UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission File No. 0-10585
Mid Am, Inc.
(Exact Name of Registrant as Specified in its Charter)
Ohio 34-1580978
(State of Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
222 South Main Street, Bowling Green, Ohio 43402
(Address of Principal Executive Office) (Zip Code)
(419) 352-5271
(Registrant's Telephone Number)
Securities registered pursuant to Section 12 (b) of the Act:None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, without par value
(Title of class)
$1.8125 Cumulative Convertible Preferred Stock, Series A, without
par value
(Title of class)
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of the Form 10-K. [ ]
Indicated by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Based on the closing sales price of March 15, 1996 the aggregate
market value of the voting stock held by nonaffiliates of the
Registrant was approximately $293,112,000.
The number of shares outstanding of the Registrant's common
stock, without par value was 18,864,288 at March 15, 1996.
DOCUMENTS INCORPORATED BY REFERENCE* WHERE INCORPORATED
Annual Report to Shareholders
for year ended December 31, 1995 Parts II and IV
Definitive Proxy Statement dated
February 29, 1996, for the Annual
Meeting of Shareholders to be held
April 17, 1996, and filed with the
Securities and Exchange Commission
on or about February 29, 1996 Part II
*As stated under various items of this report, only specified
portions of such documents are incorporated by reference herein.
INDEX
MID AM, INC. - FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995
10-K
Page
PART I
Item 1. Business ........................................ 3
Item 2. Properties ...................................... 22
Item 3. Legal Proceedings ............................... 23
Item 4. Submission of Matters to a Vote of Security
Holders ......................................... 23
PART II
Item 5. Market for Registrant's Common Stock and Related
Shareholder Matters ............................. 23
Item 6. Selected Financial Data ......................... 23
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............. 24
Item 8. Financial Statements and Supplementary Data ..... 24
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............. 24
PART III
Item 10. Directors and Executive Officers of Registrant .. 24
Item 11. Executive Compensation .......................... 27
Item 12. Security Ownership of Certain Beneficial Owners
and Management .................................. 27
Item 13. Certain Relationships and Related Transactions .. 27
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ............................ 28
Signatures ............................................... 30
Exhibit Index ............................................ 32
PART I
Item 1. INFORMATION ABOUT MID AM, INC.
Mid Am, Inc. (the "Company") owns five commercial banks, with
a total of 87 banking offices located in western Ohio along the
Interstate 75 corridor and in southern Michigan. The Company also
owns four nonbank subsidiaries, a collection agency in Ohio, a
collection agency in Florida, a broker/dealer firm, and a data
processing company whose principal function is to provide data
processing and other administrative services to the Company's
banking subsidiaries. Based on total assets as of December 31,
1995, the Company was the 9th largest bank holding company in
Ohio. Operating through its five banking subsidiaries, Mid
American National Bank and Trust Company, First National Bank
Northwest Ohio, American Community Bank, N.A., AmeriFirst Bank,
N.A. and Adrian State Bank (the "Subsidiaries"), the Company
offers a wide range of lending, depository, trust, and related
financial services to individual and business customers.
The Holding Company
Mid Am Inc.'s corporate philosophy is to encourage its bank
subsidiaries to operate as locally-oriented community banks,
augmented by experienced, centralized support from the Company in
selected critical areas. This community bank orientation is
reflected in the Subsidiaries' branch banking centers, which
generally have advisory boards comprised of local business
persons, professionals and other community representatives, that
assist the banking centers in responding to local banking needs.
The Subsidiaries concentrate on customer service and business
development, while relying upon the support of the Company in
identifying operational areas that can be effectively centralized
without sacrificing the benefits of a local orientation. Primary
candidates for centralization are those functions which are not
readily visible to customers and those which are critical to risk
management. Asset quality review, data processing, loan and
deposit processing, certain mortgage banking activities,
financial reporting, internal audit, compliance and funds
management are among the functions which are managed at the
holding company level.
The Company's market area is economically diverse, with a base
of manufacturing, service industries, transportation and
agriculture, and is not dependent upon any single industry or
employer. Principal industries in the area include automotive,
defense, glass manufacturing, health care, higher education,
metal fabrication and trucking. The region benefits from a
well-developed transportation system, including airports, Lake
Erie and interstate highways. Total employment in the market area
has increased modestly in recent years, although the population
base is stable.
Mid Am Inc.'s strategic plan includes expansion and market
diversification through internal growth and acquisitions of
financial institutions and branches. The Company seeks
acquisition partners with experienced management, which have
significant market presence or have potential for improved
profitability through financial management, economies of scale
and expanded services. The Company also plans to devote
significant resources toward the growth of its fee-based income
over the next three years through internal efforts and/or through
nonbank acquisitions, such as leasing, financing and various
other types of businesses.
Currently, Mid Am, Inc. has no pending acquisitions. The
Company intends to continue to explore bank, thrift and nonbank
acquisitions.
Mid Am, Inc. is likely to seek acquisition targets within its
current market area or in areas contiguous to it. Sources of
capital to support future growth will include future stock
offerings and the Company's internally generated capital. In
addition, Mid Am, Inc. may raise capital for acquisitions through
future sales of securities in private placements or in the public
markets. The Company will continue to consider acquisition
targets that it determines would be attractive opportunities for
future growth. Mid Am Inc.'s overall assessment of potential
acquisitions will continue to emphasize managerial strengths,
quality of assets and appropriateness of markets, as well as
purchase price and overall economic and shareholder value.
The Subsidiaries
Mid Am Bank
Mid American National Bank and Trust Company ("Mid Am Bank"),
headquartered in Toledo, Ohio, is the largest of the holding
company's five bank subsidiaries and traces its corporate history
to 1952. As of December 31, 1995, Mid Am Bank had total assets of
$835 million. Mid Am Bank's loan portfolio contains a higher
proportion of commercial loans, 29 percent as of December 31,
1995, than the other Subsidiaries, primarily due to its
metropolitan market and in part as a result of participation in a
Small Business Administration ("SBA") "preferred lender" program
under which the SBA partially guarantees certain loans originated
by Mid Am Bank. Commercial lending is generally considered to
have higher credit risk than other forms of credit because of the
higher average dollar amount of individual credits and the risk
associated with potential diminution of the value of special
purpose collateral (which often serves as security on commercial
loans) in economic downturns.
The Toledo market, at the northeastern end of the Company's
service area, has experienced substantial changes in employment
composition during the past ten years, as historically large
employers have been replaced in importance by an increasing
number of smaller companies. In addition, the competition among
financial institutions in Toledo has changed significantly in the
past ten years as a result of the acquisition of the three
largest Toledo-based bank holding companies and the two largest
thrifts by holding companies headquartered outside the Toledo
area. The Company believes that these changes and the value its
customers place on long-term community-based banking
relationships have created increased opportunities for growth in
both loans and deposits in the Toledo market.
First National
First National Bank Northwest Ohio ("First National"),
headquartered in Bryan, Ohio, was founded in 1933 and had total
assets of $523 million as of December 31, 1995. First National's
lending emphasis is on residential real estate mortgage loans,
which represented approximately 38 percent of its loan portfolio
as of December 31, 1995. Management believes First National is
one of the leading mortgage originators in its four county
primary market area in northwest Ohio.
The Company's market area in northwest Ohio, served by First
National, includes the cities of Bryan and Defiance. The area's
diverse economy includes manufacturing and agriculture. In recent
years, the Company has broadened its banking efforts to include
contiguous areas in Indiana and Michigan which share similar
characteristics to the Company's primary market area.
AmeriCom
American Community Bank, N. A. ("AmeriCom") was formed as a
result of the October 31, 1992 merger between two wholly owned
subsidiaries, The Farmers Banking Company, N.A. ("Farmers Bank")
and Citizens Loan and Building Company ("Citizens"). Farmers Bank
and Citizens trace their banking operations to 1904 and 1882,
respectively. Since the merger, AmeriCom has acquired Colonial
Federal Savings Bank located in Bellefontaine, Ohio and various
branches from Home Savings of America located in Marion and
Marysville. AmeriCom had total assets of $404 million as of
December 31, 1995. AmeriCom's market area in west central Ohio
has experienced economic growth, principally due to its proximity
to Honda of America Manufacturing, Inc.'s manufacturing
facilities near Marysville, Ohio. AmeriCom's lending emphasis is
on real estate mortgage loans, which represented approximately
72 percent of its loan portfolio as of December 31, 1995.
The Company's west central Ohio market area is served by AmeriCom
which is headquartered in Lima. Historically, Lima has been
closely affiliated with automotive parts manufacturing, oil
refining and defense hardware production. While several
Lima-based manufacturers have reduced their work force over the
last decade, numerous small manufacturing and service companies
have been created in outlying communities to supplement the local
economy.
Marysville, located approximately 25 miles northwest of Columbus,
Ohio, has been among the fastest growing areas in Ohio, primarily
due to the presence of significant manufacturing and assembly
operations of Honda of America Manufacturing, Inc. As a result
of Honda's three manufacturing facilities, several outlying
communities have experienced similar growth as component
suppliers to Honda are locating in adjacent municipalities.
AmeriFirst
AmeriFirst Bank, N.A. ("AmeriFirst") was formed as a result of
the March 19, 1993 merger of Home Federal Savings Bank ("Home
Federal"), a federal savings association located in Xenia, Ohio,
which was acquired on December 31, 1992 and Apollo Savings and
Loan Company ("Apollo"), a state savings association located in
Cincinnati, Ohio. AmeriFirst had total assets of $295 million as
of December 31, 1995. During the third quarter of 1993,
Amerifirst changed from a federal savings association to a
national bank charter. AmeriFirst's lending emphasis is on real
estate, which represents approximately 87 percent of its loan
portfolio as of December 31, 1995.
AmeriFirst serves the Dayton and Cincinnati markets which
include Wright Patterson Air Force Base and numerous major
corporations. The areas economy includes automotive, defense,
manufacturing and service industries.
Adrian State Bank
Adrian State Bank ("Adrian"), a state chartered commercial
bank headquartered in Adrian, Michigan, was formed in 1893 and
had total assets of $136 million as of December 31, 1995. Adrian,
which completed its merger with the Company on February 28, 1995,
marks the beginning of the Company's expected expansion into the
southern Michigan market. Adrian's lending emphasis is on real
estate, which represents approximately 76 percent of its loan
portfolio as of December 31, 1995.
ICS and CCBS
Lucas County Credit Bureau, Inc., an Ohio corporation, d/b/a
International Credit Service ("ICS"), and its affiliate, CCB
Services, Inc. ("CCBS"), a Florida corporation, were acquired on
November 30, 1994. ICS and CCBS engage in credit card
collection, check collection and check guarantee activities.
ICS and CCBS had combined total assets of $3.4 million as of
December 31, 1995.
MFI Investments Corp.
MFI Investments ("MFI") was chartered as a broker/dealer in 1959.
The firm uses independent contractor investment representatives,
and recruits only established brokers with well developed books
of business. MFI has increased its field force by an average of
418 percent a year over the last five years to approximately 250
independent reps in 19 states. MFI brokers will begin to offer
home mortgages and CDs, and is expected to eventually expand to
offer a wide spectrum of banking services to their existing
clients. MFI also provides back office support, due diligence,
continuing education, flexibility, networking, and recognition to
its reps. MFI brokers do not offer any proprietary products, so
they are free to offer products which best suit their customer
needs.
MAISI
Mid Am Information Services, Inc. ("MAISI"), an Ohio chartered
non-banking subsidiary of the Company, was formed in 1990 for the
purpose of providing data processing services, including loan and
deposit processing, and informational services to the Company's
subsidiaries on a contract basis.
Lending Activities
Focusing on developing strong, primary banking relationships
with businesses and individuals in its market area, the Company
generally limits its lending activities within western Ohio and
southern Michigan. The Company focuses its commercial lending
efforts on small and medium-sized companies and its real estate
lending on owner-occupied one-to-four family residential
properties and intends in the future to increase its emphasis on
SBA guaranteed loans. Consistent with the Company's community
bank philosophy, the Subsidiaries independently establish
underwriting criteria and other loan origination practices. The
Company does, however, provide guidelines regarding risk
management, quality ratings, portfolio classification and loan
participation procedures to provide a measure of consistency
throughout the organization. The Company also has centralized the
loan review function to improve in loan review and grading among
the Company's Subsidiaries.
The Company's loan portfolio at December 31, 1995 was comprised
of approximately 24 percent commercial loans, 64 percent real
estate loans (including commercial real estate) and 12 percent
consumer related installment and credit card loans. Less than 10
percent of the Company's portfolio consisted of agricultural
loans or loans directly related to agricultural activities. The
Company had an insignificant amount of "highly leveraged
transactions", as defined by the banking regulators, and no
foreign loans. The Company generally does not lend outside its
overall market area and historically has not acquired
participation interests from other financial institutions.
Commercial loans have accounted for a significant portion of
the growth in the Company's loan portfolio in recent years.
Commercial loans are made to a diverse group of industrial and
service business customers. One particular area of emphasis is
SBA guaranteed loans, in which the SBA guarantees between 75
percent and 90 percent of the principal of the loans made to
eligible borrowers.
The Company has historically been a major residential real estate
lender in its market area. Residential loans are typically sold
in the secondary market promptly after origination; however, the
Company retains a majority of the servicing rights, which
represent a growing source of fee income. At December 31, 1995,
the Company held servicing rights for approximately $1.29 billion
in mortgage loans. All the banking subsidiaries are approved
seller/servicers for the Federal Home Loan Mortgage Corporation
(Freddie Mac). Real estate construction loans totalled $63
million or 4 percent of total loans at December 31, 1995. These
loans generally involved residential construction, as the Company
has generally avoided lending as a participant in large real
estate development projects. At December 31, 1995, all real
estate construction loans were performing.
Asset Quality
The Company's banking subsidiaries monitor the adequacy of their
allowances for credit losses on a monthly basis. The banking
subsidiaries formally document their evaluations of the adequacy
of their allowances for credit losses on a quarterly basis and
the evaluations are reviewed and discussed with each bank's
respective Board of Directors. The holding company's Asset
Quality Department presents a quarterly consolidated evaluation
of the adequacy of the allowance for credit losses to the
Company's Board of Directors. These evaluations of potential
losses include a review of the current financial status and
credit standing of borrowers and their prior history, an
evaluation of available collateral, a review of loss experience
in relation to outstanding loans, and management's judgment as to
prevailing and anticipated economic conditions, among other
relevant factors. Such factors include, among others, changes in
the credit grade assigned to the loan by either the assigned
officer or by the Company's Asset Quality Department from its
periodic reviews of segments of the loan portfolios, and
increases or decreases in specific reserves assigned to
individual loans based upon changes in the fair value of
collateral or changes in the estimated cash flows expected from
the loans.
The Company's percentage of non-performing loans to total loans
was 0.67 percent at December 31, 1995 as compared to 0.52 percent
of total loans at December 3l, 1994. Non-performing loans at
December 31, 1995 aggregated $9.8 million, as compared to $7.5
million at December 31, 1994. The Company's percentage of net
charge-offs for the twelve months ended December 31, 1995 to
average loans outstanding was 0.20 percent. At December 31,
1995, the Company's allowance for credit losses was 1.01 percent
of total loans, as compared to 1.03 percent at December 31, 1994.
The allowance for credit losses as a percentage of non-performing
loans at December 31, 1995 was 151 percent compared to 197
percent at December 31, 1994. The ratio of non-performing assets
to total loans plus other real estate owned was 0.72 percent at
December 31, 1995, compared to 0.60 percent at December 31, 1994.
Although there was a slight decline in the Company's asset
quality from 1994 to 1995, management believes that its
overall loan portfolio is of good quality and continual decline
in quality is not apparent.
Loans now current, excluding non-performing loans, but where
some concerns exist as to the ability of the borrower to comply
with present loan repayment terms approximated $32,715,000 at
December 31, 1995 as compared to $39,379,000 at December 31,
1994. These loans are being closely watched by management and
the Boards of Directors of the subsidiaries. The classification
of these loans, however, does not mean to imply that management
expects losses on each of these loans, but believes that a higher
level of scrutiny is prudent under the circumstances. At December
31, 1995 and 1994 specific allocations of the allowance for
credit losses related to these loans aggregated $3,359,000 and
$3,408,000, respectively. The decrease in loans where some
concern exists is primarily attributable to improvements in
borrowers' financial condition which were identified by the
Company's continuous process of loan review.
Sources of Funds
The primary sources of funds for the Subsidiaries are customer
deposits, loan payments and principal prepayments of loans,
maturities of investment securities and short-term borrowings.
Because of the community orientation of the Subsidiaries, the
Company's base of core deposits has been relatively stable. Total
deposits averaged $1.79 billion in 1995 and $1.73 billion in
1994. At December 31, 1995, the Company had $1.86 billion in
deposits, of which approximately 12 percent were
noninterest-bearing demand deposits. The Company does not
actively seek public deposits, and such deposits account for
approximately 3 percent of total deposits. The Company has $19
million in brokered deposits.
To fund the growth of average loans during 1995, the Company
increased average short-term and long-term borrowings $32 million
or 28 percent from $111 million in 1994 to $143 million in 1995.
The increase in short-term borrowing was primarily due to an
increase in repurchase agreements and the increase in long-term
borrowings was primarily due to an increase in Federal Home Loan
Bank borrowings.
Competition
There is significant competition in the financial services
industry in western Ohio among commercial banks. As a result of
the deregulation of the financial services industry, the Company
also competes with other providers of financial services such as
savings and loan associations, credit unions, consumer finance
companies, securities firms, insurance companies, commercial
finance and leasing companies, the mutual fund industry, full
service brokerage firms and discount brokerage firms. Some of the
Company's competitors, including certain regional bank holding
companies which have made acquisitions in the Company's market
area, have substantially greater resources than that of the
Company, and as such, may have higher lending limits and may
offer other services not available through the Subsidiaries.
The Subsidiaries compete on the basis of rates of interest
charged on loans, the rates of interest paid for funds, the
availability of services and the responsiveness to the needs of
its customers.
Price Range of Common Stock and Dividends
Mid Am Inc.'s Common Stock is quoted on the NASDAQ National
Market System under the symbol "MIAM. " The following table sets
forth for the calendar periods indicated the range of the high
and low last reported sale prices per share of the Company's
Common Stock as derived from NASDAQ National Market System
quotations, as well as the cash dividends declared per share for
the same periods.
The sales price and cash dividend figures that follow have been
adjusted to reflect the three-for-two stock split effected during
1993 and the 10 percent stock dividends declared and paid in
1995, 1994 and 1992.
Cash
High Low Dividends
1993
First Quarter $ 13.23 $ 10.47 $ 0.13
Second Quarter 12.81 10.88 0.14
Third Quarter 13.23 10.88 0.14
Fourth Quarter 12.81 10.54 0.14
1994
First Quarter $ 13.02 $ 11.78 $ 0.14
Second Quarter 12.19 11.16 0.15
Third Quarter 13.53 11.98 0.15
Fourth Quarter 13.52 11.82 0.15
1995
First Quarter $ 13.86 $ 12.73 $ 0.15
Second Quarter 15.38 12.95 0.16
Third Quarter 16.50 15.38 0.16
Fourth Quarter 17.00 16.25 0.16
1996
Through February $18.00 $ 16.38 -
As of March 15, 1996, Mid Am Inc.'s Common Stock was held by
approximately 8,200 holders of record.
Dividend Policy
The Company and its predecessor, Mid Am Bank, have paid cash
dividends on its Common Stock for 40 consecutive years. In
addition to cash dividends, the Company also periodically pays
stock dividends to its shareholders, at the discretion of the
Board of Directors. The Company paid 10 percent stock dividends
in 1995, 1994 and 1992.
The payment and amount of future dividends on the Common Stock
will be determined by the Board of Directors and will depend on,
among other things, the earnings, financial condition and cash
requirements of the Company at the time such payment is
considered, and on the ability of the Company to receive
dividends from its affiliates, the amount of which is subject to
regulatory limitations.
The Company has outstanding 1,389,726 shares of Cumulative
Convertible Preferred Stock, Series A, as of March 15, 1996,
which has a dividend preference feature over the Company's Common
Stock.
Supervision and Regulation
General
Bank holding companies and banks are extensively regulated under
both federal and state law. To the extent that the following
information describes statutory and regulatory provisions, it is
qualified in its entirety by reference to the particular
statutory and regulatory provisions. A change in applicable law
or regulation may have a material effect on the business of the
Company.
As a bank holding company, the Company is subject to regulation
under the Bank Holding Company Act of 1956 (the "BHCA") and its
examination and reporting requirements. Under the BHCA, bank
holding companies may not (subject to certain limited exceptions)
directly or indirectly acquire the ownership or control of more
than 5 percent of any class of voting shares or substantially all
of the assets of any company, including a bank, without the prior
written approval of the Board of Governors of the Federal Reserve
System ("FRB"). In addition, bank holding companies are generally
prohibited under the BHCA from engaging in nonbanking activities,
subject to certain exceptions.
Payment of Dividends
The Company is a legal entity separate and distinct from its
banking and other subsidiaries. Most of the Company's revenues
result from dividends paid to it by its bank subsidiaries. There
are statutory and regulatory requirements applicable to the
payment of dividends by subsidiary banks as well as by the
Company to its shareholders.
Each national banking association is required by federal law to
obtain the prior approval of the Office of the Comptroller of the
Currency ("OCC") for the declaration and payment of dividends if
the total of all dividends declared by the board of directors of
such bank in any year will exceed the total of (i) such bank's
net profits (as defined and interpreted by regulation) for that
year plus (ii) the retained net profits (as defined and
interpreted by regulation) for the preceding two years, less any
required transfers to surplus. In addition, these banks may only
pay dividends to the extent that retained net profits (including
the portion transferred to surplus) exceed bad debts (as defined
by regulation).
The Company's only state bank, Adrian, may pay dividends only to
the extent they do not exceed the bank's retained net profits
plus the current years income.
Under the foregoing dividend restrictions, the Company's banking
subsidiaries, as of December 31, 1995, without obtaining
regulatory approvals, can declare aggregate dividends of
approximately $13.4 million from retained net profits of the
preceding two years, plus an amount approximately equal to the
net profits (as measured under current regulations), if any,
earned for the period from January 1, 1996 through the date of
declaration. During 1995, Company subsidiaries paid $38 million
in dividends to the holding company for dividend payments to
shareholders, for the repurchase program of Mid Am, Inc. common
stock and for other general corporate purposes.
The payment of dividends by the Company and the Company's
subsidiaries is also affected by various regulatory requirements
and policies, such as the requirement to maintain capital at or
above regulatory guidelines. In addition, if, in the opinion of
the applicable regulatory authority, a bank under its
jurisdiction is engaged in or is about to engage in an unsafe or
unsound practice (which, depending on the financial condition of
the bank, could include the payment of dividends), such authority
may require, after notice and hearing, that such bank cease and
desist from such practice. The FRB and the OCC have each
indicated that paying dividends that deplete a bank's capital
base to an inadequate level should be an unsafe and unsound
banking practice. The FRB, the OCC and the FDIC have issued
policy statements which provide that bank holding companies and
insured banks should generally only pay dividends out of current
operating earnings.
Certain Transactions by the Company with its Subsidiaries
There are also various legal restrictions on the extent to which
the Company and its nondepository subsidiaries can borrow or
otherwise obtain credit from, or engage in certain other
transactions with, its depository subsidiaries. The "covered
transactions" that an insured depository institution and its
subsidiaries are permitted to engage in with their nondepository
affiliates are limited to the following amounts: (i) in the case
of any one such affiliate, the aggregate amount of covered
transaction of the insured depository institution and its
subsidiaries cannot exceed 10 percent of the capital stock and
the surplus of the insured depository institution; and (ii) in
the case of all affiliates, the aggregate amount of covered
transactions of the insured depository institution and its
subsidiaries cannot exceed 20 percent of the capital stock and
surplus of the insured depository institution. In addition,
extensions of credit that constitute covered transactions must be
collateralized in prescribed amounts.
"Covered transactions" are defined by statute to include a loan
or extension of credit to the affiliate, a purchase of securities
issued by an affiliate, a purchase of assets from the affiliate
(unless otherwise exempted by the FRB), the acceptance of
securities issued by the affiliate as collateral for a loan and
the issuance of a guarantee, acceptance, or letter of credit for
the benefit of an affiliate. Further, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services.
Capital
The FRB has adopted risk based capital guidelines for bank
holding companies. The minimum guideline for the ratio of total
capital ("Total Capital") to risk weighted assets (including
certain off-balance-sheet activities, such as standby letters of
credit) is 8 percent. At least half of the Total Capital is to be
composed of common stockholders' equity, minority interests in
the equity accounts of consolidated subsidiaries and a limited
amount of perpetual preferred stock, less goodwill and other
intangibles acquired after February 19, 1992 ("Tier l Capital").
The remainder may consist of subordinated debt, other preferred
stock and a limited amount of loan loss reserves ("Tier 2
Capital").
In addition, the FRB has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide
for a minimum Tier l Capital leverage ratio (Tier l Capital to
total assets, less goodwill) of 3 percent for bank holding
companies that meet certain specified criteria, including having
the highest regulatory rating. All other bank holding companies
will generally be required to maintain a minimum Tier l Capital
leverage ratio of 3 percent plus an additional cushion of 100 to
200 basis points. The FRB has not advised the Company of any
specific minimum Tier l Capital leverage ratio applicable to it.
The guidelines also provide that bank holding companies
experiencing internal growth or making acquisitions will be
expected to maintain strong capital positions substantially above
the minimum supervisory levels without significant reliance on
intangible assets (i.e. goodwill, core deposit intangibles and
purchased mortgage servicing rights). Furthermore, the
guidelines indicate that the FRB will continue to consider a
"tangible Tier l Capital leverage ratio" (deducting all
intangibles) in evaluating proposals for expansion or new
activities. As of December 31, 1995, the Company had a tangible
Tier l Capital leverage ratio of 8.44 percent.
The following tables set forth the Tier l capital to risk-
weighted assets ratios, the total capital to risk-weighted assets
ratios and the Tier l leverage ratios for the Company as of
certain dates and periods.
Tier l Capital to Risk-Weighted Assets Ratio
(in each case calculated pursuant to
the risk-based capital guidelines)
As of: Mid Am
December 31, 1995 11.76
December 31, 1994 12.19
December 31, 1993 12.24
Total Capital to Risk-Weighted Assets Ratio
(in each case calculated pursuant to
the risk-based capital guidelines)
As of: Mid Am
December 31, 1995 12.73
December 31, 1994 13.20
December 31, 1993 13.36
Tier l Leverage Ratio
As of: Mid Am
December 31, 1995 8.44
December 31, 1994 8.36
December 31, 1993 8.19
Each of the Company Subsidiaries is subject to similar capital
requirements adopted by the FRB, the OCC or the FDIC and in the
case of Adrian, the Michigan Financial Institution Bureau
("FIB"). At December 31, 1995, each of the Company Subsidiaries
had a Tier l Capital ratio and a Total Capital ratio in excess of
the requirements and a Tier l Capital leverage ratio in excess of
7.00 percent. No regulatory agency has advised any of the
Company Subsidiaries of any specific applicable minimum Tier l
Capital leverage ratio.
Failure to meet capital guidelines could subject an insured bank
to a variety of enforcement remedies, including higher insurance
premiums, termination of deposit insurance by the FDIC and a
prohibition on the taking of brokered deposits.
It is possible that bank regulators will raise capital
requirements applicable to banking organizations beyond their
current levels. However, the management of the Company is unable
to predict whether and when higher capital requirements might be
imposed and, if they are imposed, at what levels and on what
schedule.
The Company's Support of Subsidiary Banks
Under FRB policy, the Company is expected to act as a source of
financial strength to each of its subsidiary banks and, if
necessary, to commit resources to support each of such
subsidiaries. This support may be required at times when, absent
such FRB policy, the Company would not otherwise be required to
provide it.
Under the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 ("FIRREA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by,
or reasonably expected to be incurred by, the FDIC in connection
with (i) the default of a commonly controlled FDIC-insured
depository institution "in danger of default." "Default" is
defined generally as the appointment of a conservator or receiver
and "in danger of default" is defined generally as the existence
of certain conditions indicating that a default is likely to
occur in the absence of regulatory assistance.
Under the National Bank Act, if the capital stock of a national
bank is impaired by losses or otherwise, the OCC is authorized to
require payment of the deficiency by assessment upon the bank's
shareholders, pro rata, and to the extent necessary, if any such
assessment is not paid by any shareholder after three months'
notice, to sell the stock of such shareholder to make good the
deficiency.
Under Michigan Law, if the capital of a Michigan state-chartered
bank (such as Adrian) has become impaired by losses or otherwise,
the FIB may require that the deficiency in capital be met by
assessment upon the bank's shareholders, pro rata, and if any
such assessment is not paid by any shareholder within 30 days,
cause the sale of stock of such shareholder to pay such
assessment and the cost of sale of such stock.
Any capital loans by a bank holding company to any of its
subsidiary banks are subordinate in right of payment to deposits
and to certain other indebtedness of such subsidiary bank. In
the event of a bank holding company's bankruptcy, any commitment
by the bank holding company to a federal bank regulatory agency
to maintain the capital of a subsidiary bank will be assumed by
the bankruptcy trustee and entitled to a priority of payment.
This priority would apparently apply to guarantees of capital
plans under the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA").
FDIC Insurance Assessments
The Company's subsidiary banks are subject to FDIC deposit
insurance assessments. The current assessment rates for deposits
insured by the Bank Insurance Fund ("BIF") range from 0.00
percent to 0.27 percent depending upon the assessment category
into which the insured institution is placed. The current
assessment rates for deposits insured by the Savings Association
Insurance Fund ("SAIF") range from 0.23 percent to 0.31 percent
depending upon the assessment category into which the insured
institution is placed. Most deposits acquired by the Company in
its thrift acquisitions have deposits insured by SAIF.
FDICIA
FDICIA, which became law on December 19, 1991, substantially
revises the bank regulatory and funding provisions of the Federal
Deposit Insurance Act and makes revisions to several other
federal banking statutes.
Among other things, FDICIA requires the federal banking
agencies to take "prompt corrective action" in respect of
depository institutions that do not meet minimum capital
requirements. FDICIA established five capital tiers: "well
capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically
undercapitalized." A depository institution's capital tier
depends upon where its capital levels are in relation to various
relevant capital measures, which includes a risk-based capital
measure and a leverage ratio capital measure, and certain other
factors.
A depository institution is well capitalized if it significantly
exceeds the minimum level required by regulation of each relevant
capital measure, adequately capitalized if it meets each such
measure, undercapitalized if it fails to meet any such measure,
significantly undercapitalized if it is significantly below any
such measure and critically undercapitalized if it has a ratio of
tangible equity to total assets that is equal to or less than 2
percent. An institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital
position if, among other things, it receives an unsatisfactory
examination rating.
Regulations establishing the specific capital tiers have been
adopted. Under these regulations, for an institution to be well
capitalized it must have a total risk-based capital ratio of at
least 10 percent, a Tier 1 risk-based capital ratio of at least 6
percent, and a Tier l leverage ratio of at least 5 percent, and
not be subject to any specific capital order or directive. For
an institution to be adequately capitalized it must have a total
risk-based capital ratio of at least 8 percent, a Tier l
risk-based capital ratio of at least 4 percent, and a leverage
ratio of at least 4 percent (and in some cases 3 percent). Under
these new regulations, the banking subsidiaries of the Company
were all well capitalized as of December 31, 1995.
FDICIA generally prohibits a depository institution from making
any capital distribution (including payment of a dividend) or
paying any management fee to its holding company if the
depository institution would thereafter be undercapitalized.
Undercapitalized depository institutions are subject to growth
limitations and are required to submit a capital restoration
plan. The federal banking agencies may not accept a capital plan
without determining, among other things, that the plan is based
on realistic assumptions and is likely to succeed in restoring
the depository institution's capital. In addition, for a capital
restoration plan to be acceptable, the depository institution's
parent holding company must guarantee that the institution will
comply with such capital restoration plan. The aggregate
liability of the parent holding company is limited to the lesser
of (i) an amount equal to 5 percent of the depository
institution's total assets at the time it became
undercapitalized, and (ii) the amount that is necessary (or
would have been necessary) to bring the institution into
compliance with all capital standards applicable with respect to
such institution as of the time it fails to comply with the plan.
If a depository institution fails to submit an acceptable plan,
it is treated as if it were significantly undercapitalized.
Significantly undercapitalized depository institutions may be
subject to a number of requirements and restrictions, including
orders to sell sufficient voting stock to become adequately
capitalized, requirements to reduce the total assets and
cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the
appointment of a receiver or conservator.
Under FDICIA, the FDIC is permitted to provide financial
assistance to an insured bank before appointment of a conservator
or receiver only if (i) such assistance would be the least costly
method of meeting the FDIC's insurance obligations, (ii) grounds
for appointment of a conservator or a receiver exist or are
likely to exist, (iii) it is unlikely that the bank can meet all
capital standards without assistance, and (iv) the bank's
management has been competent, has complied with applicable laws,
regulations, rules and supervisory directives and has not engaged
in any insider dealing, speculative practice or other abusive
activity.
FDICIA directs that each federal banking agency prescribe
standards for depository institutions and depository institution
holding companies relating to internal controls, information
systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, compensation,
a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to
book value for publicly traded shares and other standards as they
deem appropriate. Because such standards have been proposed but
not yet finalized, management is unable to assess their impact.
FDICIA also contains a variety of other provisions that may
affect the operations of depository institutions including new
reporting requirements, regulatory standards for real estate
lending, "truth in savings" provisions, the requirements that a
depository institution give 90 days' prior notice to customers
and regulatory authorities before closing any branch and a
prohibition on the acceptance or renewal of brokered deposits by
depository institutions that are not well capitalized or are
adequately capitalized and have not received a waiver from the
FDIC. Under regulations relating to the brokered prohibition,
Mid Am Bank is well capitalized and may accept brokered deposits
without restriction.
Regulation of Proposed Acquisitions
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 percent of
any class of voting shares of such bank, and any merger or
consolidation of the Company with another bank holding company,
will require the prior written approval of the Federal Reserve
Board under the Bank Holding Company ("BHC") Act. In reaching
its decision on an application for such approval, the Federal
Reserve Board must consider a number of factors, including the
effect of the proposed acquisition or merger on competition in
relevant geographic and product markets, the financial condition
of both parties, capital adequacy before and after the proposed
acquisition, the managerial resources and future prospects of the
parties, the convenience and needs of the communities to be
served, and the prior record of both the Company's existing bank
subsidiaries and the bank to be acquired (or the bank
subsidiaries of the other party to the merger) under the
Community Reinvestment Act. Amendments made to the BHC Act by
FDICIA further require the Federal Reserve Board (a) to
disapprove any application by a bank holding company which fails
to provide the Board with adequate assurances that it will
furnish to the Board information on the operations and activities
of such bank holding company and its affiliates determined by the
Board to be appropriate to determine and enforce compliance with
the statue, and (b) in its consideration of managerial resources,
to include consideration of the competence, experience and
integrity of the officers, directors, and principal shareholders
of the parties.
The merger or consolidation of an existing bank subsidiary of the
Company with another bank, or the acquisition by such a bank
subsidiary of assets of another bank, or the assumption of
liability by such a bank subsidiary to pay any deposits in
another bank, will require the prior written approval of the
responsible federal bank regulatory agency under the Bank Merger
Act. In reaching its decision, the responsible federal bank
regulatory agency must consider a number of factors, including
the effect of the proposed transaction on competition in relevant
geographic and product markets, the financial and managerial
resources and future prospects of the parties, capital adequacy
before and after the proposed transaction, the convenience and
needs of the communities to be served, and the prior record of
both the Company's existing bank subsidiaries and the other bank
under the Community Reinvestment Act. In addition, an
application to, and the prior approval of, the Federal Reserve
Board may be required under the BHC Act in certain such cases.
In all of the foregoing cases, the required regulatory approvals
are subject to public notice and comment procedures. Adverse
public comments received, or adverse considerations raised by the
regulatory agencies, may delay or prevent consummation of the
proposed transaction. In addition, such a transaction generally
may not be consummated before the 30th calendar day (or if the
Attorney General has made no adverse comment to the Federal
Reserve Board thereon, such shorter period not less than 15
calendar days as the Board may specify with the concurrence of
the Attorney General) after final approval of the transaction by
the federal regulatory agency. In some of the foregoing cases,
prior approvals of state bank regulatory authorities must also be
obtained prior to consummation of the proposed transactions.
The BHC Act generally prohibits bank holding companies, such as
the Company, from acquiring direct or indirect ownership or
control of voting shares or assets of any company other than a
bank, unless the company involved is engaged solely in one or
more activities which the Federal Reserve Board has determined to
be so closely related to banking or managing or controlling banks
as to be a proper incident thereto. Any such acquisition will
require, except in certain limited cases, the prior approval of
the Federal Reserve Board.
In evaluating an application for its approval of such an
acquisition, the Federal Reserve Board will consider whether the
performance by an affiliate of the Company of the activity can
reasonably be expected to produce benefits to the public (such as
greater convenience, increased competition, or gains in
efficiency) that outweigh possible adverse effects (such as undue
concentration of resources, decreased or unfair competition,
conflicts of interest, or unsound banking practices). The 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 Board's consideration
will also include an evaluation of the financial and managerial
resources of the Company, including its existing subsidiaries,
and of any entity to be acquired, and the effect of the proposed
transaction on those resources. This required regulatory
approval is subject to public notice and comment procedures, and
adverse public comments received, or adverse considerations
raised by the regulatory agencies, may delay or prevent
consummation of such an acquisition. Such an acquisition may
also require 30 days prior notice to the Department of Justice
and the Federal Trade Commission.
FIRREA amended the BHC Act in 1989 to permit the Federal Reserve
Board to approve an application by any bank holding company to
acquire and operate a savings association as a nonbank subsidiary
of such bank holding company. A bank holding company such as the
Company may apply to the Board for permission to acquire and
operate a savings association engaged only in deposit-taking,
lending and other activities that the Board has determined to be
permissible for bank holding companies, in accordance with the
procedures and standards described in the preceding paragraph.
The direct or indirect acquisition of control of a savings
association by a bank holding company would also require the
prior approval of the Director of the Office of Thrift
Supervision ("OTS") of the Department of the Treasury under the
Home Owners Loan Act ("HOLA"), and may also require prior
approval of state regulatory officials. In the case of an
application by a bank holding company such as the Company, which
did not already control a savings association, to acquire control
of a single savings association, the OTS may deny the application
under the HOLA if it determines that the financial and managerial
resources and future prospects of the applicant and the savings
association involved are such that the acquisition would be
detrimental to the savings association or to the insurance risk
of the applicable deposit insurance fund of the FDIC. FDICIA
amended HOLA to require the OTS to include, in its determination
of the managerial resources of the applicant and the association,
consideration of the competency, experience and integrity of the
officers, directors and principal shareholders of both parties.
In addition, the OTS will consider other factors in connection
with such an application, including capital adequacy before and
after the proposed acquisition and potential anti-competitive
effects. Applications to acquire more than one savings
association, and applications by entities which are already
savings and loan holding companies, require the application by
the OTS of different and more restrictive standards in reaching
its determination whether to approve such applications.
The direct or indirect acquisition of control of a savings
association by a bank holding company such as the Company which
does not already control a savings association will cause the
bank holding company to become a savings and loan holding
company. Each company becoming a savings and loan holding
company must register as such with the OTS within 90 days after
becoming a savings and loan holding company. Thereafter, the
savings and loan holding company is subject to regulation,
periodic reporting requirements, and examination by the OTS. In
the case of a bank holding company which is also a savings and
loan holding company, such OTS regulation is in addition to
continuing regulation by the Federal Reserve Board under the BHC
Act.
Employees
As of December 31, 1995, the Company and its Subsidiaries had
approximately 978 full-time and 387 part-time employees. The
Company considers its and its Subsidiaries' employee relations to
be good. None of the employees are covered by a collective
bargaining agreement.
Item 2. PROPERTIES
The Company's executive offices are located at an office
building in Bowling Green, Ohio, which is owned by Mid Am Bank.
The subsidiaries operate 87 banking centers, of which 72 are
owned, 2 are leased from various other parties and 13 are leased
from Bancsites, Inc. ("Bancsites") under long-term lease
agreements. Bancsites was a wholly-owned subsidiary of Mid Am
Bank until 1977, when Mid Am Bank distributed all shares of
Bancsites to its shareholders. Certain senior management
officials of Bancsites also serve as senior management officials
of Mid Am Bank.
The Company also owns its Bowling Green operations center
building which houses substantially all of the internal data
processing functions of the Company and its subsidiaries.
The Company owns a ten-story commercial office building in
downtown Toledo, Ohio, which serves as Mid Am Bank's executive
offices, as well as a full service banking center.
Item 3. LEGAL PROCEEDINGS
The Company's broker/dealer subsidiary, MFI, is a correspondent
in a consolidated NASD Arbitration (NASD Case No. 95-05733). The
Case revolves around an investment advisor unaffiliated with MFI
or the Company who is not a party to the arbitration as he is
believed to be uncollectible. The four Claimants allege that
certain trades directed by the unaffiliated investment advisor
were executed by employees of MFI, and as a result, the Claimants
suffered an economic loss of approximately $3,000,000. The
causes of action are brought under theories of negligence, breach
of contract, negligent hiring and failure to supervise. The
Claimants demand relief of actual damages, attorneys' fees,
interest and costs. Management of the Company intends to
vigorously contest this action, and is unable to form an opinion
as to the likely outcome of the arbitration.
The Company is subject to additional pending and threatened
lawsuits in which claims for monetary damages are asserted in the
ordinary course of business. While any litigation involves an
element of uncertainty, in the opinion of management,
liabilities, if any, arising from such litigation or threat
thereof will not have a material effect on the Company's results
of operations or financial condition.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
The information required by this item is incorporated herein by
reference from the sections entitled "Common Stock Prices,
Dividends and Yields", "Stock Information" and Note 16 of the
Consolidated Financial Statements on pages 53 and 45,
respectively, of the Company's 1995 Annual Report to Shareholders
(See Exhibit 13.1 attached hereto).
Item 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by
reference from the sections entitled "Selected Quarterly Data",
"Summary of Financial Data" and "Management's Discussion and
Analysis and Statistical Information" on pages 11 through 28 of
the Company's 1995 Annual Report to Shareholders (See Exhibit
13.1 attached hereto).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is incorporated herein by
reference from the section entitled "Management's Discussion and
Analysis and Statistical Information" on pages 11 through 28 of
the Company's 1995 Annual Report to Shareholders (See Exhibit
13.1 attached hereto).
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by
reference from the consolidated financial statements, together
with the report thereon of Price Waterhouse dated January 22,
1996, on pages 29 through 46 and from the section entitled "Other
Financial Data" on page 1 of the Company's 1995 Annual Report to
Shareholders. With the exception of the aforementioned
information and the information incorporated in Items 5, 6, 7 and
14, the 1995 Annual Report to Shareholders is not to be deemed
filed as part of this report (See Exhibit 13.1 attached hereto).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this item for Directors is
incorporated herein by reference from the section entitled
"Election of Directors" on pages 1 through 4 of the Company's
Proxy statement dated February 29, 1996 (See Exhibit 20.1
attached hereto).
