Notwithstanding anything contained herein
to the contrary, upon a Change in Control, any outstanding Option granted
hereunder immediately shall become exercisable in full.
ARTICLE 5
MISCELLANEOUS
5.1 PARTIAL EXERCISE. The Committee shall permit and shall
establish procedures for the partial exercise of Options under the Plan.
5.2 RULE 16B-3 REQUIREMENTS. Notwithstanding any other provision
of the Plan, the Committee may impose such conditions on
10
<PAGE> 13
the exercise of an Option as may be required to satisfy the requirements of Rule
16b-3 and any successor thereto.
5.3 RIGHTS PRIOR TO ISSUANCE OF SHARES. No Participant shall have
any rights as a shareholder with respect to shares covered by an Option until
and only to the extent that the Option is exercised.
5.4 NON-ASSIGNABILITY. Except as set forth below, no Option shall
be transferable by a Participant except by will, the laws of descent and
distribution or pursuant to a qualified domestic relations order.
Notwithstanding the foregoing, to the extent permitted by Rule 16b-3, an Option
may be transferred by a Participant to a living trust of which the Participant
is the grantor and beneficiary during his lifetime, if such transfer shall not
be deemed to constitute a change in beneficial ownership. No transfer of an
Option by will or the laws of descent and distribution (or to a living trust as
applicable) shall be effective to bind the Corporation unless the Corporation
shall have been furnished with written notice thereof and a copy of the will (or
trust) or such evidence as the Corporation may deem necessary to establish the
validity of the transfer and the acceptance by the transferee of the terms and
conditions of the Option.
5.5 SECURITIES LAWS.
(a) Anything to the contrary herein notwithstanding, the
Corporation's obligation to sell and deliver Common stock pursuant to the
exercise of an Option is subject to such compliance with federal and state laws,
rules and regulations applying to the authorization, issuance or sale of
securities as the Corporation deems necessary or advisable. The Corporation
shall not be required to sell and deliver Common Stock unless and until it
11
<PAGE> 14
receives satisfactory assurance that the issuance or transfer of such shares
shall not violate any of the provisions of the Securities Act of 1933, as
amended, or the Exchange Act or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder or those of the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., the National Association of
Securities Dealers, Inc. or any stock exchange on which the Common Stock may be
listed, the provisions of any state laws governing the sale of securities or
that there has been compliance with the provisions of such acts, rules,
regulations and laws.
(b) The Committee may impose such restrictions on any shares of
Common Stock acquired pursuant to the exercise of an Option as it may deem
advisable, including, without limitation, restrictions (i) under applicable
federal securities laws, (ii) required by the American Stock Exchange, Inc., the
Nasdaq Stock Market or any stock exchange or other recognized trading market
upon which such shares of Common Stock are then listed or traded, and (iii)
under any blue sky or state securities laws applicable to such shares. No shares
shall be issued until counsel for the Corporation has determined that the
Corporation has complied with all requirements under appropriate securities
laws.
5.6 TERMINATION AND AMENDMENT.
(a) The Board may terminate or suspend the Plan, in whole or in
part, or the granting of Options under the Plan, at any time. No new grants
shall be made under the Plan after December 31, 2007.
(b) The Board may amend or modify the Plan at any time and from
time to time, but no amendment or modification, without the approval of the
shareholders of the Corporation, shall (i) materially increase the benefits
accruing to Participants under
12
<PAGE> 15
the Plan, materially increase the amount of Common Stock for which grants may be
made under the Plan, except as permitted under Sections 1.4 and 4.1, or
materially change the provisions relating to the eligibility of individuals to
whom grants may be made under the Plan, (ii) cause the Nonemployee Director to
fail to satisfy the applicable requirements of Rule 16b-3 or any Nonemployee
Director to fail to qualify as a "disinterested person" as defined in that rule,
or (iii) impair the rights of any option holder granted under the Plan without
such option holder's consent. Unless otherwise permitted under Rule 16b-3, this
Plan shall not be amended more than once in any six (6) month period other than
to comply with changes in the Code or the Exchange Act.
(c) No amendment, modification or termination of the Plan shall
adversely affect any Option granted under the Plan without the consent of the
Participant holding the Option.
5.7 EFFECT ON SERVICES. Neither the adoption of the Plan nor the
granting of any Option pursuant to the Plan shall be deemed to create any right
in any individual to be retained as a Nonemployee Director.
5.8 USE OF PROCEEDS. The proceeds received from the sale of
Common Stock pursuant to the Plan shall be used for general corporate purposes
of the Corporation.
5.9 APPROVAL OF PLAN. The Plan shall be subject to the
approval of the holders of at least a majority of the shares of Common Stock of
the Corporation present and entitled to vote at a meeting of shareholders of the
Corporation held within twelve (12) months after adoption of the Plan by the
Board. Any Option granted under the Plan prior to such shareholder approval
shall be conditioned upon receipt of such approval and may not be exercised in
whole or in part unless the Plan has been approved by the
13
<PAGE> 16
shareholders as provided herein. If not approved by shareholders within twelve
(12) months after approval by the Board, the Plan shall be rescinded, and any
options granted under the Plan shall be void retroactive to the Grant Date.
BOARD APPROVAL: _________________, 1998
SHAREHOLDER APPROVAL: _________________, 1998
14
<PAGE> 1
EXHIBIT 10.6
MICHIGAN COMMUNITY BANCORP LIMITED
1998 EMPLOYEE STOCK OPTION PLAN
EFFECTIVE: ___________________
<PAGE> 2
MICHIGAN COMMUNITY BANCORP LIMITED
1998 EMPLOYEE STOCK OPTION PLAN
EFFECTIVE: ___________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 1 GENERAL PROVISIONS.....................................................1
1 PURPOSE.....................................................................1
2 DEFINITIONS.................................................................1
3. ADMINISTRATION.............................................................4
4. PARTICIPANTS...............................................................5
5. STOCK......................................................................5
6. GRANTS OF OPTIONS..........................................................5
7. TERMINATION OF EMPLOYMENT..................................................8
8. ADJUSTMENTS................................................................9
9. CHANGE IN CONTROL; GOLDEN PARACHUTES......................................10
10. SECURITIES LAWS..........................................................10
11. WITHHOLDING TAXES-NONQUALIFIED STOCK OPTIONS.............................11
12. TERMINATION AND AMENDMENT................................................12
13. MISCELLANEOUS............................................................13
14. APPROVAL OF PLAN.........................................................14
</TABLE>
<PAGE> 3
MICHIGAN COMMUNITY BANCORP LIMITED
1998 EMPLOYEE STOCK OPTION PLAN
EFFECTIVE: ___________________
ARTICLE 1
GENERAL PROVISIONS
1. PURPOSE. The purposes of this Michigan Community Bankcorp, Ltd.
1998 Employee Stock Option Plan (the "Plan") are to: (a) closely associate the
interests of the management of Michigan Community Bankcorp, Ltd. (the
"Corporation") and its Subsidiaries with the shareholders by reinforcing the
relationship between participants' rewards and shareholder gains; (b) provide
management with an equity ownership in the Corporation commensurate with the
Corporation's performance, as reflected in increased shareholder value; (c)
maintain competitive compensation levels; and (d) provide an incentive to
management for continuous employment with the Corporation or its Subsidiaries.
2. DEFINITIONS. As used in this Plan, the following terms have the
meaning described below:
(a) "Board" means the Board of Directors of the Corporation.