The following table sets forth the names and ages and business
experience of each of the executive officers of the Company. Each
executive officer of the Company is appointed by the Board of
Directors on an annual basis, and serves at the pleasure of the
Board.
Position With Company or Officer
Executive Officer Age Subsidiary and Experience Since*
Edward J. Reiter 56 Chairman and Chief Executive 1969
Officer of the Company and
Chairman of Mid Am Bank;
formerly President and Chief
Executive Officer of Mid Am Bank.
David R. Francisco 49 President and Chief Operating 1970
Officer of the Company;
formerly Chief Executive
Officer of First National.
Dennis L. Nemec 51 Executive Vice President/ 1979
Chief Financial Officer of the
Company; formerly Senior Vice
President/Finance of the Company.
W. Granger Souder 35 Executive Vice President/ 1989
General Counsel of the Company;
formerly employed as a securities
attorney in private practice.
Jerry R. Biederman 30 Senior Vice President/ 1994
Director of Audit of the Company;
formerly Audit Supervisor of
Society Management Company.
Donald P. Hileman 43 Senior Vice President/ 1990
Finance of the Company; formerly
Senior Vice President and Chief
Financial Officer of First National.
Christine Koster 43 Senior Vice President/ 1989
Training and Development of the
Company; formerly Vice President/
Training and Development of the
Company.
David L. Mead 40 Senior Vice President/ 1995
Finance; formerly a Professor at
Bluffton College and Senior Vice
President and Chief Financial
Officer of Mid Am Bank.
Cynthia A. Rossman 39 Senior Vice President/ 1985
Marketing and Planning of the
Company.
Jeffrey S. Schatz 38 Senior Vice President/ 1985
Funds Management of the
Company; formerly Vice President/
Finance and Treasurer of Citizens.
Robin Wooddall 32 Senior Vice President/ 1992
Human Resources of the Company;
formerly Vice President/Human
Resources of the Company.
Patrick A. Kennedy 49 President and Chief Executive 1981
Officer of Mid Am Bank; formerly
Executive Vice President/Lending
of Mid Am Bank; formally Senior Vice
President/Lending of First National.
James F. Burwell 45 President and Chief Executive 1980
Officer of First National;
formerly President and Chief
Operating Officer of First National;
Executive Vice President and cashier
of First National.
Cathleen F. Oxner 43 President and Chief Executive 1994
Officer of AmeriCom; formerly a
Plant Manager of Procter and Gamble.
Donald P. Southwick 39 President and Chief Executive 1994
Officer of AmeriFirst; formerly
Senior Vice President of
C.B. Financial Corporation.
Bernard A. Sikorski 53 President and Chief Executive 1995
Officer of Adrian State Bank;
formerly Executive Vice President
and Director of Marketing of
Banc One Mortgage Corporation.
James C. Burkhart 42 President and Chief Executive 1982
Officer of Mid Am Information
Services, Inc.; formerly Vice
President/Data Processing of
Mid Am Bank.
Mark S. Mandula 39 President and Chief Executive 1994
Officer of International Credit
Service; formerly Executive Vice
President/Principal-Austin Associates.
*Includes period in which executive officer was an officer of a
subsidiary or acquired company.
Item 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference from the sections entitled "Election of Directors" on
pages 1 through 4, "Executive Compensation" on pages 5 through 8
and "Report On Executive Compensation" on pages 8 through 10 of
the Company's Proxy Statement dated February 29, 1996 (See
Exhibit 20.1 attached hereto).
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item is incorporated herein by
reference from the section entitled "Election of Directors" on
pages 1 through 4 of the Company' s Proxy Statement dated
February 29, 1996 (See Exhibit 20.1 attached hereto). The Company
has no knowledge of any person or any group (as defined in
Section 13.d.3 of the Securities Exchange Act of 1934) which owns
in excess of five percent of the outstanding common stock of the
Company.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by
reference from the sections entitled "Transactions with
Management" and "Relationships with Affiliates" on page 12 of the
Company's Proxy Statement dated February 29, 1996 (See Exhibit
20.1 attached hereto).
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) Financial Statement Schedules
The following documents are filed as part of this report:
Page in Annual Report *
Report of Independent Accountants ................... 29
Consolidated Statement of Condition at
December 31, 1995 and 1994 ........................ 30
Consolidated Statement of Earnings for
the three years ended December 31, 1995 ........... 31
Consolidated Statement of Changes in Shareholders'
Equity for the three years ended December 31, 1995 32
Consolidated Statement of Cash Flows for the
three years ended December 31, 1995 ............... 33-34
Notes to Consolidated Financial Statements .......... 35-46
*Incorporated by reference from the indicated pages of the 1995
Annual Report to Shareholders. All schedules are omitted because
they are not applicable or the required information is shown in
the financial statements or notes thereto.
The following Exhibits required by Item 601 of Regulation S-K are
filed as part of this report:
Exhibit
Number Exhibit
3.1 Restated Articles of Incorporation of the Company,
as amended
3.2 Code of Regulations of the Company
10.1 Description of Incentive Plan of the Company
10.2 Description of Deferred Compensation Plan of the
Company
10.3 Stock Option Plan of the Company
10.4 Employee Stock Ownership and Pension Plan of the
Company
10.5 Employee Stock Ownership and Savings Plan of the
Company (401K)
10.6 Pension Make-Up Plan of the Company (SERP)
10.7 Form of Change in Control Agreements with Certain
Executive Officers of the Company
13.1 The Company's 1995 Annual Report to Shareholders.
Except for the portions of the report
expressly incorporated by reference,
the Report is furnished solely for the
information of the Commission and
is not deemed "filed" as part hereof.
18.0 Change in Accounting Principle
The information required by this exhibit is
incorporated herein by reference from
Note 1 of the Consolidated Financial
Statements on pages 35 through 36 of the
Company's 1995 Annual Report to Shareholders
(See Exhibit 13.1)
20.1 The Company's Proxy Statement dated February 29,
1996 for its 1996 Annual Meeting
The information required by this exhibit is
incorporated herein by reference from the
Company's Proxy Statment dated February 29,
1996, filed with the Securities and
Exchange Commission on February 29, 1996.
21.1 Subsidiaries of the Company
23.1 Consent of Independent Accountants
24.1 Power of Attorney
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto daily authorized on February 22, 1996.
MID AM, INC.
BY: Dennis L. Nemec
Dennis L. Nemec
Executive Vice President and C.F.O.
Pursuant to the requirement of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
date indicated.
Signatures
*
Edward J. Reiter Director/Chairman/C.E.O. February 22, 1996
David R. Francisco Director/President/C.O.O. February 22, 1996
Dennis L. Nemec Exec. Vice Pres./C.F.O. February 22, 1996
*
Gerald D. Aller Director February 22, 1996
*
James F. Bostdorff Director February 22, 1996
*
David A. Bryan Director February 22, 1996
*
Wayne E. Carlin Director February 22, 1996
Charles G. Hilbert Director February 22, 1996
*
D. James Hilliker Director February 22, 1996
Harry G. Kessler Director February 22, 1996
*
Walter L. Lamb,Jr. Director February 22, 1996
James E. Laughlin Director February 22, 1996
*
Marilyn O. McAlear Director February 22, 1996
*
Blair D. Miller Director February 22, 1996
*
Thomas S. Noneman Director February 22, 1996
*
Emerson J. Ross,Jr. Director February 22, 1996
*
C. Gregory Spangler Director February 22, 1996
*
Jerry L. Staley Director February 22, 1996
*
Robert E. Stearns Director February 22, 1996
*
Richard G. Tessendorf,Jr. Director February 22, 1996
*
Donald D. Thomas Director February 22, 1996
*
Douglas J. Shierson Director February 22, 1996
*The undersigned attorney-in-fact, by signing his name below,
does hereby sign this Report on Form 10-K on behalf of the
above-named officers and directors pursuant to a power of
attorney executed by such persons and filed with the Securities
and Exchange Commission contemporaneously herewith.
BY: Dennis L. Nemec
Dennis L. Nemec
Attorney-In-Fact
FORM 10-K
EXHIBIT INDEX
Exhibit
Number Exhibit
3.1 Restated Articles of Incorporation of
the Company as amended
3.2 Code of Regulations of the Company
10.1 Description of Incentive Plan of the Company
10.2 Description of Deferred Compensation Plan
of the Company
10.3 Stock Option Plan of the Company
10.4 Employee Stock Ownership and Pension plan
of the Company
10.5 Employee Stock Ownership and Savings Plan
of the Company (401K)
10.6 Pension Make-up Plan of the Company (SERP)
10.7 Form of Change in Control Agreements with
Certain Executive Officers of the Company
13.1 The Company's 1995 Annual Report to Shareholders
Except for the portions of the report expressly
incorporated by reference, the Report is furnished
solely for the information of the Commission
and is not deemed "filed" as part hereof.
18.0 Change in Accounting Principle
The information required by this exhibit is
incorporated herein by reference from
Note 1 of the Consolidated Financial Statements
on pages 35 through 37 of the Company's 1995
Annual Report to Shareholders (See Exhibit 13.1).
20.1 The Company's Proxy Statement dated February 29,
1996 for its 1996 Annual Meeting
The information required by this exhibit is
incorporated herein by reference from the
Company's Proxy Statement dated February 29,
1996, filed with the Securities and
Exchange Commission on February 29, 1996.
21.1 Subsidiaries of the Company
23.1 Consent of Independent Accountants
24.1 Power of Attorney
27.1 Financial Data Schedule
EXHIBIT 3.1
AMENDED ARTICLES OF INCORPORATION
OF
MID AM, INC.
FIRST: The name of the corporation (the "Corporation")
shall be:
Mid Am, Inc.
SECOND: the place in the State of Ohio where the
principal office of the Corporation is to be located is Bowling
Green, Wood County.
THIRD: The purpose for which the Corporation is formed
is to engage in any lawful act or activity for which corporations
may be formed under Sections 1701.01 to 1701.98 inclusive of the
Ohio Revised Code.
FOURTH: The number of shares which the Corporation is
authorized to have outstanding is seventeen million (17,000,000),
of which fifteen million (15,000,000) are common shares without
par value ("Common Shares") and two million (2,000,000) are
preferred shares without par value ("Preferred Shares"). The
express terms of the shares of each class are as follows:
Division 1. EXPRESS TERMS OF THE PREFERRED SHARES.
(A) Board of Directors Authority to Fix Certain Terms.
The Preferred Shares may be issued from time to time in
one or more series. All Preferred Shares shall be of
equal rank and shall be identical, except in respect of
the matters that may be fixed by the Board of
Directors, and each share of each series shall be
identical with all other shares of such series, except
as to the date from which dividends are cumulative.
Subject to the provisions of subsections (A)-(F) of
this Division 1, which provisions shall apply to all
Preferred Shares, the Board of Directors is authorized
to cause such shares to be issued in one or more series
and with respect to each such series, prior to the
issuance thereof, to fix:
(i) The division of such Preferred Shares
into series and the designation and authorized
number of Preferred Shares of each series;
(ii) The dividend or distribution rate;
(iii) The dates of payments of dividends or
distributions, if declared, and the dates from
which they are cumulative;
(iv) The amounts payable in the event of any
voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation;
(v) Redemption rights and price;
(vi) The terms and amounts of any sinking
fund provided for the purchase or redemption of
the Preferred Shares;
(vii) Conversion rights; and
(viii) Restrictions on the issuance of
shares of any class or series.
The Board of Directors is authorized to adopt, from
time to time, amendments to the Articles of
Incorporation fixing, with respect to each such series,
the matters described in this clauses (i) through
(viii) above.
(B) Dividend Preference. The holders of Preferred
Shares of each series, in preference to the holders of
Common Shares and of any other class of shares ranking
junior to the Preferred Shares, shall be entitled to
receive, out of any funds legally available, when and
as declared by the Board of Directors, dividends in
cash at the rate for such series fixed according to the
provisions of subsection (A) of this Division 1 and no
more, payable quarterly on the dates fixed for such
series. Such dividends shall be cumulative, in the
case of shares of each particular series, from and
after the date or dates fixed with respect to such
series. No dividends may be paid upon or declared or
set apart for any of the Preferred Shares for any
quarterly dividend period unless at the same time a
like proportionate dividend for the same quarterly
dividend period, ratably in proportion to the
respective annual dividend rates fixed therefor, shall
be paid upon or declared or set apart for all Preferred
Shares of all series then issued and outstanding and
entitled to receive such dividend.
(C) Restriction on Dividends to Junior Shares. In no
event as long as any Preferred Shares shall be
outstanding shall any dividends, except a dividend
payable in Common Shares or other shares ranking junior
to the Preferred Shares, be paid or declared or any
distribution be made on the Common Shares or any other
shares ranking junior to the Preferred Shares, nor
shall any Common Shares or any other shares ranking
junior to the Preferred Shares be purchased, retired or
otherwise acquired by the Corporation:
(i) Unless all accrued and unpaid dividends
on Preferred Shares, including the full dividends for
the current quarterly dividend period, shall have been
declared and paid or a sum sufficient for payment
thereof set apart; and
(ii) Unless there shall be no arrearage with
respect to the redemption of Preferred Shares of any
series from any sinking fund provided for shares of
such series in accordance with the provisions of clause
(vi) of subsection (A) of this Division 1.
(D) Liquidation Preference.
(i) The holders of Preferred Shares of any series
shall, in case of liquidation, dissolution or winding
up of the affairs of the Corporation, be entitled to
receive in full out of the assets of the Corporation,
including its capital, before any amount shall be paid
or distributed among the holders of the Common Shares
or any other shares ranking junior to the Preferred
Shares, the amounts fixed with respect to shares of
such series in accordance with subsection (A) of this
Division 1, plus in either event an amount equal to all
dividends accrued and unpaid thereof to the date of
payment of the amount due pursuant to such liquidation,
dissolution or winding up of the affairs of the
Corporation. In case the net assets of the Corporation
legally available therefor are insufficient to permit
the payment upon all outstanding shares of Preferred
Shares of the full preferential amount to which they
are respectively entitled, then such net assets shall
be distributed ratably upon outstanding Preferred
Shares in proportion to the full preferential amount to
which each such share is entitled;
(ii) After payment to holders of Preferred Shares
of the full preferential amounts, holders of Preferred
Shares as such shall have no right or claim to any of
the remaining assets of the Corporation; and
(iii) The merger or consolidation of the
Corporation into or with any other corporation, or the
merger of any other corporation into it, or the sale,
lease or conveyance of all or substantially all the
property or business of the Corporation, shall not be
deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this
Division 1.
(E) Voting Rights.
(i) Except as otherwise provided in this
subsection (E), the holders of Preferred Shares shall
not be entitled to vote upon any matters presented to
the shareholders;
(ii) If, and as often as, the Corporation is in
default in the payment of four (4) full quarterly
dividends (whether or not consecutive) on any series of
Preferred Shares at the time outstanding, whether or
not earned or declared, the holders of Preferred Shares
shall be entitled to one vote for each Preferred Share
upon all matters presented to the shareholders; and
provided further that the foregoing special voting
rights when vested shall remain so vested until all
accrued and unpaid dividends on the Preferred Shares of
all series then outstanding shall have been paid,
whereupon the holders of Preferred Shares shall be
divested of their special voting rights, subject to the
revesting of such special voting rights upon the event
specified above;
(iii) The affirmative vote of the holders of at
least two-thirds of the Preferred Shares at the time
outstanding, given in person or by proxy at a meeting
called for the purpose at which the holders of
Preferred Shares shall vote separately as a class,
shall be necessary to effect any one or more of the
following:
(a) Any amendment, alteration or repeal of
any of the provisions of the Articles of
Incorporation or of the Regulations of the
Corporation which affects adversely the voting
powers, rights or preferences of the holders of
Preferred Shares; provided, however, that, for the
purpose of this clause (a) only, neither the
amendment of the Articles of Incorporation so as
to authorize or create, or to increase the
authorized or outstanding amount of Preferred
Shares or of any shares of any class ranking on a
parity with or junior to the Preferred Shares, nor
the amendment of the provisions of the Regulations
so as to increase the number of Directors of the
Corporation shall be deemed to affect adversely
the voting powers, rights or preferences of the
holders of Preferred Shares; and provided further,
that if such amendment, alteration or repeal
affects adversely the rights or preferences of one
or more but not all series of Preferred Shares at
the time outstanding, only the affirmative vote of
the holders of at least two-thirds of the number
of shares at the time outstanding of the series so
affected shall be required;
(b) The authorization or creation of, or the
increase in the authorized amount of, any shares
of any class, or any security convertible into
shares of any class, ranking prior to the
Preferred Shares; or
(c) The purchase or redemption (for sinking
fund purposes or otherwise) of less than all of
the Preferred Shares then outstanding except in
accordance with a stock purchase offer made to all
holders of record of Preferred Shares, unless all
dividends upon all Preferred Shares then
outstanding for all previous quarterly dividend
periods shall have been declared and paid or funds
therefor set apart and all accrued sinking fund
obligations applicable thereto shall have been
complied with.
(iv) The affirmative vote of the holders of at
least a majority of the Preferred Shares at the time
outstanding, given in person or by proxy at a meeting
called for the purpose at which the holders of
Preferred Shares shall vote separately as a class,
shall be necessary to effect any one or more of the
following:
(a) The sale, lease or conveyance by the
Corporation of all or substantially all of its
property or business, or its consolidation with or
merger into any other corporation unless the
corporation resulting from such consolidation or
merger will have after such consolidation or
merger no class of shares either authorized or
outstanding ranking prior to or on a parity with
the Preferred Shares except the same number of
shares ranking prior to or on a parity with the
Preferred Shares and having the same rights and
preferences as the shares of the Corporation
authorized and outstanding immediately preceding
such consolidation or merger, and each holder of
Preferred Shares immediately preceding such
consolidation or merger shall receive the same
number of shares, with the same rights and
preferences, of the resulting corporation; or
(b) The authorization of any shares ranking
on a parity with the Preferred Shares or an
increase in the authorized number of shares of
Preferred Shares.
(F) Definitions. For the purpose of the Division 1,
whenever reference is made to shares "ranking prior to
the Preferred Shares" or "on a parity with the
Preferred Shares," such reference shall mean and
include all shares of the Corporation in respect of
which the rights of the holders thereof as to the
payment of dividends or as to the distributions in the
event of a voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the
Corporation are given preference over, or rank on an
equality with (as the case may be) the rights of the
holders of Preferred Shares; and whenever reference is
made to shares "ranking junior to the Preferred
Shares," such reference shall mean and include all
shares of the Corporation in respect of which the
rights of the holders thereof as to the payment of
dividends and as to the distributions in the event of a
voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation are junior
and subordinate to the rights of the holders of
Preferred Shares.
Division 2. EXPRESS TERMS OF THE COMMON SHARES.
The Common Shares shall be subject to the express terms
of the Preferred Shares and of any series thereof.
Each shareholder shall be entitled to one (1) vote for
each Common Share standing in his name on the books of
the Corporation.
FIFTH: The following provisions are hereby agreed to
for the purpose of defining, limiting and regulating the exercise
of the authority of the Corporation or of the directors, or of
all of the shareholders:
(i) The Board of Directors is expressly
authorized to set apart out of any of the funds of the
Corporation available for dividends a reserve or
reserves for any proper purpose or to abolish any such
reserve in the manner in which it was created, and to
purchase on behalf of the Corporation any shares issued
by it to the extent of the surplus of the aggregate of
its assets over the aggregate of its liabilities plus
stated capital;
(ii) The Corporation may in its regulations
confer powers upon its board of directors in addition
to the powers and authorities conferred upon it
expressly by Sections 1701.01, et seq. of the Revised
Code of Ohio;
(iii) Any meeting of the shareholders or the
board of directors may be held at any place within or
without the State of Ohio in the manner provided for in
the regulations of the Corporation; and
(iv) Except as otherwise required by these
Articles of Incorporation, but notwithstanding any
provision of the Ohio Revised Code now or hereafter in
force requiring for any purpose the vote, consent,
waiver or release of the holders of shares entitling
them to exercise two-thirds, or any other proportion,
of the voting power of the Corporation or of any class
or classes of shares thereof, any amendments to the
Articles of Incorporation may be made from time to
time, and any proposal or proposition requiring the
action of shareholders may be authorized from time to
time by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting
power of the Corporation.
SIXTH: No holder of shares of the Corporation of any
class, as such, shall have the preemptive right to subscribe for
or to purchase any shares of any class of the Corporation or any
other securities of the Corporation, whether such shares of such
class are now or hereafter authorized.
SEVENTH: In no event shall a holder of shares of any
class have the right to cumulate their votes in the election of
directors.
EIGHTH: (1) In connection with the exercise of its
judgment in determining what is in the best interest of the
Corporation and its shareholders when evaluating a Business
Combination or a proposal by another Person or Persons to make a
Business Combination or a tender or exchange offer or a proposal
by another Person or Persons to make a tender or exchange offer,
the Board of Directors of the Corporation shall, in addition to
considering the adequacy of the amount to be paid in connection
with any such transaction, consider all the following factors and
any other factors which it deems relevant: (i) the social and
economic effects of the transaction on the Corporation and its
subsidiaries, employees, depositors, loan and other customers,
creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located; (ii) the
business and financial conditions and earnings prospects of the
acquiring Person or Persons, including, but not limited to, debt
service and other existing or likely financial obligations of the
acquiring Person or Persons, and the possible effect of such
conditions upon the Corporation and its subsidiaries and the
other elements of the communities in which the Corporation and
its subsidiaries operate or are located, and (iii) the
competence, experience, and integrity of the acquiring Person or
Persons and its or their management.
(2) The affirmative vote of the holders of not less
than eighty percent (80 percent) of the Voting Stock shall be
required for the approval or authorization of any Business
Combination with a Related Person, or any Business Combination in
which a Related Person has an interest (except proportionately as
a shareholder); provided, however, that the eighty percent
(80 percent) voting requirement shall not be applicable if (i)
the Continuing Directors, who at the time constitute at least a
majority of the entire Board of Directors of the Corporation,
have expressly approved the Business Combination by at least a
two-thirds (2/3) vote of such Continuing Directors, or (ii) all
of the following conditions are satisfied:
(A) The Business Combination is a merger or
consolidation and cash or fair market value of
property, securities or other consideration to be
received per share by holders of the Common Shares
(other than such Related Person) in the Business
Combination is at least equal in value to such Related
Person's Highest Purchase Price;
(B) After such Related Person has become the
Beneficial Owner of not less than ten percent
(10 percent) of the Voting Stock of the Corporation and
prior to the consummation of such Business Combination,
such Related Person shall not have become the
Beneficial Owner of any additional shares of Voting
Stock or securities convertible into Voting Stock,
except (i) as a part of the transaction which resulted
in such Related Person becoming the Beneficial owner of
not less than ten percent (10 percent) of the Voting
Stock or (ii) as a result of a pro rata stock dividend
or stock split; and
(C) Prior to the consummation of such Business
Combination, such Related Person shall not have,
directly or indirectly, (i) received the benefit
(except proportionately as a shareholder) of any loan,
advances, guarantees, pledges, or other financial
assistance or tax credits provided by the Corporation
or any of its subsidiaries, or (ii) caused any material
change in the Corporation's business or equity capital
structure, including the issuance of shares of capital
stock of the Corporation to any third party.
(3) For purposes of this Article Eighth:
(i) The term "Business Combination" shall mean (a) any
merger or consolidation involving the Corporation or a subsidiary
of the Corporation, (b) any sale, lease, exchange, transfer or
other disposition (in one transaction or a series of
transactions), including without limitation a mortgage or any
other security device, of all or any Substantial Part of the
assets either of the Corporation or of a subsidiary of a
Corporation, (c) any sale, lease, exchange, transfer or other
disposition of all or any Substantial Part of the assets of an
entity to the Corporation or a subsidiary of the Corporation,
(d) the issuance, sale, exchange, transfer or other disposition
by the Corporation or a subsidiary of the Corporation, of its
securities with or to the Related Person, (e) any
recapitalization or reclassification of the Corporation's
securities (including, without limitation, any reverse stock
split) or other transaction that would have the effect of
increasing the voting power of a Related Person, (f) any
liquidation, spin-off, split-up, or dissolution of the
Corporation, and (g) any agreement, contract or other arrangement
providing for any of the transactions described in this
definition of Business Transaction.
(ii) The term "Related Person" shall (a) mean and
include any individual, corporation, partnership, group,
association or other person or entity which, together with its
Affiliates and the Associates, is the Beneficial Owner of not
less than ten percent (10 percent) of the voting stock of the
corporation (1) at the time the definitive agreement providing
for the Business Combination (including any amendment thereof)
was entered into, (2) at the time a resolution approving the
Business Combination was adopted by the Board of Directors of the
Corporation, or (3) as of the record date for the determination
of Shareholders entitled to notice of and to vote on, or consent
to, the Business Combination, and (b) shall mean and include any
Affiliate or Associate of any such individual, corporation,
partnership, group, association or other person or entity;
provided, however, and notwithstanding anything in the foregoing
to the contrary, the term "Related Person" shall not include the
Corporation, a wholly owned subsidiary of the Corporation, or any
trustee of, or fiduciary with respect to, any such plan when
acting in such capacity.
(iii) The term "Beneficial Owner" shall be defined
by reference to Rule 13d-3 under the Securities Exchange Act of
1934, as in effect on March 1, 1984; provided, however, and
without limitation, any individual, corporation, partnership,
group, association or other person or entity which has the right
to acquire any Voting Stock at any time in the future, whether
such right is contingent or absolute, pursuant to any agreement,
arrangement or understanding upon exercise of the rights,
warrants or options, or otherwise, shall be beneficial owner of
such Voting Stock.
(iv) The term "Highest Purchase Price" shall mean the
highest amount of consideration paid by such Related Person for a
Common Share within two (2) years prior to the date such Related
Person became the Beneficial Owner of not less than ten percent
(10 percent) of the Voting Stock; and if such stock is not listed
on any principal exchange, the highest closing bid quotation with
respect to a share of stock during the thirty (30) day period
preceding the date in question -- or if no quotations are
available, the fair market value on the date in question of a
share of such stock as determined by the Board in good faith.
(v) The term "Voting Stock" shall mean all outstanding
shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the
purpose of this Article as one class; provided, however, that if
the Corporation has shares of Voting Stock entitled to more or
less than one vote for any such share, each reference to a
proportion of shares of Voting Stock shall be deemed to refer to
such proportion of the votes entitled to be cast by such shares.
(vi) The term "Continuing Director" shall mean a
director who either was a member of the Board of Directors of the
Corporation prior to the time such Related Person became a
Related Person or who subsequently became a director of the
Corporation and whose election, or nomination for election by the
Corporation's stock holder, was approved by a vote of at least
three-quarters (3/4) of the Continuing directors then of the
Board.
NINTH: No amendment of these Articles shall be
effective to amend, alter, repeal or change the effect of any of
the provisions of Article EIGHTH unless such amendment shall
receive the affirmative vote of the holders of at least eighty
percent (80 percent) of the outstanding Common Shares; provided,
however, that such voting requirement shall not be applicable to
the approval of such an amendment if such amendment shall have
been proposed and authorized by action of the Board of Directors
of the Corporation by the affirmative vote of at least two-thirds
(2/3) of the Continuing Directors, as that term is defined in
Article EIGHTH.
TENTH: The Corporation shall have the power to
indemnify its present and past directors, officers, employees and
agents, and such other persons as it shall have powers to
indemnify, to the full extent permitted under, and subject to the
limitations of, Title 17 of the Ohio Revised Code. The
Corporation may, upon the affirmative vote of a majority of its
Board of Directors, purchase insurance for the purpose of
indemnifying its directors, officers, employees and agents to the
extent that such indemnification is allowed in this Article
TENTH.
ELEVENTH: These Amended Articles of Incorporation
supersede the Restated and Amended Articles of Incorporation of
the Corporation, as amended, heretofore in effect.
EXHIBIT 3.2
CODE OF REGULATIONS
OF
MID AM, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the
Corporation shall be at such place in the City of Bowling Green,
Ohio, as may be designated from time to time by the Board of
Directors.
Section 2. Other Offices. The Corporation shall also have
offices at such other places without, as well as within, the
State of Ohio, as the Board of Directors may from time to time
determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meeting. The annual meeting of the
shareholders of this Corporation for the purpose of fixing or
changing the number of directors of the Corporation, electing
directors and transacting such other business as may come before
the meeting, shall be held between the hours of 8:00 a.m. and
5:00 p.m. on the fourth Saturday of March of each year, but if a
legal holiday, then on the next business day following, or at
such other time as may be fixed by the Board of Directors.
Section 2. Special Meetings. Special meetings of the
shareholders may be called at any time by the Chairman of the
Board of Directors, President, or a majority of the Board of
Directors acting with or without a meeting, or by three (3) or
more shareholders owning, in the aggregate, not less than
twenty-five percent (25 percent) of the stock of the Corporation.
Section 3. Place of Meetings. Meetings of shareholders
shall be held at the main office of the Corporation unless the
Board of Directors decides that a meeting shall be held at some
other place within of without the State of Ohio and causes the
notice thereof to so state.
Section 4. Notice of Meeting. Unless waived, a written,
printed, or typewritten notice of each annual or special meeting
stating the day, hour, and place and the purpose or purposes
thereof shall be served upon or mailed to each shareholder of
record ( a) as of the next preceding the day on which notice is
given or ( b) if a record date therefor is duly fixed, of record
as of said date. Notice of such meeting shall be mailed, postage
prepaid, at least ten (10) days prior to the date thereof. If
mailed, it shall be directed to a shareholder at his address as
the name appears upon the records of the Corporation.
Section 5. Waiver of Notice. Any shareholder, either
before or after any meeting, may waive any notice required to be
given by law or under these Regulations; and whenever all of the
shareholders entitled to vote shall meet in person or by proxy
and consent to holding a meeting, it shall be valid for all
purposes without call or notice, and at such meeting any action
may be taken.
Section 6. Quorum. A majority of the outstanding capital
stock, represented in person or by proxy, shall constitute a
quorum at any meeting of the shareholders, unless otherwise
provided by law; but less than a quorum may adjourn any meeting,
from time to time, and a meeting may be held, a adjourned,
without further notice. A majority of the votes cast shall
decide every question or matter submitted to the shareholders at
any meeting, unless otherwise provided by law or by the Articles
of Incorporation.
Section 7. Proxies. Any shareholder of record who is
entitled to attend a shareholder's meeting, or to vote thereat or
to assent or give consents in writing, shall be entitled to be
represented at such meetings or to vote thereat or to assent or
give consents in writing, as the case may be, or to exercise any
other of his rights, by proxy or proxies appointed by a writing
signed by such shareholder, which need not be sealed, witnessed
or acknowledged.
A telegram, cablegram, wireless message or photogram
appearing to have been transmitted by a shareholder, or a
photograph, photostatic or equivalent reproduction of a writing
appointing a proxy or proxies shall be sufficient writing.
No appointment of a proxy shall be valid after the
expiration of eleven (11) months after it is made unless the
writing specifies the date on which it is to expire or the length
of time it is to continue in force.
Section 8. Voting. At any meeting of shareholders, each
shareholder of the Corporation shall, except as otherwise
provided by law or by the Articles of Incorporation or by these
Regulations, be entitled to one (1) vote in person or by proxy
for each share of the corporation registered in his name on the
books of the Corporation: (a) on the record date for the
determination of shareholder entitled to vote at such meeting,
notwithstanding the prior or subsequent sale, or other disposal
of such share or shares or transfer of the same on the books of
the Corporation on or after the record date; or (b) if no such
record date shall have been fixed, then at the time of such
meeting.
ARTICLE III
Board of Directors
Section 1. The Board of Directors ( hereinafter referred to
as the "Board"), shall have power to manage and administer the
business and affairs of the corporation. Except as expressly
limited by law, all corporate powers of the Corporation shall be
vested in, and may be exercised by said Board.
Section 2. Nominations For and Qualifications of Directors.
Nominations for election to the Board of Directors may be made by
the Board of Directors, or by any shareholder of any outstanding
class of capital stock of the Corporation, entitled to vote for
the election of Directors. Nominations, other than those made by
or on behalf of the existing management of the Corporation, shall
be made in writing and shall be delivered or mailed to the
President of the Corporation not less than fourteen (14) days nor
more than fifty (50) days prior to any meeting of shareholders
called for the election of Directors; provided, however, that if
less than twenty-one (21) days notice of the meeting is giving
to shareholders, such notification must be mailed or delivered to
the President of the Corporation not later than the close of
business on the Seventh (7th)day following the day on which the
notice of meeting was mailed. Such notification shall contain
the following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee; (c) the
name and residence address of the notifying shareholder; and
(d) the number of shares of capital stock of the corporation
owned by the notifying shareholder. Notifications not made in
accordance herewith may, in his/her discretion, be disregarded by
the Chairman of the meeting and upon his/her instructions, the
vote tellers may disregard all votes cast for each such nominee.
Any number of the Board of Directors of a wholly-owned banking
subsidiary of the Corporation may, if permitted under applicable
banking law, hold shares of the Corporation in lieu of shares of
such banking subsidiary to qualify as a Director of such banking
subsidiary, if required. Directors of the Corporation are
required to own 200 shares of the Corporation in order to serve
on the Board of Directors of this Corporation. Directors shall
serve no longer than their seventieth (70th) birthday, at which
time they shall be considered to have resigned from the Board of
Directors.
Section 3. Number of Directors. The number of Directors
constituting the entire Board shall not be less than five (5) no
more than twenty-five (25), the exact number of Directors to be
determined from time to time by an eighty percent (80 percent)
majority vote of the whole Board of Directors of the Corporation,
and such exact number shall be twenty-two until otherwise so
determined.
Section 4. Election and Term of Directors. The Board of
Directors shall be divided into three classes, as nearly equal in
number as the then total number of Directors constituting the
whole Board permits, with the term of office of one class
expiring each year. At the annual meeting of shareholders in
1988, Directors of the first class shall be elected to hold
office for a term expiring at the next succeeding annual meeting,
Directors of the second class shall be elected to hold office for
a term expiring at the second succeeding annual meeting, and
Directors of the third class shall be elected to hold office for
a term expiring at the third succeeding annual meeting. 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 Board of Directors, acting by
a majority of the directors then in office, although less than a
quorum, and any Director so chosen shall hold office until the
next election of the class for which such Directors shall have
been chosen and until their successor shall shorten the term of
any incumbent Director. Subject to the foregoing, at each annual
meeting of shareholders, 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.
Revisions of this Article III, Section 4--Election and Term of
Directors, shall require 80 percent vote of the common stock
outstanding and qualified to vote at a special or annual meeting
of shareholders.
Section 5. Removal of Directors. Any or all of the
Directors shall only be removed with cause and only by the
affirmative vote of not less than 80 percent vote of the whole
Board of Directors of the Corporation.
Section 6. Organization Meeting. The Secretary of the
Corporation, upon receiving the certificate of the judges of the
result of any election, shall notify the "directors elect" of
their election and of the time at which they are required to meet
for the purpose of organizing the new board and electing and
appointing officers of the corporation for the succeeding year.
Such meeting shall b e appointed to be held ont he day of the
election, or as soon thereafter as practicable, and, in any
event, within thirty (30) days thereof. If, at that time fixed
for such meeting, there shall not be a quorum present, the
Directors present may adjourn the meeting, from time to time,
until a quorum is obtained.
Section 7. Regular Meetings. The Regular meetings of the
Board of Directors shall be held, without notice, on the third
Thursday of each month of the fiscal year, at the main office, or
such other time or place as may be determined from time to time
by the Board. When any regular meeting of the Board falls upon a
holiday, the meeting shall be held on the next business day,
unless the Board shall designate some other day.
Section 8. Special Meetings. Special meetings of the Board
of Directors may be called by the Chairman, Chief Executive
Officer, and/or President of the Corporation, or at the request
of three (3) or more Directors. Each member of the Board of
Directors shall be given notice, stating the time and place, by
letter, telegram or in person of each said special meeting. Such
notice of the special meeting can be waived by a Director at the
special meeting, but if a Director does not waive such a notice,
said notice shall be received by each Director who has not waived
notice not less than three (3) days prior to the special meeting.
Section 9. Vacancies. If the office of any Director becomes
vacant by reason of death, resignation, disqualification, removal
or other cause, the majority of the Directors remaining in
office, although less than a quorum, may elect a successor for
the unexpired term and until his/her successor is elected and
qualified.
Section 10. Quorum. A majority of the Directors shall
constitute a quorum at any meeting, except when otherwise
provided by law; but lesser number may adjourn any meeting, from
time to time and the meeting may be held, as adjourned, without
further notice.
Section 11. Participation In Meetings By Conference
Telephone. Members of the Board of Directors, or of any
committee thereof, may participate in a meeting of such Board or
committee by means of conference telephone or similar
communications equipment that enables all persons participating
in the meeting to hear each other such participation shall
constitute presence in person at such meeting.
Section 12. Compensation. The Directors shall receive such
compensation for their services, as is fixed by resolution of a
majority of the Board of Directors, provided, however, that
nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and
receiving compensation therefor. Members of any standing or
special committee may by resolution of the Board be allowed such
compensation for their services as the Board may deem reasonable;
additional compensation may be allowed to directors for special
services rendered as the Board may deem reasonable.
Section 13. By Laws. For the government of its action, the
Board of Directors may adopt by-laws consistent with the Articles
of Incorporation and these Regulations.
ARTICLE IV
Committees
Section 1. Committees. The Board of Directors may by
resolution provide for such standing or special committees as it
deems desirable, and discontinue the same at pleasure. Each such
committee shall have such powers and perform such duties, not
inconsistent with law, as may be delegated to it by the Board of
Directors. Vacancies in such committees may be filled by the
Board of Directors.
ARTICLE V
Officers
Section 1. General Provisions. The Board of Directors
shall elect a Chairman and Chief Executive Officer, President and
Chief Operating Officer, such number of Vice Presidents as the
Board may from time to time determine, a Secretary and a
Treasurer. The Board of Directors may from time to time create
such offices and appoint such other officers, subordinate
officers and assistant officers as it may determine. The
Chairman and Chief Executive Officer and the President and the
Chief Operating Officer shall be, but the other officers need not
be, chosen from among the members of the Board of Directors.
Section 2. Term of Office. The officers of the Corporation
shall hold office at the pleasure of the Board of Directors and,
unless sooner removed by the Board of directors, until the
reorganization meeting of the Board of Directors following the
date of their election and until their successors are chosen and
qualified.
The Board of Directors may remove any officer at any time,
with or without cause, by a majority vote of the Board.
A vacancy in any office, however created, nay be filled by
the Board of Directors.
Section 3. Presiding Officer. The Board of Directors shall
determine by majority vote, from time to time, the officer whom
shall preside at the regular or special meetings of the Board of
Directors and of the annual or special meetings of the
shareholders.
ARTICLE VI
Duties of Officers
Section 1. Chairman and Chief Executive Officer. The
Chairman and Chief Executive Officer, if one be elected, shall be
the Chief Executive Officer of the Corporation, and shall have
such other powers and duties as may be prescribed by the Board of
Directors or by the Ohio Revised Code.
Section 2. President and Chief Operating Officer. The
President and Chief Operating Officer shall be the chief
operating officer of the Corporation and shall exercise
supervision over the business of the Corporation and over its
several officers, subject, however, to the control of the Board
of Directors. He shall have all the powers and duties prescribed
by the Ohio Revised Code and such others as the Board of
Directors may from time to time assign to him. In the absence or
disability of the Chairman, the President shall perform all the
duties of the Chairman and when so acting shall have all the
powers of the Chairman.
Section 3. Vice Presidents. The Vice Presidents shall
perform such duties as are conferred upon them by these
regulations or as may from time to time be assigned to them by
the Board of Directors, the Chairman or the President. At the
request of the Chairman, the President, or in their absence or
disability, the Vice President, designated by the Chairman or the
President or (in the absence of such designation, the Vice
President designated by the Board), shall perform all the duties
of the President, and when so acting, shall have all powers of
the President. The authority of Vice Presidents to sign in the
name of the Corporation all certificates for share and authorized
deeds, mortgages, bonds, contracts, notes and other instruments,
shall be coordinated with like authority of the President. Any
one or more of the Vice Presidents may be designated an Executive
Vice President.
Section 4. Secretary. The Secretary shall keep minutes of
all the proceedings of the shareholders and Board of Directors,
and shall make proper record of the same, which shall be attested
by him: sign all certificates for shares, and all deeds,
mortgages, bonds, contracts, notes and other instruments executed
by the Corporation requiring his signature; give notice of
meetings of shareholders and directors; keep such books as may be
required by the Board of Directors and file all reports to
states, to the Federal Government, and to foreign countries; and
perform such other and further duties as may from time to time be
assigned to him by the Board of Directors, the Chairman of the
Board or by the President.
Section 5. Treasurer. The Treasurer shall receive and have
in charge all money, bills, notes, deeds, leases, mortgages and
similar property belonging to the Corporation, and shall do so
with the same as may from time to time be required by the Board
of Directors. He shall cause to be kept adequate and correct
accounts of the business transactions of the Corporation,
including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, stated capital, and shares,
together with such other accounts as may be required, and, upon
the expiration of his term of office, shall turn over to his
successor or to the Board of Directors all property, books,
papers and money of the Corporation in his hand; and he shall
perform such other duties as from time to time may be assigned by
the Board of Directors.
Section 6. Assistant and Subordinate Officers. The Board
of Directors may appoint such assistant and subordinate officers
as it may deem desirable. Each such officer shall hold the
office during the pleasure of the Board of Directors, and perform
such duties as the board of Directors may prescribe.
The Board of Directors may, from time to time , authorize
any officer to appoint and remove assistant and subordinate
officers, to prescribe their authority and duties, and to fix
their compensation.
Section 7. Duties of Officers May Be Delegated. In the
absence of any officer of the corporation, or for any other
reason the Board of Director deem sufficient, The Board of
Directors may delegate, for the time being, the powers or duties,
or any of them, of such officer to any other officer, or to any
director.
ARTICLE VII
Certificates for Shares
Section 1. Form and Execution. Certificates for share
shall be issued to each shareholder in such form as shall be
approved by the Board of Directors. Such certificates shall be
signed by the Chairman or the President or a Vice President which
certificates shall certify the number and class of shares held by
the shareholder in the Corporation, but no certificates for
shares shall be delivered until such shares are fully paid. The
signature of any one of said officers of the Corporation may be a
facsimile, or engraved, stamped or printed. Although any officer
of the Corporation whose manual or facsimile signature is affixed
to a share certificate shall cease to be such officer before the
certificate is delivered, such certificate, nevertheless, shall
be effective in all respects when delivered.
Such certificate for shares shall be transferable in person
or by attorney, but, except as hereinafter provided in the case
of lost, mutilated or destroyed certificates, no transfer of
shares shall be entered upon the records of the Corporation until
the previous certificates if any given for the same shall have
been surrendered and cancelled.
Section 2. Lost, Mutilated or Destroyed Certificates. If
any certificate for shares is lost, mutilated or destroyed, the
Board of Directors may authorize the issuance of a new
certificate in place thereof. If the certificate is for eleven
(11)shares or more, a surety company indemnity bond will be
required to be furnished by the shareholder to indemnify Mid Am,
Inc. and if the certificate is for ten (10) shares or less, a
personal indemnity bond may be accepted in lieu of the surety
company bond. A suitable charge will be made for reissuing any
lost, mutilated or destroyed certificate. The Board of Directors
in its discretion may refuse to issue such new certificates until
the Corporation has been indemnified by a final order or decree
of a court of competent jurisdiction.
ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall end on the 31st day
of December in each year, or on such other day as may be fixed
from time to time by the Board of Directors.
ARTICLE IX
Amendments
These regulations may be amended or repealed at any meeting
of the shareholders called for that purpose by the affirmative
vote of the holders of record of shares entitling them to
exercise a majority of the voting power of such proposal or,
without a meeting, by the written consent of holders of record of
shares entitling the to exercise two-thirds of the voting power
on such proposal except that a proposal to amend Article III
Sections 4 or 5 requires an 80 percent affirmative vote of the
outstanding stock or written consent of 80 percent of the voting
power.
_________________________
Secretary
Date:____________________
EXHIBIT 10.1
Description of Incentive Plan of the Company
Incentive Plan
In 1993, the Company adopted a comprehensive Incentive
Compensation Plan, which provides annual incentive compensation
to all eligible employees of the Company and its subsidiaries.
The Plan was effective January 1, 1994 for all officers and on
July 1, 1994 for all non-officer employees of the Company and its
subsidiaries. Incentive compensation is based upon three
criteria, including overall financial performance of the Company
or the respective subsidiary, the achievement of work group or
departmental goals, and individual job performance. The
proportional weighting of criteria is dependent upon the
participants job responsibilities and their ability to effect the
performance of the subsidiary or Company as a whole. Incentive
award opportunities are expressed as a percentage of the
participant's base salary.
EXHIBIT 10.2
Description of Deferred Compensation Plan of the Company
Deferred Compensation Plan
The Company and its subsidiaries have, from time to time, entered
into non-qualified deferred compensation agreements with certain
of their officers pursuant to which the officer defers a portion
of his or her salary annually until retirement, at which time a
monthly benefit will be paid by the Company. Several deferred
compensation agreements contain a death benefit feature. The
deferred compensation agreements are granted at the discretion of
the Boards of Directors of the Company and its subsidiaries.
EXHIBIT 10.3
MID AM, INC.
1992 STOCK OPTION PLAN
As Amended by the Board of Directors
16 June 1994
and
19 October 1995
TABLE OF CONTENTS
ARTICLE I
PURPOSE AND SCOPE OF THE PLAN
1.01 ESTABLISHMENT. . . . . . . . . . . . . . . . . . . 1
1.02 PURPOSE. . . . . . . . . . . . . . . . . . . . . . 1
1.03 DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1
1.04 ADMINISTRATION . . . . . . . . . . . . . . . . . . 3
1.05 TOTAL NUMBER OF SHARES TO BE OPTIONED. . . . . . . 3
1.06 ELIGIBILITY. . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
PROVISIONS RELATING TO OPTIONS
2.01 CHARACTER OF OPTIONS . . . . . . . . . . . . . . . 9
2.02 TERMS AND CONDITIONS OF OPTIONS. . . . . . . . . . 9
2.03 DATE OF GRANTING OF OPTIONS. . . . . . . . . . . . 12
2.04 EXERCISE OF OPTION - PURCHASE OF SHARES. . . . . . 12
2.05 NO OBLIGATION TO EXERCISE OPTION . . . . . . . . . 16
ARTICLE III
GENERAL PROVISIONS
3.01 WITHHOLDING TAXES FOR AWARDS . . . . . . . . . . . . 16
3.02 CHANGE IN STOCK, ADJUSTMENTS, ETC. . . . . . . . . . 18
3.03 DURATION, AMENDMENT AND TERMINATION. . . . . . . . . 20
3.04 APPLICATION OF FUNDS . . . . . . . . . . . . . . . . 21
3.05 LEGAL AND OTHER REQUIREMENTS . . . . . . . . . . . . 21
3.06 EFFECTIVE DATE OF PLAN . . . . . . . . . . . . . . . 22
ARTICLE I
PURPOSE AND SCOPE OF THE PLAN
1.01 ESTABLISHMENT
Mid Am, Inc. (the "Company"), an Ohio corporation,
hereby establishes a plan to be called the 1992 Mid Am, Inc.
Stock Option Plan (the "Plan").
1.02 PURPOSE
The purpose of the Plan is to promote the long term
growth and prosperity of Mid Am, Inc. by providing Officers,
Directors and key employees, who are in a position to
contribute materially to the prosperity of the Company, a
financial incentive through stock ownership to make significant
contributions toward this success. The Plan is designed to
attract and retain key employees and directors and to encourage
them to acquire an ownership interest. The Plan provides for
granting these individuals options for the purchase of common
shares of the Company. The Plan also allows Officers, Directors,
and all employees to elect option grants in lieu of cash
compensation.
1.03 DEFINITIONS
Unless the context clearly indicates otherwise, the
following terms have the meanings set forth below:
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Committee" shall mean the Committee, of not less
than three (3) directors, which is appointed by
the Board to administer the Plan. These directors
shall be "disinterested persons" within the
meaning of Rule 16b-3 of the Securities Exchange
Act of 1934.
(c) "Company" shall mean Mid Am, Inc., an Ohio
corporation, and its subsidiaries.
(d) "Key Employees" shall mean employees at the level
of senior vice president or above and any other
officers of the Company who, in the sole
determination of the Special Projects Committee
have rendered valuable service to the Company, or
whose present or potential service to the Company
merits the grant of options.
(e) "Non-employee Directors" shall mean all statutory
directors of the Company and its subsidiaries who
are not employees of the Company or any of its
subsidiaries.
(f) "Incentive Stock Option" shall mean an Option that
qualifies as an Incentive Stock Option as
described in Section 422A of the Code.
(g) "Nonqualified Stock Option" means an Option other
than an Incentive Stock Option.
(h) "Option" shall mean a right to purchase shares of
common stock, granted pursuant to the Plan, in the
form of grant options or elective options as
defined in the Plan.
(i) "Optionee" shall mean a Participant to whom
Options have been granted in accordance with the
provisions of the Plan.
(j) "Option Price" shall mean the purchase price for
Stock under an Option, determined pursuant to the
Plan.
(k) "Participant" shall mean any employee of Mid Am,
Inc., whether a Key Employee or not, and any
Director of the company to whom an Option is
granted under the Plan.
(l) "Plan" shall mean this 1992 Mid Am, Inc. Stock
Option Plan and the 1994 Amendment to the 1992
Stock Option Plan (the "Amendment").
(m) "Stock" shall mean the common stock of the
Company, no par value.
1.04 ADMINISTRATION
The Plan shall be administered by the Board of
Directors of the Company (the "Board"), which, to the extent it
shall determine, may delegate its powers with respect to the
administration of the Plan to a committee of directors (the
"Committee") appointed by the Board and composed of not less than
three (3) members of the Board. If the Board chooses to appoint
a Committee, all references to the Board shall be deemed to refer
to the Committee.
The Board from time to time may adopt (and thereafter
amend and rescind) rules and regulations for carrying out the
Plan and take such action in the administration of the Plan, not
inconsistent with the provisions hereof, as it shall deem proper.
The interpretation and construction of any provisions of the Plan
by the Board shall be final and conclusive. No member of the
Board shall be liable for any action or determination made in
good faith with respect to the Plan or any option granted under
it.
1.05 TOTAL NUMBER OF SHARES TO BE OPTIONED
The maximum number of shares of common stock of the
Company which may be issued upon exercise of options under the
Plan shall not exceed seven percent of the total shares
outstanding, subject to adjustment as provided in Section 3.02
(a). The shares to be transferred or sold under the Plan shall
be authorized but unissued shares of common stock or authorized
shares held as treasury stock. The Company shall purchase any
other shares required for the Plan on the open market or from
private sources. In the event that any options under the Plan
expire or are terminated, the shares of common stock of the
Company allocable to the unexercised portion of all such options
may again be subject to an option or transfer under the Plan.
1.06 ELIGIBILITY
(a) "Grant Options" may be awarded from time to time
only to Officers, Directors and Key Employees of
the Company. The Board will, in its discretion,
determine the Officers and Key Employees to be
awarded "Grant Options", the time or times at
which such options shall be granted and in
connection therewith, the number of shares to be
covered by each grant of such options and the
manner in which they may be exercised. In making
this determination, the Board may take into
consideration the value of the services rendered
by the respective individuals, their present
and/or potential contributions to the success of
the Company and such other factors which the Board
may deem relevant in accomplishing the purpose of
the Plan. All terms and conditions of "Grant
Options", other than options granted to
Non-employee Directors, shall be subject to all
restrictions and conditions imposed by the
Board,and these terms and conditions need not be
the same for all Optionees of "Grant Options".
Eligible Directors are all Non-employee Directors
of the Company. The award of "Grant Options" to
these Non-employee Directors is not subject to the
discretion of the Board. Directors serving on the
Committee who are Non-employee Directors may
receive "GrantOptions".
(b) Grant Options to Non-employee Directors
"Grant Options" to Non-employee Directors shall be
awarded as follows:
(1) Following adoption of the Plan, each non-
employee director of the Company shall be
granted an option for 1,000 shares of stock.
Also, following adoption of the Plan, each
non-employee director of each of the
subsidiaries of the Company shall be granted
an option for 700 shares of stock.
(2) Each person subsequently elected or appointed
to serve as a non-employee director of the
Company or its subsidiaries after adoption of
this Plan shall, upon his or her initial
appointment or election automatically be
granted an option for 1,000 shares of stock
if a director of the Company or for 700
shares of stock if a director of any of the
Company's subsidiaries, if elected or
appointed more than six months prior to the
third Thursday of November in any given
year.If elected or appointed less than six
months prior to the third Thursday of
November in any given year, the director
shall receive the initial grant of 1,000 or
700 shares respectively, on the annual grant
date of the third Thursday of November, in
lieu of the annual grant of 500 or 350
shares, respectively.
(3) Beginning on the third Thursday in November
in the year immediately succeeding adoption
of this Plan, and continuing each third
Thursday in November thereafter, each
non-employee director of the Company shall
automatically granted an option for 500
shares of stock and each non-employee
director of any subsidiary of the Company
shall automatically be granted an option for
350 shares of stock.
(4) If any director serves as a director of both
the Company and of one or more subsidiaries,
he or she shall be entitled only to one
initial and one yearly grant, which shall in
each case be the larger grant to which he or
she is entitled.
(c) Elective Options
"Elective Options" may be granted to Non-employee
Directors and to all employees of the Company in
lieu of cash compensation. The Board will, in its
discretion, determine which employees are entitled
to elect options in lieu of cash compensation, the
amount of cash compensation for which "Elective
Options" may be elected as a substitution, the
time or times at which such elections must be
made and such options shall be granted in this
manner, the number of shares to be covered by each
grant of "Elective Options", and the manner in
which such options may be exercised. In making
this determination, the Board may take into
consideration the current and prospective economic
condition of the Company and such other factors
which the Board may deem relevant in accomplishing
the purpose of the Plan. All terms and conditions
of options granted, other than options granted to
Non-employee Directors, shall be subject to all
restrictions and conditions imposed by the Board,
and these terms and conditions need not be the
same for all Optionees. Any Optionee subject to
Section 16 of the Exchange Act receiving Elective
Options" shall not sell any shares of the
Company's stock (whether related to an option or
not) within six months of an "Elective Option"
grant, without the prior approval of the
Company's General Counsel. Directors eligible
for "Elective Options" are all Non-employee
Directors of the Company. Directors serving on
the committee who are Non-employee Directors may
receive "Elective Options".
(d) Elective Options to Non-employee Directors
(1) In accordance with Rule 16b-3(c)(2)(i)(C),
promulgated under Section 16 of the Securities
Exchange Act of 1934, each Non-employee Director
may elect to receive options for a number of
shares equivalent to a portion or the entire
amount of retainer and attendance fees the
Non-employee Director would normally be entitled
to receive in cash. Equivalency will be
determined by a wholly independent third party
using a fixed schedule of payments for retainers
and attendance fees.
(2) By June 30, 1994 or by December 31st of each
year thereafter, to the extent that "Elective
Options" are offered, a Non-employee Director may
elect, in writing, to receive all or a percentage
of his or her retainer and attendance fees, for
the immediately following six-month period, in
"Elective Options" in lieu of cash. The written
election to receive "Elective Options" in lieu of
cash must state the portion of compensation that a
Non-employee Director wishes to receive in
"Elective Options".
(3) A written election to receive "Elective
Options" remains in effect and is irrevocable for
the immediately following period and applies to
each subsequent period unless the election
expressly provides otherwise or until it is
revoked or changed, prior to the commencement of
the next period. It must include a designation of
beneficiary or beneficiaries to receive amounts
distributable in the event of Optionee's death.
(e) Nothing in the Plan, or in any grant of options
shall confer on any person any right to continue
in the employ of the Company, nor interfere with
the right of the Company to terminate the person's
employment at any time. No employee shall have a
right to be selected as an Optionee, nor, having
been so selected, to be selected again as an
Optionee.
ARTICLE II
PROVISIONS RELATING TO OPTIONS
2.01 CHARACTER OF OPTIONS
It is the intent of the Plan that options granted shall
be Incentive Stock Options as that term is defined in Section
422A of the Internal Revenue Code of 1986, as amended from time
to time (the "Code"), to the extent, and only to the extent, that
these options are so identified in writing. All options not
identified as Incentive Stock Options at the time of grant are
intended to be "nonqualified" or "nonstatutory" stock options
which are not Incentive Stock Options.
2.02 TERMS AND CONDITIONS OF OPTIONS
Each Option granted under the Plan shall be evidenced
by a Stock Option Agreement in a form not inconsistent with the
Plan, provided that the substance of the following terms and
conditions be included:
(a) Option Price: The price at which each share of
common stock covered by the Option may be
purchased shall be determined by the Board, but
shall not be less than 100 percent of the fair market
value of the common stock subject to the stock
option on the date of grant. Fair market value
shall be defined as the closing price on the
National Market System's NASDAQ quotation service
on the trading day immediately preceding grant.
(b) Term of Option: The Option and any related right
shall not be exercisable after the expiration of
ten (10) years from the date the option was
granted.
(c) Nontransferable: The Option and any related right
shall not be transferable by Optionee otherwise
than by will or by the laws of descent and
distribution and may be exercised, during
Optionee's lifetime, only by Optionee.
(d) Upon the termination of Optionee's employment by
the Company or relationship with the Board for any
reason other than death, Optionee may exercise
available Options pursuant to Section 2.04 of the
Plan until the earlier of the expiration of its
original term or:
1) if termination is due to retirement, one (1)
year after termination;
2) if termination is due to total and permanent
disability as determined by the Board, one
(1) year after termination;
3) if termination is for any other reason, two
(2) months after the date of notice of
termination, provided however, that in the
case of Elective Options and termination is
not for cause, one (1) year after
termination. Leaves of absence for periods
and purposes conforming to the personnel
policy of the Company as may be approved by
the Committee shall not be deemed
terminations or interruptions of employment.
(e) Death of Optionee: In the event of the death of
an Optionee during the period in which an option
is exercisable (as set forth in Subsection (b)
above), the option granted to that person and any
related right shall be exercisable only within
the twelve (12) months next succeeding such
death, and then only:
1) by the executor, executrix, administrator, or
administratrix of Optionee's estate or by the
person or persons to whom Optionee's rights
under the option shall pass by Optionee's
will or the laws of descent and
distribution,and
2) if and to the extent that Optionee was
entitled to exercise the option at the date
of Optionee's death, provided that in no
event shall the option be exercisable more
than ten (10) years after the date it was
granted.
2.03 DATE OF GRANTING OF OPTIONS
The granting of an option pursuant to the Plan shall
take place on the date the Board decides to grant the option.
Within thirty (30) days of the granting of the option, the
Company shall notify Optionee of the grant of the option and,
within sixty (60) days of the granting of the option, submit to
Optionee a Stock Option Agreement duly executed by and on behalf
of the Company, with the request that Optionee execute the
agreement within thirty (30) days after the mailing by the
Company of the agreement to Optionee. If Optionee shall fail to
execute the written option agreement within this 30-day period,
Optionee's option shall be automatically terminated unless
otherwise determined by the Board.
2.04 EXERCISE OF OPTION - PURCHASE OF SHARES
(a) Unless otherwise determined by the Board, and
except for "Elective Options" in lieu of cash
compensation elected pursuant to subsections 1.06
(c) or (d), one-fifth of the total number of
shares subject to a "Grant Option" awarded under
the Plan to an Officer or Key Employee shall
become exercisable one year from date of grant
and one-fifth on each of the four succeeding
anniversaries, provided the Officer or Key
Employee remains in the employ of the Company on
those respective dates. An Officer or Key
Employee Optionee's right to purchase shares with
respect to options which become exercisable shall
be cumulative during the term of the option.
Grant Options" awarded to Non-employee Directors
shall become exercisable immediately following
the date of the grant. "Elective Options"
elected by employees shall become exercisable
immediately following the date of the grant.
"Elective Options" elected by Non-employee
Directors shall become exercisable on the
date after the date of grant on which cash
compensation for retainers and attendance fees
would have been payable to the participant. Any
"Elective Option" granted for attendance fees not
actually earned will lapse in an amount equivalent
to the unearned fees.
(b) An option shall be exercisable by purchase of
shares only upon payment to the Company of the
full option price, as defined in Section 2.02, of
the shares with respect to which the option is
exercised; provided, however, that the Company
shall not be required to deliver any certificates
for shares of Company common stock purchased upon
the exercise of an option prior to:
1) if requested by the Company, the filing with
the Company by Optionee or purchaser acting
under Subsection 2.02(e) of a representation
in writing that at the time of exercise it is
Optionee's or purchaser's then present
intention to acquire the shares being
purchased for investment and not for resale,
or
2) the completion of any registration or other
qualification of shares under any state or
Federal laws or rulings or regulations of any
government regulatory body, which the Company
shall determine to be necessary or advisable.
An Optionee shall have none of the rights of a
shareholder until shares are issued to
Optionee, and no adjustment will be made for
dividends or other rights for which the record
date is prior to the date a stock certificate
is issued.
(c) Payment for shares shall be in United States
dollars, payable in cash or by check, determined
as of the date of exercise, equal to the number of
shares with respect to which the option is
exercised multiplied by the Option Price per
share. An option shall be deemed exercised on
the date payment and written request are received
by the Board or by any person designated by the
Board.
(d) Optionee may elect to use common stock valued at
the Fair Market Value on the last business day
preceding the exercise date to pay all or part of
the exercise price of an option, subject to
conditions the Committee may impose through the
adoption of rules or regulations or otherwise,
provided, however, that this form of payment shall
not be permitted unless at least one hundred (100)
shares of common stock are delivered for this
purpose.
(e) No Optionee or Optionee's executor, executrix,
administrator, or administratrix, legatees or
distributees, as the case may be, will be, or will
be deemed to be, a holder of any shares subject to
an option unless and until a stock certificate or
certificates for the shares are issued to this
person or them under the terms of the Plan.
(f) No option may, at any time, be exercised with
respect to a fractional share. No fractional
shares will be issued.
(g) Notwithstanding the provisions of subsections (c)
and (d) of this Section 2.04, Optionees not
subject to Section 16 of the Exchange Act may,
with the consent of the Company, simultaneously
exercise options and sell the underlying shares
to the Company, and the Company shall withhold from
the gross proceeds an amount equal to the number
of shares with respect to which the options are
exercised multiplied by the Option Price per
share.
2.05 NO OBLIGATION TO EXERCISE OPTION
Granting of an option shall impose no obligation on
Optionee to exercise the option.
ARTICLE III
GENERAL PROVISIONS
3.01 WITHHOLDING TAXES FOR AWARDS
Each Optionee shall, as a condition of exercising an
Option, pay to the Company the amount, if any, required to be
withheld from distributions resulting from exercise under
applicable Federal and state income tax laws ("Withholding
Taxes"). Withholding Taxes shall be payable as of the date income
from the exercise is included in Optionee's gross income for
federal income tax purposes (the "Tax Date"). Optionee may
satisfy this requirement by electing one of the following methods
(or a combination), which election is subject to the approval of
the Board:
(a) remitting to the Company in cash or by check the
amount of the Withholding Taxes;
(b) remitting to the Company a number of shares of
common stock having an aggregate Fair Market Value
as of the last business day preceding the Tax Date
equal to the amount of the Withholding Taxes;
(c) electing to have the Company withhold from the
distribution the number of shares of common stock
having an aggregate Fair Market Value as of the
last business day preceding the Tax Date equal to
the amount of the Withholding Taxes.
Any election by Optionee pursuant to clause (b) or (c)
of this Section 3.01 must be made on or prior to the Tax Date and
is irrevocable. In addition, if Optionee is subject to Section
16 of the Exchange Act, an election pursuant to clause (b) or (c)
of this Section 3.01 cannot be made until at least six (6) months
after the Grant Date (except that this limitation shall not apply
in the event the death or disability of Optionee occurs prior to
the expiration of the six (6) month period), and election must be
made either by the date which is at least six (6) months prior to
the Tax Date or during any period beginning prior to the Tax Date
which begins on the third business day following the date of
release for publication by the Company of quarterly or annual
summary statements of earnings and ending on the twelfth business
day following this date.
3.02 CHANGE IN STOCK, ADJUSTMENTS, ETC.
(a) In the event that the outstanding shares of common
stock of the Company are increased or decreased or
changed into or exchanged for a different number
of shares or kind of shares or other securities
of the Company or of another corporation, by
reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split,
combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be
made by the Board in the number and kind of
shares for the purchase of which options may be
granted under the Plan. In addition, the Board
shall make appropriate adjustment in the number
and kind of shares as to which outstanding
options, or portions thereof then unexercised,
shall be exercisable, to the end that the
Optionee's proportionate interest shall be
maintained as before the occurrence of such
event, and this adjustment of outstanding options
shall be made without change of the total price
applicable to the unexercised portion of the
option and with a corresponding adjustment in the
Option Price per share; provided, however, that
each such adjustment in the number and kind of
shares subject to outstanding options, including
any adjustment in the Option Price, shall be made
in a manner which will not establish a new
measurement date for the purposes of determining
compensation expense under the provisions of the
Accounting Principles Board Opinion
No. 25 - Accounting for Stock Issued to Employees,
as amended. The grant of an option pursuant to
the Plan shall not affect in any way the right or
power of the Company to make adjustments,
reclassifications, reorganizations or changes of
its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or
assets.
(b) Change in Control. Upon the Change in Control of
the Company, as defined below, each stock option
granted shall be immediately vested and fully
exercisable as of the effective date of the Change
in Control. After the effective date of the
Change in Control, the option shall remain fully
exercisable until it would otherwise expire by
reason of lapse of time. "Change in Control"
means any one or more of the following events:
(a) the merger or consolidation of Employer with
or into any other corporation and Employer is not
the surviving corporation; (b) in excess of
24.99 percent of the outstanding common stock of Employer
is owned, held or controlled by an entity, person
or group acting in concert with the power to
control the Company as that term is defined in
Rule 405 of the Securities Act of 1933; (c) the
sale or exchange of in excess of 24.99 percent of the
assets of Employer to any entity, person, or
group acting in concert;(d) the recapitalization,
reclassification of securities or reorganization
of Employer which has the effect of either subpart
(b) or (c) above; (e) the issuance by Employer of
securities in an amount in excess of 24.99 percent of the
outstanding common stock of Employer to any
entity, person, or group acting in concert and
intending to exercise control of Employer or (f)
the removal, termination or retirement of more
than 49 percent of the members of the Board of Directors.
3.03 DURATION, AMENDMENT AND TERMINATION
The Company may at any time terminate the Plan or make
amendments as it shall deem advisable and in the best interests
of the Company without further action on the part of the holders
of Company voting stock; provided, however, that no termination
or amendment shall, without the consent of the individual to whom
any option shall have been granted, affect or impair the rights
of that individual under the option, and provided further, that
unless the holders of Company voting stock shall have approved in
accordance with Rule 16b-3(b) of the Exchange Act, no amendment
of this Plan shall be made whereby:
1) the total number of shares which may be optioned under
the Plan to all individuals, or any of them, shall be
increased, except by operation of the adjustment
provisions of Section 3.02 (a) hereof;
2) the terms of the options shall be extended;
3) the minimum Option Price shall be decreased; or
4) the class of individuals to whom options may be granted
shall be changed.
3.04 APPLICATION OF FUNDS
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds of
the Company.
3.05 LEGAL AND OTHER REQUIREMENTS
The obligation of the Company to sell and deliver
common stock under the Plan shall be subject to all applicable
laws, regulations, rules and approvals, including, but not by way
of limitation, the effectiveness of a registration statement
under the Securities Act of 1933 if deemed necessary or
appropriate by the Company.
3.06 EFFECTIVE DATE OF PLAN
This Plan shall become effective October 15, 1992,
provided that it has been adopted by the affirmative vote of a
majority of the outstanding shares of the Company present and
entitled to vote at a meeting of stockholders at which a quorum
is present within one (1) year of its adoption by the Company.
The Plan shall be null and void and of no effect if this
condition is not fulfilled, and in this event each stock option
granted shall, notwithstanding any of the preceding provisions of
the Plan, be null and void and of no effect.
Executed at _________________________ this ______ day of
___________________, 19____.
MID AM, INC.
______________________________________
By____________________________________
EXHIBIT 10.4
Employee Stock Ownership and Pension Plan of the Company
ESOP Pension Plan
The Company maintains a money purchase employee stock ownership
pension plan (the "Pension Plan"), which is designed to meet the
requirements of an employee stock ownership plan under Section
4975(e)(7) of the Internal Revenue Code and Section 407(d)(6) of
the Employee Retirement Income Security Act of 1974. The Pension
Plan provides for mandatory contributions by the Company in the
form of either common stock or cash which will be used
predominantly to purchase common stock of the Company. All
employees of the Company and its subsidiaries are eligible to
participate in the Pension Plan after they attain the age of 21
and have completed one year of service during which the employee
is credited with at least 1,000 hours of service. The Company
credits each eligible participant's account with cash or common
stock of the Company equal to six percent of the employee's
compensation earned during the year with respect to which the
contribution is made. Contributions credited to a participant's
account are generally not vested until the completion of the
fifth year of service, at which time the contributions become
fully vested. Pension Plan participants are entitled to receive
distributions from their Pension Plan accounts only upon
retirement, death, total disability, termination of service, or a
change in control. Distributions may be made in either cash or
common stock of the Company and may be paid in lump sum or in the
form of an annuity.
Participating employees are entitled to instruct the trustee of
the Pension Plan how to vote the shares of the Company's common
stock held in their account. The trustee of the Pension Plan, Mid
American National Bank, purchases the shares of the Company's
common stock either directly from the Company or on the open
market, and has dispositive powers over the shares.
The ESOP Pension Plan, as amended, follows this description.
TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................... 2
1.01 Acquired Employer............................. 2
1.02 Anniversary Date.............................. 2
1.03 Annual Compensation........................... 2
1.04 Code.......................................... 2
1.05 Company....................................... 2
1.06 Employee...................................... 2
1.07 Employer...................................... 2
1.08 Entry Date.................................... 2
1.09 ERISA......................................... 3
1.10 ESOP.......................................... 3
1.11 Hour of Service............................... 3
1.12 Named Fiduciary............................... 4
1.13 Normal Retirement Age......................... 4
1.14 Normal Retirement Date........................ 4
1.15 Participant................................... 4
1.16 Plan.......................................... 4
1.17 Plan Administrator............................ 4
1.18 Plan Year..................................... 5
1.19 Qualified Election............................ 5
1.20 Qualifying Employer Securities................ 5
1.21 Self-Employed Person.......................... 5
1.22 Trustee....................................... 5
1.23 Trust Fund.................................... 5
1.24 Year of Service............................... 5
ARTICLE II ELIGIBILITY................................... 7
2.01 Eligibility................................... 7
2.02 Eligibility Upon Re-Employment................ 7
2.03 Eligibility for Employees of an Acquired Employer 7
ARTICLE III CONTRIBUTIONS................................. 8
3.01 Employer Contributions........................ 8
ARTICLE IV ALLOCATIONS................................... 9
4.01 Participant Accounts.......................... 9
4.02 Annual Allocations............................ 9
4.03 Annual Report to Participants................. 9
ARTICLE V BENEFITS TO PARTICIPANTS....................... 10
5.01 Upon Retirement or Disability.................. 10
5.02 Upon Death.................................... 10
5.03 Upon Termination of Employment................ 11
5.04 Certification by Plan Administrator........... 13
ARTICLE VI DISTRIBUTIONS................................. 14
6.01 Method and Medium of Payment.................. 14
6.02 Special ESOP Distribution Requirements........ 17
6.03 Mandatory Commencement of Benefits............ 18
6.04 Distribution After Death of a Participant..... 19
6.05 Right to Have Accounts Transferred............ 20
6.06 Cash Dividend Option.......................... 20
ARTICLE VII LIMITATION ON CONTRIBUTIONS AND BENEFITS...... 21
7.01 Limitation of Benefits........................ 21
ARTICLE VIII TOP HEAVY PROVISIONS.......................... 25
8.01 Definitions................................... 25
8.02 Determination of Top Heavy Status............. 26
8.03 Combination of Defined Benefit and Defined
Contribution Plan.......................... 27
8.04 Minimum Contribution.......................... 27
8.05 Minimum Vesting............................... 27
ARTICLE IX AMENDMENT OR TERMINATION...................... 29
9.01 Amendment..................................... 29
9.02 Plan Termination or Discontinuance of
Contributions.............................. 29
9.03 Merger, Consolidation or Transfer of Assets... 30
ARTICLE X ADMINISTRATION................................ 31
10.01 Plan Administrator............................ 31
10.02 Records and Reports........................... 32
10.03 Claims Procedure.............................. 32
10.04 Participant's Right to Vote Employer Stock.... 33
ARTICLE XI EXEMPT LOAN................................... 34
11.01 Definition of Exempt Loan..................... 34
11.02 Requirements for an Exempt Loan............... 34
11.03 Right of First Refusal........................ 35
ARTICLE XII TRUSTEE....................................... 36
12.01 Fiduciary Status.............................. 36
12.02 Establishment and Acceptance of Trust......... 36
12.03 Trustee's General Powers...................... 36
12.04 Payment of Compensation, Expenses and Taxes... 38
12.05 Accounting.................................... 38
12.06 Trustee's General Powers...................... 38
12.07 Voting Employer Stock......................... 38
12.08 Removal, Resignation and Appointment of
Successor Trustee.......................... 39
12.09 Investment Manager............................ 39
12.10 Payment of Expenses........................... 40
ARTICLE XIII INVESTMENT OF THE TRUST FUND.................. 41
13.01 General Investment Fund....................... 41
13.02 Appraisal of Employer Stock................... 42
13.03 Diversification of Investments................ 42
ARTICLE XIV MISCELLANEOUS................................. 44
14.01 Participant's Rights.......................... 44
14.02 Assignment or Alienation of Benefits.......... 44
14.03 Reversion of Funds to Employer................ 44
14.04 Third Party Immunity.......................... 45
14.05 Delegation of Authority by Employer........... 45
14.06 Allocation of Responsibilities................ 46
14.07 Construction of Plan.......................... 46
14.08 Gender and Number............................. 46
14.09 Headings...................................... 46
APPENDIX A LIST OF PARTICIPATING EMPLOYERS............... 47
MID AM, INC.
EMPLOYEE STOCK OWNERSHIP PENSION PLAN
AS AMENDED AND RESTATED
THIS AGREEMENT, made and executed at Bowling Green, Ohio on the
17th day of September, 1993, to be effective as of July 1, 1989,
by and between MID AM, INC., a corporation organized and existing
under the laws of the State of Ohio (hereinafter referred to as
"Employer"), and MID AMERICAN NATIONAL BANK & TRUST (hereinafter
referred to as "Trustee").
WITNESSETH:
WHEREAS, the Employer established the "Mid Am, Inc. Employee
Stock Ownership Pension Plan" (hereinafter referred to as the
"Plan") which became effective July 1, 1989; and
WHEREAS, the Employer deems it necessary to amend the Plan to
comply with the Tax Reform Act of 1986 and make certain other
changes;
NOW, THEREFORE, in consideration of these premises and the mutual
covenants herein contained, it is mutually agreed by and between
the Employer and the Trustee, that the Plan and Trust shall read
as follows:
ARTICLE I
DEFINITIONS
1.01 Acquired Employer. "Acquired Employer" means any
organization, corporate or otherwise, which is acquired by
purchase, merger, consolidation or any other method.
1.02 Anniversary Date. "Anniversary Date" means the last day of
each Plan Year.
1.03 Annual Compensation. "Annual Compensation" means the total
wages, salary, bonuses, commissions, overtime pay and other extra
remunerations received from the Employer during the Plan Year,
but excluding amounts received based on allocable contributions
to the Plan. Annual Compensation includes a Participant's
voluntary reductions in cash consideration made in accordance
with arrangements established by the Employer under Section 125
and Section 401(k) of the Code.
A Participant's Annual Compensation in excess of $200,000 shall
be excluded for purposes of the Plan. This $200,000 limitation
will be adjusted at the same time and in the same manner as is
provided in Section 415(d) of the Code.
1.04 Code. "Code" means the Internal Revenue Code of 1986, as
amended.
1.05 Company. "Company" means the Employer and any other
corporation which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) which
includes the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in
Section 414(c) of the Code) with the Employer; any organization
(whether or not incorporated) which is a member of an affiliated
service group (as defined in Section 414(m) of the Code) which
includes the Employer; and any other entity required to be
aggregated with the Employer pursuant to regulations under
Section 414(o) of the Code.
1.06 Employee. "Employee" means any person employed by the
Employer.
1.07 Employer. "Employer" means Mid Am, Inc. or any subsidiary,
affiliate or other facility of Mid Am, Inc. to which this Plan
has been extended, as listed in Appendix A hereof.
1.08 Entry Date. "Entry Date" means the date the Employee
becomes a Participant hereunder, pursuant to the eligibility
requirements of Section 2.01 hereof.
1.09 ERISA. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
1.10 ESOP. "ESOP" means an Employee Stock Ownership Plan as
defined in Section 4975(e)(7) of the Code.
1.11 Hour of Service. "Hour of Service" means:
(a) Each hour for which an Employee is directly or indirectly
paid or entitled to payment by either the Company or the Employer
for the performance of duties; and
(b) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by either the Company or the
Employer for reasons (such as vacation, sickness, disability, or
similar leave of absence) other than for the performance of
duties, and for military leaves, Maternity/Paternity Leaves or
leaves for jury duty; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by either the
Company or the Employer provided that the same Hours of Service
shall not be credited under this subsection (c) and subsection
(a) or (b) above, as the case may be.
Hours of Service computed hereunder shall be computed in
accordance with Section 2530.200 b-2 (b) and (c) of the
Department of Labor Regulations which is incorporated herein by
reference.
In no event shall more than 501 Hours of Service be credited for
any one continuous period of absence during or for which the
Employee receives payment for nonperformance of duties whether or
not such period occurs in a single computation period.
For purposes of this Section 1.11, Maternity/Paternity Leave
means absence in accordance with the Employer's or Company's
preapproved leave policy which may permit such leaves:
(a) by reason of the pregnancy of an individual,
(b) by reason of the birth of a child of an individual,
(c) by reason of the placement of a child with an individual in
connection with the adoption of such child by such individual, or
(d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Hours of Service credited under this paragraph shall be
credited:
(a) in the computation period in which the absence begins if the
crediting is necessary in order to give the Participant 501
Hours, or
(b) in all other cases, in the following computation period.
If the number of hours which would have been credited cannot be
determined, such person shall receive credit for eight Hours of
Service per day of such absence.
For purposes of this Section 1.11, "computation period" shall
mean a 12 consecutive month period commencing on the date of an
Employee's first Hour of Service with either the Company or the
Employer, or any anniversary thereof.
1.12 Named Fiduciary. "Named Fiduciary" means a fiduciary named
in this document, or who, pursuant to a procedure specified in
the Plan, is identified as a Named Fiduciary.
1.13 Normal Retirement Age. "Normal Retirement Age" means age
sixty-five (65).
1.14 Normal Retirement Date. "Normal Retirement Date" means the
first day of the month coinciding with or next following the date
on which a Participant attains Normal Retirement Age.
1.15 Participant. "Participant" means an Employee who has
satisfied the eligibility requirements for participation in the
Plan.
1.16 Plan. "Plan" means the Mid Am, Inc. Employee Stock
Ownership Pension Plan.
1.17 Plan Administrator. "Plan Administrator" means the
Committee appointed pursuant to Article X hereof.
1.18 Plan Year. "Plan Year" means the 12-month period beginning
on January 1 and ending on the following December 31 of each
year. There will be a short Plan Year which begins on July l,
1989 and ends on December 31, 1989.
1.19 Qualified Election. "Qualified Election" means a waiver of
a Qualified Joint and Survivor Annuity or a Qualified
Pre-retirement Survivor Annuity. The waiver must be in writing
and must be consented to by the Participant's spouse. The
spouse's consent to a waiver must be witnessed by a Plan
representative or notary public and must be limited to a benefit
for a specific alternate beneficiary (or a specific form of
benefit). Notwithstanding this consent requirement, if the
Participant establishes to the satisfaction of a Plan
representative that such written consent may not be obtained
because there is no spouse or the spouse cannot be located, a
waiver will be deemed a Qualified Election. Any consent necessary
under this provision will not be valid with respect to any other
spouse. Additionally, a revocation of a prior waiver may be made
by a Participant without the consent of the spouse at any time
before the commencement of benefits. The number of revocations
shall not be limited. Any new waiver or change of beneficiary
will require a new spousal consent.
1.20 Qualifying Employer Securities. "Qualifying Employer
Securities" means an Employer security which is common stock
issued by the Employer having a combination of voting power and
dividend rights equal to or in excess of the class of Employer
common stock having the greatest voting power and the class of
Employer common stock having the greatest dividend rights.
1.21 Self-Employed Person. "Self-Employed Person" means a
self-employed individual who performs personal services for the
Employer and who owns an interest in the Employer.
1.22 Trustee. "Trustee" means Mid American National Bank & Trust
Company or its successors as appointed under the Plan, which
shall be a Named Fiduciary.
1.23 Trust Fund. "Trust Fund" means all assets of whatever kind
or nature held by the Trustee pursuant to the terms of the Plan.
1.24 Year of Service. For purposes of determining eligibility to
participate in the Plan in accordance with Section 2.01 hereof,
"Year of Service" means the completed 12 consecutive month period
commencing on the date of an Employee's first Hour of Service
with either the Company or the Employer, or any anniversary date
thereof, during which such Employee is credited with at least one
thousand (1,000) Hours of Service.
For purposes of determining a Participant's nonforfeitable
interest pursuant to Section 5.03 hereof, "Year of Service" means
a Plan Year during which such Participant is credited with at
least 1,000 Hours of Service. For purposes of Section 5.03, a
Participant will be credited with a Year of Service if he
completes 1,000 Hours of Service during said period, even though
he is not employed for the full 12-month period.
Service of an Employee with the Armed Forces of the United States
shall be deemed to be service with the Employer for purposes of
Sections 2.01 and 5.03 hereof, provided the Employee returns to
active employment with the Employer within the prescribed time
limits during which he retains re-employment rights by law. If
such Employee does not return during such period, his employment
will be deemed to have been terminated when he entered the Armed
Forces.
An Employee who does not initially meet the eligibility
requirements of Section 2.01 and later becomes a Participant,
will have all Years of Service counted for Plan purposes, both
prior to and subsequent to becoming a Participant.
In the event a terminated Participant is re-hired, all Years of
Service with either the Company or the Employer shall be counted
for purposes of Sections 2.01 and 5.03 hereof.
Employees of an acquired employer shall be granted Years of
Service credit under the conditions and standards of this Section
1.24 for all service which they had with the acquired employer.
ARTICLE II
ELIGIBILITY
2.01 Eligibility
Each Employee shall participate in the Plan on the January 1 or
July 1 coinciding with or next following the date he meets all of
the following criteria:
(a) is credited with one Year of Service;
(b) has attained age twenty-one (21); and
(c) is not a member of a collective bargaining unit unless the
agreement between the Employer and the union provides for
participation hereunder.
2.02 Eligibility Upon Re-Employment
A former Participant, or former Employee who met the eligibility
requirements of Section 2.01 for participation in the Plan at the
time he terminated employment, who is subsequently rehired shall
participate hereunder on the Entry Date coinciding with or next
following his re-employment by the Employer.
2.03 Eligibility for Employees of an Acquired Employer
Employees of an Acquired Employer will be eligible for this Plan
under the conditions of Article II as of such dates as determined
by any of the corporate officers. Such group of employees and
dates of entry shall be described in Appendix A of this Plan.
ARTICLE III
CONTRIBUTIONS
3.01 Employer Contributions
The Employer shall contribute to the Trust Fund on behalf of each
Participant, including a Participant who continues in the employ
of the Employer after his Normal Retirement Date, an amount equal
to six percent (6 percent) of his Annual Compensation.
An allocation will be made only if the Participant was employed
on the last day of such Plan Year and was credited with at least
1,000 Hours of Service during such Plan Year, subject to the
provisions of Section 8.04 hereof, except that any Participant
who became totally and permanently disabled, died or retired
during such Plan Year shall receive an allocation.
Employer contributions shall be paid in cash or shares of
Employer stock. Shares of Employer stock will be valued at their
then fair market value. To the extent that the Trust has
obligations arising from an extension of credit to the Trust
which is payable in cash within one year of the date of the
Employer's contribution is made, such contribution will be paid
to the Trust in cash.
These contributions are intended to qualify as employee stock
ownership contributions under Section 4975(e)(7) of the Code and
the regulations thereunder, and are intended to be invested
primarily in Qualifying Employer Securities. At any time up to
100 percent of the assets may be invested in Qualifying Employer
Securities.
The annual contribution of the Employer shall be made to the
Trustee in full within such time as may be permitted for Federal
income tax purposes to obtain a deduction for the contribution by
the Employer for such taxable year.
ARTICLE IV
ALLOCATIONS
4.01 Participant Accounts
A separate account shall be maintained by the Trustee for each
Participant as follows:
(a) General Account. The amount of the Employer's contribution to
the Trust Fund pursuant to Section 3.01 hereof and allocated
pursuant to Section 4.02(a) hereof, together with such
Participant' share of all income, gains and accumulations
therefrom, shall be credited and losses debited to each
Participant's General Account.
Said General Account will sometimes hereinafter be referred to as
"Account".
4.02 Annual Allocations
(a) Employer Contribution: Effective as of the last day of each
Plan Year, any amount contributed by the Employer pursuant to
Section 3.01 hereof shall be allocated and credited to the
General Account of each eligible Participant as provided in
Section 3.01 hereof.
(b) Investment Gain or Loss: Any net gain or net loss resulting
from the operation of the Investment Funds of the Trust for such
year, determined in accordance with Article XIII hereof, shall be
allocated by the Trustee to the respective Participant's Account
in proportion to the value of the respective interests in the
Investment Fund immediately preceding such revaluation.
(c) Allocation of Cash Dividends: Cash dividends on Employer
Stock allocated to a Participant's Account shall be credited to
the Participant's Account.