(b) "Change in Control" means the occurrence of any of the following
events:
(i) If any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), or group of persons acting in concert,
other than the Corporation, a Subsidiary or an employee benefit plan or
employee benefit plan trust
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maintained by the Corporation or a Subsidiary, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 of the Exchange Act,
except that a person also shall be deemed the beneficial owner of all
securities which such person may have a right to acquire, whether or
not such right is presently exercisable), directly or indirectly, of
securities of the Corporation representing twenty (20%) percent or more
of the combined voting power of the Corporation's then outstanding
securities ordinarily having the right to vote in the election of
directors; or
(ii) A liquidation or dissolution of the Corporation, sale of
substantially all of the assets of the Corporation or a merger,
consolidation or combination in which the Corporation is not the
survivor; or
(iii) The addition of new members to the Board within any
consecutive twenty-four (24) month period, which members constitute a
majority of the Board, unless a majority of the Board consists of
incumbent members of the Board in office prior to the commencement of
such twenty-four (24) month period, plus new members who were
recommended or appointed by a majority of the incumbent directors in
office immediately prior to the addition of such new members of the
Board.
(c) "Committee" means the Compensation Committee of the Corporation, or
other designated committee of the Corporation, which shall be comprised of two
or more disinterested members of the Board, as defined in Rule 16b-3.
(d) "Common Stock" means shares of the Corporation's authorized
Common Stock.
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(e) "Corporation" means Michigan Community Bankcorp, Ltd., a Michigan
corporation.
(f) "Employee" means an Employee of the Corporation or its Subsidiaries
who has an "employment relationship" with the Corporation or its Subsidiaries,
as defined in Treasury Regulation 1.421-7(h), and the term "employment" means
employment with the Corporation or its Subsidiaries.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
(h) "Fair Market Value" means, for purposes of determining the value of
Common Stock, the average of the published closing bid and asked prices of the
Common Stock on the NASD OTC Bulletin Board (the "Bulletin Board"), or if the
Common Stock has become listed on The Nasdaq Stock Market ("Nasdaq"), then on
Nasdaq instead; or if the Common Stock is not quoted on either the Bulletin
Board or Nasdaq, a value determined by any fair and reasonable means prescribed
by the Committee.
(i) "Grant Date" means the date as of which the Committee authorizes an
individual Option.
(j) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code.
(k) "Initial Offering Price" means the price per share of Common Stock
received by the Corporation, excluding any underwriters' fees or commissions in
connection with its initial public offering of Common Stock.
(l) "Nonqualified Stock Option" means an Option that is not intended to
constitute an Incentive Stock Option.
(m) "Option" means either an Incentive Stock Option or a Nonqualified
Stock Option.
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(n) "Option Agreement" means either or both of an Incentive Stock
Option Agreement or a Nonqualified Stock Option Agreement between a Participant
and the Corporation relative to the grant of an Option as described in Section
6(a) of this Plan.
(o) "Participant" means an Employee designated by the Committee to
participate in this Plan.
(p) "Plan" means the Michigan Community Bankcorp, Ltd. 1998 Employee
Stock Option Plan, the terms of which are set forth herein, and any amendments
hereto.
(q) "Subsidiary" means a corporation of which more than fifty (50%)
percent of the outstanding voting stock is owned by the Corporation, either
directly or indirectly through one or more other Subsidiaries.
3. ADMINISTRATION. This Plan shall be administered by the Committee in
accordance with Rule 16b-3 of the Exchange Act. The Committee shall interpret
this Plan, prescribe, amend and rescind rules and regulations relating to this
Plan, and make all other determinations necessary or advisable for the
administration of this Plan. The Committee will make determinations with respect
to the officers and other key employees who will participate in the Plan and the
extent of their participation, including the type of Option. In making such
determinations, the Committee may consider the position and responsibilities of
the Employee, the nature and value of his or her services and accomplishments,
the present and potential contribution of the Employee to the success of the
Corporation and such other factors as the Committee may deem relevant. The
decision of the Committee on any question concerning the interpretation of this
Plan or any Option granted under this Plan shall be final and binding upon all
Participants.
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<PAGE> 7
4. PARTICIPANTS. Participants in this Plan shall be such Employees
(including Employees who are directors) of the Corporation and its Subsidiaries
as the Committee may select from time to time. The Committee may grant Options
to an individual upon the condition that the individual become an Employee of
the Corporation or of a Subsidiary, provided that the Option award shall be
deemed to be granted only on the date that the individual becomes an Employee.
5. STOCK. Subject to adjustment as provided in Section 9, the total
number of shares of Common Stock available for grants of Options under this Plan
shall be Twenty Nine Thousand(29,000) Shares subject to any unexercised portion
of a terminated, canceled or expired Option granted hereunder may again be
subjected to grants under this Plan.
6. GRANTS OF OPTIONS.
(a) Terms and Conditions; Designations. The Committee, at any time and
from time to time, subject to the terms and conditions of this Plan, may grant
Options to such Employees and for such number of shares of Common Stock as it
shall designate. The Committee shall determine the general terms and conditions
of exercise, including any applicable vesting requirements, and the Committee
may designate any Option granted as either an Incentive Stock Option or a
Nonqualified Stock Option, or may designate a portion of an Option as an
Incentive Stock Option or a Nonqualified Stock Option. Each grant of an Option
shall be evidenced by an Incentive Stock Option Agreement or a Nonqualified
Stock Option Agreement, as the case may be, which shall specify the applicable
terms and conditions and designations relative to such grant as determined by
the Committee. Each Option granted under this Plan shall meet all of
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<PAGE> 8
the terms and conditions of this Plan, except that an Incentive Stock Option
shall comply with the additional requirements of Section 6(b) below.
(b) Additional Requirements of Incentive Stock Options. Any Option
intended to constitute an Incentive Stock Option shall meet all of the terms and
conditions of this Plan and, in addition, shall comply with all of the following
requirements of this Section 6(b):
(i) No Incentive Stock Option shall be granted with an exercise
price below its Fair Market Value on the Grant Date or with an exercise
term that extends beyond ten (10) years from the Grant Date. No
Incentive Stock Option shall be exercisable after the expiration of its
exercise term.
(ii) An Incentive Stock Option shall not be granted to any
Participant who owns (within the meaning of Section 424(d) of the Code)
stock of the Corporation or any Subsidiary possessing more than ten
(10%) percent of the total combined voting power of all classes of
stock of the Corporation or a Subsidiary, unless, at the Grant Date,
the exercise price for the Option is at least one hundred ten (110%)
percent of the Fair Market Value of the shares subject to the Option
and the Option, by its terms, is not exercisable more than five (5)
years after the Grant Date.
(iii) The aggregate Fair Market Value of the underlying Common
Stock (determined at the Grant Date) as to which Incentive Stock
Options granted under this Plan (including a plan of a Subsidiary) may
first be exercised by a Participant in any one calendar year shall not
exceed One Hundred Thousand ($100,000) Dollars. To the extent that an
Option intended to constitute an Incentive Stock Option
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<PAGE> 9
shall violate the foregoing One Hundred Thousand ($100,000) Dollar
limitation, the portion of the Option that exceeds the One Hundred
Thousand ($100,000) Dollar limitation shall be deemed to constitute a
Nonqualified Stock Option.
(c) Option Price. The Committee shall determine the Option price per
share for each Option granted under this Plan. The Option price will not be less
than the Fair Market Value of the shares of Common Stock at the Grant Date,
except in the case of an Incentive Stock Option granted to any Participant who
owns (within the meaning of Section 424(d) of the Code) stock of the Corporation
or any Subsidiary possessing more than ten (10%) percent of the total combined
voting power of all classes of stock of the Corporation or a Subsidiary, the
Option price will be equal to one hundred ten (110%) percent of Fair Market
Value of the Shares subject to the Option at the Grant Date; provided that for
all Options granted during the 12 month period following the initial public
offering of Common Stock by the Corporation, the Option price shall not be less
than the Initial Offering Price.
(d) Notice of Exercise and Payment.
(i) A Participant shall exercise an Option by delivery to the
Corporation of a notice of exercise in the form approved by the
Committee.
(ii) The purchase price for shares of Common Stock to be acquired
upon exercise of an Option granted hereunder shall be paid in full in
cash or by personal check, bank draft or money order at the time of
exercise; provided, however, that in lieu of such form of payment a
Participant may pay such purchase price in whole or in part by
tendering shares of Common Stock, duly endorsed for transfer (or with
7
<PAGE> 10
duly executed stock powers attached), or in any combination of the
above. Shares of Common Stock surrendered upon exercise shall be valued
at Fair Market Value on the last trading date immediately preceding the
date on which the certificate(s) for such shares, duly endorsed for
transfer or accompanied by appropriate stock powers, are surrendered to
the Corporation. Participants who are subject to short swing profit
restrictions under the Exchange Act and who exercise an Option by
tendering previously-acquired shares shall do so only in accordance
with the provisions of Rule 16b-3 of the Exchange Act. Notwithstanding
the foregoing, any Option shall be deemed exercised by delivery to the
Corporation of a properly executed exercise notice, acceptable to the
Corporation, together with irrevocable instructions to the
Participant's broker to deliver to the Corporation sufficient cash to
pay the exercise price and any applicable income and employment
withholding taxes, in accordance with a written agreement between the
Corporation and the brokerage firm ("cashless exercise procedure").
(e) Acceleration of Exercise of Option. The Committee, in its sole
discretion, may accelerate the time at which any Option may be exercised in
whole or in part.
7. TERMINATION OF EMPLOYMENT.
(a) Options.
(i) If, prior to the date that an Option first becomes
exercisable, a Participant's employment is terminated for any reason
other than a Change in Control, the Participant's right to exercise the
Option shall terminate and all rights thereunder shall cease.
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<PAGE> 11
(ii) In the event that the employment of an optionee to whom an
Option has been granted under the Plan shall terminate (except as set
forth below) such Option may be exercised, to the extent that the
Option was exercisable on the date of termination of employment, only
until the earlier of three (3) months after such termination or the
original expiration date of the Option; provided, however, that if
termination of employment results from death or total and permanent
disability (within the meaning of Section 22(e)(3) of the Code, such
three (3) month period shall be extended to twelve (12) months.
(iii) The Committee, at the time of a Participant's termination of
employment, may, in its sole discretion, accelerate the term of an
Option or, subject to Section 7(a)(ii), extend the exercise period of
an Option to a date not later than the original expiration date.
8. ADJUSTMENTS. The total amount of Common Stock for which Options
may be granted under this Plan, and the number of shares subject to any such
grants (both as to the number of shares of Common Stock and the Option price),
shall be appropriately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock resulting from the payment of a stock
dividend on Common Stock, a subdivision or combination of shares of Common
Stock, a stock split, a recapitalization or otherwise. The foregoing adjustments
and the manner of application of the foregoing provisions shall be determined by
the Committee in its sole discretion. Any such adjustment may provide for the
elimination of any fractional share which might otherwise become subject to an
Option.
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<PAGE> 12
9. CHANGE IN CONTROL; GOLDEN PARACHUTES. Notwithstanding anything
contained herein to the contrary, upon a Change in Control, any outstanding
Option granted hereunder immediately shall become exercisable in full,
regardless of any installment provision applicable to such Option; provided,
however, that to the extent that the acceleration of a grant is deemed to
constitute a "golden parachute payment" under Section 280G of the Code and such
payment, when aggregated with other golden parachute payments to the Participant
results in an "excess golden parachute payment" under Section 280G of the Code,
any accelerated payment under this Section 9 shall be reduced to the highest
permissible amount that shall not subject the Participant to an excess golden
parachute excise tax under Section 4999 of the Code and shall entitle the
Corporation to retain its full compensation tax deduction for the payment.
10. SECURITIES LAWS.
(a) Compliance. Notwithstanding anything contained herein to the
contrary, the Corporation's obligation to sell and deliver Common Stock pursuant
to the exercise of an Option is subject to such compliance with federal and
state laws, rules and regulations applying to the authorization, issuance or
sale of securities as the Corporation deems necessary or advisable. No shares
shall be issued until counsel for the Corporation has determined that the
Corporation has complied with all requirements under appropriate securities
laws.
(b) Assurance of No Violation. The Corporation shall not be required
to sell and deliver Common Stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares shall not violate any of
the provisions of the Securities Act of 1933, as amended, or the Exchange Act,
or the
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<PAGE> 13
rules and regulations of the Securities Exchange Commission promulgated
thereunder or those of the National Association of Securities Dealers, Inc. (the
"NASD") with respect to NASDAQ or any stock exchange on which the Common Stock
may be listed, the provisions of any state laws governing the sale of
securities, or that there has been compliance with the provisions of such acts,
rules, regulations and laws.
(c) Restrictions. The Committee may impose such restrictions on any
shares of Common Stock acquired pursuant to the exercise of an Option under this
Plan as it may deem advisable, including, without limitation, restrictions (i)
under applicable federal securities laws, (ii) under the requirements of the
NASD with respect to NASDAQ or any stock exchange or other recognized trading
market upon which such shares of Common Stock are then listed or traded, and
(iii) under any blue sky or state securities laws applicable to such shares.
Notwithstanding any other provision of this Plan, the Committee may impose such
conditions on the exercise of an Option as may be required to satisfy the
requirements of Rule 16b-3 of the Exchange Act.
11. WITHHOLDING TAXES-NONQUALIFIED STOCK OPTIONS.
(a) Right to Withhold; Use of Previously-Acquired Shares and Cashless
Exercise Procedure. The Corporation or a Subsidiary shall have the right to
withhold from a Participant's compensation or require a Participant to remit
sufficient funds to satisfy applicable withholding for income and employment
taxes upon the exercise of a Nonqualified Stock Option. A Participant may make a
written election to tender previously-acquired shares of Common Stock or have
shares of Common Stock withheld from the exercise, provided that the shares have
an aggregate Fair Market Value sufficient to satisfy in whole or in part the
applicable
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<PAGE> 14
withholding taxes. The cashless exercise procedure of Section 6(d)(ii) may be
utilized to satisfy the withholding requirements related to the exercise of a
Nonqualified Stock Option.
(b) Insider Trading Restrictions. Except as permitted under Rule 16b-3
of the Exchange Act, a Participant subject to the insider trading restrictions
of Section 16(b) of the Exchange Act may use Common Stock to satisfy the
applicable withholding requirements only if notice of election to exercise is
given to the Committee within the ten (10) day "window periods" set forth in
Rule 16b-3, or if such election is made at least six months prior to the date on
which the Nonqualified Stock Option is exercised. Any election by a Participant
to utilize Common Stock for withholding purposes is subject to the discretion of
the Committee.
12. TERMINATION AND AMENDMENT. The Board may terminate this Plan, or
the granting of Options under this Plan, at any time. An Option may not be
granted pursuant to the Plan after December 31, 2007. The Board of Directors may
from time to time terminate the Plan or amend the Plan subject to shareholder
approval to the extent necessary to satisfy the requirements of Rule 16b-3 under
the Exchange Act, or any successor rule. The Board may amend or modify this Plan
at any time and from time to time, but no amendment or modifications, without
the approval of the shareholders of the Corporation, shall (a) materially
increase the benefits accruing to Participants under this Plan, (b) increase the
amount of Common Stock for which such grants and awards may be made under this
Plan, except as permitted under Section 8 hereof, or (c) change the provisions
relating to the eligibility of individuals to whom grants and awards may be made
under this Plan. No amendment, modification or termination of
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<PAGE> 15
this Plan shall in any manner affect any Option granted under this Plan without
the consent of the Participant holding the Option.
13. MISCELLANEOUS.
(a) Partial Exercise; No Fractional Shares. The Committee may permit,
and shall establish procedures for, the partial exercise of Options granted
under this Plan, provided that no fractional shares of Common Stock shall be
issued upon exercise of an Option.
(b) Rights Prior to Issuance of Shares. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option until the
issuance of a stock certificate for such shares. No adjustment shall be made for
dividends or other rights with respect to such shares for which the record date
is prior to the date the certificate is issued.
(c) Non-Assignability. No Option shall be transferable by a
Participant except by will or the laws of descent and distribution. During the
lifetime of a Participant, an Option shall be exercised only by the Participant.