4.03 Annual Report to Participants
The Plan Administrator shall notify each Participant in writing
of the financial status of his Account as of the last day of each
Plan Year.
ARTICLE V
BENEFITS TO PARTICIPANTS
5.01 Upon Retirement or Disability
When a Participant retires (whether it be Early Retirement, at
Normal Retirement Date or after Normal Retirement Date) or
becomes totally and permanently disabled, the entire interest in
his Account, including the amount of any additional credit as
finally determined, representing his participation and
contributions for the year in which his disability or retirement
occurred, shall become nonforfeitable and his participation
hereunder shall thereupon cease. The Plan Administrator, in
accordance with the provisions of Section 6.01 hereof, shall then
direct the Trustee to distribute to such Participant the entire
interest in his Account.
Normal Retirement. Each Participant's Account shall be
nonforfeitable upon the attainment of his Normal Retirement Age
and the Participant may retire on his Normal Retirement Date.
Late Retirement. A Participant who remains in the employment of
the Employer after his Normal Retirement Date shall continue to
participate hereunder. No distribution shall be made to the
Participant until his actual retirement, subject to the mandatory
commencement of benefit provisions of Section 6.02 hereof.
Early Retirement. A Participant may retire early at any time
after attaining age fifty-five (55) if at that time he is
credited with at least five (5) Years of Service.
Total and Permanent Disability. "Total and permanent disability"
means a physical or mental condition of a Participant resulting
from a bodily injury or disease or mental disorder which renders
him incapable of continuing in the employment of the Employer.
The total and permanent disability of any Participant shall be
determined by the Plan Administrator, in accordance with uniform
principles consistently applied, upon the basis of such evidence
as the Plan Administrator deems necessary or advisable.
5.02 Upon Death
Upon the death of a Participant, the entire interest in the
Account of such Participant, including the amount of any
additional credit as finally determined, representing his
participation and contributions for the Plan Year in which his
death occurs, shall become nonforfeitable and the Plan
Administrator in accordance with the provisions of Section 6.01
hereof shall then direct the Trustee to distribute the entire
interest in his Account to such Participant's designated
beneficiary or beneficiaries, or if none, as provided in this
Section 5.02. The Plan Administrator may require such proper
proof of death and such evidence of the right of any person to
receive payment of the entire interest in the Account of such
deceased Participant as the Plan Administrator deems desirable
and the Plan Administrator's determination shall be conclusive.
Such distribution shall be made as soon as administratively
feasible following the Participant's death and in accordance with
the rules and procedures established by the Plan Administrator.
Each Participant, by written instrument delivered to the Plan
Administrator, shall have the unqualified right, subject to a
Qualified Election, to designate and from time to time change the
beneficiary or beneficiaries to receive in the event of his death
the entire interest in his Account.
In the event the Participant fails to designate a beneficiary or
beneficiaries, the entire interest in his Account shall be
distributed first to his spouse if then living, or second to his
estate.
5.03 Upon Termination of Employment
(a) Nonforfeitable Interest. Upon termination of a Participant's
employment for any reason other than retirement, total and
permanent disability or death, the Trustee shall, in accordance
with the provisions of Section 6.01 hereof and at the instruction
of the Plan Administrator, distribute to the Participant the
nonforfeitable interest in his General Account based on his Years
of Service determined in accordance with the following schedule:
Years of Service Nonforfeitable Interest
Less than 5 0 percent
5 or more 100 percent
Normal Retirement Age 100 percent
In the event the nonforfeitable interest schedule is hereby
amended, or the nonforfeitable interest schedule of an existing
plan is amended by the Plan, then any Participant who has
completed at least three Years of Service on the later of the
date the amendment is adopted, or the date the amendment is
effective may elect, in writing, beginning on the date the Plan
amendment is adopted and ending on the later of:
(1) his termination of employment,
(2) the date which is 60 days after the day the Plan amendment is
adopted,
(3) the date which is 60 days after the day the Plan amendment
becomes effective, or
(4) the date which is 60 days after the day the Participant is
issued written notice of the Plan amendment by the Plan
Administrator
to have his nonforfeitable interest in his Account determined
without regard to such amendment by notifying the Plan
Administrator.
(b) Forfeiture.
(1) If a Participant terminates service, and the value of his
vested Account is not greater than $3,500, the Participant will
receive a distribution of the value of the entire vested portion
of his Account and the nonvested portion will be treated as a
forfeiture.
(2) If a Participant terminates and elects to receive, pursuant
to Section 6.01 hereof, the vested portion of his Account, the
nonvested portion will be treated as a forfeiture. If the
Participant receives a distribution of less than the entire
vested portion of his Account, the part of the nonvested portion
that will be treated as a forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the
amount of the distribution and the denominator of which is the
total value of the vested Account.
(3) If a Participant receives a distribution pursuant to Section
6.01 hereof which is less than the value of the Participant's
Account, and resumes employment within the five consecutive Plan
Years following the Plan Year in which termination of employment
occurs, the Participant's Account will be restored to the amount
on the date of distribution if the Participant repays to the Plan
the full amount of the distribution.
(4) If a Participant does not receive a distribution pursuant to
Section 6.01 hereof, no forfeiture will occur until the
expiration of five consecutive Plan Years following the Plan Year
in which termination of employment occurs during which the
Participant is not re-employed.
Forfeitures shall be used to reduce the contribution due from the
Employer for the current Plan Year following the Plan Year in
which the forfeiture occurs.
For purposes of this Section 5.03(b), if a Participant does not
have any nonforfeitable interest in his Account, he will be
deemed to have received a distribution of the entire vested
portion of his Account in accordance with the provisions of
subparagraph (2) above without having submitted any application
for benefits to the Plan Administrator. If such Participant
returns to active service with the Employer prior to the
expiration of five consecutive Plan Years following the Plan Year
in which his termination of employment occurred, said Participant
will be deemed to have paid back the distribution and his Account
will be restored as provided in subparagraph (3) above.
(c) In the event that there is a Change in Control of the
Employer, the nonforfeitable interest of each Participant in his
Account pursuant to Section 5.03(a) shall be 100 percent as of
the effective date of the Change in Control. For the purposes of
the Plan, any one or more of the following events shall
constitute a Change in Control: (i) the merger or consolidation
of Employer with or into any other corporation and Employer is
not the surviving corporation; (ii) in excess of 24.99 percent of
the outstanding common stock of Employer is owned, held or
controlled by an entity, person or group acting in concert with
the power to control the company as that term is defined in Rule
405 of the Securities Act of 1933; (iii) the sale or exchange of
in excess of 24.99 percent of the assets of Employer to any
entity, person or group acting in concert; (iv) the
recapitalization, reclassification of securities or
reorganizations of Employer which has the effect of either
subpart (ii) or (iii) above; (v) the issuance by Employer of
securities in an amount in excess of 24.99 percent of the
outstanding common stock of Employer to any entity, person or
group acting in concert and intending to exercise control of
Employer; or (vi) the removal, termination or retirement of more
than 50 percent of the members of the Board of Directors during any
consecutive 12-month period.
5.04 Certification by Plan Administrator
The Plan Administrator shall certify to the Trustee all pertinent
facts and information required to determine its proper action in
connection with retirement, disability, death and termination of
employment of Participants, and the Trustee may rely fully upon
information so certified and shall be fully protected in so
doing; but in the absence of appropriate certificates as to any
such facts or pertinent related facts, the Trustee may rely and
act upon other information which it reasonably believes to be
true.
ARTICLE VI
DISTRIBUTIONS
6.01 Method and Medium of Payment
The distribution of a Participant's nonforfeitable interest in
his Account shall be subject to the consent, in writing, of the
Participant and the Participant's spouse, if any. However, if the
value of the Participant's vested Account is not greater than
$3,500, the Plan Administrator shall require a distribution of
the value of the entire vested portion of the Participant's
Account. If a lump sum distribution is to be made after the
Annuity Starting Date, such distribution must be consented to in
writing by the Participant and the Participant's spouse, if any,
or where the Participant is dead, the surviving spouse,
regardless of the amount of the distribution.
(a) Definitions: The following definitions shall apply for
purposes of this Section 6.01:
(1) "Annuity Starting Date." Annuity Starting Date means the
first day of the first period for which an amount is payable as
an annuity, regardless of when or whether payment is actually
made. In the case of benefits not payable as an annuity, the
Annuity Starting Date is the date on which all events have
occurred which entitle the Participant to a benefit.
(2) "Election Period." Election Period means the period which
begins on the first day of the Plan Year in which the Participant
attains age 35 and ends on the date of the Participant's death.
If a Participant separates from service prior to the first day of
the Plan Year in which age 35 is attained, with respect to
benefits accrued prior to separation, the Election Period shall
begin on the date of separation.
(3) "Qualified Joint and Survivor Annuity." Qualified Joint and
Survivor Annuity means an annuity for the life of the Participant
with a survivor annuity for the life of the spouse which is not
less than 50 percent and not more than 100 percent of the amount
of the annuity which is payable during the joint lives of the
Participant and the spouse which is the actuarial equivalent of
the normal form of benefit, or if greater, any optional form of
benefit. A Qualified Joint and Survivor Annuity for a Participant
who is not married shall be an annuity for the life of such
Participant.
(b) Joint and Survivor Benefits
All Participants shall have their benefits distributed in the
form of an automatic joint and survivor annuity. This provision
shall apply to any Participant who:
(1) begins to receive payments under the Plan on or after Early
or Normal Retirement Age; or
(2) dies on or after Normal Retirement Age while still working
for the Employer; or
(3) separates from service on or after becoming vested in his
Account and thereafter dies before beginning to receive such
benefits.
The above provision is subject to a Qualified Election executed
during the Election Period.
Qualified Joint and Survivor Annuity: Unless an optional form of
benefit is selected within the Election Period pursuant to a
Qualified Election within the 90- day period ending on the date
benefit payments would commence, a Participant's vested Account
will be paid in the form of a Qualified Joint and Survivor
Annuity.
Qualified Pre-Retirement Survivor Annuity: Absent a Qualified
Election to the contrary, if a vested Participant dies, the
Participant's vested Account balance shall be applied toward the
purchase of an annuity for the life of the Participant's
surviving spouse, if any. The spouse of the deceased Participant
may elect to receive the full value of such Participant's Account
in a lump sum in lieu of the Qualified Pre-Retirement Survivor
Annuity.
The surviving spouse shall begin to receive payments immediately,
unless such surviving spouse elects a later date.
Failure to waive any joint and survivor annuity form of payment
will not result in a decrease in any Plan benefit with respect to
such Participant.
The Plan Administrator shall provide each Participant within the
applicable period, a written explanation of the Qualified
Pre-Retirement Survivor Annuity which shall contain the
following: 1) the terms and conditions of a Qualified
Pre-Retirement Survivor Annuity; 2) the Participant's right to
make and the effect of an election to waive this form of benefit;
3) the rights of the Participant's spouse; and 4) the right to
make, and the effect of, a revocation of a previous election to
waive the Qualified Pre-Retirement Survivor Annuity. In the case
of a Participant who enters the Plan after the first day of the
Plan Year in which the Participant attained age 32, the Plan
Administrator shall provide the required notice no later than the
close of the second Plan Year succeeding the entry of the
Participant in the Plan. For purposes of this notice, "applicable
period" means, with respect to a particular Participant, the
latest of the following:
(1) The period which begins with the first day of the Plan Year
in which the Participant attains age 32 and ending with the close
of the Plan Year preceding the Plan Year in which the Plan Year
in which the Participant attains age 35;
(2) a reasonable period after the Employee becomes a Participant;
(3) a reasonable period after this Section 6.01(b) no longer
applies to the Participant; or
(4) a reasonable period after the Participant's separation from
service in the case of a Participant who separates from service
before attaining age 35.
(c) Optional Forms of Benefit
Except as provided in paragraph (b) above, the distribution of a
Participant's nonforfeitable interest in his Account shall be
made by the Trustee to such Participant or his beneficiaries upon
his retirement, disability, death or termination of employment,
as the case may be, in cash or in kind, or part in cash and part
in kind, in one or a combination of two or more of the following
methods as such Participant or beneficiary, subject to a
Qualified Election, may request:
(1) in one sum, or
(2) in periodic distributions.
If any portion of a Participant's Account is to be distributed
pursuant to this Section 6.01 over a period of years, such
portion shall be distributed in substantially equal installments
over such number of years as shall not exceed:
(1) a period certain not extending beyond the life expectancy of
the Participant, or
(2) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
beneficiary.
6.02 Special ESOP Distribution Requirements
This Section 6.02 shall apply to distributions of a Participant's
General Account and shall not act to eliminate any form or time
of distribution otherwise available under the Plan.
(a) Time of Distribution. Notwithstanding any other provision of
this Plan, other than such provisions as require the consent of
the Participant and the Participant's spouse to a distribution
with a present value in excess of $3,500, a Participant may elect
to have the portion of his General Account attributable to
Qualifying Employer Securities distributed as follows:
(1) If the Participant separates from service by reason of the
attainment of Normal Retirement Age, death or disability, the
distribution of such portion of the Participant's General Account
will begin not later than one year after the close of the Plan
Year in which such event occurs unless the Participant otherwise
elects pursuant to Section 6.01 hereof.
(2) If the Participant separates from service for any reason
other than those enumerated in paragraph (1) above, and is not
re-employed by the Employer at the end of the fifth Plan Year
following the Plan Year of such separation from service,
distribution of such portion of the Participant's General Account
will begin not later than one year after the close of the fifth
Plan Year following the Plan Year in which the Participant
separated from service unless the Participant otherwise elects
pursuant to Section 6.01 hereof.
(3) If the Participant separates from service for a reason other
than those described in paragraph (1) above, and is employed by
the Employer as of the last day of the fifth Plan Year following
the Plan Year of such separation from service, distribution to
the Participant, prior to any subsequent separation from service,
shall be in accordance with Section 6.01 hereof.
For purposes of this Section 6.02, Qualified Employer Securities
shall not include any Employer securities acquired with the
proceeds of a loan described in Article XII hereof until the
close of the Plan Year in which such loan is repaid in full.
(b) Form of Distribution. Distributions may be made either in
whole shares of Employer stock or in cash as the Plan
Administrator shall decide, provided that any distribution in
cash shall only be made after a Participant has been offered the
right to receive such distribution in shares of Employer stock.
In the event the distribution is to be made in Employer stock,
any balance in a Participant's Account will be applied to acquire
for distribution the maximum number of whole shares of Employer
stock at the applicable value. Any fractional share value
unexpended balance will be distributed in cash. If the Employer
stock is not available for purchase by the Trustee, then the
Trustee shall hold such balance until Employer stock is acquired
and then make such distribution. The Trustee will make
distribution from the Trust only on instructions from the Plan
Administrator.
(c) Period for Payment. Distributions required under this Section
6.02 shall be made in substantially equal annual payments over a
period of five years unless the Participant otherwise elects
under the provisions of Section 6.01 hereof. In no event shall
such distribution period exceed the period permitted in Section
401(a)(9) of the Code.
6.03 Mandatory Commencement of Benefits
Distribution hereunder shall commence not later than the 60th day
after the end of the Plan Year in which the later of the
following event occurs:
(a) the Participant attains the earlier of age 65, or Normal
Retirement Age;
(b) the 10th anniversary of the year in which the Participant
commences participation in the Plan; or
(c) the Participant terminates his employment with the Employer.
A Participant may elect to defer the commencement of distribution
hereunder to a date later than set forth above, provided,
however, that any such election must be made by submitting to the
Plan Administrator a written statement, signed by the
Participant, which written statement describes the method and
medium of distribution and the date on which such distribution
shall commence. If the Participant's entire interest is to be
distributed in other than a lump sum, then the amount to be
distributed each year must be at least an amount equal to the
quotient obtained by dividing the Participant's entire interest
by the life expectancy of the Participant or joint and last
survivor expectancy of the Participant and designated
beneficiary. Life expectancy and joint and last survivor
expectancy are computed by the use of the return multiples
contained in Section 1.72-9 of the Income Tax Regulations. For
purposes of this computation, a Participant's life expectancy may
be recalculated no more frequently than annually, however, the
life expectancy of a non-spouse beneficiary may not be
recalculated. If the Participant's spouse is not the designated
beneficiary, the method of distribution selected must assure that
more than 50 percent of the present value of the amount available for
distribution is paid within the life expectancy of the
Participant.
Anything above to the contrary notwithstanding, distributions of
a Participant's benefits must commence by April 1 of the calendar
year following the calendar year in which the Participant attains
age 70-1/2 in accordance with the minimum distribution
requirements of Section 401 (a)(9) of the Code . For purposes of
this minimum distribution, the Participant may elect prior to the
date of the first required distribution to have his life
expectancy and his spouse's life expectancy recalculated
annually. Such election shall be irrevocable once made, and shall
apply for all subsequent Plan Years. The Participant and his
spouse shall have the right to separately elect as to whether
each wants his life expectancy recalculated, and the election of
one shall not affect the election of the other. In the event that
either the Participant or his spouse fails to make an election,
his life expectancy shall be recalculated annually.
6.04 Distribution After Death of a Participant
If a Participant dies before any of his interest in the Plan has
been distributed, the Participant's interest shall be distributed
in one of the following methods:
(a) The entire interest of the Participant shall be distributed
no later than December 31 of the calendar year which contains the
fifth anniversary of the date of the Participant's death,
regardless of who is to receive the distribution.
(b) If the distribution is to be made to a designated
beneficiary, the distribution of a Participant's interest shall
commence not later than December 31 of the calendar year
immediately following the calendar year in which the Participant
died, and payments shall occur over a period not extending beyond
the life expectancy of such designated beneficiary. If
distribution is to be made to the Participant's surviving spouse,
distributions must commence on or before the later of: 1)
December 31 of the calendar year immediately following the
calendar year in which the Participant died, or 2) December 31 of
the calendar year in which the Participant would have attained
age 70 1/2. Such distributions shall occur over a period not
extending beyond the life expectancy of such designated
beneficiary.
A Participant or his spouse or designated beneficiary, subject to
a Qualified Election, may elect the method of distribution
described in subparagraph (b) above. Such election must be made
no later than the earlier of 1) the date which distribution would
have to occur according to the provisions of subparagraph (a)
above; or 2) the date which distribution would have to occur
according to the provisions of subparagraph (b) above. As of such
date, the election is irrevocable and shall apply for all
subsequent years and any subsequent beneficiaries. If no such
election is made, distribution shall be made in accordance with
subparagraph (a) above.
If the surviving spouse dies before the distribution to such
spouse begins, the payment of the Participant's interest shall be
made as if the surviving spouse were the Participant.
6.05 Right to Have Accounts Transferred
By notice to the Plan Administrator, a Participant entitled to a
distribution shall have the right to have the nonforfeitable
portion of his Account transferred to another plan and trust
which is qualified under Section 401(a) of the Code and is a
tax-exempt trust under the provisions of Section 501(a) of the
Code or to an Individual Retirement Account as provided under
Section 408 of the Code. Notwithstanding the preceding sentence,
no such transfer may occur to another qualified plan and trust
maintained by the Company.
6.06 Cash Dividend Option
Effective with the dividend paid on Employer stock as of
September 30, 1990, a Participant shall have the option to elect
to receive dividends in cash on Employer stock. This election
shall apply to all Participants who have a 100 percent
nonforfeitable interest in each of their Accounts pursuant to
Section 5.03. Participants may elect to receive quarterly
dividends in cash as of the end of June and the end of December.
Each June election shall apply to the next following September 30
and December 31 quarterly dividends. Each December election shall
apply to the next following March 31 and June 30 quarterly
dividends. Participant elections shall be made in writing in
accordance with procedures and forms provided by the Plan
Administrator. Employer dividends not elected in cash shall be
reinvested in additional shares of Employer stock.
ARTICLE VII
LIMITATION ON CONTRIBUTIONS AND BENEFITS
7.01 Limitation of Benefits
(a) Definitions: The following definitions shall apply for
purposes of this Section 7.01:
(1) "Annual Addition." Annual Addition means for each Plan Year
the sum of the following amounts credited to a Participant's
Account for the Limitation Year under all Defined Contribution
Plans maintained by the Employer:
(A) Employer contributions,
(B) Employee contributions,
(C) Forfeitures, and
(D) Any amounts allocated to an individual medical account (as
defined in Section 415(1)(1) of the Code) which is part of any
pension or annuity plan maintained by the Employer are treated as
Annual Additions to a Defined Contribution Plan. Amounts derived
from contributions paid or accrued after December 31, 1985 in
taxable years ending after such date which are attributable to
post retirement medical benefits allocated to the separate
account of a Key employee (as defined in Section 419A(d)(2) of
the Code) under a welfare benefit fund (as defined in Section
419(e) of the Code) maintained by the Employer are treated as
Annual Additions to a Defined Contribution Plan. These amounts
are treated as Annual Additions but are not subject to the 25 percent
of Compensation limit.
The Annual Addition for any Limitation Year beginning prior to
January 1, 1987 shall not be recomputed to treat all Employee
Contributions as an Annual Addition.
(2) "Compensation." Compensation means a Participant's earned
income, wages, salaries, fees for professional services and other
amounts received for personal services actually rendered in the
course of employment with the Employer maintaining the Plan
(including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips and bonuses),
but excluding the following:
(A) Employer contributions to a plan of deferred compensation
which are not included in the Employee's gross income for the
taxable year in which contributed, Employer contributions under a
simplified employee pension plan to the extent such contributions
are deductible by the Employee or any distributions from a plan
of deferred compensation;
(B) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(C) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(D) Other amounts which received special tax benefits or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity described
in Section 403(b) of the Code (whether or not the amounts are
actually excludable from the gross income of the Employee).
(3) "Defined Contribution Plan." Defined Contribution Plan means
a pension plan or profit sharing plan which provides for an
individual account for each Participant and for benefits based
solely upon the amount contributed to the Participant's account
and any income, expenses, gains, losses and any forfeitures of
accounts of other Participants which may be allocated to such
Participant's account.
(4) "Limitation Year." Limitation Year means the Plan Year.
(b) Limitation on Annual Additions: Any other provision of this
Plan to the contrary notwithstanding, the maximum Annual Addition
allocated to the Account of any Participant under the Plan and
any other Defined Contribution Plan maintained by the Employer or
the Company may not exceed the lesser of:
(1) Thirty Thousand Dollars ($30,000) or, if greater, twenty-five
percent (25 percent) of the defined benefit dollar limitation set
forth in Section 415(b)(1) of the Code as in effect for the
Limitation Year, or
(2) Twenty-five percent (25 percent) of the Participant's
Compensation for the Limitation Year.
If, as the result of a reasonable error in estimating a
Participant's Annual Compensation, the allocation of forfeitures
or under other limited facts and circumstances as may be provided
under the Regulations to Section 415 of the Code, the Annual
Addition exceeds the maximum under this and any other Defined
Contribution Plan maintained by the Employer, an amount
attributable to the Employer's contribution for the current Plan
Year necessary to reduce the Annual addition to the maximum
Annual Addition shall be held in a separate account, and shall be
utilized to reduce the contribution of the Employer for the next
succeeding Plan Year and shall be accounted for accordingly by
the Trustee. Any such sums shall not share in the gains or losses
of the Trust Fund.
(c) Limitation of Benefits. Under All Plans: Where an Employee is
a Participant under the Plan and a defined benefit plan
maintained by the Employer, the sum of the defined contribution
fraction and the defined benefit fraction for any Limitation Year
may not exceed 1.0 as computed under the terms and conditions as
set forth under Section 415(e) of the Code.
For purposes of computing the defined contribution fraction for
any Limitation Year, the numerator shall be the sum of the Annual
Additions to the Participant's Account during such Limitation
Year and for all prior Limitation Years, and the denominator
shall be the lesser of:
(1) the product of 1.25 multiplied by the maximum permissible
dollar amount under Section 415(c)(1)(A) of the Code for such
year and for all prior years, or
(2) the product of 1.4 multiplied by the maximum permissible
percentage of compensation contributed under Section 415(c)(1)(B)
of the Code for such year and for all prior years.
For purposes of computing the defined benefit plan fraction for
any Limitation Year, the numerator shall be the Participant's
projected annual benefit under the defined benefit plan as of the
end of the Limitation Year and the denominator shall be the
lesser of:
(1) the product of 1.25 multiplied by the maximum permissible
dollar amount of benefit in effect under Section 415(b)(1)(A) of
the Code for such year, or;
(2) the product of 1.4 multiplied by the maximum permissible
percentage of compensation limitation of the amount of benefit in
effect under Section 415(b)(1)(B) of the Code for such year.
If the Defined Contribution Plans and the defined benefit plans
in which an Employee is a Participant satisfy the requirements of
Section 415 of the Code in effect for all Limitation Years
beginning prior to January 1, 1987, where necessary, an amount
shall be subtracted from the numerator of the defined
contribution fraction (not to exceed such numerator) as
prescribed by the Secretary of the Treasury so that the sum of
the defined benefit plan fraction and the defined contribution
fraction computed under Section 415(e)(1) of the Code does not
exceed 1.0 for such Limitation Year.
ARTICLE VIII
TOP HEAVY PROVISIONS
8.01 Definitions
The following definitions shall apply for purposes of this
Article VIII:
(a) "Aggregation Group." Aggregation Group shall mean the
following:
(1) Each plan of the Employer in which a Key Employee is a
Participant;
(2) Each other plan of the Employer (including a terminated plan
of the Employer if it was maintained within the last five years
ending on the Determination Date for the Plan Year being tested
for Top Heavy status) that allows a plan covering a Key Employee
to meet qualification requirements under the coverage rules of
Section 410 or the anti-discrimination rules of Section 401(a)(4)
of the Code;
(3) At the option of the Employer, any other Plan maintained by
the Employer as long as the expanded Aggregation Group including
such plan or plans continues to satisfy the coverage rules of
Section 410 and the antidiscrimination rules of Section 401(a)(4)
of the Code.
(b) "Determination Date." Determination Date shall mean the last
day of the Plan Year preceding the Plan Year which is being
tested for Top Heavy status. In the first Plan Year, the
Determination Date shall mean the last day of the Plan Year which
is being tested for Top Heavy status.
(c) "Key Employee." Key Employee means any Employee, former
Employee, or beneficiary of such Employees, who at any time
during the Plan Year or the four preceding Plan Years is:
(1) An officer of the Employer having Annual Compensation from
the Employer greater than 150 percent of the Section 415(c)(1)(A)
dollar limit,
(2) One of ten employees having Annual Compensation from the
Employer of more than the limitation in effect under Section
415(c)(1)(A) of the Code, and owning (or considered as owning
within the meaning of Section 318 of the Code) both more than
.5 percent interest as well as one of the ten largest interests
in the Employer. However, if two Employees have the same
ownership interest in the Employer, the Employee having the
greater Annual Compensation shall be treated as having the larger
interest,
(3) A 5 percent owner of the employer, or
(4) A 1 percent owner of the Employer having an Annual
Compensation from the Employer of more than $150,000.
For purposes of determining the top ten owners, 5 owners, or 1
percent owners, ownership is determined without regard to the
aggregation rules of Sections 414(b),(c) and (m) of the Code.
(d) "Non-Key Employee." Non-Key Employee means any Employee who
is not a Key Employee. Non-Key Employees include Employees who
are former Key Employees.
(e) "Valuation Date." Valuation Date means the last day of the
Plan Year.
8.02 Determination of Top Heavy Status
The plan will be considered Top Heavy if, as of the Determination
Date, the present value of cumulative accrued benefits under the
Plan for Key Employees exceeds 60 percent of the present value of
the cumulative accrued benefits under the Plan for all Employees.
In determining the ratio of accrued benefits for Key Employees to
all other Employees, the Plan Administrator shall use the
procedure as outlined in Section 416(g) of the Code which is
incorporated herein by reference. In determining whether the Plan
is considered Top Heavy, all plans within the Aggregation Group
will be utilized for the calculation.
Solely for the purpose of determining if the Plan, or any other
plan included in the Aggregation Group, is Top Heavy the accrued
benefit of an Employee other than a Key Employee shall be
determined under:
(a) The method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Employer or the
Company, or
(b) If there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under the
fractional accrual rate of Section 411(b)(1)(C) of the Code.
The present value of cumulative accrued benefits of a Participant
who has not been credited with an Hour of Service for the
Employer maintaining the Plan during the five year period ending
on the Determination Date will be disregarded for purposes of
this Article VIII.
8.03 Combination of Defined Benefit and Defined Contribution Plan
In the event the Plan is deemed to be Top Heavy, the defined
benefit and defined contribution fraction set forth in Section
7.01(c) will be calculated by substituting 1.0 for 1.25. If a
Non-Key Employee participates in this Plan and a defined benefit
plan which are both Top Heavy, the minimum contribution
requirements for this Plan and the minimum benefit requirement
for the defined benefit plan, pursuant to Section 416 of the
Code, will be satisfied if such Participant is provided with a
contribution to the Plan equal to 5 percent of Annual
Compensation.
8.04 Minimum Contribution
In the event that the Plan in aggregation with any other Defined
Contribution Plans of the Employer is determined to be Top Heavy,
the Participants who are Non-Key Employees will be eligible for a
minimum contribution for such Plan Year. This minimum
contribution, which shall be allocated to the General Account of
Participants who are Non-Key Employees, will be contributed to
this Plan in an amount equal to 3 percent of Annual Compensation
or if less, the largest contribution percentage of Annual
Compensation provided on behalf of any Key Employee. The minimum
contribution required by this Section 8.04 shall be made on
behalf of such Participants who are employed as of the last day
of the Plan Year regardless of the number of Hours of Service
credited to each Participant for such Plan Year and regardless of
such Participant's level of Annual Compensation. If this minimum
contribution is provided by another Defined Contribution Plan of
the Employer, then this Section 8.04 will not apply to this Plan.
If part of this minimum contribution is provided by another
Defined Contribution Plan of the Employer, then the balance of
the minimum contribution shall be provided by this Plan.
8.05 Minimum Vesting
In the event the Plan is determined to be Top Heavy, each
Participant shall have a nonforfeitable interest in his Account
at least equal to the following schedule:
Years of Service Nonforfeitable Percentage
Less than 3 0 percent
3 or more 100 percent
Irrespective of this provision, the above schedule shall not
apply where the nonforfeitable interest in the Participant's
Account under Section 5.03 hereof would be greater.
ARTICLE IX
AMENDMENT OR TERMINATION
9.01 Amendment
The Employer reserves the right, at any time and from time to
time, to amend in whole or in part either retroactively or
prospectively any or all of the provisions of the Plan without
the consent of any Participant or his beneficiaries hereunder.
Such amendment shall be stated in an instrument executed by the
Employer and the Trustee in the same manner and form as the Plan
and upon the execution thereof, the Plan shall be deemed to have
been amended in the manner therein set forth and the Employer,
the Trustee and all Participants and their beneficiaries
hereunder shall be bound thereby; provided, however, that no
amendment:
(a) shall authorize, cause or permit any part of the Trust Fund
(other than such part as is required to pay taxes and
administrative expenses) to be used or diverted to purposes other
than the exclusive benefit of the Participants, former
Participants or their beneficiaries or estates;
(b) shall have the effect of vesting in the Employer any interest
in or control over any policies of insurance purchased hereunder
or over any part of the Trust Fund subject to the terms of the
Plan;
(c) shall affect the rights, duties or responsibilities of the
Trustee without its consent; or
(d) shall have any retroactive effect so as to deprive any
Participant of his nonforfeitable interest already accrued, or
eliminate an optional form of benefit, except only that any
amendment may be made retroactive which is necessary to conform
the Plan to mandatory provisions of federal or state law,
regulations or rulings.
Notwithstanding the foregoing, the Employer may unilaterally
amend the Plan without Trustee execution if the amendment does
not affect the rights, duties or responsibilities of the Trustee.
Such amendments, however, must be provided to the Trustee by the
Employer.
9.02 Plan Termination or Discontinuance of Contributions
The Employer shall have the right, at any time, to terminate the
Plan. Upon such termination, or any partial termination, the
entire interest of each Participant's Account shall become
nonforfeitable. Upon the discontinuance of the Employer's
contributions or suspension thereof on other than a temporary
basis, the entire interest of each Participant's Account shall
become nonforfeitable. Any unallocated funds existing at the time
of such termination or discontinuance shall be allocated to the
then Participants in the same manner as Employer contributions
under Section 4.02(a) hereof.
In the event the Employer terminates the Plan but does not
terminate the Trust Fund, the Trustee, in its sole discretion,
may either continue to maintain and administer the Trust Fund or
terminate the same. No termination of the Plan shall have the
effect of vesting in the Employer any interest in or control over
any part of the Trust Fund.
9.03 Merger, Consolidation or Transfer of Assets
The Plan may be merged, consolidated or its assets or liabilities
transferred to any other plan provided each Participant would
receive a benefit immediately after such merger, consolidation or
transfer, if the successor plan then terminated, which is equal
to or greater than the benefit he would have received immediately
prior to such merger, consolidation or transfer if the Plan were
to have terminated on such date.
ARTICLE X
ADMINISTRATION
10.01 Plan Administrator
The Employer shall appoint a Committee to administer the Plan.
The Committee shall be the Plan Administrator and each member of
such Committee shall be a Named Fiduciary. This Committee shall
consist of members who may be officers, other employees of the
Employer or any other individual. No member shall ever be
disqualified from exercising the powers and discretion herein
conferred by reason of the fact that such member is or may
thereafter be a Participant or entitled to benefits hereunder.
The members of the Committee shall serve at the pleasure of the
Employer. Any member may resign by delivering his written
resignation to the Employer and the Committee. Vacancies in the
Committee arising by resignation, death, removal or otherwise,
shall be filled by the Employer.
(a) Powers and Duties. The Committee shall administer the Plan in
accordance with its terms and shall have all powers necessary to
administer the Plan in accordance with the provisions set forth
in the Plan. The Committee shall interpret the Plan and shall
determine all questions arising in the administration,
interpretation and application of the Plan. Any such
determination by the Committee shall be conclusive and binding on
all persons, subject to the claims procedure as set forth in
Section 10.03 hereof.
(b) Organization and Operation of Committee.
The Committee shall act by a majority of its members at that time
in office and such action may be taken either by a vote at a
meeting or taken in writing by unanimous consent without a
meeting. The Committee may authorize any one or more of its
members to execute any document or documents on behalf of the
Committee, in which event the Committee shall notify the Trustee
in writing of such action and the name or names of its member or
members so designated. The Trustee thereafter shall accept and
rely upon any document executed by such member or members as
representing action by the Committee until the Committee shall
file with the Trustee a written revocation of such designation.
The Committee may adopt such by-laws and regulations as it deems
desirable for the conduct of its affairs, and may appoint such
accountant, counsel, specialists, and other persons as it deems
necessary or desirable in connection with the administration of
the Plan. The Committee shall be entitled to rely conclusively
upon and shall be fully protected in any action taken by it in
good faith in relying upon, any opinions or reports which shall
be furnished to it by any such accountant, counsel or other
specialists.
(c) Payment of Expenses. The members of the Committee shall serve
without compensation for services as such, but all expenses of
the Committee shall be paid by the Employer. Such expense shall
include any expenses incident to the functioning of the
Committee, including but not limited to, fees of accountants,
legal counsel, investment counsel and other specialists, and
other costs of administering the Plan. At the option of the
Committee, reasonable and necessary expenses of administering the
Plan as described in this Section to include expenses incurred to
properly communicate the Plan to employees may be paid by the
Trustee from the Trust Fund. The committee shall act as a prudent
buyer of services by purchasing in a prudent manner and by
securing engagement letters and itemized billings.
(d) Limitation on Liability. It is intended to allocate to the
Committee only those responsibilities included in this Section
and the Employer shall indemnify each Committee member against
personal loss by reason of service as a Committee member. The
Committee shall have no responsibility for the custody or
management of the Trust Fund or for the evaluation of the
investment performance of such Trust Fund.
10.02 Records and Reports
The Committee shall keep a record of all its proceedings and
acts, and shall keep all such books of accounts, records and
other data as may be necessary for the proper administration of
the Plan. The Committee shall notify the Trustee and the Employer
of any action taken by it and when required, shall notify any
other interested person or persons.
10.03 Claims Procedure
A claim for a Plan benefit shall be deemed filed when a written
communication is made by a Participant or beneficiary, or the
authorized representative of either, which is reasonably
calculated to bring the claim to the attention of the Plan
Administrator.
If no claim is wholly or partially denied, notice of such
decision shall be furnished to the claimant in writing within 90
days after receipt of the claim by the Plan Administrator. Such
notice shall set forth, in a manner calculated to be understood
by the claimant: (l) the specific reason or reasons for the
denial; (2) specific reference to pertinent Plan provisions on
which the denial is based; (3) a description of any additional
material or information necessary to perfect the claim and an
explanation of why such material or information is necessary; and
(4) an explanation of the Plan's claim review procedure.
Within 90 days from the receipt of the notice of denial, a
claimant may appeal such denial to the Plan Administrator for a
full and fair review. The review shall be instituted by the
filing of a written request for review by the claimant or his
authorized representative within the 90-day period stated above.
A request for review shall be deemed filed as of the date of
receipt of such written request by the Plan Administrator. The
claimant or his authorized representative shall have the right to
review all pertinent documents, may submit issues and comments in
writing and may do such other appropriate things as the Plan
Administrator may allow. The decision of the Plan Administrator
shall be made not later than 60 days after the receipt of the
request for review; unless special circumstances, such as the
need to hold a hearing, requires an extension of time, in which
case, a decision shall be rendered not later than 120 days after
the receipt for review which decision shall be final and binding
on such claimant.
10.04 Participant's Right to Vote Employer Stock
Each Participant shall be entitled to direct the exercise of
voting rights with respect to the whole shares of stock allocated
to said Participant's Account. The Company shall provide to each
Participant materials pertaining to the exercise of such rights
containing all the information distributed to shareholders as
part of its distribution of such information to shareholders. A
Participant shall have the opportunity to exercise any such
rights within the same time period as shareholders of the
Company. In the exercise of voting rights, votes representing
fractional shares of stock and shares of stock held in
unallocated inventory shall be voted in the same ratio for the
election of directors and for and against each issue as the
applicable vote directed by Participants with respect to whole
shares of stock.
ARTICLE XI
EXEMPT LOAN
11.01 Definition of Exempt Loan
An Exempt Loan is a direct loan of cash, a purchase money
transaction, an assumption of the obligation of the Plan, or a
guarantee of the obligation of the Plan assumed in conjunction
with one of the above between the Plan and a party-in-interest as
defined in Section 3(14) of ERISA.
11.02 Requirements for an Exempt Loan
Any exempt loan entered into by the Plan shall meet the following
requirements:
(a) The loan shall primarily be for the benefit of Participants.
The rate of interest shall be reasonable and the net effect of
the rate of interest and the price of the securities to be
acquired with the loan shall be such that Plan assets would not
be depleted. The loan shall be made only upon such terms as would
result from arm's length negotiations between the Plan and
independent third parties.
(b) The proceeds received shall be used only to acquire Employer
securities, to repay the loan or to repay a prior exempt loan.
(c) The loan shall be made without recourse against the general
assets of the Plan. The collateral shall consist only of
securities acquired with the proceeds of the loan, or securities
acquired with proceeds of a prior exempt loan if the prior exempt
loan is being paid with proceeds of the current exempt loan.
There shall be no right of any lender to the Plan against assets
of the Plan other than collateral given for the loan,
contributions made to the Plan to meet the obligations of the
loan, and earnings attributable to collateral and investment of
the contributions made to meet the obligations of the loan. In
the event of default the amount of Employer stock transferred to
the lender in satisfaction of a default cannot exceed the amount
of such default. In the case of a default in favor of a
party-in-interest, the default shall only be to the extent of
current payments due.
(d) Payments made by the Plan to repay an exempt loan shall not
exceed an amount equal to contributions and earnings received
during or prior to the year minus such payments in prior years.
The Employer stock purchased with the proceeds of the loan shall
be held in a suspense account until the stock is released from
the suspense account and allocated to the Participant's General
Account. Stock released from the suspense account must be equal
to an amount calculated by multiplying the amount of encumbered
stock by the fraction of the principal and interest paid for the
Plan Year divided by the sum of the principal and interest paid
for the Plan Year plus principal and interest for all future
years.
(e) The Employer stock acquired with the proceeds of an exempt
loan shall not be subject to any option other than the option
provided for in Section 11.03 or a buy-sell or similar
arrangement when the stock is held by or distributed from the
Plan whether or not the Plan ceases to be an ESOP or the exempt
loan is fully repaid.
11.03 Right of First Refusal
Employer stock acquired with the assets of an exempt loan may be
subject to a right of first refusal in the Employer, or in the
Plan. The right of first refusal shall comply with the following
requirements:
(a) The selling price and other terms under the right of first
refusal must be not less favorable to the security holder than
the greater of the fair market value of the security as
determined under Article XIII, or the purchase price or other
terms offered by a third person pursuant to a good faith offer to
purchase.
(b) The right of first refusal must lapse no later than fourteen
(14) days after the security holder gives written notice to the
Employer that an offer by a third party to purchase the stock has
been received.
ARTICLE XII
TRUSTEE
12.01 Fiduciary Status
The Trustee shall be a Named Fiduciary and agrees to accept the
duties and responsibilities attendant thereto.
12.02 Establishment and Acceptance of Trust
The Trustee shall receive any contributions paid to it. All
contributions so received, together with the income therefrom,
shall be held, managed and administered in the Trust pursuant to
the terms of the Plan. The Trustee hereby accepts the Trust
created hereunder and agrees to perform its duties under the
Plan.
12.03 Trustee's General Powers
The Trustee shall have the following powers and authority in the
administration of the Trust Fund:
(a) To primarily hold and invest in Qualifying Employer
Securities such that the Plan maintains its status as an Employee
Stock Ownership Plan, but subject to the Fiduciary requirements
of ERISA.
(b) To hold, sell, invest, reinvest, convey, exchange, mortgage,
pledge, option, lease for any term of years irrespective of the
period of any trust hereunder and with or without privilege or
option or purchase (including 99-year leases renewable forever),
or otherwise deal in and dispose of all or any part of the Trust
property, without order of court at public or private sale, for
cash or on credit, for such considerations and on such terms and
conditions as the Trustee, in its uncontrolled discretion, may
deem either necessary, advisable or expedient; and no purchaser,
mortgagee, pledgee, optionee, lessee or any other person or
persons dealing with the Trustee shall be required or permitted
to see the application of any purchase money or Trust Funds, or
be required or permitted to inquire into the power of authority
of the Trustee or into the validity, necessity, advisability or
expediency of any act of the Trustee.
(c) To vote upon any stocks, bonds or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments
incidental thereto; to oppose or to consent to, or otherwise
participate in corporate reorganizations or other changes
affecting corporate securities, and to delegate discretionary
powers and to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities or other property
held as part of the Trust fund. Such powers shall be subject to
the voting rights granted Participants under Article X.
(d) To cause any securities, real property or other tangible or
intangible property held as part of the Trust Fund to be
registered or titled in its own name or in the name of one or
more of its nominees, and to hold any investments in bearer form,
but the books and records of the Trustee shall at all times show
that all such investments are part of the Trust Fund.
(e) To borrow in a manner consistent with Article XI regarding
Exempt Loans.