Any transferee of an Option shall take the same subject to the terms and
conditions of this Plan and the related Agreement. No transfer of an Option by
will or the laws of descent and distribution shall be effective to bind the
Corporation unless the Corporation shall have been furnished with written notice
thereof and with a copy of the will and/or such other evidence as the
Corporation may deem necessary to establish the validity of the transfer and the
acceptance by the transferee of the terms and conditions of the Option.
(d) Effect on Employment. Neither the adoption of this Plan nor the
granting of any Option pursuant to this Plan shall be deemed to confer on any
person any right to continue in the
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employ of the Corporation or Subsidiary or to continue to perform services for
the Corporation or a Subsidiary or interferes in any way with the right of the
Corporation or a Subsidiary to terminate such person's service as an officer or
employee at any time.
(e) Use of Proceeds. The proceeds received from the sale of Common
Stock pursuant to this Plan will be used for general corporate purposes of the
Corporation.
(f) Captions. The captions and headings of the sections and
subsections have been inserted as a matter of convenience and reference only and
shall not control or affect the meaning or construction of this Plan.
14. APPROVAL OF PLAN. The Plan shall be subject to the approval of the
holders of at least a majority of the Common Stock of the Corporation present
and entitled to vote at a meeting of shareholders of the Corporation held within
twelve (12) months after adoption of this Plan by the Board. No Option granted
under this Plan may be exercised in whole or in part until this Plan has been
approved by the shareholders as provided herein. If not approved by the
shareholders within such twelve (12) month period, this Plan and any Options
granted hereunder shall be rescinded.
BOARD APPROVAL: _________________, 1998
SHAREHOLDER APPROVAL: _________________, 1998
14
<PAGE> 1
EXHIBIT 10.7
INCENTIVE STOCK OPTION AGREEMENT
PURSUANT TO THE
MICHIGAN COMMUNITY BANKCORP, LTD.
1998 EMPLOYEE STOCK OPTION PLAN
THIS AGREEMENT, dated this _________ day of ______________, 19___, is
made between MICHIGAN COMMUNITY BANKCORP, LTD. (the "Corporation") and
_________________________ (the "Optionee").
WHEREAS, the Optionee is now in the employ of the Corporation or its
Subsidiary, as defined in the Michigan Community Bankcorp, Ltd. 1998 Employee
Stock Option Plan (the "Plan"), and the Corporation desires to have the Optionee
remain in such employ and to afford the Optionee the opportunity to acquire
stock ownership in the Corporation so that the Optionee may have a direct
proprietary interest in the Corporation's success; and
WHEREAS, the Corporation and its shareholders have approved the Plan,
pursuant to which the Corporation may, from time to time, enter into stock
option agreements with certain of its Eligible Employees, as therein defined.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby
mutually covenant and agree as follows.
1. GRANT OF OPTION
Subject to the terms and conditions set forth herein, the Corporation
hereby grants to the Optionee during the period commencing on the day after the
Corporation's Common Stock (the "Stock") is registered with the Securities and
Exchange Commission related to its initial public offering (the "Operative
<PAGE> 2
Date") and ending on the earlier of the applicable date specified in Section 4
or the date ten (10) years from the date of this Agreement (the "Option Period")
Incentive Stock Options to purchase from the Corporation, at a price of per
share equal to the Initial Offering Price (as defined in the Plan), up to but
not exceeding in the aggregate __________ shares of the Corporation's Common
Stock ("Stock"), such number being subject to adjustment as provided in the
Plan. In the event the Corporation shall not have caused the Stock to be
registered with the Securities and Exchange Commission for purposes of its
initial public offer on or before twelve (12) months from the date hereof, the
grant of the option hereunder shall be terminated and ineffectual ab initio.
2. EXERCISE OF OPTION
Subject to such other limitations as may be provided by the Committee
(as defined in the Plan) or the Corporation's Board of Directors, the Option
granted in Section 1 of this Agreement may be exercised as follows:
(a) The Optionee shall have the right hereunder to purchase from the
Corporation the aggregate number of shares of Stock optioned hereunder on or
after the following dates in cumulative fashion as follows:
(1) On and after the Operative Date up to seventy (70%)
percent of the shares optioned hereunder;
(2) On and after the first anniversary of the Operative
Date, up to eighty-five (85%) percent of the shares optioned hereunder;
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<PAGE> 3
(3) On and after the second anniversary of the Operative
Date, up to ninety-five (95%) percent of the shares
optioned hereunder; and
(4) On and after the third anniversary of the Operative
Date, all shares optioned hereunder.
(b) To the extent not exercised, installments shall accumulate and be
exercisable by the Optionee, in whole or in part, in any subsequent year
included in the Option Period but not later than the expiration of the Option
Period.
(c) No less than one thousand (1,000) shares may be purchased upon
any one exercise of the Option granted hereby, unless the number of shares
purchased at such time is the total number of shares in respect of which the
Option hereby granted is then exercisable.
(d) In no event shall any Option granted hereby be exercisable for a
fractional share. (e) From time to time, in its discretion, the Committee may
offer the Optionee the right to cancel any Options granted hereunder in exchange
for such consideration as the Committee shall determine.
(f) Notwithstanding anything contained in this Agreement to the
contrary, upon a Change in Control (as defined in the Plan), any outstanding
Option granted hereunder immediately shall become exercisable in full,
regardless of any installment provision applicable to such Option; provided,
however, that to the extent that the acceleration of a grant is deemed to
constitute a "golden parachute payment" under Section 280G of the Code (as
defined in the Plan) and such payment, when aggregated with other golden
parachute payments to the Optionee results in an "excess golden parachute
payment" under Section 280G of the Code, any
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accelerated payment under this Section 2(f) shall be reduced to the
highest permissible amount that shall not subject the Optionee to an excess
golden parachute excise tax under Section 4999 of the Code and shall entitle the
Corporation to retain its full compensation tax deduction for the payment.
3. METHOD OF EXERCISING OPTION AND PAYMENT OF OPTION PRICE
(a) The Option hereby granted shall be exercised by the Optionee by
delivering to the Secretary of the Corporation, from time to time, on any
business day (the "Exercise Date"), written notice specifying the number of
shares the Optionee then desires to purchase (the "Notice"), and cash,
certified check, bank draft or money order to the order of the Corporation
for an amount in United States Dollars equal to the option price for the number
of shares specified in the Notice (the "Total Option Price"). In lieu of such
form of payment, an Optionee may pay all or part of such purchase price, in
whole or in part, by tendering shares of the Corporation's Stock, duly endorsed
for transfer (or with duly executed stock powers attached). Shares of the Stock
surrendered upon exercise shall be valued at Fair Market Value (as defined in
the Plan) on the last trading date immediately preceding the date on which the
certificate(s) for such shares, duly endorsed for transfer or accompanied by
appropriate stock powers, are surrendered to the Corporation. The Total Option
Price shall be delivered to the Secretary of the Corporation with the Notice
not later than the end of the first business day after the Exercise Date.
(b) The Notice, at the option of the Corporation, shall also state the
following:
I hereby represent and warrant that I am purchasing these shares
solely with a view to bona fide investment for my own individual
account and not with any present
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<PAGE> 5
intention to resell the same. I further represent and warrant that I
will dispose of said shares only in compliance with the applicable
federal and state laws or regulations relating to the sale of
securities.
(c) Within five (5) business days after the Exercise Date, the
Corporation shall, subject to the receipt of withholding tax, if any, issue to
the Optionee the number of shares with respect to which such Option shall be so
exercised, and shall deliver to the Optionee a certificate (or certificates)
therefor. The certificate(s) shall bear the following legend:
THIS COMMON STOCK HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR APPLICABLE STATE SECURITIES LAW AND MAY
BE OFFERED, SOLD OR TRANSFERRED ONLY IF REGISTERED PURSUANT TO THE
PROVISIONS OF THE ACT OR APPLICABLE STATE SECURITIES LAW OR IF THE
PROVISIONS OF RULE 144(K) UNDER THE ACT ARE APPLICABLE OR IF, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION, AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE.