(f) To borrow, for not more than 12 months, for the purpose of
the Trust, but not as described in Article XI, in any amount or
amounts, not exceeding in the aggregate 25 percent of the fair
market value of the Trust Fund as of the date of borrowing and
upon such terms and conditions as the Trustee shall deem
advisable; and, for any sum so borrowed, to issue promissory
notes as Trustee, and to secure the repayment thereof by pledging
all or any part of the Trust Fund; and no person lending money to
the Trustee shall be bound to see to the application of the money
lent or to inquire into the validity, expedience or propriety of
any such borrowing.
(g) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the
best interests of the Trust created hereby, without liability for
interest thereon.
(h) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired
by it as Trustee hereunder, whether or not such securities or
other property would normally be purchased as investments
hereunder.
(i) To make, execute, acknowledge and deliver any and all
documents of transfer and conveyance and all other instruments
that may be necessary or appropriate to carry out the powers
herein granted.
(j) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust Fund, to
commence or defend suits or legal or administrative proceedings
and to represent the Trust Fund in all suits and legal and
administrative proceedings.
(k) To employ suitable agents, investment counsel and legal
counsel (who may be counsel for the Employer), and to pay their
reasonable expenses and compensation.
(l) To do all such acts, take all such proceedings and exercise
all such rights and privileges, although not specifically
mentioned herein, as the Trustee may deem necessary to administer
the Trust Fund and to carry out the purpose of this Trust.
12.04 Payment of Compensation, Expenses and Taxes
The Trustee shall be paid such reasonable compensation as shall
from time to time be agreed upon in writing by the Employer and
the Trustee. In the event that a Trustee is also an Employee of
the Employer, no compensation shall be payable for services as
Trustee. In addition, the Trustee shall be reimbursed for any
reasonable expenses, including legal counsel fees and investment
counsel fees, incurred in the administration of the Trust Fund.
Such compensation and expenses shall be paid by the Employer, but
until paid shall constitute a charge upon the Trust Fund. All
taxes of any and all kinds whatsoever that may be levied or
assessed under existing or future laws upon, or in respect of,
the Trust Fund or the income therefrom shall be paid from the
Trust Fund.
12.05 Accounting
The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions
hereunder. All accounts, books and records relating to such
transactions shall be opened to inspection and audit at all
reasonable times by any person designated by the Plan
Administrator.
12.06 Trustee's General Powers
The Trustee shall discharge its duties with respect to the Plan
solely in the interest of the Participants and their
beneficiaries for the exclusive purpose of providing benefits to
Participants and their beneficiaries. The Trustee shall discharge
its duties with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man, acting in like
capacity and familiar with such matters, would use in the conduct
of an enterprise of a like character and with like aims. The
Trustee shall discharge its duties in accordance with the terms
and provisions of the Plan.
12.07 Voting Employer Stock
All unallocated Employer stock of each Participant shall be voted
by the Trustee in accordance with instructions received from the
Plan Administrator. The Trustee shall not exercise its power to
vote any Employer stock for which it has not received
instructions.
12.08 Removal, Resignation and Appointment of Successor Trustee
The Trustee may be removed by the Employer at any time upon 30
days' written notice to the Trustee and the Plan Administrator.
The Trustee may resign at any time upon 30 days' written notice
to the Employer and the Plan Administrator. Upon such removal or
resignation of the Trustee, the Employer shall appoint a
successor trustee or trustees who shall have the same powers and
duties as those conferred upon the Trustee hereunder. Upon
acceptance of such appointment by the successor trustee, the
Trustee shall assign, transfer and pay over to such successor the
funds and properties then constituting the Trust Fund. The
Trustee is authorized, however, to reserve such sum of money as
it may deem advisable for payment of its fees and expenses in
connection with the settlement of its account or otherwise, and
any balance of such reserve remaining after the payment of such
fees and expenses shall be paid over to the successor trustee.
12.09 Investment Manager
The investment powers conferred upon the Trustee shall be
exercised by the Trustee in its sole discretion; provided,
however, that the Plan Administrator may, at any time and from
time to time, appoint one or more:
(a) banks as defined in the Investment Advisors' Act of 1940, or;
(b) persons registered as an Investment Advisor under said Act,
to act as Investment Manager(s) of all such portions of the Trust
assets as the Plan Administrator in its sole discretion shall
direct. In order to serve as Investment Manager, any such bank or
person must state in writing to the Plan Administrator and the
Trustee that it meets the requirements set forth in this Section
12.09 to be an Investment Manager and that it acknowledges that
it shall be a fiduciary with respect to this Trust during all
periods that it shall serve as such. During any period in which
an Investment Manager has been appointed and is serving with
respect to the Trust assets or any portion thereof, it shall have
all powers normally given to the Trustee under this Article XII
with respect to the management, acquisition or disposition of any
asset of the Trust Fund, or such portion thereof and the Trustee
shall have no powers, duties or obligations with respect to the
investment, management, acquisition or disposition of such
assets. The Investment Manager shall be entitled to receive such
reasonable compensation and such reimbursement of his expenses on
such basis or in such amounts as may be agreed to or approved
from time to time by the Plan Administrator. Such compensation
and expenses shall be borne and paid from the Trust as a regular
charge and expense thereof, unless otherwise paid by the
Employer. At any time, the Plan Administrator by written notice
to the Investment Manager and the Trustee, may change that
portion of the Trust assets subject to management by the
Investment Manager. Any Investment Manager may resign at any time
by giving written notice to the Plan Administrator and the
Trustee of its intention to do so at least 30 days before such
resignation is to become effective, unless the Plan Administrator
shall accept as adequate a shorter notice. The Plan Administrator
may remove any Investment Manager by written notice delivered to
the Investment Manager and the Trustee at least 30 days before
such removal is to become effective unless the Investment Manager
shall accept as adequate a shorter notice. Unless the Plan
Administrator appoints a successor to an Investment Manager which
has resigned or been removed, or which is no longer managing a
portion of the Trust assets, the powers, duties and obligations
of the Trustee with respect to the portion of the Trust assets
formerly managed by the Investment Manager shall be automatically
restored.
12.10 Payment of Expenses
Pursuant to instruction of the Company, the Trustee shall pay
from the Trust Fund all reasonable and necessary expenses, taxes
and charges incurred on behalf of the Fund or the income thereof
in connection with the administration or operation of the Trust
Fund to the extent that such items are not otherwise paid. No
provision of this Plan shall be construed to provide for payment
to or the reimbursement of the Trustee (or any employee or agent
of the Trustee) with respect to any liability or expense
(including counsel fees) that may be incurred by the Trustee (or
any employee or agent) having been found to have breached any
responsibility it may have under the other provisions of this
Plan or any responsibility or prohibition imposed upon it by
ERISA.
ARTICLE XIII
INVESTMENT OF THE TRUST FUND
13.01 General Investment Fund
The Trustee shall have the right to combine the Accounts of the
Participants, except such portion of the Accounts as may have
been otherwise invested pursuant to this Article XIII, into a
general fund, hereinafter called the "General Investment Fund",
for the purpose of a general trust investment.
The Trustee shall invest and reinvest the principal and income of
the General Investment Fund, and shall keep it invested, without
distinction between principal and income, in any common or
preferred stocks, bonds, notes, mortgages, guaranteed dollar
amount or variable dollar amount annuities, or other securities,
including qualifying real estate or qualifying securities of the
Employer, real estate, shares of regulated investment companies,
common or collective trust funds, or in property of any kind or
nature, whether or not such investment be expressly authorized or
permitted by statutes, court decisions, regulations or other
restrictions of law prescribing investments or other actions by
fiduciaries, it being the intention that except as otherwise
restricted by the provisions of the succeeding paragraphs of this
Section 13.01, the Trustee shall be relieved from all
restrictions imposed by present or future laws on investments
which may be made by a trustee; provided, however, the Trustee
may, in its discretion, pending investment, temporarily retain in
cash or cash balances, or in a savings account maintained by the
Trustee in any bank or financial institution, including any bank
serving as Trustee hereunder, and bearing a reasonable rate of
interest, or in short term government obligations or commercial
papers, such portion of the General Investment Fund as it may
deem advisable.
In acquiring, investing, reinvesting, exchanging, retaining,
selling, and managing property for the General Investment Fund,
the Trustee shall act solely in the interests of the Participants
and beneficiaries of the Plan with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
man acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims.
In directing or making such investment, the Trustee shall not be
restricted to securities or other property of the character
authorized or required by applicable law from time to time for
trust investment and shall permit the value of any qualifying
securities and qualifying real property of the Employer in the
General Investment Fund to exceed 10 percent of the fair market
value of the General Investment Fund.
The Trustee shall diversify the investments of the General
Investment Fund so as to minimize the risk of large losses,
unless under the circumstances it is clearly prudent not to do
so.
The Trustee shall revalue the assets of the General Investment
Fund at their fair market value as of the end of each Plan Year
and at such other time as the Plan Administrator may direct. The
Account of each Participant shall then be adjusted by
apportioning the General Investment Fund, including income, as
thus revalued, among Participants' Accounts in proportion to the
value of their respective interests in the General Investment
Fund immediately preceding such revaluation.
13.02 Appraisal of Employer Stock
Annually, as of the last day of the Plan Year, the Employer shall
have made an appraisal of the Employer stock by a person who
customarily makes such appraisals and who is independent of the
Plan or the Employer, but only if the Employer stock is not
traded on a recognized exchange. For all purposes except with
regard to a transaction between the Plan and a party-in-interest,
the value as of the most recent Anniversary Date shall be used.
For all transactions between the Plan and a party-in-interest as
that term is defined in Section 3(14) of ERISA, the value of the
Employer stock must be determined as of the date of the
transaction. In the event of such transaction, the Employer shall
have made an independent appraisal of the Employer stock as of
the date of the transaction by a person who customarily makes
such appraisals and who is independent of the Plan or the
Employer.
13.03 Diversification of Investments
This Section 13.03 applies only to a Participant's General
Account.
(a) Definitions.
(1) "Qualified Participant" means a Participant who has attained
age 55 and who has completed at least ten years of participation
in the Plan.
(2) "Qualified Election Period" means the period of participation
after the Participant becomes a Qualified Participant.
(b) Election by Qualified Participants. Each Qualified
Participant shall be permitted to direct the Plan as to the
investment of 25 percent of the value of the Participant's
Account during his Qualified Election Period. A Qualified
Participant who attains age 60 may direct the Plan as to the
investment of 50 percent of the value of his Account during his
remaining Qualified Election Period.
(c) Method of Directing Investment. The Participant's direction
shall be provided to the Plan Administrator in writing; shall be
effective no later than 180 days after the close of the Plan Year
to which the direction applies; and shall specify which, if any,
of the options set forth in subsection (d) below the Participant
selects.
(d) Investment Options.
(1) At the election of the Qualified Participant, the Plan shall
distribute (notwithstanding Section 409(d) of the Code) the
portion of the Participant's Profit Sharing Contributions Account
that is covered by the election within 90 days after the last day
of the period during which the election can be made. Such
distribution shall be subject to such requirements of the Plan
concerning put options as would otherwise apply to a distribution
of Qualifying Employer Securities from the Plan. This Section
13.03(d)(1) shall apply notwithstanding any other provision of
the Plan other than such provision as require the consent of the
Participant to a distribution with a present value in excess of
$3,500. If the Participant does not consent, such amount shall be
retained in this Plan.
(2) In lieu of distribution under Section 13.03(d)(1) hereof, the
Qualified Participant who has the right to receive a cash
distribution under Section 13.03(d)(1) hereof may direct the Plan
to transfer the portion of the Participant's Profit Sharing
Contributions Account that is covered by the election to another
qualified plan of the Employer which accepts such transfers,
provided that such Plan permits Employee-directed investment and
does not invest in Qualifying Employer Securities to a
substantial degree. Such transfer shall be made no later than 90
days after the 1st day of the period during which the election
can be made.
(3) In lieu of alternatives (l) and (2) of this Section 13.03(d),
the Participant shall be provided an opportunity to select among
at least three investment options to include, but not limited to,
a stock fund, a bond fund and a money market or cash equivalent
fund. The Participant's election shall be made in accordance with
rules and procedures established by the Committee with amounts
invested in one or more funds in increments of at least 10
percent.
ARTICLE XIV
MISCELLANEOUS
14.01 Participant's Rights
Neither the establishment of the Plan, nor any modification
thereof, nor the creation of any fund or account, nor any
distributions hereunder, shall be construed as giving to any
Participant or other person any legal or equitable right against
the Employer, or any officer or Employee thereof, or the Trustee,
or the Plan Administrator except as herein provided. Under no
circumstances shall the terms of employment of any Participant be
modified or in any way affected thereby.
14.02 Assignment or Alienation of Benefits
No benefit or interest available hereunder will be subject to
assignment or alienation, either voluntarily or involuntarily.
The preceding sentence shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with
respect to a participant pursuant to a domestic relations order,
unless such order is determined to be a Qualified Domestic
Relations Order or any domestic relations order entered before
January 1, 1985. For purposes of this Section 14.02, "Qualified
Domestic Relations Order" means any domestic relations order
which creates or recognizes the existence of an alternate payee's
right to, or assigns to an alternate payee the right to, receive
all or a portion of the benefits payable with respect to a
Participant, and which otherwise meets the requirements of
Section 414(p) of the Code.
As soon as practical after receipt of a domestic relations order,
the Plan Administrator shall determine whether it is a Qualified
Domestic Relations Order. If the domestic relations order is
determined to be a Qualified Domestic Relations Order, the Plan
Administrator shall be permitted, in accordance with rules and
regulations promulgated by the Internal Revenue Service and the
rules and regulations established by the Plan Administrator, to
direct the Trustee to make an immediate distribution to the
alternate payee (i) if the amount is less than $3,500, (ii) as
provided in any such Order, or (iii) as elected by the alternate
payee. Such distribution shall be permitted regardless of the age
or employment of the Participant and regardless of whether the
Participant is otherwise entitled to a distribution.
14.03 Reversion of Funds to Employer
All Employer contributions are conditioned upon their
deductibility pursuant to Section 404 of the Code. The Employer
shall not directly or indirectly receive any refund on
contributions made to the Trust Fund except in the following
circumstances:
(a) the contribution was made by reason of a mistake of fact,
(b) the deduction for such contribution is disallowed, or
(c) the initial qualification of the Plan, or subsequent
qualification of the Plan resulting from a Plan amendment, is
denied under the Code.
Earnings attributable to any contribution subject to refund shall
not be refunded. The amount subject to refund shall be reduced by
any loss attributable thereto, and by any amount which would
cause the individual account of any Participant to be reduced to
less than the balance which would have been in the account had
the contribution subject to refund not been made. The return of
the contribution shall be made within one year of the mistaken
payment, the disallowance of deduction (to the extent disallowed)
or the denial of qualification, as the case may be.
Except as provided above, under no circumstances shall any amount
of the principal or income of the Trust Fund be used for or
diverted to the Employer or be used for or diverted to purposes
other than the exclusive benefit of Participants, former
Participants, and their beneficiaries.
14.04 Third Party Immunity
No third party, including but not limited to life insurance
companies and regulated investment companies, shall be deemed to
be a party to the Plan for any purpose or to be responsible for
the validity of the Plan; nor shall such third party be required
to take cognizance of the Trustee or of the Plan Administrator
hereunder, nor shall such third party be responsible to see that
any action of the Trustee or the Plan Administrator is authorized
by the terms of the Plan. Any such third party shall be fully
discharged from any and all liability for any amount paid to the
Trustee or paid in accordance with the direction of the Trustee
or the Plan Administrator, as the case may be, or for any change
made or action taken by such third party upon such direction; and
no such third party shall be obligated to see to the distribution
or further application of any monies so paid by such third party.
14.05 Delegation of Authority by Employer
Whenever the Employer, under the terms of the Plan, is permitted
or required to do or perform any act or matter or thing, it shall
be done and performed by any officer thereunto duly authorized.
14.06 Allocation of Responsibilities
None of the allocated responsibilities or any other
responsibilities shall be shared by any two or more Named
Fiduciaries unless such sharing is provided by a specific
provision of the Plan. Whenever one Named Fiduciary is required
to follow the directions of another Named Fiduciary, the
responsibility shall be that of the Named Fiduciary giving the
directions.
14.07 Construction of Plan
To the extent not in conflict with the provisions of ERISA, all
questions of interpretation of the Plan shall be governed by the
laws of the State of Ohio.
14.08 Gender and Number
Wherever any words are used herein in the masculine gender, they
shall be construed as though they were also used in the feminine
gender in all cases where they would so apply, and wherever any
words are used herein in the singular form, they shall be
construed as though they were also used in the plural form in all
cases where they would so apply.
14.09 Headings
Headings of sections are for general information only, and the
Plan is not to be construed by reference thereto. Executed at
Bowling Green, Ohio, the day and year first above written.
Mid Am, Inc.
Robin Wooddall By W. Granger Souder
Witness Its Senior Vice President/General Counsel
Mid American National Bank & Trust Company
Karen Simons By David E. Judy VP/TO
Witness
J. Philip Ruyle SVP/TO
APPENDIX A
LIST OF PARTICIPATING EMPLOYERS
EMPLOYER EFFECTIVE DATE
Mid Am, Inc. July 1, 1989
Mid American National Bank & Trust Company July 1, 1989
First National Bank Northwest Ohio July 1, 1989
Farmers Banking Company July 1, 1989
Citizens Building & Loan July 1, 1990
Mid Am Information Services, Inc. January 1, 1991
American Community Bank, NA October 31, 1992
(* merger of Farmers & Citizens)
Home Federal Savings January 1, 1993
Apollo Savings July 1, 1993
AmeriFirst March 19, 1993
(* merger of Home Federal & Apollo)
EXHIBIT 10.5
Employee Stock Ownership and Savings Plan of the Company (401K)
EXHIBIT 10.5
Profit Sharing/401(k) Savings Plan
The Company also maintains an employee stock ownership and
savings plan (the "Profit Sharing/Savings Plan"), which is
designed to provide discretionary contributions by the Company to
eligible employees' accounts based upon the profitability of the
Company and to provide a means of voluntary tax-free salary
deferral for employees pursuant to Section 401(k) of the Internal
Revenue Code. The profit sharing aspect of the Profit
Sharing/Savings Plan, which is incorporated into the
Company's ESOP, provides for discretionary contributions by the
Company in the form of the Company's common stock or cash which
will be used predominantly to purchase common stock of the
Company. The Company may, at its sole discretion, credit eligible
participants' accounts with cash or the Company's common stock of
up to three percent of the employee's annual compensation.
Eligibility requirements, vesting parameters, termination and
distribution rules are substantially identical to those of the
Pension Plan.
The Profit Sharing/Savings Plan also contains a 401(k) salary
deferral provision, which enables eligible employees to defer a
percentage of their annual compensation, not to exceed the
maximum amount permitted under the Internal Revenue Code. The
Company also matches, dollar-for-dollar, the amount deferred by
eligible employees, for a maximum matching contribution of three
percent of the participant's annual compensation. Participants
may direct their deferral compensation, including any matching
contributions, into several investment alternatives.
The Profit Sharing/401(k) Savings Plan, as amended, follows this
description.
MID AM, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ................................... 2
l.0l Acquired Employer ...................................... 2
1.02 Anniversary Date....................................... 2
1.03 Annual Compensation.................................... 2
1.04 Code................................................... 2
l.05 Company................................................ 2
1.06 Employee............................................... 3
1.07 Employer............................................... 3
1.08 Entry Date............................................. 3
1.09 ERISA.................................................. 3
1 l0 ESOP.................................................... 3
1.11 Hour of Service......................................... 3
1.12 Named Fiduciary..........................................4
1.13 Normal Retirement Age....................................4
1.14 Normal Retirement Date...................................4
l.15 Participant..............................................4
l.l6 Plan.....................................................5
1.17 Plan Administrator.......................................5
1.18 Plan Year................................................5
l.l9 Qualified Election.......................................5
1.20 Qualifying Employer Securities...........................5
1.21 Self-Employed Person.....................................5
1.22 Trustee..................................................5
1.23 Trust Fund...............................................5
1.24 Year of Service..........................................6
ARTICLE ELIGIBILITY...........................................7
2.01- Eligibility.............................................7
2.02 Eligibility Upon Re-Employment...........................7
2.03 Eligibility for Employees of an Acquired Employer........7
ARTICLE III CONTRIBUTIONS.....................................8
3.01 Employer Contributions...................................8
3.02 Rollover Contributions..................................10
ARTICLE IV ALLOCATIONS.......................................11
4.01 Participant Accounts....................................11
4.02 Annual Allocations......................................12
4.03 Annual Report to Participants ..........................12
ARTICLE V BENEFITS TO PARTICIPANTS ..........................13
5.0l Upon Retirement or Disability..........................13
5.02 Upon Death.............................................13
5.03 Upon Termination of Employment.........................14
5.04 Certification by Plan Administrator....................17
ARTICLE VI DISTRIBUTIONS....................................18
6.01 Method and Medium of Payment...........................18
6.02 Special ESOP Distribution Requirements ................21
6.03 Mandatory Commencement of Benefits ....................22
6.04 Distributions After Death of a Participant ............24
6.05 Right to Have Accounts Transferred ....................24
6.06 Distribution of Excess Deferrals ......................25
6.07 Restrictions on Distributions of Compensation Deferral
Contributions .........................................25
6.08 Loans to Participants .................................26
6.09 Cash Dividend Option ..................................27
6.10 Hardship Distributions ................................28
ARTICLE VII LIMITATION ON CONTRIBUTIONS AND BENEFITS .......29
7.01 Limitation of Benefits ................................29
ARTICLE VIII NONDISCRIMINATION REQUIREMENTS.................33
8.01 Definitions ...........................................33
8.02 Nondiscrimination Requirements for Compensation Deferral
Contributions .........................................38
8.03 Nondiscrimination Requirements for Matching Contributions
and Employee Contributions ............................41
ARTICLE IX TOP HEAVY PROVISIONS.............................45
9.01 Definitions ...........................................45
9.02 Determination of Top Heavy Status .....................46
9.03 Combination of Defined Benefit and Defined Contribution
Plan...................................................47
9.04 Minimum Contribution ..................................47
9.05 Minimum Vesting .......................................47
ARTICLE X AMENDMENT OR TERMINATION..........................49
10.01 Amendment.........................................49
10.02 Plan Termination or Discontinuance of
Contributions.....................................49
10.03 Merger, Consolidation or Transfer of Assets.......50
ARTICLE XI ADMINISTRATION....................................51
11.01 Plan Administrator................................51
11.02 Records and Reports...............................52
11.03 Claims Procedure..................................52
11.04 Participants' Right to Vote Employer Stock........53
ARTICLE XII EXEMPT LOAN.......................................54
12.01 Definition of Exempt Loan.........................54
12.02 Requirements for an Exempt Loan...................54
12.03 Right of First Refusal............................55
ARTICLE XIII TRUSTEE ..........................................56
13.01 Fiduciary Status..................................56
13.02 Establishment and Acceptance of Trust.............56
13.03 Trustee's General Powers..........................56
13.04 Payment of Compensation, Expenses and Taxes.......58
13.05 Accounting........................................58
13.06 Trustee's General Powers..........................58
13.07 Voting Employer Stock.............................58
13.08 Removal, Resignation and Appointment of Successor
Trustee...........................................59
13.09 Investment Manager................................59
13.10 Payment of Expenses...............................60
ARTICLE XIV INVESTMENT OF THE TRUST FUND ......................61
14.01 General Investment Fund ..........................61
14.02 Individual Investment Funds.......................62
14.03 Appraisal of Employer Stock ......................63
14.04 Diversification of Investments ...................63
ARTICLE XV MISCELLANEOUS ...................................65
15.01 Participant's Rights ..................................65
15.02 Assignment or Alienation of Benefits ..................65
15.03 Reversion of Funds to Employer ........................65
15.04 Third Party Immunity ..................................66
15.05 Delegation of Authority by Employer ...................66
15.06 Allocation of Responsibilities ........................67
15.07 Construction of Plan ..................................67
15.08 Gender and Number .....................................67
15.09 Headings ..............................................67
APPENDIX A LIST OF PARTICIPATING EMPLOYERS .................68
MID AM, INC.
EMPLOYEE STOCK OWNERSHIP AND SAVINGS PLAN
AS AMENDED AND RESTATED
THIS AGREEMENT, made and executed at Bowling Green, Ohio on the
17th day of September , 1993, to be effective July 1, 1989, by
and between MID AM, INC., a corporation organized and existing
under the laws of the State of Ohio (hereinafter referred to as
"Employer"), and MID AMERICAN NATIONAL BANK & TRUST COMPANY
(hereinafter referred to as "Trustee").
WITNESSETH:
WHEREAS, the Employer established the "Mid American National Bank
and Trust Company Profit Sharing Retirement Plan", which was
effective January 1, 1966 and which was changed to the "Mid Am,
Inc. Employee Stock Ownership and Savings Plan" (hereinafter
referred to as the "Plan") which became effective July 1, 1989;
and
WHEREAS, the Employer deems it necessary to amend the Plan to
comply with the Tax Reform Act of 1986 and make certain other
changes;
NOW, THEREFORE, in consideration of these premises and the mutual
covenants herein contained, it is mutually agreed by and between
the Employer and the Trustee, that the Plan and Trust shall read
as follows:
ARTICLE I
DEFINITIONS
1.01 Acquired Employer. "Acquired Employer" means any
organization, corporate or otherwise, which is acquired by
purchase, merger, consolidation or any other method.
1.02 Anniversary Date. "Anniversary Date" means the last day of
each Plan Year.
1.03 Annual Compensation. "Annual Compensation" means the total
wages, salary, bonuses, commissions, overtime pay and other extra
remunerations during the Plan Year received from the Employer but
excluding amounts received based on allocable contributions to
the Plan. Annual Compensation includes a Participant's voluntary
reductions in cash consideration made in accordance with
arrangements established by the Employer under Section 125 and
Section 401(k) of the Code.
A Participant's Annual Compensation in excess of $200,000 shall
be excluded for purposes of the Plan. This $200,000 limitation
will be adjusted at the same time and in the same manner as is
provided in Section 415(d) of the Code.
In determining the Annual Compensation of a Participant for
purposes of this limitation, the rules of Section 414(q)(6) of
the Code shall apply, except in applying such rules, the term
"family" shall include only the spouse of the Participant and any
lineal descendants of the Participant who have not attained age
19 before the close of the year If, as a result of the
application of such rules the adjusted $200,000 limitation is
exceeded, then the limitation shall be prorated among the
affected individuals in proportion to each such individual's
Annual Compensation as determined under this Section prior to the
application of this limitation.
1.04 Code. "Code" means the Internal Revenue Code of 1986, as
amended.
1.05 Company. "Company" means the Employer and any other
corporation which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) which
includes the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in
Section 414(c) of the Code) with the Employer; any organization
(whether or not incorporated) which is a member of an
affiliated service group (as defined in Section 414(m) of the
Code) which includes the Employer; and any other entity required
to be aggregated with the Employer pursuant to regulations under
Section 414(o) of the Code.
1.06 Employee. "Employee" means any person employed by the
Employer.
1.07 Employer. "Employer" means Mid Am, Inc. or any subsidiary,
affiliate or other facility of Mid Am, Inc. to which this Plan
has been extended, as listed in Appendix A hereof.
1.08 Entry Date. "Entry Date" means the date the Employee becomes
a Participant hereunder, pursuant to the eligibility requirements
of Section 2.01 hereof.
1.09 ERISA. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.10 ESOP. "ESOP" means an Employee Stock Ownership Plan as
defined in Section 4975(e)(7) of the Code.
1.11 Hour of Service-~ice. "Hour of Service" means:
(a) Each hour for which an Employee is directly or indirectly
paid or entitled to payment by either the Company or the Employer
for the performance of duties;
(b) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by either the Company or the
Employer for reasons (such as vacation, sickness, disability, or
similar leave of absence) other than for the performance of
duties, and for military leaves, Maternity/Paternity Leaves or
leaves for jury duty; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by either the
Company or the Employer provided that the same Hours of Service
which shall not be credited under this subsection (c) and
subsections (a) or (b) above, as the case may be.
Hours of Service computed hereunder shall be computed in
accordance with Section 2530.200 b-2 (b) and (c) of the
Department of Labor Regulations which is incorporated herein by
reference.
In no event shall more than 501 Hours of Service be credited for
any one , continuous period of absence during or for which the
employee receives payment for nonperformance of duties whether or
not such period occurs in a single computation period.
For purposes of this Section 1.11, a Maternity/Paternity Leave
means absence in accordance with the Employer's or Company's
pre-approved leave policy which may permit such leaves:
(a) by reason of the pregnancy of an individual,
(b) by reason of the birth of a child of an individual,
(c) by reason of the placement of a child with an individual in
connection with the adoption of such child by such individual, or
(d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
The Hours of Service credited under this paragraph shall be
credited:
(a) in the computation period in which the absence begins if the
crediting is necessary in order to give the Participants (501)
Hours, or
(b) in all other cases, in the following computation period.
If the number of hours which would have been credited cannot be
determined, such person shall receive credit for eight Hours of
Service per day of such absence.
For purposes of this Section 1.11, "computation period" shall
mean a 12 consecutive month period commencing on the date of an
Employee's first Hour of Service with either the Company or the
Employer, or any anniversary thereof.
1.12 Named Fiduciary. "Named Fiduciary" means a fiduciary named
in this document, or who, pursuant to a procedure specified in
the Plan, is identified as a Named Fiduciary.
1.13 Normal Retirement Age. "Normal Retirement Age" means age
sixty-five(65).
1.14 Normal Retirement Date. "Normal Retirement Date" means the
first day of the month coinciding with or next following the date
on which a Participant attains Normal Retirement Age.
1.15 Participant. "Participant" means an Employee who has
satisfied the eligibility requirements for participation in the
Plan.
1.16 Plan. "Plan" means the Mid Am, Inc. Employee Stock Ownership
and Savings Plan.
1.17 Plan Administrator. "Plan Administrator" means the Committee
appointed pursuant to Article XI hereof.
1.18 Plan Year. "Plan Year" means the 12-month period beginning
on January 1 and ending on the following December 31 of each
year.
1.19 Qualified Election. "Qualified Election" means a waiver of
the lump sum payment to the spouse in the event of death of the
Participant. The waiver must be in writing and must be consented
to by the Participant's spouse. The spouse's consent to a waiver
must be witnessed by a Plan representative or notary public and
must be limited to a benefit for a specific alternate beneficiary
(or a specific form of benefit). Notwithstanding this consent
requirement, if the Participant establishes to the satisfaction
of a Plan representative that such written consent may not be
obtained because there is no spouse or the spouse cannot be
located, a waiver will be deemed a Qualified Election. Any
consent necessary under this provision will not be valid with
respect to any other spouse. Additionally, a revocation of a
prior waiver may be made by a Participant without the consent of
the spouse at any time before the commencement of benefits. The
number of revocations shall not be limited. Any new waiver or
change of beneficiary will require a new spousal consent.
1.20 Qualifying Employer Securities. "Qualifying Employer
Securities" means an Employer security which is common stock
issued by the Employer having a combination of voting power and
dividend rights equal to or in excess of the class of Employer
common stock having the greatest voting power and the class of
Employer common stock having the greatest dividend rights.
1.21 Self-Employed Person. "Self-Employed Person" means a
self-employed individual who performs personal services for the
Employer and who owns an interest in the Employer.
1.22 Trustee. "Trustee" means Mid American National Bank & Trust
Company or its successor as appointed under the Plan, which shall
be a Named Fiduciary.
1.23 Trust Fund. "Trust Fund" means all assets of whatever kind
or nature held by the Trustee pursuant to the terms of the Plan.
1.24 Year of Service. For purposes of determining eligibility
to participate in the Plan in accordance with Section 2.01
hereof, "Year of Service" means the completed 12 consecutive
month period commencing on the date of an Employee's first Hour
of Service with either the Company or the Employer, or any
anniversary date thereof, during which such Employee is credited
with at least one thousand (1,000) Hours of Service.
For purposes of determining a Participant's nonforfeitable
interest pursuant to Section 5.03 hereof, "Year of Service" means
a Plan Year during which such Participant is credited with at
least 1,000 Hours of Service. For purposes of Section 5.03, a
Participant will be credited with a Year of Service if he
completes 1,000 Hours of Service during said period, even though
he is not employed for the full 12-month period.
Service of an Employee with the Armed Forces of the United States
shall be deemed to be service with the Employer for purposes of
Sections 2.01 and 5.03 hereof, provided the Employee returns to
active employment with the Employer within the prescribed time
limits during which he retains re-employment rights by law. If
such Employee does not return during such period, his employment
will be deemed to have been terminated when he entered the Armed
Forces.
An Employee who does not initially meet the eligibility
requirements of Section 2.01 and later becomes a Participant,
will have all Years of Service counted for Plan purposes, both
prior to and subsequent to becoming a Participant.
In the event a terminated Participant is re-hired, all Years of
Service with either the Company or the Employer shall be counted
for purposes of Sections 2.01 and 5.03 hereof.
Employees of an acquired employer shall be granted Years of
Service credit under the conditions and standards of this Section
1.24 for all service which they had with the acquired employer.
ARTICLE II
ELIGIBILITY
2.01 Eligibility
Each Employee who was a participant in the Mid American National
Bank and Trust Company Employee Stock Ownership Trust as of
January 1, 1989 shall continue to participate in the Plan as
amended and restated.
Each Employee shall participate in the Plan on the January 1 or
July 1 coinciding with or next following the date he meets all of
the following requirements:
(a) is credited with one (1) Year of Service;
(b) has attained age twenty-one (21); and
(c) is not a member of a collective bargaining unit unless the
agreement between the Employer and the union provides for
participation hereunder.
2.02 Eligibility Upon Re-Employment
A former Participant, or former Employee who met the eligibility
requirements of Section 2.01 for participation in the Plan at the
time he terminated employment, who is subsequently rehired shall
participate hereunder on the Entry Date coinciding with or next
following his re-employment by the Employer.
2.03 Eligibility for Employees of an Acquired Employer
Employees of an Acquired Employer will be eligible for this Plan
under the conditions of Article II as of such dates as determined
by any of the corporate officers. Such group of employees and
dates of entry shall be described in Appendix A of this Plan.
ARTICLE III
CONTRIBUTIONS
3.01 Employer Contributions
The Plan is designed to qualify as a profit sharing plan for
purposes of Sections 401(a), 402, 412 and 417 of the Code,
however, the Employer may make contributions to the Plan without
regard to current or accumulated earnings and profits for any
taxable year or years ending with or within such Plan Year.
Profit Sharing Contributions. Each year the Employer may make a
contribution to the Trust Fund in such amounts as it may
determine in its sole discretion, to be held and administered in
trust by the Trustee according to the terms and conditions of the
Plan. Employer contributions shall be paid in cash or shares of
Employer stock. Shares of Employer stock will be valued at their
then fair market value. To the extent that the Trust has
obligations arising from an extension of credit to the Trust
which is payable in cash within one year of the date of the
Employer's contribution is made, such contribution will be paid
to the Trust in cash. Any such contribution shall be allocated
in accordance with Section 4.02 hereof.
These contributions are intended to qualify an employee stock
ownership contributions under Section 4975(e)(7) of the Code and
the regulations thereunder, and are intended to be invested
primarily in Qualifying Employer Securities. At any time, up to
100 percent of the assets attributable to Profit Sharing
Contributions may be invested in Qualifying Employer Securities.
The Employer's Profit Sharing Contribution, if any, shall be made
to the Trustee in full within such time as may be permitted for
Federal Income Tax purposes to obtain a deduction for the
contribution by the Employer for such taxable year.
Compensation Deferral Contributions. Effective July 1, 1989, each
eligible Participant may elect to defer a percentage of his
Annual Compensation for each pay period that he remains a
Participant in accordance with procedures established by the Plan
Administrator. The Participant's election shall be made at such
time and in such manner as the Plan Administrator shall
determine. Said election shall remain in effect until revoked or
superseded by a subsequent election pursuant to procedures
established by the Plan Administrator.
Compensation Deferral Contributions shall not be considered as
income to the Participant for purposes of Section 61 of the Code.
Such contributions shall be deemed as those made by the Employer,
subject to the limitations of Section 7.01 hereof.
Except as provided herein, the Employer shall contribute to the
Plan on behalf of the Participant the full amount of the
Compensation Deferral Contribution authorized by said
Participant. In no event, however, shall a Participant's
Compensation Deferral Contributions to the Plan for any calendar
year exceed seven thousand dollars ($7,000) or such other amount
as may be allowable pursuant to Section 402(g)(5) of the Code.
The Employer shall automatically discontinue Compensation
Deferral Contributions for the remainder of the year on behalf of
a Participant who reaches this limitation. A Participant may
request a distribution of any Excess Deferrals (Compensation
Deferral Contributions in excess of the limitation) in accordance
with the provisions of Section 6.06 hereof in the event that his
Compensation Deferral Contributions to the Plan, when combined
with any amounts deferred under any plans or arrangements
described in Sections 401(k), 408(k) or 403(b) of the Code,
exceed the limit of Section 402(g) of the Code.
Contributions to a Participant's Compensation Deferral
Contributions Account must meet the nondiscrimination
requirements of Section 401(k) of the Code pursuant to Section
8.02 hereof.
Compensation Deferral Contributions shall be periodically
contributed by the Employer to the Trust Fund in accordance with
the Employer's established payroll procedures in a manner
uniformly applied to all Participants similarly situated.
Matching Contributions. Effective July 1, 1989, the Employer
shall contribute to the Trust Fund on behalf of each Participant
an amount equal to 50 percent of the first 6 percent of a
Participant's Compensation Deferral Contributions, to a maximum
of 3 percent of such Participant's Annual Compensation. Matching
Contributions for the period from July 1, 1989 through December
31, 1989 shall be based on Annual Compensation received during
that period. Effective January 1, 1992, the Employer shall
determine the Matching Contribution each Plan Year. The
discretionary Matching Contribution shall be communicated to
Participants prior to the beginning of each Plan Year.
Notwithstanding the above, Compensation Deferral Contributions
authorized by Participants employed by the Farmers Banking
Company that represent a one-time election to defer their July,
1989 cash bonus shall not be eligible for Employer Matching
Contributions.
Contributions to a Participant's Matching Contributions Account
must meet the nondiscrimination requirements of Section 401(m) of
the Code pursuant to Section 8.03 hereof.
Matching Contributions shall be periodically contributed by the
Employer to the Trust Fund in accordance with the Employer's
established payroll procedures in a manner uniformly applied to
all Participants similarly situated.
3.02 Rollover Contributions
The Trustee may accept transfers on behalf of a Participant from:
(a) a qualified pension or profit sharing plan maintained by a
former employer of the Participant;
(b) a previously qualified pension or profit sharing plan
maintained by the Employer;
(c) a "rollover" Individual Retirement Account as that term is
defined in Section 408(d)(3)(A)(ii) of the Code;
(d) a plan in which assets are held on behalf of an
Owner-Employee as defined in Section 401(c)(3) of the Code, which
satisfies the applicable requirements of Sections 401(a) and
401(d) of the Code and with respect thereto:
(1) the transferred funds shall be maintained in separate
accounts in the name of the respective Participants; and
(2) a Participant's interest in the separate account shall be
nonforfeitable; and
(3) the Trustee may not lend any portion of such separate account
to any Participant.
Rollover Contributions made pursuant to this Section 3.01 shall
be credited to the Participant's Rollover Contributions Account
and shall be at all times nonforfeitable.
Notwithstanding the above, no direct transfer may be made from a
plan maintained by the Company that is subject to the
requirements of Section 401(a)(11)(A) of the Code.
ARTICLE IV
ALLOCATIONS
4.01 Participant Accounts
Separate Accounts shall be maintained by the Trustee for each
Participant as follows:
(a) Profit Sharing Contributions Account. The amount of the
Employer's contribution to the Trust Fund pursuant to Section
3.01 hereof and allocated pursuant to Section 4.02(a) hereof,
together with such Participant's share of all income, gains and
accumulations therefrom, shall be credited and losses debited to
each Participant's Profit Sharing Contributions Account.
(b) Compensation Deferral Contributions Account. Compensation
Deferral Contributions authorized by each Participant and
contributed by the Employer pursuant to Section 3.01 hereof,
together with such Participant's share of all income, gains and
accumulations therefrom, shall be credited and losses debited to
each Participant's Compensation Deferral Contributions Account.
(c) Matching Contributions Account. Matching Contributions made
by the Employer pursuant to Section 3.01 hereof, together with
such Participant's share of all income, gains and accumulations
therefrom, shall be credited and losses debited to such
Participant's Matching Contributions Account.
(d) Prior Plan Account. Amounts transferred from a previous
qualified plan of the Employer, together with such Participant's
share of all forfeitures, income, gains and accumulations
therefrom, shall be credited and losses debited to each
Participant's Prior Plan Account.
(e) Rollover Contributions Account. Rollover Contributions made
by a Participant pursuant to Section 3.02 hereof, together with
such Participant's shares of all income, gains and accumulations
therefrom, shall be credited and losses debited to such
Participant's Rollover Contributions Account.
Said Profit Sharing Contributions Account, Compensation Deferral
Contributions Account, Matching Contributions Account, Prior Plan
Account and Rollover Contributions Account will sometimes
hereinafter be collectively referred to as "Accounts" .
4.02 Annual Allocations
(a) Employer Contributions.
Profit Sharing Contributions. Effective as of the last day of
each Plan Year, any amount contributed by the Employer pursuant
to Section 3.01 hereof shall be allocated and credited to the
Profit Sharing Contributions Account of each eligible
Participant. An allocation will be made only if the Participant
was employed on the last day of such Plan Year and was credited
with at least 1,000 Hours of Service during such Plan Year,
subject to the provisions of Section 8.04 hereof, except that any
Participant who became totally and permanently disabled, died or
retired during such Plan Year shall receive an allocation. Such
allocations shall be determined in the same proportion that such
Participant's Annual Compensation bears to the total Annual
Compensation of all Participants for such Plan Year.
Compensation Deferral Contributions. Compensation Deferral
Contributions made by the Employer on behalf of a Participant
shall be credited to said Participant's Compensation Deferral
Contributions Account.
Matching Contributions. Matching Contributions made by the
Employer on behalf of a Participant shall be credited to said
Participant's Matching Contributions Account.
(b) Investment Gain or Loss: Any net gain or net loss resulting
from the operation of the Investment Funds of the Trust for such
year, determined in accordance with Article XIV hereof, shall be
allocated by the Trustee to the respective Participant's Accounts
in proportion to the value of the respective interests in the
Investment Fund immediately preceding such revaluation.
(c) Allocation of Cash Dividends: Cash dividends on Employer
Stock allocated to a Participant's Account shall be credited to
the Participant's Account.
4.03 Annual Report to Participants
The Plan Administrator shall notify each Participant in writing
of the financial status of his Accounts as of the last day of
each Plan Year.
ARTICLE V
BENEFITS TO PARTICIPANTS
5.01 Upon Retirement or Disability
When a Participant retires (whether it be Early Retirement, at
Normal Retirement Date or after Normal Retirement Date) or
becomes totally and permanently disabled, the entire interest in
his Accounts, including the amount of any additional credit as
finally deternined, representing his participation and
contributions for the year in which his disability or retirement
occurred, shall become nonforfeitable and his participation
hereunder shall thereupon cease. The Plan Administrator, in
accordance with the provisions of Section 6.01 hereof, shall then
direct the Trustee to distribute to such Participant the entire
interest in his Accounts.
Normal Retirement. Each Participant's Accounts shall be
nonforfeitable upon the attainment of his Normal Retirement Age
and the Participant may retire on his Normal Retirement Date.
Late Retirement. A Participant who remains in the employment of
the Employer after his Normal Retirement Date shall continue to
participate hereunder. No distribution shall be made to the
Participant until his actual retirement, subject to the mandatory
commencement of benefit provisions of Section 6.02 hereof.
Early Retirement. A Participant may retire early at any time
after attaining age fifty-five (55).
Total and Permanent Disability. "Total and permanent disability"
means a physical or mental condition of a Participant resulting
from a bodily injury or disease or mental disorder which renders
him incapable of continuing in the employment of the Employer.
The total and permanent disability of any Participant shall be
deternined by the Plan Administrator, in accordance with uniform
principles consistently applied, upon the basis of such evidence
as the Plan Administrator deems necessary.
5.02 Upon Death
Upon the death of a Participant, the entire interest in the
Accounts of such Participant, including the amount of any
additional credit as finally determined, representing his
participation and contributions for the Plan Year in which his
death occurs, shall become nonforfeitable and the Plan
Administrator, in accordance with the provisions of Section 6.01
hereof, shall then direct the Trustee to distribute the entire
interest in his Accounts to such Participant's designated
beneficiary or beneficiaries, or if none, as provided in
this Section 5.02. The Plan Administrator may require such
proper proof of death and such evidence of the right of any
person to receive payment of the entire interest in the Accounts
of such deceased Participant as the Plan Administrator deems
desirable and the Plan Administrator's determination shall be
conclusive. Such distribution shall be made as soon as
administratively feasible following the Participant's death and
in accordance with the rules and procedures established by the
Plan Administrator.
All payments must be made to the spouse of the Participant in a
lump sum unless subject to a Qualified Election.
Each Participant, by written instrument delivered to the Plan
Administrator, shall have the unqualified right to designate and
from time to time change the beneficiary or beneficiaries to
receive in the event of his death the entire interest in his
Accounts.
In the event the Participant fails to designate a beneficiary or
beneficiaries, the entire interest in his Accounts shall be
distributed first to his spouse if then living, or second to his
estate.
5.03 Upon Termination of Employment
(a) Nonforfeitable Interest. Upon termination of a Participant's
employment for any reason other than retirement, total and
permanent disability or death, the Trustee shall, in accordance
with the provisions of Section 6.01 hereof and at the instruction
of the Plan Administrator, distribute to the Participant the
entire interest then constituting his Compensation Deferral
Contributions Account, Matching Contributions Account and
Rollover Contributions Account which are always nonforfeitable,
and the nonforfeitable interest in his Profit Sharing
Contributions Account, and Prior PLAN Account based on his
Years of Service determined in accordance with the applicable
schedule below:
For Participants hired before January 1, 1989
(Except Employees of First National Bank Northwest Ohio)
Years of Service Nonforfeitable Interest
Less than 1 0 percent
1 but less than 2 10 percent
2 but less than 3 20 percent
3 but less than 4 30 percent
4 but less than 5 40 percent
5 or more 100 percent
Normal Retirement Age 100 percent
For Participants hired on or after January 1, 1989 and
Employees of First National Bank Northwest Ohio
Years of Service Nonforfeitable Interest
Less than 5 0 percent
5 or more 100 percent
Normal Retirement Age 100 percent
In the event the nonforfeitable interest schedule is hereafter
amended, or the nonforfeitable interest schedule of an existing
plan is amended by the Plan, then any Participant who has
completed at least three Years of Service on the later of the
date the amendment is adopted, or the date the amendment is
effective may elect, in writing, beginning on the date the Plan
amendment is adopted and ending on the later of:
(1) his termination of employment,
(2) the date which is 60 days after the day the Plan amendment is
adopted,
(3) the date which is 60 days after the day the Plan amendment
becomes effective, or
(4) the date which is 60 days after the day the Participant is
issued written notice of the Plan amendment by the Plan
Administrator,
to have his nonforfeitable interest in his Accounts determined
without regard to such amendment by notifying the Plan
Administrator.
(b) Forfeiture.
(1) If a Participant terminates service, and the value of his
vested Accounts is not greater than $3,500, the Participant will
receive a distribution of the value of the entire vested portion
of his Accounts and the nonvested portion will be treated as a
forfeiture.
(2) If a Participant terminates service and elects to receive,
pursuant to Section 6.01 hereof, the vested portion of his
Accounts, the nonvested portion will be treated as a forfeiture.
If the Participant receives a distribution of less than the
entire vested portion of his Accounts, the part of the nonvested
portion that will be treated as a forfeiture is the total
nonvested portion multiplied by a fraction, the numerator of
which is the amount of the distribution and the denominator of
which is the total value of the vested Accounts.
(3) If a Participant receives a distribution pursuant to Section
6.01 hereof which is less than the value of the Participant's
Account, and resumes employment within the five consecutive Plan
Years following the Plan Year in which termination of employment
occurs, the Participant's Account will be restored to the amount
on the date of distribution if the Participant repays to the Plan
the full amount of the distribution.
(4) If a Participant does not receive a distribution pursuant to
Section 6.01 hereof, no forfeiture will occur until the
expiration of five consecutive Plan Years following the Plan Year
in which termination of employment occurs during which the
Participant is not re-employed.
Forfeitures shall be used to reduce the contribution due from the
Employer for the current Plan Year or the Plan Year following the
Plan Year in which the forfeiture occurs.
For purposes of this Section 5.03(b) if a Participant does not
have any nonforfeitable interest in his Accounts, he will be
deemed to have received a distribution of the entire vested
portion of his Accounts in accordance with the provisions of
subparagraph (2) above without having submitted any application
for benefits to the Plan Administrator. If such Participant
returns to active service with the Employer prior to the
expiration of five consecutive Plan Years following the Plan
Year in which his termination of employment occurred, said
Participant will be deemed to have paid back the distribution and
his Accounts will be restored as provided in subparagraph (3)
above.
(c) In the event that there is a Change in Control of the
Employer, the nonforfeitable interest of each Participant in his
Accounts pursuant to Section S.03(a) shall be 100 percent as of
the effective date of the Change in Control. For the purposes of
the Plan, any one or more of the following events shall
constitute a Change in Control: (i) the merger or consolidation
of Employer with or into any other corporation and Employer is
not the surviving corporation; (ii) in excess of 24.99 percent of
the outstanding common stock of Employer is owned, held or
controlled by an entity, person or group acting in concert with
the power to control the company as that term is defined in Rule
405 of the Securities Act of 1988; (iii) the sale or exchange of
in excess of 24.99 percent of the assets of Employer to any
entity, person or group acting in concert; (iv) the
recapitalization, reclassification of securities or
reorganization of Employer which has the effect of either subpart
(ii) or (iii) above; (v) the issuance by Employer of securities
in an amount in excess of 24.99 percent of the outstanding common
stock of Employer to any entity, person or group acting in
concert and intending to exercise control of Employer; or (vi)
the removal, termination or retirement of more than 50 percent of
the members of the Board of Directors during any consecutive
12-month period.
5.04 Certification by Plan Administrator
The Plan Administrator shall certify to the Trustee all pertinent
facts and information required to determine its proper action in
connection with retirement, disability, death and termination of
employment of Participants, and the Trustee may rely fully upon
information so certified and shall be fully protected in so
doing; but in the absence of appropriate certificates as to any
such facts or pertinent related facts, the Trustee may rely and
act upon other information which it reasonably believes to be
true.
ARTICLE VI
DISTRIBUTIONS
6.01 Method and Medium of Payment
The distribution of a Participant's nonforfeitable interest in
his Account shall be subject to the consent, in writing, of the
Participant and the Participant's spouse, if any. However, if the
value of the Participant's vested Account is not greater than
$3,500, the Plan Administrator shall require a distribution of
the value of the entire vested portion of the Participant's
Account. If a lump sum distribution is to be made after the
Annuity Starting Date, such distribution must be consented to in
writing by the Participant and the Participant's spouse, if any,
or where the Participant is dead, the surviving spouse,
regardless of the amount of the distribution.
(a) Definitions: The following definitions shall apply for
purposes of this Section 6.01:
(l) "Annuity Starting Date." Annuity Starting Date means the
first day of the first period for which an amount is payable as
an annuity, regardless of when or whether payment is actually
made. In the case of benefits not payable as an annuity, the
Annuity Starting Date is the date on which all events have
occurred which entitle the Participant to a benefit.
(2) "Election Period." Election Period means the period which
begins on the first day of the Plan Year in which the Participant
attains age 35 and ends on the date of the Participant's death.
If a Participant separates from service prior to the first day of
the Plan Year in which age 35 is attained, with respect to
benefits accrued prior to separation, the Election Period shall
begin on the date of separation.
(3) "Qualified Joint and Survivor Annuity." Qualified Joint and
Survivor Annuity means an annuity for the life of the Participant
with a survivor annuity for the life of the spouse which is not
less than 50 percent and not more than 100 percent of the amount
of the annuity which is payable during the joint lives of the
Participant and the spouse which is the actuarial equivalent of
the normal form of benefit, or if greater, any optional form of
benefit. A Qualified Joint and Survivor Annuity for a Participant
who is not married shall be an annuity for the life of such
Participant.
(b) Joint and Survivor Benefits
All Participants shall have their benefits distributed in the
form of an automatic joint and survivor annuity. This provision
shall apply to any Participant who:
(1) begins to receive payments under the Plan on or after Early
or Normal Retirement Age; or
(2) dies on or after Normal Retirement Age while still working
for the Employer; or
(3) separates from service on or after becoming vested in his
Account and thereafter dies before beginning to receive such
benefits.
The above provision is subject to a Qualified Election executed
during the Election Period.
Qualified Joint and Survivor Annuity: Unless an optional form of
benefit is selected within the Election Period pursuant to a
Qualified Election within the 90- day period ending on the date
benefit payments would commence, a Participant's vested Account
will be paid in the form of a Qualified Joint and Survivor
Annuity.
Qualified Pre-Retirement Survivor Annuity: Absent a Qualified
Election to the contrary, if a vested Participant dies, the
Participant's vested Account balance shall be applied toward the
purchase of an annuity for the life of the Participant's
surviving spouse, if any. The spouse of the deceased Participant
may elect to receive the full value of such Participant's Account
in a lump sum in lieu of the Qualified Pre-Retirement Survivor
Annuity.
The surviving spouse shall begin to receive payments immediately,
unless such surviving spouse elects a later date.
Failure to waive any joint and survivor annuity form of payment
will not result in a decrease in any Plan benefit with respect to
such Participant.
The Plan Administrator shall provide each Participant within the
applicable period, a written explanation of the Qualified
Pre-Retirement Survivor Annuity which shall contain the
following: 1) the terms and conditions of a Qualified
Pre-Retirement Survivor Annuity; 2) the Participant's right to
make and the effect of an election to waive this form of benefit;
3) the rights of the Participant's spouse; and 4) the right to
make, and the effect of, a revocation of a previous election to
waive the Qualified Pre-Retirement Survivor Annuity. In the case
of a Participant who enters the Plan after the first day of the
Plan Year in which the Participant attained age 32, the Plan
Administrator shall provide the required notice no later than the
close of the second Plan Year succeeding the entry of the
Participant in the Plan. For purposes of this notice, "applicable
period" means, with respect to a particular Participant, the
latest of the following:
(1) The period which begins with the first day of the Plan Year
in which the Participant attains age 32 and ending with the close
of the Plan Year preceding the Plan Year in which the Plan Year
in which the Participant attains age 35;
(2) a reasonable period after the Employee becomes a Participant;
(3) a reasonable period after this Section 6.01(b) no longer
applies to the Participant; or
(4) a reasonable period after the Participant's separation from
service in the case of a Participant who separates from service
before attaining age 35.
(c) Optional Forms of Benefit
Except as provided in paragraph ~b) above, the distribution of a
Participant's nonforfeitable interest in his Account shall be
made by the Trustee to such Participant or his beneficiaries upon
his retirement, disability, death or termination of employment,
as the case may be, in cash or in kind, or part in cash and part
in kind, in one or a combination of two or more of the following
methods as such Participant or beneficiary, subject to a
Qualified Election, may request:
(1) ln one sum, or
(2) in periodic distributions.
If any portion of a Participant's Account is to be distributed
pursuant to this Section 6.01 over a period of years, such
portion shall be distributed in substantially equal installments
over such number of years as shall not exceed:
(1) a period certain not extending beyond the life expectancy of
the Participant, or
(2) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated beneficiary.
6.02 Special ESOP Distribution Requirements
This Section 6.02 shall apply to distributions of a Participant's
Profit Sharing Contributions Account, and shall not act to
eliminate any form or time of distribution otherwise available
under the Plan.
(a) Time of Distribution. Notwithstanding any other provision of
this Plan, other than such provisions as require the consent of
the Participant and the Participant's spouse to a distribution
with a present value in excess of $3,500, a Participant may elect
to have the portion of his Profit Sharing contributions Account
attributable to Qualifying Securities acquired by the Plan after
December 31, 1986 distributed as follows:
(1) If the Participant separates from service by reason of the
attainment of Normal Retirement Age, death or disability, the
distribution of such portion of the Participant's Profit Sharing
Contributions Account will begin not later than one year after
the close of the Plan Year in which such event occurs unless the
Participant otherwise elects pursuant to Section 6.01 hereof.
(2) If the Participant separates from service for any reason
other than those enumerated in paragraph (1) above, and is not
re-employed by the Employer at the end of the fifth Plan Year
following the Plan Year of such separation from service,
distribution of such portion of the Participant's Profit sharing
Contributions Account will begin not later than one year after
the close of the fifth Plan Year following the Plan Year in which
the Participant separated from service unless the Participant
otherwise elects pursuant to Section 6.01 hereof.
(3) If the Participant separates from service for a reason other
than those described in paragraph (1) above, and is employed by
the Employer as of the last day of the fifth Plan Year following
the Plan Year of such separation from service, distribution to
the Participant, prior to any subsequent separation from service,
shall be in accordance with Section 6.01 hereof.
For purposes of this Section 6.02, Qualifying Employer Securities
shall not include any Employer securities acquired with the
proceeds of a loan described in Article XII hereof until the
close of the Plan Year in which such loan is repaid in full.
(b) Form of Distribution. Distribution may be made either in
whole shares of Employer stock or in cash as the Plan
Administrator shall decide, provided that any distribution in
cash shall only be made after a Participant has been offered the
right to receive such distribution in shares of Employer stock.
In the event the distribution is to be made in Employer stock,
any balance in a Participant's Account will be applied to
acquire for distribution the maximum number of whole shares of
Employer stock at the applicable value. Any fractional share
value unexpended balance will be distributed in cash. If the
Employer stock is not available for purchase by the Trustee, then
the Trustee shall hold such balance until Employer stock is
acquired and then make such distribution. The Trustee will make
distribution from the Trust only on instructions from the Plan
Administrator.
(c) Period for Payment. Distributions required under this Section
6.02 shall be made in substantially equal annual payments over a
period of five years unless the Participant otherwise elects
under the provisions of Section 6.01 hereof. In no event shall
such distribution period exceed the period permitted in Section
401(a)(9) of the Code.
(d) Determination of Amount Subject to Special Distribution and
Payment Requirements. The portion of a Participant's Profit
Sharing contributions Account attributable to Qualifying Employer
Securities which were acquired by the Plan after December 31,
1986, shall be determined by multiplying the number of shares of
such securities held in the Account by a fraction, the numerator
of which is the number of shares acquired by the Plan after
December 31, 1986 and allocated to Participant's Profit Sharing
Contributions Account (not to exceed the number of shares held by
the Plan on the date of distribution) and the denominator of
which is the total number of shares held by the Plan at the date
of the distribution.
6.03 Mandatory Commencement of Benefits
Distribution hereunder shall commence not later than the 60th day
after the end of the Plan Year in which the later of the
following events occurs:
(a) The Participant attains the earlier of: (1) age 65 or (2)
Normal Retirement Age;
(b) The tenth anniversary of the year in which the Participant
commences participation in the Plan; or
(c) The Participant terminates his employment with the Employer.
A Participant may elect to defer the commencement of distribution
hereunder to a date later than set forth above, provided,
however, that any such election must be made by submitting to the
Plan Administrator a written statement, signed by the
Participant, which written statement describes the method and
medium of distribution and the date on which such distribution
shall commence. If the Participant's entire interest is to be
distributed in other than a lump sum, then the amount to
be distributed each year must be at least an amount equal to the
quotient obtained by dividing the Participant's entire interest
by the life expectancy of the Participant or joint and last
survivor expectancy of the Participant and designated
beneficiary. Life expectancy and joint and last survivor life
expectancy are computed by the use of the return multiples
contained in Section 1.729 of the Income Tax Regulations. For
purposes of this computation, a Participant's life expectancy may
be recalculated no more frequently than annually, however, the
life expectancy of a non-spouse beneficiary may not be
recalculated. If the Participant's spouse is not the designated
beneficiary, the method of distribution selected must assure that
more than 50 percent of the present value of the amount available for
distribution is paid within the life expectancy of the
Participant. All distributions must meet the minimum distribution
incidental benefit requirements in Section 1.401(a)(9)-2 of the
proposed regulations.
Anything above to the contrary notwithstanding, distributions of
a Participant's benefits must commence by April 1 of the calendar
year following the calendar year in which the Participant attains
age 70-1/2 in accordance with the minimum distribution
requirements of Section 401 (a)(9) of the Code. For purposes of
this minimum distribution, the Participant may elect prior to the
date of the first required distribution to have his life
expectancy and his spouse's life expectancy recalculated
annually. Such election shall be irrevocable once made, and shall
apply for all subsequent Plan Years. The Participant and his
spouse shall have the right to separately elect as to whether
each wants his life expectancy recalculated, and the election of
one shall not affect the election of the other. In the event that
either the Participant or his spouse fails to make an election,
his life expectancy shall be recalculated annually.
The mandatory commencement of distribution to a Participant or
beneficiary pursuant to this Section, shall not apply provided
(i)that prior to January 1, 1984, or such other date permitted by
law, a Participant (including Key Employees) who had an Account
balance under this Plan as of December 31, 1983 made a written
designation providing for the commencement of distributions at a
later date, and (ii)further providing for a method of
distribution of the benefit which satisfy the provisions of Code
Section 401(a)(9) as in effect prior to the enactment of the Tax
Equity and Fiscal Responsibility Act of 1982 (including rules
relating to incidental death benefits). Any written designation,
if made, shall be binding upon the Plan Administrator. In
addition, the mandatory commencement of distribution shall not
apply to any Participant who attained age 70-1/2 prior to January
1, 1988 and who was not a five percent owner at any time after he
attained age 66-1/2.
6.04 Distributions After Death of a Participant
If a Participant dies before any of his interest in the Plan has
been distributed, the Participant's interest shall be distributed
in one of the following methods:
(a) The entire interest of the Participant shall be distributed
no later than December 31 of the calendar year which contains the
fifth anniversary of the date of the Participant's death,
regardless of who is to receive the distribution.
(b) If the distribution is to be made to a designated
beneficiary, the distribution of a Participant's interest shall
commence not later than December 31 of the calendar year
immediately following the calendar year in which the Participant
died, and payments shall occur over a period not extending beyond
the life expectancy of such designated beneficiary. If
distribution is to be made to the Participant's surviving spouse,
distribution must commence on or before the later of:
(1) December 31 of the calendar year immediately following the
calendar year in which the Participant died, or (2) December 31
of the calendar year in which the Participant would have attained
age 701/2. Such distribution shall occur over a period not
extending beyond the life expectancy of such designated
beneficiary.
A Participant or his spouse or designated beneficiary, subject to
a Qualified Election, may elect the method of distribution
described in subparagraph (b) above. Such election must be made
no later than the earlier of: (1) the date which distribution
would have to occur according to the provisions of subparagraph
(a) above, or 2) the date which distribution would have to occur
according to the provisions of subparagraph (b) above. As of such
date, the election is irrevocable and shall apply for all
subsequent years and any subsequent beneficiaries. If no such
election is made, distribution shall be made in accordance with
subparagraph (a) above.
If the surviving spouse dies before the distributions to such
spouse begin, the payment of the Participant's interest shall be
made as of the surviving spouse were the Participant.
If distribution of the Participant's interest has begun at the
time of such Participant's death, distribution may be made for a
term certain at least as rapidly as under the method of
distribution used prior to the death of the Participant.
6.05 Right to Have Accounts Transferred
By notice to the Plan Administrator, a Participant entitled to a
distribution shall have the right to have the nonforfeitable
portion of his Accounts transferred to another
plan and trust which is qualified under Section 401(a) of the
Code and is a tax-exempt trust under the provisions of Section
501(a) of the Code or to an Individual Retirement Account as
provided under Section 408 of the Code. Notwithstanding the
preceding sentence, no such transfer may occur to another
qualified plan and trust maintained by the Company.
6.06 Distribution of Excess Deferrals
Notwithstanding any other provision of this Plan, Excess
Deferrals and income attributable thereto shall be distributed no
later than the April l5th following the calendar year in which
the Participant claims Excess Deferrals. The Participant's claim
must be in writing; must be submitted to the Plan Administrator
no later than March 1 of the calendar year following the calendar
year of the Excess Deferrals; must specify the amount of the
Participant's Excess Deferrals for the preceding calendar year;
and must be accompanied by a written statement of the Participant
that if such amounts are not distributed, the Excess Deferrals,
when added to amounts deferred under other plans or arrangements
described in Sections 401(k), 408(k) or 403(b) of the Code,
exceed the limit imposed on the Participant by Section 402(g)
of the Code for the calendar year in which the contributions were
made.
The Excess Deferrals distributed to a Participant with respect to
a calendar year shall be adjusted for income and, if there is a
loss allocable to the Excess Deferrals, shall in no event be less
than the lesser of the Participant's Compensation Deferral
Contributions Account under the Plan or the Participant's
Compensation Deferral Contributions for the calendar year.
For purposes of this Section 6.06, "Excess Deferrals" means the
amount of a Participant's Compensation Deferral Contributions to
this Plan which the Participant claims, pursuant to the procedure
outlined above, to be in excess of the amount allowable under
Section 402(g) of the Code.
6.07 Restrictions on Distributions of Compensation Deferral
Contributions
Compensation Deferral Contributions may not be distributed from
this Plan prior to the earlier of:
(a) retirement, separation from service, death or disability of
the Participant;
(b) attainment of age 59-1/2 by the Participant, if procedures
have been established by the Plan Administrator;
(c) termination of the Plan without establishment of a successor
plan;
(d) sale of substantially all of the assets of the Employer to an
entity that is not an affiliated employer; or
(e) upon the sale of a subsidiary of the Employer to an entity
that is not an affiliated employer, only Participants who are
employed by such subsidiary may receive a distribution of their
Compensation Deferral Contributions Account.
In addition, if procedures have been established by the Plan
Administrator, Compensation Deferral Contributions (excluding any
earnings thereon) may be distributed upon hardship of the
Participant determined in accordance with Section 401(k) of the
Code.
6.08 Loans to Participant
The Trustee has the power to make loans to Participants on a
uniform, nondiscriminatory basis in accordance with procedures
established by the Plan Administrator, from the assets of the
Trust upon the terms and conditions hereinafter set forth, and
upon the request of a Participant for a loan from the Trust.
(a) The total amount which any Participant can borrow under this
provision cannot exceed the lesser of 50 percent of the
Participant's vested Accounts or $50,000, reduced by the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before which such
loan is to be made.
(b) Each loan shall bear an interest at an annual rate
which, at the time of the loan, is comparable to the rate then
being charged by commercial banking institutions in
Bowling Green, Ohio for loans of a similar nature; or, if
applicable, the rate which at the time of the loan is in effect
at the Trustee's Commercial Loan Department.
(c) Each Participant who receives a loan hereunder shall also
receive a clear statement of the charges involved in each loan
transaction. The statement shall include the dollar amount and
the annual interest rate of the finance charge.
(d) Loans shall be repaid by the Participant in such manner as
the Trustee and the Participant shall determine, provided that
said loan shall be repaid in full within the earlier of five
years or the date of the Participant's retirement; provided,
however, that if the loan is to be used to acquire a dwelling
which is to be used within a reasonable time as the principal
residence of the Participant, the length of the loan shall be
comparable to the length of loans being granted by commercial
banking institutions in Bowling Green, Ohio for loans for a
similar purpose. The loan shall be amortized in level payments
over the term of the loan, with payments occurring not less
frequently than quarterly.
(e) All loans shall be evidenced by Promissory Notes and such
other documents which the Trustee may reasonably require under
the circumstances.
(f) The Trustee shall be entitled to exercise all legal and
equitable rights available to it in order to enforce the
collection of such unpaid loan balance.
(g) If any loan to a Participant is unpaid on the date that he,
or his beneficiary or estate, becomes entitled to receive
benefits from the Trust, such unpaid portion shall, as of that
date, become due and the amount thereof, together with any unpaid
interest thereon, shall be deducted from any benefits which he,
his beneficiary or his estate otherwise would have been entitled
to receive.
If procedures have been established by the Plan Administrator,
collateral to secure repayment of a loan may include real or
personal property. If real property is given as collateral, it
shall be pledged by a mortgage which shall be properly recorded.
If a loan is not repaid when due, the Plan Administrator shall
take all actions as are appropriate to collect the debt and such
actions shall include in each case in which real property has
been pledged, first foreclosing on the mortgage or taking the
property given as security and only secondarily shall the Plan
Administrator seek recovery from the Participant's Accounts.
The provisions of this Section 6.08 shall apply the same for
loans renewed, renegotiated, modified or extended as for new
loans.
6.09 Cash Dividend Option
Effective with the dividend paid on Employer stock as of
September 30, 1990, a Participant shall have the option to elect
to receive dividends in cash on Employer stock. This election
shall apply to all Participants who have a 100 percent
nonforfeitable interest in each of their Accounts pursuant to
Section 5.03.
Participants may elect to receive quarterly dividends in cash as
of the end of June and the end of December. Each June election
shall apply to the next following September 30 and December 31
quarterly dividends. Each December election shall apply to the
next following March 31 and June 30 quarterly dividends.
Participant elections shall be made in writing in accordance with
procedures and forms provided by the Plan administrator.
Employer dividends not elected in cash shall be reinvested in
additional shares of Employer stock.
6.10 Hardship Distributions
Distribution of Compensation Deferral Contributions may be made
to a Participant in the event of hardship. For purposes of this
Section, hardship is defined as an immediate and heavy financial
need of the employee where such employee lacks other available
resources. Hardship distributions are subject to the spousal
consent requirements contained in Sections 401(a)(11) and 417 of
the Code.
The following are the only financial needs considered immediate
and heavy:
Expenses incurred or necessary for medical care, described in
Section 213(d) of the Code, of the Participant, the Participant's
spouse or dependents; the purchase (excluding mortgage payments)
of a principal residence for the Participant; payment of tuition
and related educational fees for the next twelve (12) months of
post-secondary education for the Participant, the Participant's
spouse, children or dependents; or the need to prevent eviction
of the Participant from, or a foreclosure on, the mortgage of,
the Participant's principal residence.
A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Participant only if:
(a) compensation deferral contributions for the Participant's
taxable year immediately following the taxable year of the
hardship distribution shall be limited to the applicable limit
under Section 402(g) of the Code for such taxable year less the
amount of compensation deferral contributions for the taxable
year of the hardship distribution;
(b) the Participant has obtained all available distributions,
other than-hardship distributions, and all non-taxable loans
under this Plan and all other plans maintained by the Employer;
(c) the Participant shall not be permitted to make compensation
deferral contributions under this Plan and any other Plan of the
Employer for a period of 12 months after the receipt of the
hardship distribution; or
(d) the distribution is not in excess of the amount of an
immediate and heavy financial need.
ARTICLE VII
LIMITATION ON CONTRIBUTIONS AND BENEFITS
7.01 Limitation of Benefits
(a) Definitions: The following definitions shall apply for
purposes of this Section 7.01:
(1) "Annual Addition." Annual Addition means for each Plan Year
the sum of the following amounts credited to a Participant's
Accounts for the Limitation Year under all Defined Contribution
Plans maintained by the Employer:
(A) Employer contributions,
(B) Employee contributions,
(C) Forfeitures, and
(D) Any amounts allocated to an individual medical account (as
defined in Section 415(1)(2) of the Code) which is part of any
pension or annuity plan maintained by the Employer are treated as
Annual Additions to a Defined Contribution Plan. Amounts derived
from contributions paid or accrued after December 31, 1985 in
taxable years ending after such date which are attributable to
post retirement medical benefits allocated to the separate
account of a key employee (as defined in Section 419(d)(3) of the
Code) under a welfare benefit fund (as defined in Section 419(e)
of the Code) maintained by the Employer are treated as Annual
Additions to a Defined Contribution Plan. These amounts are
treated as Annual Additions but are not subject to the 25 percent
of Compensation limit.
The Annual Addition for any Limitation Year beginning prior to
January 1, 1987 shall not be recomputed to treat all Employee
contributions as an Annual Addition.
In the event that the Trust has obtained an Exempt Loan pursuant
to Article XII, the Annual Addition limitations shall be
determined with regard to the contributions used by the Trust to
pay the loan and not the allocation to the Profit Sharing
Contributions Account of each Participant based upon assets
withdrawn from the suspense account established in accordance
with the requirements for such Exempt Loan.
Rollover Contributions made by a Participant pursuant to
Section 3.02 hereof, shall not be taken into account in computing
Annual Additions.
(2) "Compensation." Compensation means a Participant's earned
income, wages, salaries, fees for professional and other amounts
received for personal services actually rendered in the course of
employment with the Employer maintaining the Plan (including, but
not limited to, commissions paid to salesmen, compensation for
services on the basis of a percentage of profits, commissions on
insurance premiums, tips and bonuses), but excluding the
following:
(A) Employer contributions to a loan of deferred
compensation which are not included in the Employee's gross
income for the taxable year in which contributed, Employee
contributions under a simplified employee pension plan to the
extent such contributions are deductible by the Employee or any
distributions from a plan of deferred compensation;
(B) amounts realized from the exercise of a nonqualified
stock option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(C) amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
(D) other amounts which received special tax benefits or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
described in Section 403(b) of the Code (whether or not the
amounts are actually excludible from the gross income of the
Employee).
(3) "Defined Contribution Plan." Defined Contribution Plan
means a pension plan or profit sharing plan which provides for an
individual account for each Participant and for benefits based
solely upon the amount contributed to the Participant's account
and any income, expenses, gains, losses and any forfeitures
of accounts of other Participants which may be allocated to such
Participant's account.
(4) "Limitation Year." Limitation Year means the Plan Year.
(b) Limitation on Annual Additions. Any other provision of this
Plan to the contrary notwithstanding, the maximum Annual Addition
to the Accounts of any Participant under the Plan and any other
Defined Contribution Plan maintained by the Employer or the
Company may not exceed the lesser of:
(1) $30,000 or, if greater, 1/4 of the defined benefit dollar
limitation set forth in Section 415(b)(1)(A) of the Code as
adjusted for the cost of living increases pursuant to Section
415(d) and in effect for the Limitation Year, or
(2) 25 percent of the Participant's Compensation for the
Limitation Year.
If, as the result of a reasonable error in estimating a
Participant's Annual Compensation, the allocation of forfeitures,
or under other limited facts and circumstances as may be provided
under the Regulations to Section 415 of the Code, the Annual
Addition exceeds the maximum under this and any other Defined
Contribution Plan maintained by the Employer, an amount
attributable to the Employer's contribution for the current Plan
Year necessary to reduce the Annual Addition to the maximum
Annual Addition shall be held in a separate account, and shall be
utilized to reduce the contribution of the Employer for the next
succeeding Plan Year and shall be accounted for accordingly by
the Trustee. Any such sums shall not share in the gains or losses
of the Trust Fund.
(c) Limitation of Benefits Under All Plans. Where an Employee is
a Participant under the Plan and a defined benefit plan
maintained by the Employer, the sum of the defined contribution
fraction and the defined benefit fraction for any Limitation Year
may not exceed 1.0 as computed under the terms and conditions as
set forth under Section 415(e) of the Code.
For purposes of computing the defined contribution fraction for
any Limitation Year, the numerator shall be the sum of the Annual
Addition to the Participant's Accounts during such Limitation
Year and for all prior Limitation Years, and the denominator
shall be the lesser of:
(1) the product of 1.25 multiplied by the maximum permissible
dollar amount under Section 415(c)(1)(A) of the Code for such
year and for all prior years or,
(2) the product of 1.4 multiplied by the maximum permissible
percentage of compensation contributed under Section 415(c)(1)(B)
of the Code for such year and for all prior years.
For purposes of computing the defined benefit plan fraction for
any Limitation Year, the numerator shall be the Participant's
projected annual benefit under the defined benefit plan as of the
end of the Limitation Year and the denominator shall be the
lesser of:
(1) the product of 1.25 multiplied by the maximum permissible
dollar amount of benefit in effect under Section 415(b)(1)(A) of
the Code for such year, or;
(2) the product of 1.4 multiplied by the maximum permissible
percentage of compensation limitation of the amount of benefit in
effect under Section 415(b)(1)(B) of the Code for such year.
If the Defined Contribution Plans and the defined benefit plans
in which an Employee is a Participant satisfy the requirements of
Section 415 of the Code in effect for all Limitation Years
beginning prior to January 1, 1987, where necessary, an amount
shall be subtracted from the numerator of the defined
contribution fraction (not to exceed such numerator) as
prescribed by the Secretary of the Treasury so that the sum of
the defined benefit plan fraction and the defined contribution
fraction computed under Section 415(e)(1) of the Code does not
exceed 1.0 for such Limitation Year.
ARTICLE VIII
NONDISCRIMINATION REQUIREMENTS
8.01 Definitions
The following definitions shall apply for purposes of this
Article VIII:
(1) "Actual Contribution Percentage. " Actual Contribution
Percentage means the average (expressed as a percentage) of the
Actual Contribution Ratios of the Participants in a group.
(2) "Actual Contribution Ratio." Actual Contribution Ratio means
the ratio (expressed as a percentage) of the Participant's
Employee Contributions and Matching Contributions to the Plan for
the Plan Year (and any other plan which is aggregated with ~ .
Plan for purposes of meeting the nondiscrimination requirements
of Section 401(m) of the Code) to the Participant's Compensation
for the Plan Year. The Actual Contribution Ratio of a Participant
who is eligible, but neither makes Employee Contributions nor
receives Matching Contributions is zero.
(3) "Actual Deferral Percentage." Actual Deferral Percentage
means the average (expressed as a percentage) of the Actual
Deferral Ratios of the Participants in a group.
(4) " Actual Deferral Ratio. " Actual Deferral Ratio means the
ratio (expressed as a percentage) of the Participant's Elective
Contributions for the Plan Year (under the Plan and any other
plan which is aggregated with the Plan for purposes of meeting
the nondiscrimination requirements of Section 401(k) of the Code)
to the Participant's Compensation for the Plan Year. At the
option of the Plan Administrator, Qualified Matching
Contributions and/or Qualified Nonelective Contributions may be
included for purposes of determining each Participant's Actual
Deferral Ratio. The Actual Deferral Ratio of a Participant who is
eligible but has no Elective Contributions, Qualified Matching
Contributions or Qualified Nonelective Contributions is zero.
(5) "Compensation." Compensation means compensation received from
the Employer during the Plan Year which is includible in gross
income for income tax purposes.
The Plan Administrator may elect to include in Compensation any
elective contributions made by such Participant that are not
includible in gross income under Section 125, 402(a)(8), 402(h)
or 403(b) of the Code. Such election shall be made on a uniform
and consistent basis with respect to all Participants and all
plans of the Employer for any particular Plan Year. In absence of
a specified election to the contrary, Compensation shall include
said elective contributions.
(6) "Elective Contributions." Elective Contributions means
Compensation Deferral Contributions and any other Employer
contributions made to the Plan, and any other plan which is
aggregated with the Plan for purposes of meeting the
nondiscrimination requirements of Section 401(k) of the Code,
that were subject to a cash or deferred arrangement.
(7) "Employee Contributions." Employee Contributions means any
contributions to the Plan (and any other plan which is aggregated
with the Plan for purposes of meeting the nondiscrimination
requirements of Section 401(m) of the Code) that are designated
or treated as after-tax Employee contributions and are allocated
to a separate account to which attributable earnings and losses
are allocated.
(8) "Excess Contributions." Excess Contributions means the excess
of: (1) the Elective Contributions, Qualified Matching
Contributions and/or Qualified Nonelective Contributions of a
Highly Compensated Employee or Family Group for such Plan Year,
over 2) the maximum amount of such contributions permitted under
the limits determined in accordance with Section 8.02 hereof.
(9) "Excess Aggregate Contributions." Excess Aggregate
Contributions means the excess of: (1) the Employee Contributions
and Matching Contributions actually made by or on behalf of a
Highly Compensated Employee or Family Group for such Plan Year,
over (2) the maximum amount of such contributions permitted under
the limits determined in accordance with Section 8.03 hereof.
(10) "Family Group." Family Group means a Highly Compensated
Employee and a Family Member (or Family Members) who are required
to be aggregated for purposes of the nondiscrimination test. If a
Participant is required to be aggregated with more than one
Highly Compensated Employee or Family Member, all Participants
who are members of such Family Groups shall be aggregated as one
Family Group.
(11) "Family Member." Family Member means a spouse and any lineal
ascendant or descendant of a Highly Compensated Employee who is a
5 percent owner or a Highly Compensated Employee who is one of
the top ten paid Highly Compensated Employees, including the
spouse of such lineal ascendant or descendent, as defined in
Section 414(1)(6)(B) of the Code.
(12) "Highly Compensated Employee." The term Highly Compensated
Employee includes highly compensated active Employees and highly
compensated former Employees.
An active Highly Compensated Employee includes any Employee who
performs service for the Employer during the determination year
and who during the look back year: (i) received Compensation from
the Employer in excess of $75,000 (as adjusted pursuant to
Section 415(d) of the Code); (ii) received Compensation from the
Employer in excess of $50,000 (as adjusted pursuant to Section
415(d) of the Code) and was a member of the top-paid group for
such year; or (iii) was an officer of the Employer and received
Compensation during such year is greater than 50 percent of the
dollar limitation in effect under Section 415(b)(1)(A) of the
Code. The term Highly Compensated Employee also includes: (i)
Employees who are both described in the preceding sentence if the
term "determination year" is substituted for the term "look back
year" and the Employee is one of the 100 Employees who received
the most Compensation from the Employer during the determination
year; and (ii) Employees who are 5 percent owners at any time
during the look back year or determination year.
If no officer has satisfied the Compensation requirement of (iii)
above during either a determination year or look back year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.
For the purpose of determining who is highly compensated,
Compensation shall only include compensation received during the
determination year or look back year and shall have the meaning
provided such term by Plan Section 7.01(a)(2), but without regard
to reductions from Code Sections 125, 402(a)(8) and 402)h)(1)(B).
For this purpose, the determination year shall be the Plan Year.
The look back year shall be the 12-month period immediately
preceding the determination year.
A former Highly Compensated Employee includes any Employee who
separated from service (or was deemed to have separated) prior to
the determination year, performs no service for the Employer
during the determination year, and was an active Highly
Compensated Employee for either the separation year or any
determination year ending on or after the Employee's 55th
birthday.
If an Employee is, during a determination year or look back year,
a Family Member of either a 5 percent owner who is an active or
former Employee or a Highly Compensated Employee who is one of
the ten most Highly Compensated Employees ranked on the basis of
Compensation paid by the Employer during such year, then the
Family Member and the 5 percent owner or top ten Highly
Compensated Employee shall be treated as a single Employee
receiving Compensation and plan contributions or benefits equal
to the sum of such Compensation and contributions or benefits of
the Family Member and 5 percent owner or top ten Highly
Compensated Employee. For purposes of this Section, Family Member
includes the spouse, lineal ascendant and descendants of the
Employee or former Employee and the spouses of such lineal
ascendant and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identify of
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the Compensation that
is considered, will be made in accordance with Section 414(q) of
the Code and the regulations thereunder.
Before determining who are Highly Compensated Employees, Code
Sections 414(b), (c), (m), (n) and (o) shall first be applied.
The Employer may elect to make the look back year calculation for
a determination year on the basis of the calendar year ending
with or within the applicable determination year (or, in the case
of a determination year that is shorter than 12 months, the
calendar year ending with or within the 12-month period ending
with the end of the applicable determination year). In such case,
the Employer must make the determination year calculation for the
determination year on the basis of the period, if any, by which
the applicable determination year extends beyond such calendar
year (i.e., the lag period). If the applicable year for which the
determination is being made is the calendar year, the Employer
still may elect to make the calendar year calculation election.
In such case, the look back year calculation is made on the basis
of the calendar year determination year and, because there is no
lag period, a separate determination year calculation is not
required.
In making the determination year calculation on the basis of the
lag period, if any, the dollar amounts applicable under this Plan
Section 8.01(12)(i) & (ii) are to be adjusted by multiplying such
dollar amounts by a fraction, the numerator of which is the
number of calendar months that are included in the lag period and
the denominator of which is 12.
If the Employer elects to make the calendar year calculation
election with respect to one plan, entity, or arrangement, such
election must apply with respect to all plans, entities, and
arrangements of the Employer.
(13) "Matching Contributions." Matching Contributions means:
(a) an Employer contribution made to the Plan (or any plan
required to be aggregated with the Plan for purposes of the
nondiscrimination requirements of Section 401(m) of the Code) on
account of Employee Contributions to the Plan;
(b) an Employer contribution made to the Plan (or any plan
required to be aggregated with the Plan for purposes of the
nondiscrimination requirements of Section 401(m) of the Code) on
account of an Elective Contribution to the Plan; or
(c) a forfeiture allocable on the basis of Excess Aggregate
Contributions.
A contribution made by the Employer in order to meet the Top
Heavy minimum contribution requirements of Section 9.04 hereof
may not be treated as a Matching Contribution.
(14) "Non-Highly Compensated Employee." Non-Highly Compensated
Employee means any Employee who is neither a Highly Compensated
Employee nor a Family Member.
(15) "Qualified Matching Contribution." Qualified Matching
Contributions means Matching Contributions that are fully vested
at the time of contribution and are subject to the withdrawal
restrictions of Section 6.06 hereof.
(16) "Qualified Nonelective Contributions." Qualified Nonelective
Contributions means Employer contributions, other than Elective
Contributions and Matching Contributions, that are fully vested
at the time of contribution and are not subject to the withdrawal
restrictions of Section 6.06 hereof.
8.02 Nondiscrimination Requirements for Compensation Deferral
Contributions
(a) Actual Deferral Percentage Test. In no event shall the Actual
Deferral Percentage of Participants who are Highly Compensated
Employees exceed the Actual Deferral Percentage of the
Participants who are Non-Highly Compensated Employees by more
than the greater of:
(1) 125 percent of the Actual Deferral Percentage for
Participants who are Non-Highly Compensated Employees, or
(2) The lesser of 200 percent of the Actual Deferral Percentage
for Participants who are Non-Highly Compensated Employees or two
percentage points higher than the Actual Deferral Percentage for
Participants who are Non-Highly Compensated Employees.