4. TERMINATION
The Options granted hereby shall terminate and be of no force or effect
upon the expiration of ten (10) years from the date of this Agreement, unless
terminated prior to such time as provided below. If the Optionee ceases
employment with the Corporation, the Optionee's Options shall terminate or be
exercisable as follows:
(a) Termination Before Option Becomes Exercisable. If, prior to the
date that an Option first becomes exercisable, an Optionee's employment with the
Corporation is terminated for any reason other than a Change in Control (as
defined in the Plan), the Options granted hereby shall terminate as of the date
of termination.
(b) Termination After Option Becomes Exercisable. If an Optionee
terminates employment with the Corporation after an
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<PAGE> 6
Option first becomes exercisable, such Option may be exercised, to the extent
that such Option was exercisable on the date of termination of employment, until
the earlier of three (3) months after such termination or the original
expiration date of the Option.
(c) Disability. Upon the Optionee's disability (as that term is defined
in the Plan), the Options granted hereby are exercisable by the Optionee within
twelve (12) months (or such shorter time as may be provided by law or the terms
of the Options as specified in Section 1) from the date of the Optionee's
Disability. This Section 4(c) shall apply only to the Optionees who are
Employees (as defined in the Plan) and only to the extent that the Option was
exercisable on the date of Disability.
(d) Death. If the Optionee dies while in the employment of the
Corporation, the Optionee's estate, personal representative or beneficiary (as
applicable) shall have the right to exercise the Options granted hereby within
twelve (12) months from the date of the Optionee's death (or within such shorter
time as may be provided by law or the terms of the Options as specified in
Section 1) to the extent that the Option was exercisable on the date of the
Optionee's death.
Any determination made by the Committee with respect to any matter
referred to in this Section 4 shall be final and conclusive on all persons
affected thereby. Employment by the Corporation shall be deemed to include
employment of the Optionee by, and to continue during any period in which the
Optionee is in the employ of, any Subsidiary (as defined in the Plan).
6
<PAGE> 7
5. OPTIONEE
Whenever the word "Optionee" is used in any provision of this Agreement
under circumstances where the provision should logically be construed to apply
to the estate, personal representative or beneficiary to whom this Option may be
transferred by will or by the laws of descent and distribution, the word
"Optionee" shall be deemed to include such person.
6. ASSIGNABILITY
Except as otherwise provided herein, this Option is not transferable by
the Optionee otherwise than by will or the laws of descent and distribution and
is exercisable during the Optionee's lifetime only by the Optionee. No
assignment or transfer of this Option, or of the rights represented thereby,
whether voluntary or involuntary, by operation of law or otherwise, except by
will or the laws of descent and distribution, shall vest in the assignee or
transferee any interest or right herein whatsoever, but immediately upon any
attempt to assign or transfer this Option, the same shall terminate and be of no
force or effect.
7. RIGHTS AS A SHAREHOLDER
The Optionee shall not be deemed for any purpose to be a shareholder of
the Corporation with respect to the shares represented by this Option until this
Option shall have been exercised, payment and issue shall have been made as
herein provided, and the Optionee's name shall have been entered as a
shareholder of record on the books of the Corporation.
8. NO ASSURANCE OF EMPLOYMENT
The existence of this Option shall not be deemed to grant the Optionee
any right regarding continued employment by the Corporation or any Subsidiary,
to change any terms or conditions
7
<PAGE> 8
of employment of Optionee or to waive any claim which the Corporation or any
Subsidiary have against Optionee.
9. THE CORPORATION'S RIGHTS
The existence of this Option shall not affect in any way the right or
power of the Corporation or its shareholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Corporation's capital structure or its business, or any merger or consolidation
of the Corporation, or any issue of bonds, debentures, preferred or other stocks
with preference ahead of or convertible into, or otherwise affecting the Stock
of the Corporation or the rights thereof, or the dissolution or liquidation of
the Corporation, or any sale or transfer of all or any part of the Corporation's
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
10. RECAPITALIZATION; MERGER AND CONSOLIDATION
(a) If the shares of the Corporation's Stock as a whole are increased,
decreased or changed into or exchanged for a different number or kind of shares
or securities of the Corporation, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or the
like, an appropriate and proportionate adjustment shall be made in the number
and kinds of shares of Stock subject to the Plan and in the number, kinds and
per share exercise price of shares subject to any unexercised Options or
portions thereof granted prior to any such change. Any such adjustment in an
outstanding Option, however, shall be made without a change in the total price
applicable to the unexercised portion for the Option, but with a corresponding
adjustment in
8
<PAGE> 9
the price for each share of Stock covered by the Option. No fractional shares
shall be issued as a result of any adjustment.
(b) Upon dissolution or liquidation of the Corporation, or upon
reorganization, merger or consolidation in which the Corporation is not the
surviving corporation or upon the sale of substantially all of the property of
the Corporation to another company, the Plan and the Options issued thereunder
shall terminate, unless provision is made in connection with such transaction
for the assumption of Options theretofore granted or the substitution of such
Options of new options of the successor employer company or a parent or
subsidiary thereof, with appropriate adjustment as to the number and kinds of
shares and the per share exercise prices. In the event of such termination, all
outstanding Options shall be exercisable in full for at least thirty (30) days
prior to the termination date whether or not otherwise exercisable during such
period but not later than the date the Option otherwise would expire.
11. PREEMPTION BY APPLICABLE LAWS OR REGULATIONS
Anything in this Agreement to the contrary notwithstanding, if, at any
time specified herein for the issuance of shares to the Optionee, any law,
regulation or requirements of any governmental authority having appropriate
jurisdiction shall require either the Corporation or the Optionee to take any
action prior to or in connection with the shares of Stock then to be issued,
sold or repurchased, the issue, sale or repurchase of such shares of Stock shall
be deferred until such action shall have been taken.
12. RESOLUTION OF DISPUTES
Any dispute or disagreement which shall arise under, as a result of or
pursuant to this Agreement shall be determined by
9
<PAGE> 10
the Committee in its absolute and uncontrolled discretion, and any such
determination or any other determination by the Committee under or pursuant to
this Agreement and any interpretation by the Committee of the terms of this
Agreement shall be final, binding and conclusive on all persons affected
thereby.
13. AMENDMENTS
The Board (as defined in the Plan) shall have the right, in its
absolute and uncontrolled discretion, to alter or amend this Agreement, from
time to time, in any manner, for the purpose of promoting the objectives of the
Plan, but no amendment or modifications, without the approval of the
shareholders of the Corporation, shall (a) materially increase the benefits
accruing to Plan Participants, (b) increase the amount of Stock for which such
grants and awards may be made under the Plan, except as permitted under Section
8 of the Plan, or (c) change the provisions relating to the eligibility of
individuals to whom grants and awards may be made under the Plan. No amendment,
modification or termination of the Plan shall in any manner affect any Option
granted under the Plan without the consent of the individual holding the Option.
14. NOTICE
Any notice which either party hereto may be required or permitted to
give to the other shall be in writing and may be delivered personally or by
mail, postage prepaid, addressed as follows: To the Corporation at
__________________________________ ___________________________________,
Attention: Office of the Secretary) or at such other address as the Corporation,
by notice to the Optionee, may designate in writing from time to time; to the
Optionee, at his or her address as shown on the records of
10
<PAGE> 11
the Corporation or at such other address as the Optionee, by notice to the
Secretary of the Corporation, may designate in writing from time to time.
15. TAX WITHHOLDING
The Corporation or a Subsidiary shall have the right to deduct from any
payment hereunder any federal, state, local or employment taxes which it deems
are required by law to be withheld, or require the Optionee to remit sufficient
funds to satisfy applicable withholding upon the exercise of an Option. At the
request of the Optionee, or as required by law, such sums as may be required for
the payment of any estimated or accrued income tax liability may be withheld and
paid over to the governmental entity entitled to receive the same. An Optionee
may make a written election to tender previously-acquired shares of Stock or
have shares of Stock withheld from the exercise, provided that the shares have
an aggregate Fair Market Value sufficient to satisfy, in whole or in part, the
applicable withholding taxes.
16. FRACTIONAL SHARES
Any fractional shares concerning this Option shall be eliminated at the
time of exercise by rounding down for fractions of less than one-half (1/2) and
rounding up for fractions of equal to or more than one-half (1/2). No cash
settlements shall be made with respect to fractional shares eliminated by
rounding.
17. GOVERNING LAW
All matters relating to this Agreement shall be governed by the laws of
the State of Michigan, without regard to the principles of the conflict of laws,
except to the extent preempted by the laws of the United States.
11
<PAGE> 12
18. CONSTRUCTION
This Agreement has been entered into in accordance with the terms of
the Plan, and wherever a conflict may arise between the terms of this Agreement
and the terms of the Plan, the terms of the Plan shall control.
19. QUALIFIED NATURE OF AGREEMENT
This Agreement is intended to be an agreement concerning a stock option
arrangement which is qualified under Section 422 of the Code (as defined in the
Plan), and this Agreement shall be so construed.
20. GENERAL
The Corporation shall at all times during the term of this Option
reserve and keep available such number of shares of Stock as will be sufficient
to satisfy the requirements herein, shall pay all original issue and transfer
taxes with respect to the issue and transfer of shares pursuant hereto and all
other fees and expenses necessarily incurred by the Corporation in connection
therewith, and will, from time to time, use its best efforts to comply with all
laws and regulations which, in the opinion of counsel for the Corporation, shall
be applicable thereto.
21. REGULATORY COMPLIANCE.
No Stock shall be issued hereunder until the Corporation has received
all necessary regulatory approvals and has taken all necessary steps to
assurance compliance with federal and state securities laws or has determined to
its satisfaction and the satisfaction of its counsel that an exemption from the
requirements of the federal and applicable state securities are available.
12
<PAGE> 13
22. INCORPORATION OF PLAN
This Agreement is entered into under the applicable provisions of the
Plan which is attached hereto and made a part hereof.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set the
Optionee's hand and seal, all on the date and year first above written.
MICHIGAN COMMUNITY BANKCORP, OPTIONEE:
LTD.
By:_________________________ __________________________
Its____________________
Date:_______________________ Date:_____________________
13
<PAGE> 1
EXHIBIT 10.8
CREDIT AUTHORIZATION AGREEMENT
NBD BANK (the "Bank"), whose address is 611 Woodward Avenue, Detroit, Michigan
48226-3947, has approved the credit facilities listed below (collectively, the
"Credit Facilities," and individually, as designated below) to Michigan
Community Bancorp Limited (the "Borrower"), whose address is 12900 Hall Road,
Sterling Heights, MI 48313, subject to the terms and conditions set forth in
this agreement.
1.0 Credit Facilities
1.1 UNCOMMITTED CREDIT AUTHORIZATIONS. The Bank has approved the
uncommitted credit authorizations listed below (collectively,
the "Credit Authorizations," and individually, as designated
below) subject to the terms and conditions of this agreement
and the Bank's continuing satisfaction with the Borrower's
financial status. Disbursements under the Credit
Authorizations are solely at the Bank's discretion. Any
disbursement on one or more occasions shall not commit the
Bank to make any subsequent disbursement.
A. FACILITY A. The Bank has approved an uncommitted Credit
Authorization to the Borrower in the principal sum not to
exceed $500,000.00 in the aggregate at any one time
outstanding ("Facility A"). Credit under Facility A shall be
in the form of disbursements evidenced by credits to the
Borrower's account and shall be repayable as set forth in a
Master Demand Note executed concurrently (referred to in this
agreement both singularly and together with any other
promissory notes referenced in the Section 1 as the "Notes").
The proceeds of Facility A shall be used for the following
purpose: Prepay lease on branch and working capital. Facility
A shall expire on August 31, 1998 unless earlier withdrawn.
2.0 CONDITIONS PRECEDENT.
2.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. Before
the first extension of credit under this agreement, whether by
disbursement of a loan, issuance of a letter of credit, the
funding of a Lease or otherwise, the Borrower shall deliver to
the Bank, in form and substance to satisfactory to the Bank:
A. LOAN DOCUMENTS. The Notes, and if applicable, the
Leases, the letter of credit applications, the
security agreement, financing statements, mortgage
guaranties, subordination agreements and any other
loan documents which the Bank may reasonably required
to give effect to he transactions described by this
agreement;
<PAGE> 2
B. EVIDENCE OF DUE ORGANIZATION AND GOOD STANDING.
Evidence satisfactory to the Bank of the due
organization and good standing of the Borrower and
every other business entity that is a part to his
agreement or any other loan document required by this
agreement; and
C. EVIDENCE OF AUTHORITY TO ENTER INTO LOAN DOCUMENTS.
Evidence satisfactory to the bank that (i) each party
to this agreement and any other loan document
required by this agreement is authorized to enter
into the transactions described by this agreement and
the other loan documents, and (ii) the person signing
on behalf of each part is authorized to do so.
2.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. Before any extension
o credit under this agreement, whether by disbursement of a loan,
issuance of a letter of credit, the finding of a Lease or otherwise,
the following conditions shall have been satisfied:
A. REPRESENTATIONS. The Representations contained in this
agreement shall be true on and as of the date of the extension
of credit;
B. NO EVENT OF ACCELERATION. No event of acceleration shall have
occurred and be continuing or would result from the extension
of credit;
C. CONTINUED SATISFACTION. The Bank shall have remained
satisfied with the Borrower's managerial and financial
status;
D. ADDITIONAL APPROVALS, OPINIONS, AND DOCUMENTS. The Bank shall
have received such other approvals, opinions, and documents as
it may reasonably request.
3.0 FEES AND EXPENSES.
4.1 FEES. Upon execution of this agreement, or as set forth below,
the Borrower shall pay the Bank the following fees, all of
which the Borrower acknowledges have been earned by the Bank:
$3,500.00 facility fee.
4.2 OUT-OF-POCKET EXPENSES. The Borrower shall reimburse the Bank
for its out-of-pocket expenses and reasonable attorney's fees
(including the fees of in-house counsel) allocated to the
Credit Facilities.
4.0. SECURITY.
4.1 Payment of the borrowings and all other obligations under the
Credit Facilities shall be secured by a first security
interest and/or real estate
<PAGE> 3
mortgage, as the case may be, covering the following property
and all its additions, substitutions, increments, proceeds and
products, whether now owned or later acquired ("Collateral"):
A. REAL ESTATE The real property, including
improvements, located at Part of Lot 1 of North Hills
Subdivision situated in the Township of Avon, Oakland
County, Michigan. The Borrower shall deliver to the
Bank an executed mortgage, consent of landlord and
mortgage survey, all in form and substances
satisfactory to the Bank.
4.2 No forbearance or extension of time granted any subsequent
owner of the Collateral shall release the Borrower form
liability.
4.3 ADDITIONAL COLLATERAL/SETOFF. To further secure payment of the
borrowing and all other obligations under the Credit
Facilities and all of the Borrower's other liabilities to the
Bank, the Borrower grants to the Bank a continuing security
interest in (i) all securities and other property of the
Borrower in the custody, possession or control of the Bank
(other than property held by the Bank solely in a fiduciary
capacity) and (ii) all balances of deposit accounts of the
Borrower with the Bank. The Bank shall have the right at any
time to apply its own debt or liability to the e Borrower, or
to any other party liable for payment of the obligations under
the Credit Facilities, in whole or partial payment of such
obligations or other present or future liabilities, without
any requirement of mutual maturity.