In the event that a Highly Compensated Employee participates in a
plan (or a group of plans maintained by the Company) that is
subject to both the nondiscrimination requirements of Section
401(k) of the Code and the nondiscrimination requirements of
Section 401(m) of the Code, the sum of the Actual Deferral
Percentage and the Actual Contribution Percentage for the group
of Highly Compensated Employees may not exceed the sum of:
(1) 125 percent of:
(A) the Actual Deferral Percentage of the Group of Non-Highly
Compensated Employees; or
(B) the Actual Contribution Percentage of Non-Highly Compensated
Employees; plus
(2) the lesser of:
(A) 2 percent plus the lesser of (l)(a) or (l)(b) above; or
(B) 200 percent of the lesser of (l)(a) or (l)(b) above.
Alternatively, the sum of the Actual Deferral Percentage and the
Actual Contribution Percentage for the group of the Highly
Compensated Employees may not exceed the sum of:
(1) 125 percent of the lesser of:
(A) the Actual Deferral Percentage of the group of Non-Highly
Compensated Employees; or
(B) the Actual Contribution Percentage of Non-Highly Compensated
Employees; plus
(2) the lesser of:
(A) 2 percent plus the greater of (l)(a) or (l)(b) above; or
(B) 200 percent of the greater of (l)(a) or (l)(b) above.
Any alternative calculation provided by such final regulation
shall be incorporated in this Plan by reference and shall apply
when and as provided in those regulations.
To the extent that it is necessary, the Actual Deferral
Percentage or the Actual Contribution Percentage of the Highly
Compensated Employee group shall be reduced to comply with this
limitation.
(b) Excess Contributions. To the extent that it is necessary in
order to comply with the nondiscrimination requirements of
Section 401(k) of the Code, the Actual Deferral Ratio of
Participants who are Highly Compensated Employees shall be
reduced and the Employer shall distribute the amount of the
Excess Contributions, as well as income attributable thereto, to
Participants no later than the end of the Plan Year following the
Plan Year for which said Excess Contributions were made. The
Actual Deferral Ratios of Participants who are Highly Compensated
Employees shall be reduced in accordance with the following:
(1) Elective Contributions made on behalf of Participants who are
Highly Compensated Employees and who are receiving the highest
percentages of Elective Contributions as a percentage of
Compensation shall be reduced beginning with the highest of such
percentages until the percentage of Elective Contributions of
each such Highly Compensated Employee is equal.
(2) If any Excess Contributions remain after the above reduction,
Elective Contributions made on behalf of all Participants who are
Highly Compensated Employees shall be reduced on a pro rata
basis. <PAGE>
Income or loss attributable to Excess Contributions shall be
determined in the same proportion that the amount of the
Participant's Elective Contributions distributed bears to the
balance of his appropriate Account.
The distribution of Excess Contributions and income may be made
without the consent of the Participant or his spouse, and shall
be considered as income to the Participant for purposes of
Section 61 of the Code.
If the Plan provides for Employee Contributions, the Plan
Administrator may re-characterize Elective Deferrals as Employee
Contributions as an alternative to distributing Excess
Contributions, provided the following requirements are met:
(1) The amount of re-characterized Elective Contributions, when
combined with the Highly Compensated Employee's other Employee
Contributions, does not exceed any limit on Employee
Contributions to the Plan, including the nondiscrimination
restrictions provided in Plan Section 8.03.
(2) The re-characterized Elective Contributions must be
considered as Employee Contributions for the Plan Year in which
the Elective Contributions were made.
(c) Special Rules.
(1) The Actual Deferral Ratio of a Family Group is determined by
combining the Elective Contributions, and Qualified Matching
Contributions and Qualified Nonelective Contributions if
appropriate, and Compensation of all members of the Family Group.
Such Family Group shall be treated as one Participant for
purposes of the limitation described in Plan Section 8.02(a) and
(b). The determination and correction of Excess Contributions of
a Family Group whose Actual Deferral Ratio is determined under
these Family Aggregation Rules shall be accomplished by reducing
the Actual Deferral Ratio as required by Plan Section 8.02(b) and
allocating the Excess Contributions for the Family Group among
the Family Members in proportion to the Elective Contribution of
each Family Member that is combined to determine the Actual
Deferral Ratio. The Excess Contribution allocated to each Family
Member shall be distributed to each Family Member as described in
Plan Section 8.02(b).
(2) In the event that the Plan satisfies the requirements of
Section 410(b) of the Code only if aggregated with one or more
other plans, or if one or more other plans satisfy the
requirements of Section 410(b) of the Code only if aggregated
with the Plan, then this Section 8.02 shall be applied by
determining the Actual Deferral Ratios of all eligible
Participants as if all such plans were a single plan.
(3) For purposes of this Section 8.02, the Actual Deferral Ratio
for any Participant who is a Highly Compensated Employee for the
Plan Year and who is eligible for Elective Contributions under
two or more plans described in Section 401(a) of the Code or
arrangements described in Section 401(k) of the Code that are
maintained by the Company or the Employer shall be determined as
if all such contributions were made under a single plan.
8.03 Nondiscrimination Requirements for Matching Contributions
and Employee Contributions
(a) Actual Contribution Percentage Test. In no event shall the
Actual Contribution Percentage of Participants who are Highly
Compensated Employees exceed the Actual Contribution Percentage
of the Participants who are Non-Highly Compensated Employees by
more than the greater of:
(1) 125 percent of the Actual Contribution Percentage for
Participants who are Non-Highly Compensated Employees, or
(2) The lesser of 200 percent of the Actual Contribution
Percentage for Participants who Non-Highly Compensated Employees
or two percentage points higher than the Actual Contribution
Percentage for Participants who are Non-Highly Compensated
Employees.
In the event that a Highly Compensated Employee participates in
the Plan and a cash or deferred arrangement maintained by the
Employer that is subject to the nondiscrimination requirements of
Section 401(k) of the Code, the sum of the Actual Deferral
Percentage for the group of Highly Compensated Employees in the
Plan subject to Section 401(k) and the Actual Contribution
Percentage for Highly Compensated Employees under this Plan may
not exceed the sum of:
(1) 125 percent of the greater of:
(A) the Actual Deferral Percentage of the group of Non-Highly
Compensated Employees; or
(B) the Actual Contribution Percentage of Non-Highly Compensated
Employees; plus
(2) the lesser of:
(A) 2 percent of the lesser of (l)(a) or (l)(b) above; or
(B) 200 percent of the lesser of (l)(a) or (l)(b) above.
Alternatively, the sum of the Actual Deferral Percentage and the
Actual Contribution Percentage for the group of the Highly
Compensated Employees may not exceed the sum of:
(1) 125 percent of the lesser of:
(A) the Actual Deferral Percentage of the group of Non-Highly
Compensated Employees; or
(B) the Actual Contribution Percentage of Non-Highly Compensated
Employees; plus
(2) the lesser of:
(A) 2 percent of the greater of (l)(a) or (l)(b) above; or
(B) 200 percent of the greater of (l)(a) or (l)(b) above.
Any alternative calculation provided by such final regulation
shall be incorporated in this Plan by reference and shall apply
when as provided in those regulations.
To the extent that it is necessary, the Actual Deferral
Percentage or the Actual Contribution Percentage of the Highly
Compensated Employee group shall be reduced to comply with this
limitation.
(b) Excess Aggregate Contributions. To the extent that it is
necessary in order to comply with the nondiscrimination
requirements of Section 401(m) of the Code, the Actual
Contribution Ratio of Participants who are Highly Compensated
Employees shall be reduced and the Employer shall distribute the
amount of the vested Excess Aggregate Contributions, as well as
income attributable thereto, to Participants no later than the
end of the Plan Year following the Plan Year for which said
Excess Aggregate Contributions were made.
The Actual Contribution Ratios of Participants who are Highly
Compensated Employees shall be reduced in accordance with the
following:
(1) Employee Contributions made by Participants who are Highly
Compensated Employees and who are contributing the highest
percentage of Compensation shall be reduced beginning with the
highest of such percentages until the percentage of Employee
Contributions of each such Highly Compensated Employee is equal.
(2) If any Excess Aggregate Contributions remain after the above
reduction, then Employee Contributions made by all Participants
who are Highly Compensated Employees shall be reduced on a pro
rata basis.
(3) If any Excess Aggregate Contributions remain after the above
reduction, Matching Contributions made on behalf of Participants
who are Highly Compensated Employees and who are receiving the
highest percentages of Matching Contributions as a percentage of
Compensation shall be reduced beginning with the highest of such
percentages until the percentage of Matching Contributions of
each such Highly Compensated Employee is equal.
(4) If any Excess Aggregate Contributions remain after the above
reductions, Matching Contributions made on behalf of all
Participants who are Highly Compensated Employees shall be
reduced on a pro rata basis.
Income or loss attributable to Excess Aggregate Contributions
shall be determined in the same proportion that the amount of the
Participant's Employee Contributions or Matching Contributions
distributed bears to the balance of his appropriate Account.
The distribution of Excess Aggregate Contributions and income may
be made without the consent of the Participant or his spouse, and
shall be considered as income to the Participant, except to the
extent of Employee Contributions distributed, for purposes of
Section 61 of the Code.
(c) Special Rules.
(1) The Actual Contribution Ratio of a Family Group is determined
by combining the Employee Contributions, Matching Contributions
and Compensation of all members of the Family Group.
Such Family Group shall be treated as one Participant for
purposes of the limitation described in Plan Section 8.03(a and
b). The determination and correction of Excess Aggregate
Contributions of a Family Group whose Actual Contribution Ratio
is determined under these Family Aggregation Rules shall be
accomplished by reducing the Actual Contribution Ratio as
required by Plan Section 8.03(b) and allocating the Excess
Aggregate Contributions for the Family Group among the Family
Members in proportion to the Employee Contributions and Matching
Contributions of each Family Member that is combined to determine
the Actual Deferral Ratio. The Excess Aggregate Contribution
allocated to each Family Member shall be distributed to each
Family Member as described in Plan Section 8.03(b).
(2) In the event that the Plan satisfies the requirements of
Section 410(b) of the Code only if aggregated with one or more
other plans, or if one or more other plans satisfy the
requirements of Section 410(b) of the Code only if aggregated
with the Plan, then this Section 8.03 shall be applied by
determining the Actual Contribution Ratios of all eligible
Participants as if all such plans were a single plan.
(3) For purposes of this Section 8.03, the Actual Contribution
Ratio for any Participant who is a Highly Compensated Employee
for the Plan Year and who is eligible to make Employee
Contributions or to receive Matching Contributions to his account
under two or more plans described in Section 401(a) of the Code
or arrangements described in Section 401(k) of the Code that are
maintained by the Company or the Employer shall be determined as
if all such contributions were made under a single plan.
ARTICLE IX
TOP HEAVY PROVISIONS
9.01 Definitions
The following definitions shall apply for purposes of this
Article IX:
(a) "Aggregation Group." Aggregation Group shall mean the
following:
(1) Each plan of the Employer in which a Key Employee is a
Participant;
(2) Each other plan of the Employer (including a terminated plan
of the Employer if it was maintained within the last five (5)
years ending on the Determination Date for the Plan Year being
tested for Top Heavy status) that allows a plan covering a Key
Employee to meet qualification requirements under the coverage
rules of Section 410 or the anti-discrimination rules of Section
401(a)(4) of the Code;
(3) At the option of the Employer, any other Plan maintained by
the Employer as long as the expanded Aggregation Group including
such plan or plans continues to satisfy the coverage rules of
Section 410 and the antidiscrimination rules of Section 401(a)(4)
of the Code.
(b) "Determination Date." Determination Date shall mean the last
day of the Plan Year preceding the Plan Year which is being
tested for Top Heavy status. In the first Plan Year, the
Determination Date shall mean the last day of the Plan Year which
is being tested for Top Heavy status.
(c) "Key Employee." Key Employee means any Employee, former
Employee, or beneficiary of such Employees, who at any time
during the Plan Year or the four preceding Plan Years is:
(1) an officer having Annual Compensation from the Employer
greater than 50 percent of the Section 415(b)(1)(A) dollar limit
(as adjusted and in effect for that Plan Year);
(2) one of ten employees having Annual Compensation from the
Employer of more than the limitation in effect under Section
415(c)(1)(A) of the Code, and owning (or considered as owning
within the meaning of Section 318 of the Code) both more than an
.5 percent interest as well as one of the ten largest interests
in the Employer. However, if two Employees have the same
ownership interest in the Employer, the Employee having the
greater Annual Compensation shall be treated as having the larger
interest; (3) a 5 percent owner of the Employer; or
(4) a 1 percent owner of the Employer having an Annual
Compensation from the Employer of more than $l.
For purposes of determining the top ten owners, 5 percent owners,
or 1 percent owners, ownership is determined without regard to
the aggregation rules of Sections 414(b), (c) and (m) of the
Code.
(d) "Non-Key Employee." Non-Key Employee means any Employee who
is not a Key employee. Non-Key Employees include Employees who
are former Key Employees.
(e) "Valuation Date." Valuation Date means the last day of the
Plan year.
9.02 Determination of Top Heavy Status
The Plan will be considered Top Heavy if, as of the Determination
Date, the present value of cumulative accrued benefits under the
Plan for Key Employees exceeds 60 percent of the present value of
the cumulative accrued benefits under the Plan for all Employees.
In determining the ratio of accrued benefits for Key Employees to
all other Employees, the Plan Administrator shall use the
procedure as outlined in Section 416(g) of the Code which is
incorporated herein by reference. In determining whether the Plan
is considered Top Heavy, all plans within the Aggregation Group
will be utilized for the calculation. For this purpose, all
Employer Contributions, including Compensation Deferral
Contributions, and forfeitures shall be taken into account in
determining the contribution percentage made on behalf of any Key
Employee.
Solely for the purpose of determining if the Plan, or any other
plan included in the Aggregation Group is Top Heavy, the accrued
benefit of an Employee other than a Key Employee shall be
determined under:
(a) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Employer or the
Company, or
(b) if there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under the
fractional accrual rate of Section 41 l(b)(l)(C) of the Code.
The present value of cumulative accrued benefits of a Participant
who has not been credited with an Hour of Service for the
Employer maintaining the Plan during the five year period ending
on the Determination Date will be disregarded for purposes of
this Article IX.
9.03 Combination of Defined Benefit and Defined Contribution Plan
In the event the Plan is deemed to be Top Heavy, the defined
benefit and defined contribution fraction set forth in Section
7.01(c) will be calculated by substituting 1.0 for 1.25. If a
Non-Key Employee participates in this Plan and a defined benefit
plan which are both Top Heavy, the minimum contribution
requirement for this Plan and the minimum benefit requirement for
the defined benefit plan, pursuant to Section 416 of the Code,
will be satisfied if such Participant is provided with a
contribution to the Plan equal to 5 percent of Annual
Compensation.
9.04 Minimum Contribution
In the event that the Plan in aggregation with any other Defined
Contribution Plans of the Employer is determined to be Top Heavy,
the Participants who are Non-Key Employees will be eligible for a
minimum contribution for such Plan Year. This minimum
contribution, which shall be allocated to the Profit Sharing
Contributions Account of participants who are Non-Key Employees,
will be contributed to this Plan in an amount equal to 3 percent
of Annual Compensation or if less, the largest contribution
percentage of Annual Compensation provided on behalf of any Key
Employee. The minimum contribution required by this Section 9.04
shall be made on behalf of such Participants who are employed as
of the last day of the Plan Year regardless of the number of
Hours of Service credited to each Participant for such Plan Year,
regardless of such Participant's level of Annual Compensation and
regardless of whether such Participant is authorizing
Compensation Deferral Contributions to the Plan. If this minimum
contribution is provided by another Defined Contribution Plan of
the Employer, then this Section 9.04 will not apply to this Plan.
If part of this minimum contribution is provided by another
Defined Contribution Plan of the Employer, then the balance of
the minimum contribution shall be provided by this Plan.
Compensation Deferral Contributions of Non-Key Employees shall
not be considered as part of the minimum contribution required by
this Section 9.04.
9.05 Minimum Vesting
In the event the Plan is determined to be Top Heavy, each
Participant shall have a nonforfeitable interest in his Accounts
at least equal to the following schedule:
Years of Service Nonforfeitable Percentage
Less than 3 0 percent
3 or more 100 percent
Irrespective of this provision, the above schedule shall not
apply where the nonforfeitable interest in the Participant's
Accounts under Section 5.03 hereof would be greater.
ARTICLE X
AMENDMENT OR TERMINATION
10.01 Amendment
The Employer reserves the right, at any time and from time to
time, to amend in whole or in part either retroactively or
prospectively any or all of the provisions of the Plan without
the consent of any Participant or his beneficiaries hereunder.
Such amendment shall be stated in an instrument executed by the
Employer and the Trustee in the same manner and form as the Plan
and upon the execution thereof, the Plan shall be deemed to have
been amended in the manner therein set forth and the Employer,
the Trustee and all Participants and their beneficiaries
hereunder shall be bound thereby; provided, however, that no
amendment:
(a) shall authorize, cause or permit any part of the Trust Fund
(other than such part as is required to pay taxes and
administrative expenses) to be used or diverted to purposes other
than the exclusive benefit of the Participants, former
Participants or their beneficiaries or estates.;
(b) shall have the effect of vesting in the Employer any interest
in or control over any policies of insurance purchased hereunder
or over any part of the Trust Fund subject to the terms of this
Plan;
(c) shall affect the rights, duties or responsibilities of the
Trustee without its Consent; or
(d) shall have any retroactive effect so as to deprive any
Participant of his nonforfeitable interest already accrued, or
eliminate an optional form of benefit, except only that any
amendment may be made retroactive which is necessary to conform
the Plan to mandatory provisions of Federal or State law,
regulations or rulings.
Notwithstanding the foregoing, the Employer may unilaterally
amend the Plan without Trustee execution if the amendment does
not affect the rights, duties or responsibilities of the Trustee.
Such amendments, however, must be provided to the Trustee by the
Employer.
10.02 Plan Termination or Discontinuance of Contributions
The Employer shall have the right, at any time, to terminate the
Plan. Upon such termination, or any partial termination, the
entire interest of each affected Participant's Accounts shall
become nonforfeitable. Upon the discontinuance of the Employer's
contributions or suspension thereof on other than a temporary
basis, the entire interest of each affected Participant's
Accounts shall become nonforfeitable. Any unallocated funds
existing at the time of such termination or discontinuance shall
be allocated to the then affected Participants in the same manner
as Employer contributions under Section 4.02(a).
In the event the Employer terminates the Plan but does not
terminate the Trust Fund, the Trustee, in its sole discretion,
may either continue to maintain and administer the Trust Fund or
terminate the same. No termination of the Plan shall have the
effect of vesting in the Employer any interest in or control over
any part of the Trust Fund.
Distribution upon Plan termination shall be made in accordance
with the provisions of Article VI hereof.
10.03 Merger, Consolidation or Transfer of Assets
The Plan may be merged, consolidated or its assets or liabilities
transferred to any other plan provided each Participant would
receive a benefit immediately after such merger, consolidation or
transfer, if the successor plan then terminated, which is equal
to or greater than the benefit he would have received immediately
prior to such merger, consolidation or transfer if the Plan were
to have terminated on such date.
ARTICLE XI
ADMINISTRATION
11.01 Plan Administrator
The Employer shall appoint a Committee to administer the Plan.
The Committee shall be the Plan Administrator and each member of
such Committee shall be a Named Fiduciary. This Committee shall
consist of members who may be officers, other employees of the
Employer or any other individual. No member shall ever be
disqualified from exercising the powers and discretion herein
conferred by reason of the fact that such member is or may
thereafter be a Participant or entitled to benefits hereunder.
The members of the Committee shall serve at the pleasure of the
Employer. Any member may resign by delivering his written
resignation to the Employer and the Committee. Vacancies in the
Committee arising by resignation, death, removal or otherwise,
shall be filled by the Employer.
(a) Powers and Duties. The Committee shall administer the Plan in
accordance with its terms and shall have all powers necessary to
administer the Plan in accordance with the provisions set forth
in the Plan. The Committee shall interpret the Plan and shall
determine all questions arising in the administration,
interpretation and application of the Plan. Any such
determination by the Committee shall be conclusive and binding on
all persons, subject to the claims procedure as set forth in
Section ll.03 hereof.
(b) Organization and Operation of Committee. The Committee shall
act by a majority of its members at that time in office and such
action may be taken either by a vote at a meeting or taken in
writing by unanimous consent without a meeting.
The Committee may authorize any one or more of its members to
execute any document or documents on behalf of the Committee, in
which event the Committee shall notify the Trustee in writing of
such action and the name or names of its member or members so
designated. The Trustee thereafter shall accept and rely upon any
document executed by such member or members as representing
action by the Committee until the Committee shall file with the
Trustee a written revocation of such designation.
The Committee may adopt such by-laws and regulations as it deems
desirable for the conduct of its affairs, and may appoint such
accountant, counsel, specialists, and other persons as it deems
necessary or desirable in connection with the administration of
the Plan. The Committee shall be entitled to rely conclusively
upon, and shall be fully protected in any action taken by it in
good faith in relying upon, any opinions or reports which shall
be furnished to it by any such accountant, counsel or other
specialists.
(c) Payment of Expenses. The members of the Committee shall serve
without compensation for services as such, but all expenses of
the Committee shall be paid by the Employer. Such expense shall
include any expenses incident to the functioning of the
Committee, including but not limited to, fees of accountants,
legal counsel, investment counsel and other specialists, and
other costs of administering the Plan. At the option of the
Committee, reasonable and necessary expenses of administering the
Plan as described in this Section to include expenses incurred to
properly communicate the Plan to employees may be paid by the
Trustee from the Trust Fund. The Committee shall act as a prudent
buyer of services by securing engagement letters and itemized
billings.
(d) Limitation on Liability. It is intended to allocate to the
Committee only those responsibilities included in this Section
and the Employer shall indemnify each Committee member against
personal loss by reason of service as a Committee member. The
Committee shall have no responsibility for the custody or
management of the Trust Fund or for the evaluation of the
investment performance of such Trust Fund.
11.02 Records and Reports
The Committee shall keep a record of all its proceedings and
acts, and shall keep all such books of accounts, records and
other data as may be necessary for the proper administration of
the Plan. The Committee shall notify the Trustee and the Employer
of any action taken by it and, when required, shall notify any
other interested person or persons.
11.03 Claims Procedure
A claim for a Plan benefit shall be deemed filed when a written
communication is made by a Participant or beneficiary, or the
authorized representative of either, which is reasonably
calculated to bring the claim to the attention of the Plan
Administrator.
If a claim is wholly or partially denied, notice of such decision
shall be furnished to the claimant in writing within 90 days
after receipt of the claim by the Plan Administrator. Such notice
shall set forth, in a manner calculated to be understood by the
claimant: (1) the specific reason or reasons for the denial; (2)
specific reference to pertinent Plan provisions on which the
denial is based; (3) a description of any additional material or
information necessary to perfect the claim and an explanation of
why such material or information is necessary; and (4) an
explanation of the Plan's claim review procedure .
Within 90 days from the receipt of the note of denial, a claimant
may appeal such denial to the Plan Administrator for a full and
fair review. The review shall be instituted by the filing of a
written request for review by the claimant or his authorized
representative within the 90 day period stated above. A request
for review shall be deemed filed as of the date of receipt of
such written request by the Plan Administrator. The claimant or
his authorized representative shall have the right to review all
pertinent documents, may submit issues and comments in writing
and may do such other appropriate things as the Plan
Administrator may allow. The decision of the Plan Administrator
shall be made not later than 60 days after the receipt of the
request for review; unless special circumstances, such as the
need to hold a hearing, requires an extension of time, in which
case, a decision shall be rendered not later than 120 days after
the receipt of a request for review which decision shall be final
and binding on such claimant.
11.04 Participants' Right to Vote Employer Stock
Each Participant shall be entitled to direct the exercise of
voting rights with respect to the whole shares of stock allocated
to said Participant's Account. The Company shall provide to each
Participant materials pertaining to the exercise of such rights
containing all the information distributed to shareholders as
part of its distribution of such information to shareholders. A
Participant shall have the opportunity to exercise any such
rights within the same time period as shareholders of the
Company. In the exercise of voting rights, votes representing
fractional shares of stock and shares of stock held in
unallocated inventory shall be voted in the same ratio for the
election of directors and for and against each issue as the
applicable vote directed by Participants with respect to whole
shares of stock.
ARTICLE XII
EXEMPT LOAN
12.01 Definition of Exempt Loan
An Exempt Loan is a direct loan of such, a purchase money
transaction, an assumption of the obligation of the Plan, or a
guarantee of the obligation of the Plan assumed in conjunction
with one of the above between the Plan and a party-in-interest as
defined in Section 3(14) of ERISA.
12.02 Requirements for an Exempt Loan
Any Exempt Loan entered into by the Plan shall meet the following
requirements:
(a) The loan shall primarily be for the benefit of Participants.
The rate of interest shall be reasonable and the net effect of
the rate of interest and the price of the securities to be
acquired with the loan shall be such that Plan assets would not
be depleted. The loan shall be made only upon such terms as would
result from arm's length negotiations between the Plan and
independent third parties.
(b) The proceeds received shall be used only to acquire Employer
securities, to repay the loan or to repay a prior Exempt Loan.
(c) The loan shall be made without recourse against the general
assets of the Plan. The collateral shall consist only of
securities acquired with the proceeds of the loan, or securities
acquired with proceeds of a prior Exempt Loan if the prior Exempt
Loan is being paid with proceeds of the current Exempt Loan.
There shall be no right of any lender to the Plan against assets
of the Plan other than collateral given for the loan,
contributions made to the Plan to meet the obligations of the
loan, and earnings attributable to collateral and investment of
the contributions made to meet the obligations of the loan. In
the event of default the amount of Employer stock transferred to
the lender in satisfaction of a default cannot exceed the amount
of such default. In the case of a default in favor of a
party-in-interest, the default shall only be to the extent of
current payments due.
(d) Payments made by the Plan to repay an Exempt Loan shall not
exceed an amount equal to contributions and earnings received
during or prior to the year minus such payments in prior years.
The Employer stock purchased with the proceeds of the loan shall
be held in a suspense account until the stock is released from
the suspense account and allocated to the Participants' Profit
Sharing Contributions Accounts. Stock released from the suspense
account must be equal to an amount calculated by multiplying
the amount of encumbered stock by the fraction of the principal
and interest paid for the Plan Year divided by the sum of the
principal and interest paid for the Plan Year plus principal and
interest for all future years.
(e) The Employer stock acquired with the proceeds of an Exempt
Loan shall not be subject to any option other than the option
provided for in Section 12.03 or a buy-sell or similar
arrangement when the stock is held by or distributed from the
Plan whether or not the Plan ceases to be an ESOP or the Exempt
Loan is fully repaid.
12.03 Right of First Refusal
Employer stock acquired with the assets of an Exempt Loan may be
subject to a right of first refusal in the Employer, or in the
Plan. The right of first refusal shall comply with the following
requirements:
(a) The selling price and other terms under the right of first
refusal must be not less favorable to the security holder than
the greater of the fair market value of the security as
determined under Article XIV, or the purchase price or other
terms offered by a third person pursuant to a good faith offer to
purchase.
(b) The right of first refusal must lapse no later than 14 days
after the security holder gives written notice to the Employer
than an offer by a third party to purchase the stock has been
received.
ARTICLE XIII
TRUSTEE
13.01 Fiduciary Status
The Trustee shall be a Named Fiduciary and agrees to accept the
duties and responsibilities attendant thereto.
13.02 Establishment and Acceptance of Trust
The Trustee shall receive any contributions paid to it. All
contributions so received together with the income therefrom
shall be held, managed and administered in the Trust pursuant to
the terms of the Plan. The Trustee hereby accepts the Trust
created hereunder and agrees to perform its duties under the
Plan.
13.03 Trustee's General Powers
The Trustee shall have the following powers and authority in the
administration of the Trust Fund:
(a) To primarily hold and invest in Qualifying Employer
Securities such that the Plan maintains its status as an Employee
Stock Ownership Plan, but subject to the Fiduciary requirements
of ERISA.
(b) To hold, sell, invest, reinvest, convey, exchange, mortgage,
pledge, option, lease for any term of years irrespective of the
period of any trust hereunder and with or without privilege or
option to purchase (including 99-year leases renewable forever),
or otherwise deal in and dispose of all or any part of the Trust
property, without order of court at public or private sale, for
cash or on credit, for such considerations and on such terms and
conditions as the Trustee, in its uncontrolled discretion, may
deem either necessary, advisable or expedient; and no purchaser,
mortgagee, pledgee, optionee, lessee or any other person or
persons dealing with the Trustee shall be required or permitted
to see the application of any purchase money or Trust Funds, or
be required to inquire into the power or authority of the Trustee
or into the validity, necessity, advisability or expediency of
any act of the Trustee.
(c) To vote upon any stocks, bonds or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments
incidental thereto; to oppose or to consent to, or otherwise
participate in corporate reorganizations or other changes
affecting corporate securities, and to delegate discretionary
powers and to pay any assessments or charges in connection
therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities or other property
held as part of the Trust Fund. Such powers shall be subject to
the voting rights granted Participants under Article XI.
(d) To cause any securities, real property or other tangible or
intangible property held as part of the Trust Fund to be
registered or titled in its own name or in the name of one or
more of its nominees, and to hold any investments to bearer form,
but the books and records of the Trustee shall at all times show
that all such investments are part of the Trust Fund.
(e) To borrow in a manner consistent with Article XII regarding
Exempt Loans.
(f) To borrow, for not more than 12 months, for the purpose of
the Trust, but not as described in Article XII, in any amount or
amounts, not exceeding in the aggregate 25 percent of the fair
market value of the Trust Fund as of the date of borrowing and
upon such terms and conditions as the Trustee shall deem
advisable; and, for any sum so borrowed, to issue promissory
notes as Trustee, and to secure the repayment thereof by pledging
all or any part of the Trust Fund; an no person lending money to
the Trustee shall be bound to see to the application of the money
lent or to inquire into the validity, expedience or propriety of
any such borrowing.
(g) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the
best interests of the Trust created hereby, without liability for
interest thereof.
(h) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired
by it as Trustee hereunder, whether or not such securities or
other property would normally be purchased as investments
hereunder.
(i) To make, execute, acknowledge and deliver any and all
documents of transfer and conveyance and all other instruments
that may be necessary or appropriate to carry out the powers
herein granted.
(j) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust Fund, to
commence or defend suits or legal or administrative proceedings
and to represent the Trust Fund in all suits and legal and
administrative proceedings.
(k) To employ suitable agents, investment counsel and legal
counsel (who may be counsel for the Employer), and to pay their
reasonable expenses and compensation.
(l) To do all such acts, take all such proceedings and exercise
all such rights and privileges, although not specifically
mentioned herein, as the Trustee may deem necessary to administer
the Trust Fund and to carry out the purpose of this Trust.
13.04 Payment of Compensation, Expenses and Taxes
The Trustee shall be paid such reasonable compensation as shall
from time to time be agreed upon in writing by the Employer and
the Trustee. In the event that a Trustee is also an Employee of
the Employer, no compensation shall be payable for services as
Trustee. In addition, the Trustee shall be reimbursed for any
reasonable expenses, including legal counsel fees and investment
counsel fees, incurred in the administration of the Trust Fund.
Such compensation and expenses shall be paid by the Employer, but
until paid shall constitute a charge upon the Trust Fund. All
taxes of any and all kinds whatsoever that may be levied or
assessed under existing or future laws upon, or in respect of,
the Trust Fund or the income therefrom shall be paid from the
Trust Fund.
13.05 Accounting
The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions
hereunder. All accounts, books and records relating to such
transactions shall be opened to inspection and audit at all
reasonable times by any person designated by the Plan
Administrator.
13.06 Trustee's General Powers
The Trustee shall discharge its duties with respect to the Plan
solely in the interest of the Participants and their
beneficiaries for the exclusive purpose of providing benefits to
Participants and their beneficiaries. The Trustee shall discharge
its duties with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man, acting in like
capacity and familiar with such matters, would use in the conduct
of an enterprise of a like character and with like aims. The
Trustee shall discharge its duties in accordance with the terms
and provisions of the Plan.
13.07 Voting Employer Stock
All unallocated Employer stock of each Participant shall be voted
by the Trustee in accordance with instructions received from the
Plan Administrator. The Trustee shall not exercise its power to
vote any Employer stock for which it has not received
instructions .
13.08 Removal, Resignation and Appointment of Successor Trustee
The Trustee may be removed by the Employer at any time upon 30
days' written notice to the Trustee and the Plan Administrator.
The Trustee may resign at any time upon 30 days' written notice
to the Employer and the Plan Administrator. Upon such removal or
resignation of the Trustee, the Employer shall appoint a
successor trustee or trustees who shall have the same powers and
duties as those conferred upon the Trustee hereunder. Upon
acceptance of such appointment by the successor trustee, the
Trustee shall assign, transfer and pay over to such successor the
funds and properties then constituting the Trust Fund. The
Trustee is authorized, however, to reserve such sum of money as
it may deem advisable for payment of its fees and expenses in
connection with the settlement of its account or otherwise, and
any balance of such reserve remaining after the payment of such
fees and expenses shall be paid over to the successor trustee.
13.09 Investment Manager
The investment powers conferred upon the Trustee shall be
exercised by the Trustee in its sole discretion; provided,
however, that the Plan Administrator may, at any time and from
time to time, appoint one or more:
(a) banks as defined in the Investment Advisors Act of 1940, or;
(b) persons registered as an Investment Advisor under said Act,
to act as Investment Manager(s) of all such portions of the Trust
assets as the Plan Administrator in its sole discretion shall
direct. In order to serve as Investment Manager, any such bank or
person must state in writing to the Plan Administrator and the
Trustee that it meets the requirements set forth in this Section
13.09 to be an Investment Manager and that it acknowledges that
it shall be a fiduciary with respect to this Trust during all
periods that it shall serve as such. During any period in which
an Investment Manager has been appointed and is serving with
respect to the Trust assets or any portion thereof, it shall have
all powers normally given to the Trustee under this Article XIII
with respect to the management, acquisition or disposition of any
asset of the Trust Fund, or such portion thereof and the Trustee
shall have no powers, duties or obligations with respect to the
investment, management, acquisition or disposition of such
assets. The Investment Manager shall be entitled to receive such
reasonable compensation and such reimbursement of his expenses on
such basis or in such amounts as may be agreed to or approved
from time to time by the Plan Administrator. Such compensation
and expenses shall be borne and paid from the Trust as a regular
charge and expenses thereof, unless otherwise paid by the
Employer. At any time, the Plan Administrator, by written notice
to the Investment Manager and the Trustee, may change that
portion of the Trust assets subject to management by the
Investment Manager. Any Investment Manager may resign at any time
y giving written notice to the Plan Administrator and the Trustee
of its intention to do so at least 30 days before such
resignation is to become effective, unless the Plan Administrator
shall accept as adequate a shorter notice. The Plan Administrator
may remove any Investment Manager by written notice delivered to
the Investment Manager and the Trustee at least 30 days before
such removal is to become effective unless the Investment Manager
shall accept as adequate a shorter notice. Unless the Plan
Administrator appoints a successor to an Investment Manager which
has resigned or been removed, or which is no longer managing a
portion of the Trust assets, the powers, duties and obligations
of the Trustee with respect to the portion of the Trust assets
formerly managed by the Investment Manager shall be automatically
restored.
13.10 Payment of Expenses
Pursuant to instructions of the Company, the Trustee shall pay
from the Trust Fund all reasonable and necessary expenses, taxes
and charges incurred on behalf of the Fund or the income thereof
in connection with the administration or operation of the Trust
Fund to the extent that such items are not otherwise paid. No
provision of this Plan shall be construed to provide for payment
to or the reimbursement of the Trustee (or any employee or agent
of the Trustee) with respect to any liability or expense
(including counsel fees) that may be incurred by the Trustee (or
any employee or agent) having been found to have breached any
responsibility it may have under the other provisions of this
Plan or any responsibility or prohibition imposed upon it by
ERISA.
ARTICLE XIV
INVESTMENT OF THE TRUST FUND
14.01 General Investment Fund
The Trustee shall have the right to combine the Accounts of the
Participants, except such portion of the Accounts as may have
been otherwise invested pursuant to this Article XIV, into a
general fund, hereinafter called the "General Investment Fund",
for the purpose of a general trust investment.
The Trustee shall invest and reinvest the principal and income of
the General Investment Fund, and shall keep it invested, without
distinction between principal and income, in any common or
preferred stocks, bonds, notes, mortgages, guaranteed dollar
amount or variable dollar amount annuities, or other securities,
including qualifying real estate or qualifying securities of the
Employer, real estate, shares of regulated investment companies,
common or collective trust funds, or in property of any kind or
nature, whether or not such investment be expressly authorized or
permitted by statutes, court decisions, regulations or other
restrictions of law prescribing investments or other actions by
fiduciaries, it being the intention that except as otherwise
restricted by the provisions of the succeeding paragraphs of this
Section 14.01, the Trustee shall be relieved from all
restrictions imposed by present or future laws on investments
which may be made by a Trustee; provided, however, the Trustee
may, in its discretion, pending investment, temporarily retain in
cash or cash balances, or in a savings account maintained by the
Trustee in any bank or financial institution, including any bank
serving as Trustee hereunder, and bearing a reasonable rate of
interest, or in short term government obligations or commercial
papers, such portion of the General Investment Fund as it may
deem advisable.
In acquiring, investing, reinvesting, exchanging, retaining,
selling and managing property for the General Investment Fund,
the Trustee shall act solely in the interests of the Participants
and beneficiaries of the Plan with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent
man acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims.
In directing or making such investments, the Trustee shall not be
restricted to securities or other property of the character
authorized or required by applicable law from time to time for
trust investment and shall permit the value of any qualifying
securities and qualifying real property of the Employer in the
General Investment Fund to exceed 10 percent of the fair market value
of the General Investment Fund.
The Trustee shall diversify the investments of the General
Investment Fund so as to minimize the risk of large losses,
unless under the circumstances it is clearly prudent not to do
so.
Any other provision of this Plan to the contrary notwithstanding,
the Trustee shall not engage in any prohibited transaction as
that term is defined in Section 406 of ERISA.
The Trustee shall revalue the assets of the General Investment
Fund at their fair market value as of the end of each Plan Year
and at such other time as the Plan Administrator may direct. The
Accounts of each Participant shall then be adjusted by
apportioning the General Investment Fund, including income, as
thus revalued, among Participants Accounts in proportion to the
value of their respective interests in the General Investment
Fund immediately preceding such revaluation.
14.02 Individual Investment Funds
In accordance with procedures established by the Plan
Administrator, the Trustee shall separately invest and reinvest
all or any part of each Participant's Compensation Deferral
Contributions Account, Matching Contributions Account and the
Prior Plan Account upon receipt of and in accordance with written
directions for investment by such Participant received through
the Plan Administrator. Such amounts shall be invested as
directed by the Participant, in increments of at least 10 percent, in
one or more of the Investment Funds. The Investment Funds shall
include, but are not limited to, the following:
(a) Money Market Fund
(b) Bond Fund
(c) Stock Fund
(d) Balanced Fund
The Trustee may, however, in its discretion, pending investment,
temporarily retain in cash or cash balance such portion of a
Participant's Accounts as it may deem advisable.
A Participant may change the investment of his Accounts by
providing the Plan Administrator with written instructions to be
effective as of January 1, April 1, July 1 or October 1 of any
Plan Year. Said instructions must be received by the Plan
Administrator at least 15 days prior to the effective date. The
Participant may elect to invest future contributions differently
than present account balances.
<PAGE>
The Trustee shall revalue the assets of each Investment Fund at
their fair market value as of the end of each Plan Year and at
such other time as the Plan Administer may direct. The Accounts
of each Participant shall then be adjusted by apportioning the
Investment Fund, including income, as thus revalued, among
Participants' Accounts in proportion to the value of their
respective interests in the Investment Fund immediately preceding
such revaluation.
Participants who have a Prior Plan Account from the Mid Am Bank
Profit Sharing Plan shall have a one-time option to direct the
investment of this Prior Plan Account into shares of Cumulative
Convertible Preferred Stock Series A. This election is effective
May 1, 1992 and may be made by completing forms provided by the
Plan Administrator.
14.03 Appraisal of Employer Stock
Annually, as of the last day of the Plan Year, the Employer shall
have made an appraisal of the Employer stock by a person who
customarily makes such appraisals and who is independent of the
Plan or the Employer, but only if the Employer stock is not
traded on a recognized exchange. For all purposes except with
regard to a transaction between the Plan and a party-in-interest,
the value as of the most recent Anniversary Date shall be used.
For all transactions between the Plan and a party-in-interest as
that term is defined in Section 3(14) of ERISA, the value of the
Employer stock must be determined as of the date of the
transaction. In the event of such transaction, the Employer shall
have made an independent appraisal of the Employer stock as of
the date of the transaction by a person who customarily makes
such appraisals and who is independent of the plan or the
Employer.
14.04 Diversification of Investments
This Section 14.04 applies only to a Participant's Profit Sharing
Contributions Account.
(a) Definitions.
(1) "Qualified Participant" means a Participant who has attained
age 55 and who has completed at least ten years of participation
in the Plan.
(2) "Qualified Election Period" means the period of participation
after the Participant becomes a Qualified Participant.
(b) Election by Qualified Participants. Each Qualified
Participant shall be permitted to direct the Plan as to the
investment of 25 percent of the value of the Participant's Profit
Sharing Contributions Account during his Qualified Election
Period. A Qualified Participant who attains age 60 may direct the
Plan as to the investment of 50 percent of the value of his
Profit Sharing Contributions Account during his remaining
Qualified Election Period.
(c) Method of Directing Investment. The Participant's direction
shall be provided to the Plan Administrator in writing; shall be
effective no later than 180 days after the close of the Plan Year
to which the direction applies; and shall specify which, if any,
of the options set forth in subsection (d) below the Participant
selects.
(d) Investment Options.
(1) At the election of the Qualified Participant, the Plan shall
distribute (notwithstanding Section 409(d) of the Code) the
portion of the Participant's Profit Sharing Contributions Account
that is covered by the election within 90 days after the last day
of the period during which the election can be made. Such
distribution shall be subject to such requirements of the Plan
concerning put options as would otherwise apply to a distribution
of Qualifying Employer Securities from the Plan. This Section
14.04(d)(1) shall apply notwithstanding any other provision of
the Plan other than such provision as require the consent of the
Participant to a distribution with a present value in excess of
$3,500. If the Participant does not consent, such amount shall be
retained in this Plan.
(2) In lieu of distribution under Section 14.04(d)(1) hereof, the
Qualified Participant who has the right to receive a cash
distribution under Section 14.04(d)(1) hereof may direct the Plan
to transfer the portion of the Participant's Profit Sharing
Contributions Account that is covered by the election to another
qualified plan of the Employer which accepts such transfers,
provided that such Plan permits Employee-directed investment and
does not invest in Qualifying Employer Securities to a
substantial degree. Such transfer shall be made no later than 90
days after the 1st day of the period during which the election
can be made.