4.4 CROSS LIEN. Any of the Borrower's other property in which the
Bank has a security interest to secure payment of any other
debt, whether absolute, contingent, direct or indirect,
including the Borrower's guaranties of the debts of others,
shall also security payment of and be part of the Collateral
for the Credit Facilities.
5.0 GUARANTIES. Payment of the Borrower's obligations under the Credit
Facilities shall be guaranteed by David A. McKinnon, by execution of
the Bank's form of guaranty agreement. The liability of the guarantors,
if more than one, shall be e joint and several.
6.0 SUBORDINATION. The Credit facilities shall be supported by the
subordination of all debt owing form the Borrower to _______, including
without limitation debt currently owing in the amount of $_________, in
manner and by agreement satisfactory to the Bank.
7.0 AFFIRMATIVE COVENANTS. So long as any debt or obligation remains
outstanding under the Credit Facilities, the Borrower, and each of its
subsidiaries, if any, shall:
<PAGE> 4
7.1 INSURANCE. Maintain insurance with financially sound and
reputable insurers covering its properties and business
against those casualties and contingencies and in the types
and amounts as shall be in accordance with sound business and
industry practices.
7.2 EXISTENCE. Maintain its existence and business operations as
presently in effect in accordance with all applicable laws and
regulations, pay its debts and obligations when due under
normal terms, and pay on or before their due date, all taxes,
assessments, fees and other governmental monetary obligations,
except as they may be contested in good faith if they have
been properly reflected on its books and, at the Bank's
request, adequate funds or security has been pledged to insure
payment.
7.3 FINANCIAL RECORDS. Maintain proper books and records of
account, in accordance with generally accepted accounting
principles where applicable, and consistent with financial
statements previously submitted to the Bank. The Bank retains
the right to inspect the Collateral and business records
related to it at such times and at such intervals as the Bank
may reasonably require.
7.4 NOTICE. Give prompt notice to the Bank of the occurrence of
(i) any Event of Acceleration, and (ii) any other development,
financial or otherwise, which would affect the Borrower's
business, properties or affairs in a materially adverse
manner.
7.5 COLLATERAL AUDITS. Permit the Ban or it agents to perform
audits of the Collateral. The Borrower shall compensate the
Bank for such audits in accordance with the Bank's schedule of
fees as amended from time to time.
7.6 MANAGEMENT. Maintain David A. McKinnon as Chief Executive
Officer.
7.7 FINANCIAL REPORTS. Furnish to Bank whatever information,
books, and records the Bank may reasonably request, including
at a minimum: If the Borrower has subsidiaries, all financial
statements required will be provided on a consolidated and on
a separate basis.
A. Within 45 days after and as of the end of each
calendar year, the signed personal financial
statement of Guarantor.
7.8 ENVIRONMENTAL CERTIFICATE. Furnish to the Bank an
Environmental Certificate on the Bank's form on and as of the
date of this agreement and thereafter as required by the
Environmental Certificate.
<PAGE> 5
8. NEGATIVE COVENANTS.
8.1 DEFINITIONS. As used in this agreement, the following terms
shall have the following respective meanings:
A. "Debt Service" means for any period, principal and
interest payments either paid or due during that
period [on all debt of the Borrower] [on all debt of
the Borrower to the Bank] [on all debt of the
Borrower except Subordinated Debt].
B. "EBITDA" means for any period, net income plus to the
extent deducted in determining net income, interest
expense (including but not limited to imputed
interest on capital leases), tax expense,
depreciation, and amortization.
C. "Subordinated Debt" means debt subordinated to the
Bank in manner and by agreement satisfactory to the
Bank.
D. "Tangible Net Worth" means total assets less
intangible assets, total liabilities, and all sums
owing form stockholders, members, or partners, as the
case may be, and from officers, managers, and
directors. Intangible assets include goodwill,
patents, copyrights, mailing lists, catalogs,
trademarks, bond discount and underwriting expenses,
organization expenses, and all other intangibles.
8.2 Unless otherwise noted, the financial requirements set forth
in this section shall be computed in accordance with generally
accepted accounting principles applied on a basis consistent
with financial statements previously submitted by the Borrower
to the Bank.
8.3 Without the written consent of the Bank, so long as any debt
or obligation remains outstanding under the Credit Facilities,
the Borrower shall not: (where appropriate, covenants apply on
a consolidated basis)
A. DIVIDENDS. Acquire or retire an o its shares of
capital stock, or declare or pay dividends or make
any other distributions upon any of its shares of
capital stock or percentage ownership interests,
except dividends payable in its capital stock and
dividends payable to "Subchapter S" corporation
shareholders and distributions payable to LLC members
in amounts sufficient to pay the shareholders' or
members' income tax obligations related to the
Borrower's taxable income.
B. DEBT. Incur, or permit to remain outstanding, debt or
borrowed money or installment obligations, except
debt reflected in the latest
<PAGE> 6
financial statement of the Borrower furnished to the
Bank prior to execution o this agreement and not to
be paid with proceeds of borrowings or leases under
the Credit Facilities. For purposes of this covenant,
the sale of an accounts receivable shall be deemed
the incurring of debt for borrowed money.
C. GUARANTIES. Guarantee or otherwise become or remain
secondarily liable on the undertaking of another,
except for the endorsement of drafts for deposit and
collection in the ordinary course of business.
D. LIENS. Create or permit to exist an lien on an of its
property, real or personal, except: existing liens
known to the Bank; liens to the Bank; liens incurred
in the ordinary course of business securing current
nondelinquent liabilities for taxes, worker's
compensation, unemployment insurance, social security
and pension liabilities; and liens for taxes being
contested in good faith.
E. ADVANCES AND INVESTMENTS. Purchase or acquire any
securities of, or make any loans or advances to, or
investments in, an person, firm or corporation,
except obligations of the United States Government,
open market commercial paper rated one of the top two
ratings by a rating agency of recognized standing, or
certificates of deposit in insured financial
institutions.
F. USE OF PROCEEDS. Use, or permit any proceeds of the
Credit Facilities to be used, directly or indirectly,
for the purpose of "purchasing or carrying any bargin
stock" within the meaning of Federal Reserve Board
Regulation U. At the Bank's request, the Borrower
shall furnish to he Bank a completed Federal Reserve
Board Form U-1.
G. FAILURE OF INITIAL PUBLIC OFFERING. Fail to raise
necessary capital funds through an initial public
offering before July 31, 1998, in an amount necessary
to open subsidiary banks as outlined in application
to the Financial Institutions Bureau of the State of
Michigan. If sufficient funds are not raised,
Guarantor agrees to pledge additional personal
collateral in the form of residential real estate
and/or marketable securities in an amount and type
acceptable to the Bank.
9.0 REPRESENTATIONS BY BORROWER. Each Borrower represents that (a)
the execution and delivery of this agreement, the Notes, and
Leases and the performance of the obligations they impose do
not violate any law, conflict with any agreement by which the
Borrower is bound, or require the
<PAGE> 7
consent or approval of any governmental authority or other
third party; (b) this agreement, the Notes, and the Leases are
valid and binding agreements, enforceable in accordance with
their terms; and (c) all balance sheets, profit and loss
statements, and other financial statement furnished to the
Bank are accurate and fairly reflects the financial condition
of the organizations and persons to which they apply on their
effective dates, including contingent liabilities of every
type which financial condition has not changed materially and
adversely since those dates. Each Borrower, if other than a
natural person, further represents that: (a) it is duly
organized, existing and in good standing under the laws of the
jurisdiction under which it was organized; and (b) the
execution and delivery of this agreement, the Notes, and the
Leases and the performance of the obligations they impose (i)
are within its power; (ii) have been duly authorized by all
necessary action of its governing body; and (iii) do not
contravene the terms of its articles of incorporation or
organization, its bylaws, or any partnership, operating or
other agreement governing its affairs.
10.0 ACCELERATION.
10.1 EVENTS OF ACCELERATION. If any of the following
events occurs, the Credit Facilities shall terminate
and all borrowings and other obligations under them
shall be due immediately, without notice, at the
Bank's option, whether or not the Bank has made
demand.
A. The Borrower or any guarantor of any of the
Credit Facilities, the Notes or the Leases
("Guarantor") fails to pay when due any
amount payable under the Credit Facilities
or under any agreement or instrument
evidencing debt to any creditor;
B. The Borrower or any Guarantor (a) fails to
observe or perform any other term of this
agreement, the Notes or the Leases; (b)
makes any materially incorrect or misleading
representation, warranty, or certificate to
the Bank; (c) makes any materially incorrect
or misleading representation in any
financial statement or other information
delivered to the Bank; or (d) defaults under
the terms of any agreement or instrument
relating to any debt for borrowed money
(other than borrowings under the Credit
Facilities) such that the creditor declares
the debt due before its maturity;
C. There is a default under the terms of any
loan agreement, mortgage, security agreement
or any other document executed as part of
the Credit Facilities, or any guaranty of
the obligations under the Credit Facilities
becomes
<PAGE> 8
unenforceable in whole or in part, or any
guarantor fails to promptly perform under
its guaranty;
D. A "reportable event" (as defined in the
Employee Retirement Income Security Act of
1974 as amended) occurs that would permit
the Pension Benefits Guaranty Corporation to
terminate any employee benefit plan o the
Borrower or any affiliate of the Borrower;
E. The Borrower or any Guarantor becomes
insolvent or unable to pay its debts as they
become due;
F. The Borrower or any Guarantor (a) makes an
assignment for the benefit of creditors; (b)
consents to the appointment of a custodian,
receive or trustee for it or for a
substantial part of its assets; or (c)
commences any proceeding under any
bankruptcy, reorganization, liquidation or
similar laws of any jurisdiction;
G. A custodian, receiver or trustee is
appointed for the Borrower or any Guarantor
or for a substantial part of its assets
without its consent and is not removed
within 60 days after such appointment;
H. Proceedings are commenced against the
Borrower or any Guarantor under any
bankruptcy, reorganizations, commencement;
or the Borrower or Guarantor consents to the
Commencement of such proceedings;
I. Any judgment is entered against the Borrower
or any Guarantor, or any attachment, levy or
garnishment is issued against any property
of the Borrower or any Guarantor;;
J. The Borrower or any Guarantor dies;
K. The Borrower or any Guarantor, without the
Bank's written consent, (a) dissolved, (b)
merges or consolidates with any third party,
(c) leases, sells or otherwise conveys a
material part of its assets or business
outside the ordinary course of business, (d)
leases, purchases or otherwise acquires a
material part of the assets of any other
corporation or business entity, except in
the ordinary course of business, or (e)
agrees to do any of the foregoing,
(notwithstanding the foregoing, any
subsidiary may merge or consolidate with any
<PAGE> 9
other subsidiary, or with the Borrower, so
long as the Borrower is the survivor);
L. The loan-to-value ratio of any pledged
securities at any time exceeds _____% and
such excess continues for five (5) days
after notice from the Bank to the Borrower;
M. There is a substantial change in the
existing or prospective financial condition
of the Borrower or any Guarantor which the
Bank in good faith determines to be
materially adverse; or
N. The Bank in good faith shall deem itself
insecure.
10.2 REMEDIES. If the borrowings and all other obligations
under the Credit Facilities are not paid at maturity,
whether by demand, acceleration or otherwise, the
Bank shall have all of the rights and remedies
provided by any law or agreement. Any requirement of
reasonable notice shall be met if the Bank sends the
notice to the Borrower at least seven (7) days prior
to the date of sale, disposition or other event
giving rise to the required notice. The Bank is
authorized to cause all or any part of the Collateral
to be transferred to or registered in its name or in
the name of any other person, firm or corporation,
with or without designation of the capacity of such
nominee. The Borrower shall be liable for any
deficiency remaining after disposition of any
Collateral. The Borrower is liable to he Bank for all
reasonable costs and expenses of every kind incurred
in the making or collection of the Credit Facilities,
including, without limitation, reasonable attorney's
fees and court costs (whether attributable to the
Bank's in-house or outside counsel). These costs and
expense shall include, without limitation, any costs
or expenses incurred by the Bank in any bankruptcy,
reorganization, insolvency or other similar
proceedings.
11.0 MISCELLANEOUS.
11.1 Notice from one party to another relating to this
agreement shall be deemed effective if made in
writing including telecommunications) and delivered
to the recipient's address, telex number or fax
number set forth under its name below by any of the
following means (a) hand delivery, (b) registered or
certified mail, postage prepaid, with return receipt
requested (c) first c lass or express mail, postage
prepaid, (d) Federal Express, or like overnight
courier service or (e) fax, telex or other wire
transmission with request for assurance of receipt in
a manner typical with respect to
<PAGE> 10
communication of that type. Notice made in accordance
with this section shall be deemed delivered upon
receipt if delivered by hand or write transmission, 3
business days after mailing if mailed by first class,
registered or certified mail, or one business day
after mailing or deposit with an overnight courier
service if delivered by express mail or overnight
courier.
11.2 No delay on the part of the Bank in the exercise of
any right or remedy shall operate as a waiver. No
single or partial exercise by the Bank of any right
or remedy shall preclude any other future exercise of
it or the exercise of any other right or remedy. No
waiver or indulgence by the Bank of any default shall
be effective unless in writing and signed by the
Bank, nor shall a waiver on one occasion be construed
as a bar to or waiver of that right on any future
occasion.
11.3 This agreement, the Notes, the Leases and any related
loan documents embody the entire agreement and
understanding between the Borrower and the Bank and
supersede all prior agreements and understandings
relating to their subject matter. If any one or more
of the obligations of the Borrower under this
Agreement, the Notes or the Leases shall be invalid,
illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the
remaining obligations of the Borrower shall not in
any way be affected or impaired, and such invalidlty,
illegality or unenforceability in one jurisdiction
shall not affect the validity, legality or
enforceability of the obligations of the Borrower
under this Agreement, the Notes or the Leases in any
other jurisdiction.
11.4 The Borrower, if more than one, shall be jointly and
severally liable.
11.5 This agreement is delivered in the State of Michigan
and governed by Michigan law. This agreement is
binding on the Borrower and its successors, and shall
inure to the benefit of the Bank ,its successors and
assigns.
11.6 Section headings are for convenience of reference
only and shall not affect the interpretation of
this agreement.
12.0 WAIVER OF JURY TRIAL. The Bank and the Borrower knowingly and
voluntarily waive any right either of them have to a trial by
jury in any proceeding (whether sounding in contract or tort)
which is in any way connected with this or any related
agreement, or the relationship established under them. This
provision may only be modified in a written instrument
executed by the Bank and the Borrower.
<PAGE> 11
Executed by the parties on:
NBD BANK BORROWER:
Vice President Chief Executive Officer
ADDRESS FOR NOTICES: ADDRESSES FOR NOTICES:
611 Woodward Avenue, MS 8077 12900 Hall Road, Ste. 395
Detroit, MI 48226 Sterling Heights, MI 48313
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF MICHIGAN COMMUNITY BANCORP LIMITED
Name of Subsidiary State of Incorporation
- ------------------ ----------------------
Lakeside Community Bank Michigan
North Oakland Community Bank Michigan
<PAGE> 1
EXHIBIT 23.2
Independent Auditors' Consent
We consent to the use in this Registration Statement of Michigan Community
Bancorp Limited (the "Company") on Form SB-2 of our report dated August 20,
1998 on the financial statements for the period ended July 31, 1998 appearing
in this Registration Statement. We also consent to the reference to us under
the heading "Experts", and to the incorporation by reference of this consent
into any Rule 462(b) registration statement of the Company that incorporates by
reference this Registration Statement.
/s/ Plante & Moran, LLP
Bloomfield Hills, Michigan
August 27, 1998
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