(3) In lieu of alternatives (1) and (2) of this Section 14.04(d),
the Participant shall be provided an opportunity to select among
at least three investment options to include, but not limited to,
a stock fund, a bond fund and a money market or cash equivalent
fund. The Participant's election shall be made in accordance with
rules and procedures established by the Committee with amounts
invested in one or more funds in increments of at least 10%.
ARTICLE XV
MISCELLANEOUS
15.01 Participant's Rights
Neither the establishment of the Plan, nor any modification
thereof, nor the creation of any fund or account, nor any
distributions hereunder, shall be construed as giving to any
Participant or other person any legal or equitable right against
the Employer, or any officer or Employee thereof, or the Trustee,
or the Plan Administrator except as herein provided. Under no
circumstances shall the terms of employment of any Participant be
modified or in any way affected thereby.
15.02 Assignment or Alienation of Benefits
No benefit or interest available hereunder will be subject to
assignment or alienation, either voluntarily or involuntarily.
The preceding sentence shall also apply to the creation,
assignment, or recognition of a right to any benefit payable with
respect to a participant pursuant to a domestic relations order,
unless such order is determined to be a Qualified Domestic
Relations Order or any domestic relations order entered before
January 1, 1985. For purposes of this Section 15.02, "Qualified
Domestic Relations Order" means any domestic relations order
which creates or recognizes the existence of an alternate payee's
right to, or assigns to an alternate payee the right to, receive
all or a portion of the benefits payable with respect to a
Participant, and which otherwise meets the requirements of
Section 414(p) of the Code.
As soon as practical after receipt of a domestic relations order,
the Plan Administrator shall determine whether it is a Qualified
Domestic Relations Order. If the domestic relations order is
determined to be a Qualified Domestic Relations Order, the Plan
Administrator shall be permitted, in accordance with rules and
regulations promulgated by the Internal Revenue Service and the
rules and regulations established by the Plan Administrator, to
direct the Trustee to make an immediate distribution to the
alternate payee (i) if the amount is less than $3,500, (ii) as
provided in any such Order, or (iii) as elected by the alternate
payee. Such distribution shall be permitted regardless of the age
or employment of the Participant and regardless of whether the
Participant is otherwise entitled to a distribution.
15.03 Reversion of Funds to Employer
All Employer contributions are conditioned upon their
deductibility pursuant to Section 404 of the Code. The Employer
shall not directly or indirectly receive any refund on
contributions made to the Trust Fund except in the following
circumstances:
(a) The contribution was made by reason of a mistake of fact,
(b) the deduction for such contribution is disallowed, or
(c) the initial qualification of the Plan is denied under the
Code.
Earnings attributable to any contribution subject to refund shall
not be refunded. The amount subject to refund shall be reduced by
any loss attributable thereto, and by any amount which would
cause the individual account of any Participant to be reduced to
less than the balance which would have been in the account had
the contribution subject to refund not been made. The return of
the contribution shall be made within one (1) year of the
mistaken payment, the disallowance of deduction (to be extent
disallowed) or the denial of qualification, as the case may be.
Except as provided above, under no circumstances shall any amount
of the principal or income of the Trust Fund be used for or
diverted to the Employer or be used for or diverted to purposes
other than the exclusive benefit of Participants, former
Participants, and their beneficiaries.
15.04 Third Party Immunity
No third party, including but not limited to life insurance
companies and regulated investment companies, shall be deemed to
be a party to the Plan for any purpose or to be responsible for
the validity of the Plan; nor shall such third party be required
to take cognizance of the Trustee or of the Plan Administrator
hereunder, nor shall such third party be responsible to see that
any action of the Trustee or the Plan Administrator is authorized
by the terms of the Plan. Any such third party shall be fully
discharged from any and all liability for any amount paid to the
Trustee or paid in accordance with the direction of the Trustee
or the Plan Administrator, as the case may be, or for any change
made or action taken by such third party upon such direction; and
no such third party shall be obligated to see to the distribution
or further application of any monies so paid by such third party.
15.05 Delegation of Authority by Employer
Whenever the Employer, under the terms of the Plan, is permitted
or required to do or perform any act or matter or thing, it shall
be done and performed by any officer thereunto duly authorized.
15.06 Allocation of Responsibilities
None of the allocated responsibilities or any other
responsibilities shall be shared by any two or more Named
Fiduciaries unless such sharing is provided by a specific
provision of the Plan. Whenever one Named Fiduciary is required
to follow the directions of another Named Fiduciary, the
responsibility shall be that of the Named Fiduciary giving the
directions.
15.07 Construction of Plan
To the extent not in conflict with the provisions of ERISA, all
questions of interpretation of the Plan shall be governed by the
laws of the State of Ohio.
15.08 Gender and Number
Wherever any words are used herein in the masculine gender, they
shall be construed as though they were also used in the feminine
gender in all cases where they would so apply, and wherever any
words are used herein in the singular form, they shall be
construed as though they were also used in the plural form in all
cases where they would so apply.
15.09 Headings
Headings of sections are for general information only, and the
Plan is not to be construed by reference thereto.
Executed at Bowling Green, Ohio, the day and year first above
written.
Mid Am, Inc.
Robin Wooddall by W. Granger Souder
Witness Senior Vice President/
General Counsel
Mid American National Bank & Trust
Company
Karen Simons by David E. Judy
Witness VP/TO
by J. Philip Ruyle SR VP/TO
APPENDIX A
LIST OF PARTICIPATING EMPLOYERS
EMPLOYER EFFECTIVE DATE
Mid Am, Inc. July 1, 1989
Mid American National Bank & Trust Company July 1, 1989
First National Bank Northwest Ohio July 1, 1989
Farmers Banking Company July 1, 1989
Citizens Building & Loan July 1, 1990
Mid Am Information Services, Inc. January 1, 1991
American Community Bank, NA October 31, 1992
(*merger of Farmers & Citizens)
Home Federal Savings January 1, 1993
Apollo Savings July 1, 1993
AmeriFirst March 19, 1993
(* merger of Home Federal & Apollo)
EXHIBIT 10.6
Pension Make-Up Plan of the Company (SERP)
Make Up Plan
In 1993, the Company adopted a funded, non-qualified supplemental
executive retirement plan ("the Make Up Plan"), due to
limitations imposed by federal law on the amount of retirement
income that may be paid through the Pension Plan and Profit
Sharing Plan. Under the Make Up Plan, any employee whose benefits
under the Pension Plan and Profit Sharing Plan would exceed the
maximum benefit limitations imposed by Section 402(g) of the
Internal Revenue Code, will receive under the Make Up Plan an
amount equal to the benefit the participant would have received
without regard to the limitations minus the amount actually
received under the Pension Plan and Profit Sharing Plan. Benefits
under the Make Up Plan are funded annually with the Company's
common stock, and are held in an irrevocable trust for the
benefit of the participants. Payments under the Make Up Plan have
no effect on the funding or availability of funds under the
Company's Pension Plan and Profit Sharing Plan.
The Make Up Plan follows this description.
MID AM, INC.
PENSION MAKE UP PLAN
WHEREAS, the Employee Retirement Income Security Act of 1974
("ERISA") requires that limits be set on the maximum benefits
which may be paid from a tax-qualified defined contribution
retirement plan to a Participant in such a plan; and
WHEREAS, the Mid Am, Inc. Employee Stock Ownership & Savings Plan
was effective January 1, 1975, and includes nondiscrimination
limitations as imposed under Section 401(k) of the Internal
Revenue Code as well as maximum benefit limitations imposed by
Section 415 and Section 401(a)(17) of the Internal Revenue Code;
and
WHEREAS, the Mid Am, Inc. Employee Stock Ownership Pension Plan
was effective July 1, 1989, and included benefit limitations
imposed by Section 415 and Section 401(a)(17) of the Internal
Revenue Code; and
WHEREAS, Mid Am, Inc. (the "Corporation") intends to adopt this
nonqualified "top hat" retirement benefit plan effective
January 1, 1993, so that a Participant may receive a benefit
equal to the contribution that cannot be paid under the Basic
Plans due to the limits placed on the benefit amounts by Sections
401(k), 402(g), 401(a)(17) and 415(c) and related sections of the
Internal Revenue Code of 1986, as may be amended from time to
time.
NOW, THEREFORE, the Corporation adopts the Mid Am, Inc. Pension
Make-up Plan ("Plan") for certain employees who participate in
the Basic Plans (the "Participants") for the purpose of providing
an opportunity for Participants to defer compensation and to
receive any Corporation matching and other non-elective
contributions which cannot be paid under the Basic Plans because
of the restrictions imposed by ERISA and the Internal Revenue
Code of 1986. The Corporation promises to purchase stock for each
Participant to pay the benefits defined to Participants, or on
their behalf to their heirs, personal representatives or
beneficiaries, subject to the terms and conditions specified
hereinafter.
Page 1
ARTICLE I
DEFINITIONS
1. "Act" means the Employee Retirement Income Security Act of
1974, as amended.
2. "Account" means a liability of the Corporation in the name of
each Participant.
3. "Basic Plans" means the Mid Am, Inc. Employee Stock Ownership
and Savings Plan ("Savings Plan") and the Mid Am, Inc. Employee
Stock Ownership Plan ("Pension Plan") as amended from time to
time.
4. "Beneficiary" means any person designated by a Participant to
receive payment under this Plan in the event of the Participant's
death and shall mean the spouse of the Participant in the event
is married and has designated no other beneficiary.
5. "Board of Directors" means the Board of Directors of Mid Am,
Inc.
6. "Change in Control" means any one or more of the following
events:
a. the merger or consolidation of the Corporation with or into
any other corporation and Mid Am, Inc. is not the surviving
corporation;
b. in excess of 24.99 percent of the outstanding common stock of
the Corporation is owned, held or controlled by an entity, person
or group acting in concert with the power to control the
Corporation as that term is defined in Rule 405 of the Securities
Act of 1933;
c. the sale or exchange of in excess of 24.99 percent of the
assets of the Corporation to any entity, person, or group acting
in concert;
d. the recapitalization, reclassification of securities or
reorganization of the Corporation which has the effect of either
subpart (b) or (c) above;
e. the issuance by the Corporation of securities in an amount in
excess of 24.99 percent of the outstanding common stock of the
Corporation to any entity, person, or group acting in concert and
intending to exercise control of the Corporation, or
f. the removal, termination or retirement of more than 49 percent
of the members of the Board of Directors.
7. "Code" means the Internal Revenue Code of 1986, as may be
amended from time to time.
8. "Corporation" means Mid Am, Inc., an Ohio corporation. Such
term includes all corporations which comprise a "controlled group
of corporations" as defined in Section 414(b) of the Code, of
which Mid Am, Inc. is a member.
Page 2
9. "Diminution of Status" means a material diminution of or
interference with an Employee~s duties, responsibilities and
benefits. By way of example and not by way of llrnitation, any of
the following actions, if unreasonable or materially adverse to
Employee, shall constitute diminution or interference unless
consent to in writing by the Employee:
a. a reduction in the size or a change in the location of
Employee's office;
b. a reduction or adverse change in the scope or nature of the
secretarial or other administrative support of Employee;
c. a reduction or adverse change in Employee's title or
decision-making responsibilities;
d. a reduction in the number of seniority of other personnel
reporting to Employee, other than as part of a company-wide
reduction in staff, or a reduction in the frequency with which
personnel are to report to Employee;
e. an increase in the number of, or a decrease in the seniority
of, the persons (other than the Board of Directors) to whom
Employee must report; or an increase in the frequency of, or in
the nature of matters with respect to which, reports by Employee
shall be required;
f. a reduction or adverse change in the salary, perquisites,
benefits, contingent benefits or vacation time which had
previously been provided to Employee, other than as part of an
overall program applied uniformly and with equitable effect to
all members of the senior management of the Corporation; and
g. a material increase in the required hours of work or the work
load of Employee.
10. "Eligible Employee" means any Employee who is among a select
group of management or highly compensated employees.
11. "Employee" means any individual employed by the Corporation.
12. "Participant" means any Employee individual who, by reason of
his or her responsibilities with the Corporation and the nature
of his or her participation in the Basic Plans, is selected by
the Special Projects Comrnittee to partlcipate in this Plan.
13. "Special Projects Committee" means the Special Projects
Comrnittee appointed by the Board of Directors to act on behalf
of the Corporation.
14. "Stock" means the Common Stock of the Corporation.
15. "Termination or Diminution of Status for Cause" means
involuntary termination or dirninution of status under the
following circumstances.
a. misappropriating any funds or property of the Corporation;
b. being convicted of a felony;
Page 3
c. mismanaging the assets of the Corporation;
d. inability to fulfill the duties of the position for a period
longer than three consecutive months;
e. incompetence, insubordination, willful misconduct, dishonesty,
or neglect in the performance of the duties of the position;
f. material breach of this Agreement;
g. being under the habitual ir~luence of alcohol or other drugs;
or
h. (1) If Employee is suspended from office or temporarily
prohibited from participating in the regular conduct of the
Corporation's affairs by any regulatory agency, all obligations
under this Agreement shall be suspended upon suspension or
prohibition. Once the matter is resolved and Employee is
perrnitted to return to his or her position, the Corporation, in
its sole discretion, may reinstate, in whole or in part, any of
the obligations.
(2) If Employee is removed from office and/or permanently
prohibited from participating in the conduct of the Corporation's
affairs by any regulatory agency, Corporations obligations under
this Agreement shall terminate, but vested rights of the parties
shall not be affected.
16. "Rabbi Trust" means an employer grantor trust established to
hold contributions to this Plan.
ARTICLE II
ELIGIBILITY
Any Eligible Employee who is selected by the Special Projects
Cornrnittee shall be eligible to participate in this Plan. Upon
completion of the participation election form, the Eligible
Employee selected will become a Participant.
ARTICLE III
CONTRIBUTIONS AND BENEFITS
All Participants and Beneficiaries whose benefits under the Basic
Plans are lirnited, directly or indirectly, by Section 401(k),
402(g), 401(a)(17) or 415(c) and related sections of the Code,
shall be eligible to receive the "Pension Make-up" benefits
pursuant to this Plan. In no event shall a Participant or
Beneficiary who is not entitled to benefits under the Basic Plans
be eligible for, or receive, the Pension Make-up benefits of this
Plan.
Page 4
<PAGE>
The Corporation shall credit the Account of each Participant with
the following Pension Make-up amounts:
1. The amount which is equal to the excess, if any, of A over B,
where:
"A" is the amount of the maximum matching contribution that would
have been contributed to the Savings Plan for the year determined
without the limitations imposed by Section 415(c), Section
401(k), Section 401(m), Section 402(g) or Section 401(a)(17) of
the Code and assuming the Participant had elected to defer a
sufficient amount of his or her Annual Compensation to maximize
the matching contribution (regardless of whether or not the
Participant has made such election); and
"B" is the actual matching contribution made on behalf of the
Participant to the Savings Plan, and
2. The amount which is equal to the excess, if any, of C over D,
where:
"C" is the sum of the arnount of the Employer Pension
Contribution in the Pension Plan plus the amount of the Employer
Profit Sharing Contribution in the Savings Plan that would have
been contributed to the Basic Plans for the year based on his or
her Annual Compensation and determined without the limitations
imposed by Sections 401(a)(17) and 415(c); and
"D" is the sum of the actual Employer Pension Contribution plus
Employer Profit Sharing Contribution allocated to the Participant
in the Basic Plans.
In calculating the Pension Make-up amounts as set forth above,
Annual Compensation includes compensation as defined in the Basic
Plans (but without regard to the limitation imposed by Section
401(a)(17)), plus any compensation which the Participant has
elected to defer pursuant to any nonqualified deferred
compensation arrangement with the Corporation.
The Pension Make-up amounts shall be credited to the
Participant's Account on the last day of the Plan Year with
respect to which the amounts would have been contributed to the
Basic Plans had it not been for the limitations imposed by the
Code.
The Corporation shall establish the Rabbi Trust and make
contributions to it for the purpose of providing a source of
funds to meet the liabilities under the Plan.
Contributions to the Rabbi Trust shall be made by the Corporation
on the third Thursday of January of each year, or as soon
thereafter as administratively practical and can be made in the
form of cash or Stock.
Contributions made in Stock will generally be acquired through
purchase on the open market by a third party purchasing agent on
the date upon which the Contributions are made by the
Corporation.
Page 5
It is contemplated that the Rabbi Trust will generally invest all
cash contributions made to it in Stock as soon as
administratively practical following each Plan Year for which
contributions are made. If cash contributions are made to the
Rabbi Trust which are not immediately invested in Stock, or the
Rabbi Trust receives cash dividends on Stock which are not
immediately reinvested, such amounts shall be invested in
interest bearing accounts and accrue interest until invested in
Stock.
The Account of each Participant shall be adjusted at least
annually or more frequently as deterrnined by the Special
Projects Committee. For each measurement period, any interest,
dividends, gains, losses, appreciation or depreciation of the
assets (i.e., principally Stock and interest bearing accounts) of
the Rabbi Trust shall be accounted for and used to adjust the
value of the Participant's Account on a reasonable basis as
determined by the Special Projects Committee.
Each Participant shall be entitled to the full amount of all
appreciation in value of any Stock allocated or considered
allocated to his or her Account, including, without limitation,
all stock and cash dividends, stock splits, or rights offerings,
subject to all vesting requirements, as set forth in Article V.
ARTICLE IV
TIMING OF BENEFITS
Payments of benefits under this Plan shall be paid within 30 days
of the later of attainment of age 65 or separation from service.
In the event that the Participant shall die or become disabled
prior to separation from service, any amount due him or her under
this Agreement will vest irnrnediately and will be paid at that
time to the Participant, the Participant's spouse or such other
Beneficiary as the Participant shall have designated. With
respect to any benefit payments under this Plan, the Corporation
shall withhold as required by applicable tax law.
Benefits will be paid to the Participant in cash or Stock, or a
combination of both, at the option of the Corporation. The
Corporation shall have the right to direct the Trustee of the
Rabbi Trust to sell sufficient shares of Stock to allow the Rabbi
Trust and/or the Corporation, as appropriate, to make the proper
tax withholdings and deposits as required by law.
In the event a Participant encounters a hardship resulting from
circumstances of sufficient severity that a Participant is
confronted by present or impending financial ruin, the Special
Projects Committee may permit a distribution of the vested value
of the Participant's Accounts up to an amount necessary to cure
the hardship. Any request for such a distribution must be made by
the Participant in writing to the Special Projects Committee for
disposition.
In the event of involuntary termination or Diminution of Status
of Participant's employment other than for cause, in connection
with or within two years after a Change in Control, payment of
all vested benefits due under this Plan shall be made in a lump
sum cash amount within 30 days after the effective date of
involuntary termination or Diminution of Status.
Page 6
ARTICLE V
VESTING
Subject to the right of the Corporation to discontinue the Plan,
as provided in Article VIII hereof, a Participant shall have a
nonforfeitable interest in benefits payable under the Plan to the
same extent the Participant is vested in his or her benefits
under the Basic Plans.
Notwithstanding the above, upon a Change in Control, all benefits
under the Plan shall be imrnediately vested. Should a Participant
retire before the age of 65, the Special Projects Committee shall
have the discretion to immediately vest all benefits accrued by
the Participant under the Plan.
ARTICLE VI
FUNDING
Benefits under this Plan shall be paid from the general assets of
the Corporation as set aside in the Rabbi Trust. This Plan shall
be administered as an unfunded plan which is maintained primarily
for the purpose of providing supplemental retirement compensation
"for a select group of management or highly compensated
employees" as set forth in Sections 201(2), 301(3), and 401(a)(1)
of the Act, and is not intended to meet the qualification
requirements of Section 401 of the Code. Any assets set aside in
the Rabbi Trust shall not be deemed to be the property of the
Participant. No Participant or Beneficiary shall be entitled to
receive any payment for benefits under this Plan from the
qualified trust maintained for the Basic Plans.
ARTICLE Vll
PLAN ADMINISTRATION
This Plan shall be operated under the direction of the Board of
Directors and administered by the Special Projects Committee in a
manner consistent with the operation and adrninistration of the
Basic Plans. A Special Projects Committee decision in any matter
involving the interpretation and application of this Plan shall
be final and binding. All questions or interpretations shall be
governed by the local laws of the state of Ohio unless
specifically preempted by the Act.
Page 7
ARTICLE VIII
AMENDMENT AND DISCONTINUANCE
Mid Arn, Inc. hereby reserves the right and power, by action of
its Board of Directors, to amend, suspend or terminate this Plan
in whole or in part, at any time. However, in no event shall Mid
Am, Inc. have the right to eliminate or reduce any benefit which
has been vested or become nonforfeitable under the Plan, subject
to Article V hereof. This Plan confers no additional rights to
any Participant or Employee of the Corporation and shall not be
construed to be a prornise to continue the employment of any
Employee or a Participant.
IN WITNESS WHEREOF, this instrument has been executed at Bowling
Green, Ohio this
day of , 19
MID AM, INC.
By:
Witness
Page 8
MID AM, INC.
TRUST AGREEMENT
January 1993
MID AM, INC.
TRUST AGREEMENT
THIS AGREEMENT made this day of , 19 , by and
between Mid Am, Inc. (the Corporation) and Mid Am Bank and Trust
(Trustee):
WHEREAS, the Corporation has adopted the Mid Am, Inc. Pension
Make-up Plan, a nonqualified deferred compensation plan designed
to replace certain retirement benefits; and.
WHEREAS, the Corporation has incurred or expects to incur
liability under the terms of such Plan with respect to the
individuals participating in such Plan; and
WHEREAS, the Corporation wishes to establish a trust (hereinafter
called "Trust") and to contribute to the Trust assets that shall
be held therein, subject to the claims of the Corporation's
creditors in the event of the Corporation's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries
in such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the
status of the Plan as an unfunded plan maintained for the purpose
of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Corporation to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan.
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as
follows:
Page 1
SECTION 1
ESTABLISHMENT OF TRUST
The Corporation hereby deposits with Trustee in trust Mid Am
Stock, which shall become the principal of the Trust to be held,
administered and disposed of by Trustee as provided in this Trust
Agreement.
The Trust hereby established shall be irrevocable.
The Trust is intended to be a grantor trust, of which the
Corporation is the grantor, within the meaning of subpart E, part
I, subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, and shall be construed accordingly.
The principal of the Trust, and any earnings thereon shall be
held separate and apart from other funds of the Corporation and
shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Plan
participants and their beneficiaries against the Corporation. Any
assets held by the Trust will be subject to the claims of the
Corporation's general creditors under federal and state law in
the event of Insolvency, as defined in Section 3(a) herein.
The Corporation, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other property
in trust with Trustee to augment the principal to be held,
administered and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or
beneficiary shall have any right to compel such additional
deposits.
SECTION 2
PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFlCIARIES
The Corporation shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each
Plan participant (and his or her beneficiaries), that provides a
formula or other instructions acceptable to Trustee for
determining the amount so payable, the form in which such amount
is to be paid (as provided for or available under the Plan), and
the time of commencement for payment of such amounts. Except as
otherwise provided herein, Trustee shall make payments to the
Plan participants and their beneficiaries in accordance with such
Payment Schedule. The Trustee shall make provision for the
reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment
of benefits pursuant to the terms of the Plan and shall pay
amounts withheld to the appropriate taxing authorities or
deterrnine that such amounts have been reported, withheld and
paid by the Corporation.
Page 2
The entitlement of a Plan participant or his or her beneficiaries
to benefits under the Plan shall be determined bv the Corporation
or such party as it shall designate under the Plan, and any claim
for such benefit shall be considered and reviewed under the
procedures set out in the Plan.
The Corporation may make payment of benefits directly to Plan
participants or their beneficiaries as thev become due under the
terms of the Plan. The Corporation shall notify Trustee of its
decision to make pavment of benefits directly prior to the time
amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Corporation shall make
the balance of each such payment as it falls due. Trustee shall
notify the Corporation where principal and earnings are not
sufficient.
SECTION 3
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN THE CORPORATION IS INSOLVENT
Trustee shall cease payment of benefits to Plan participants and
their beneficiaries if the Corporation is Insolvent. The
Corporation shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Corporation is unable to pay its debts
as they become due, or (ii) the Corporation is subject to a
pending proceeding as a debtor under the United States Bankruptcy
Code, or (iii) the Corporation is determined to be insolvent by a
banking authority.
At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall
be subject to clairns of general creditors of the Corporation
under federal and state law as set forth below.
The Board of Directors and the Chief Executive Officer of the
Corporation shall have the duty to inform Trustee in writing of
the Corporation's Insolvency. If a person claiming to be a
creditor of the Corporation alleges in writing to Trustee that
the Corporation has become Insolvent, Trustee shall determine
whether the Corporation is Insolvent and pending such
determination, Trustee shall discontinue payment of benefits to
Plan participants or their beneficiaries.
Unless Trustee has actual knowledge of the Corporation's
Insolvency, or has received notice from the Corporation or a
person claiming to be a creditor alleging that the Corporation is
Insolvent, Trustee shall have no duty to inquire whether the
Corporation is Insolvent. Trustee may in all events rely on such
evidence concerning the Corporation's solvency as may be
furnished to Trustee and that provides Trustee with a reasonable
basis for making a determination concerning the Corporation's
solvency.
If at any time Trustee has determined that the Corporation is
Insolvent, Trustee shall discontinue payments to Plan
participants or their beneficiaries and shall hold the assets of
the Trust for the benefit of the Corporation's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Plan participants or their beneficiaries to pursue
their rights as general creditors of the Corporation with respect
to benefits due under the Plan or otherwise.
Page 3
Trustee shall resume the pavment of benefits to Plan participants
or their beneficiaries in accordance with Section 2 of this Trust
Agreement onlv after Trustee has determined that the Corporation
is not Insolvent (or is no longer lnsolvent).
Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or
their beneficiaries under the terrns of the Plan for the period
of such discontinuance, less the aggregate amount of any
payrnents made to Plan participants or their beneficiaries by
the Corporation in lieu of the payments provided for hereunder
during any such period of discontinuance.
SECTION 4
INVESTMENT AUTHORITY
Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by the Corporation. All
rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no
event be exercisable by or rest with Plan participants.
The Corporation shall have the right at anytime, and from time to
time in its sole discretion, to substitute assets of equal fair
market value for any asset held by the Trust. This right is
exercisable by the Corporation in a nonfiduciary capacity without
the approval or consent of any person in a fiduciary capacity.
SECTION 5
DISPOSITION OF INCOME
During the term of this Trust, all income received by the Trust,
net of expenses and taxes, shall be accumulated and reinvested.
SECTION 6
ACCOUNTING BY TRUSTEE
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Corporation and Trustee.
Within 45 days follo~ving the close of each calendar year and
within 45 days after the removal or resignation of Trustee,
Trustee shall deliver to the Corporation a written account of its
adrninistration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
Page 4
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments
purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other
property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be.
SECTION 7
RESPONSIBILITY OF TRUSTEE
Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person
acting in like capacity and familiar with such matters would use
in the conduct of an enterprise of a like character and with like
aims, provided, however, that Trustee shall incur no liability to
any person for any action taken pursuant to a direction, request
or approval given by the Corporation which is contemplated by,
and in conformity with, the terrns of the Plan or this Trust and
is given in writing by the Corporation. In the event of a dispute
between the Corporation and a party, Trustee may apply to a court
of competent jurisdiction to resolve the dispute.
Trustee may consult with legal counsel (who may also be counsel
for the Corporation generally) with respect to any of its duties
or obligations hereunder.
Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist
it in performing any of its duties or obligations hereunder.
Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise
herein, provided, however, that if an insurance policy is held as
an asset of the Trust, Trustee shall have no power to name a
beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any person
the proceeds of any borrowing against such policy.
Notwithstanding anv powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any
power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of
section 301.7701-2 of the Procedure and Administrative
Regulations promulgated pursuant to the Internal Revenue Code.
SECTION 8
COMPENSATION AND EXPENSES OF TRUSTEE
The Corporation shall pay all administrative and Trustee's fees
and expenses. If not so paid, the fees and expenses shall be paid
from the Trust.
Page 5
SECTION 9
RESIGNATION AND REMIOVAL OF TRUSTEE
Trustee may resign at any time by written notice to the
Corporation, which shall be effective 30 days after receipt of
such notice unless the Corporation and Trustee agree otherwise.
Trustee may be removed by the Corporation on 30 days notice or
upon shorter notice accepted by Trustee.
Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred
to the successor Trustee. The transfer shall be completed within
60 days after receipt of notice of resignation, removal or
transfer, unless the Corporation extends the time limit.
If Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 10 hereof, by the effective date of
resignation or removal under paragraph(s) (a) (or (b)) of this
section If no such appointment has been made, Trustee may apply
to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative
expenses of the Trust.
SECTION 10
APPOINTMENT OF SUCCESSOR
If Trustee resigns (or is removed) in accordance with Section
9(a) or (b) hereof, the Corporation may appoint any third party,
such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor
to replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee,
who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The
former Trustee shall execute any instrument necessary or
reasonably requested by the Corporation or the successor
Trustee to evidence the transfer.
SECTION 11
AMENDMENT OR TERMlNATION
This Trust Agreement may be amended by a written instrument
executed by Trustee and the Corporatlon. Notwithstanding the
foregoing, no such amendment shall conflict with the terms of the
Plan or shall make the Trust revocable.
Page 6
The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to
benefits pursuant to the terrns of the Plan. Upon termination of
the Trust any assets remaining in the Trust shall be returned to
the Corporation.
SECTION 12
MISCELLANEOUS
Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
This Trust Agreement shall be governed by and construed in
accordance with the laws of the state of Ohio.
SECTION 13
EFFECTIVE DATE
The effective date of this Trust Agreement shall be , 19
IN WITNESS WHEREOF, this Trust Agreement has been executed at
Bowling Green, Ohio this day of , 19_.
MID AM, INC.
By:
Witness
MID AM, INC. BANK AND TRUST
By:
Witness
Page 7
EXHIBIT 10.7
Form of Change in Control Agreements with Certain Executive
Officers of the Company
Change in Control Agreements
In order to assure continuity of management and operations, the
Company and its subsidiaries have Change in Control Agreements
(the "Agreements") with certain of their executive officers.
During the term of the Agreements, the executive officers have
agreed, among other things, to devote their time, skill, energy
and attention to the business of the Company and its subsidiaries
and to perform their duties in a diligent, trustworthy, loyal,
businesslike and efficient manner. The base salary of these
employees will continue to be determined in accordance with
normal corporate procedures and can be adjusted at any time. In
addition, the executive officers will continue to participate in
the benefit plans available to all employees.
Pursuant to the Agreements, the Company and its subsidiaries
could terminate an executive officer's employment without
liability under the contract for any reason, or for no reason,
with or without notice. The Agreements do not change the
employees' status as employees at will in accordance with the
laws of the State of Ohio. In the event of involuntary
termination or diminution of status, without cause, after a
change in control (as defined), the employees would be entitled
to compensation under the Agreements in an amount equal to
between one and one-half to two and one-half times the employee's
average total compensation, depending upon the officer's level
for the immediately preceding two years, payable in lump sum or
monthly installments. However, the Company and any of its
subsidiaries are not obligated to pay any amount which is in
excess of the then maximum amount which they can deduct for
federal income tax purposes. For purposes of the Agreements, a
change in control is defined as a merger or consolidation with or
into any other corporation where the Company is not the surviving
corporation, certain situations involving the issuance of,
ownership, or control of in excess of 24.99 percent of the
outstanding common stock or assets of the Company, or the
removal, termination or retirement of more than 49 percent of the
members of the Board of Directors.
The form of Change in Control Agreement follows this description.
CHANGE IN CONTROL AGREEMENT
This Change in Control Agreement is entered into ,
19 , by and between Mid Am, Inc. ("Company") and , a resident of
, Ohio ("Employee").
ARTICLE I.
EMPLOYMENT
Section 1. Emplovment. Company shall employ Employee and Employee
shall accept employment with Company upon the terms and subject
to the conditions set forth in this Agreement.
Section 2. Duties and Services. Employee shall be employed in the
capacity of - and shall have such other duties and
responsibilities as are designated by the Board of Directors from
time to time consistent with Employee's level of authority and
responsibility with Company. Employee agrees to perform
designated duties and services and to devote Employee's full and
exclusive business time, skill, best efforts and attention
(excluding vacations and other leaves of absence) to promote
the business of Company and to perform faithfully to the fullest
extent of Employee's ability all of Employee's duties under this
Agreement. Employee further agrees, upon any appointment or
election to the Board of Directors of Company, Company's parent,
or any of Company's affiliates, to accept such appointment or
election and to devote Employee's best efforts to perform any
duties as director.
Section 3. Term. The term of this Agreement ("Employment") shall
begin on the date above and shall continue until the first
anniversary of the Agreement, unless sooner terminated pursuant
to Article II, Section 1. This Agreement shall be automatically
renewed for additional one year periods following the original
term, at the end of each subsequent one year period, upon the
same terms and conditions.
Section 4. Place of Emplovment. Employee's initial place of
employment is. However, Company may require that Employee work at
any other place as Company may direct. If Employee is required to
relocate, however, Company shall pay Employee's reasonable moving
expenses actually incurred in accordance with Company policy.
Section 5. Compensation. Company shall pay to Employee as
compensation for services rendered during the Employment such
salary, bonus, commission or other remuneration as the Board of
Directors of Company may determine from time to time.
Section 6. Adherence to Standards. Employee shall comply with the
policies, standards, rules and regulations of Company from time
to time established including, but not limited to, rules
established by Company covering hours of work, vacation periods,
sick leave and other terms and conditions of the Employment.
Section 7. Expense Reimbursement. Company shall reimburse
Employee for authorized travel and other reasonable expenses
actually incurred in promoting, fostering, furthering and
perpetuating the business of Company upon receipt and approval by
Company of expense vouchers prepared by Employee and submitted to
Company promptly after such expenses are incurred.
Section 8. Benefits. Employee shall be included, to the extent
eligible, in any and all benefit plans and policies which apply
to Company's salaried employees generally.
Section 9. Authority. Except for the authority granted to the
officers of Company by Company's Code of Regulations, as amended
from time to time, Employee has no authority to commit or
obligate Company, financially or otherwise, without Company's
prior written approval.
Section 10. Other Emplovment. Employee shall refrain from acting
in any other employment or consulting capacity without the prior
written consent of Company. It is Company's intention that
Employee devote all of Employee's work effort towards the
fulfillment of Employee's obligations under this Agreement.
Employee may in any event hold securities in any publicly held
corporation and may serve as a member of the board of directors
of any business which is not in competition with Company.
ARTICLE II.
TERMINATION OF EMPLOYMENT
Section 1. Termination for Cause. If Employee is terminated for
"cause", then Company's obligation under this Agreement to make
any further payments to Employee or to continue any benefits
shall cease. "Cause" shall mean:
A. Misappropriating any funds or property of Company;
B. Being convicted of a felony;
C. Mismanaging the assets of Company;
D. Inability to fulfill the duties of the position for a period
longer than three consecutive months;
E. Gross incompetence, gross insubordination, willful misconduct,
dishonesty, or gross neglect in the performance of the duties
of the position;
F. Material breach of this Agreement;
G. Being under the habitual influence of alcohol or other drugs;
or
H. (i). If Employee is suspended from office or temporarily
prohibited from participating in the conduct of Company's
affairs by any regulatory agency, Company's obligations under
this Agreement shall be suspended upon suspension or
prohibition. Once the matter is resolved and Employee is
permitted to return to his or her position, the Company, in
its sole discretion, may reinstate, in whole or in part, any
of the obligations.
(ii). If Employee is removed from office and/or permanently
prohibited from participating in the conduct of Company's
affairs by any regulatory agency, Company's obligations
under this Agreement shall terminate, but vested rights of
the parties shall not be affected.
Section 2. Involuntary Termination or Diminution of Status
Following Change in Control. Employee shall be entitled to
certain payments and benefits upon involuntary termination or
Diminution of Status, as defined below, following a Change in
Control.
A. Compensation. In the event of involuntary termination or
Diminution of Status of Employee's employment other than for
cause, as defined above, in connection with or within two years
after a Change in Control, Company shall pay to Employee a lump
sum cash amount or monthly installments, as Employee chooses,
equal to the product of 1.5 times the Employee's Average Annual
Compensation. For purposes of this subparagraph, Average Annual
Compensation shall mean either: (i) the average total annual
compensation (salary and incentive) payable during the preceding
two years; or (ii) in the event that the Employee shall have been
employed by the Company less than two years, the annualized
average total compensation (salary and incentive) payable during
the period in which Employee has been employed by the Company. If
Employee chooses to receive this payment in a lump sum, this
amount shall be paid within 30 days after the effective date of
involuntary termination or Diminution of Status. If Employee
chooses to receive this payment in a series of equal monthly
installments over a one and one half year period, payments shall
be made in accordance with the payroll practice of Company but no
less frequently than once a month. These payments are subject to
reduction to the extent necessary so that they do not constitute
"excess parachute payments" under the Internal Revenue Code and
so that they violate no applicable law governing executive
compensation.
B. Continuation of Benefits. In addition, all ESOP contributions
to Employee's account, all stock option grants which are not
vested at the date of termination or Diminution of Status, and
all amounts credited to Employee's SERP account at that time, if
any, shall immediately vest and become due and payable by
Company. During the one and one-half year period after
involuntary termination or Diminution of Status of Employee's
employment, Employee shall also be entitled to participate in the
Company's health or medical plan, at a level identical to that
in effect at the time of termination or Diminution of Status at
Company's expense, regardless of whether Company is partially or
fully self-insured. Company will continue payment for these
benefits unless impermissible under applicable law. These
payments are subject to reduction to the extent necessary so that
they do not constitute "excess parachute payments" under the
Internal Revenue Code and so that they violate no applicable law
governing executive compensation. These payments may be
terminated if Employee receives comparable benefits
<PAGE>
through other full-time employrnent with an unaffiliated
employer. Upon expiration of this one and one-half year period,
Employee shall be perrnitted to participate in Company's health
or medical plan, at Employee's cost (which cost shall be equal to
that charged to COBRA participants) until Employee is eligible
for Medicare.
Section 3. Definitions.
A. "Change in Control" means any one or more of the following
events: (a) the merger or consolidation of Employer with or into
any other corporation and Employer is not the surviving
corporation; (b) in excess of 24.99 percent of the outstanding
cornmon stock of Employer is owned, held or controlled by an
entity, person or group acting in concert with the power to
control the Company as that terrn is defined in Rule 405 of the
Securities Act of 1933; (c) the sale or exchange of in excess of
24.99 percent of the assets of Employer to any entity, person, or
group acting in concert; (d) the recapitalization,
reclassification of securities or reorgar~ization of Employer
which has the effect of either subpart (b) or (c) above; (e) the
issuance by Employer of securities in an amount in excess of
24.99 percent of the outstanding common stock of Employer to any
entity, person, or group acting in concert and intending to
exercise control of Employer or (f) the removal, termination or
retirement of more than 49 percent of the members of the Board
of Directors.
B. "Diminution of Status" means a material diminution of or
interference with Employee's duties, responsibilities and
benefits. By way of example and not by way of limitation, any of
the following actions, if unreasonable or materially adverse to
Employee, shall constitute diminution or interference urlless
consented to in writing by Employee: (1) a reduction in the size
or a change in the location of Employee's office; (2) a reduction
or adverse change in the scope or nature of the secretarial or
other administrative support of Employee; (3) a reduction or
adverse change in Employee's title or decision-making
responsibilities; (4) a reduction in the number or seniority of
other Company personnel reporting to Employee, other than as part
of a Company-wide reduction in staff, or a reduction in the
frequency with which personnel are to report to Employee; (5) an
increase in the number of, or a decrease in the seniority of, the
persons (other than the Board of Directors) to whom Employee must
report; or an increase in the frequency of, or in the nature of
matters with respect to which, reports by Employee shall be
required; (6) a reduction or adverse change in the salary,
perquisites, benefits, contingent benefits or vacation time which
had previously been provided to Employee, other than as part of
an overall program applied uniformly and with equitable effect to
all members of the senior management of the Company; and (7) a
material increase in the required hours of work or the workload
of Employee.
ARTICLE III.
OTHER TERMS
Section 1. Governing Law. This Agreement and all questions
relating to its validity, interpretation, performance and
enforcement shall be governed by the laws of the State of Ohio.
Section 2. No Duty to Mitigate. Employee has no duty to mitigate
the payment of any compensation or benefits received under this
Agreement and any amount earned by Employee after termination or
Diminution of Status shall not reduce the amount owed by Company
pursuant to the terms of this Agreement.
Section 3. Damages. Employer and Employee agree that no damages
shall be payable upon Involuntary Termination or Diminution of
Status prior to a Change in Control, regardless of whether
Involuntary Termination or Diminution of Status occur with or
without notice, or with or without reason. If such action occurs
after a Change in Control, Article II, Section 2 is controlling
on the issue of damages.
Section 4. Entire Agreement. This Agreement constitutes the
entire agreement between the parties on this subject matter and
may not be modified or amended except in a writing signed by both
parties. All prior agreements, representations, statements,
negotiations and understandings are superseded. This Agreement
may not be modified or amended after a Change in Control.
Section 5. Assignability. This Agreement shall be freely
assignable in whole or in part by Company but may not be assigned
by Employee.
Section 6. Waiver. Neither the failure nor any delay on the part
of Company to exercise any right, remedy, power or privilege
hereunder shall operate as a waiver, nor shall any single or
partial exercise of any right, remedy, power or privilege
preclude any other or further exercise of the same or any other
right, remedy, power, privilege, nor shall any waiver of any
right, remedy, power or privilege with respect to any occurrence
be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
Section 7. Binding Obligation. This Agreement shall be binding on
Employee's heirs, legal representatives and assigns and shall be
binding on any successors and assigns of Company. All terms and
conditions of this Agreement shall survive the termination of the
Employment.
Section 8. Severability. All clauses of this Agreement are
distinct and severable, and if any clause shall be deemed
invalid, illegal or unenforceable in whole or in part, for any
reason, and such clause cannot be amended so as to make it
enforceable, it shall not affect the legality or enforceability
of any other clause of this Agreement.
Section 9. Counterparts. This Agreement may be executed in more
than one counterpart and each counterpart shall be considered an
original.
Section 10. Headings. The paragraph headings are for convenience
only and shall not in any way affect the interpretation or
enforceability of any provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
WARNING - READ CAREFULLY - THIS AGREEMENT AFFECTS THE CONDITIONS
OF YOUR EMPLOYMENT.
MID AM, INC.
By:
Its:
EMPLOYEE
EXHIBIT 13.1
MID AM, INC. 1995 ANNUAL REPORT
TABLE of CONTENTS
Message from Management Page 2
Banking Page 6
Technology Page 8
Collections Page 9
Brokerage Page 10
Selected Quarterly Data Page 11
Summary of Financial Data Page 12
Management's Discussion and Analysis Page 13
Report of Independent Accountants Page 29
Consolidated Financial Statements Page 30
Notes to Consolidated Financial Statements Page 35
Mid Am, Inc. Eight Year Performance Summary Page 47
Executive Officers and Boards of Directors Page 49
Affiliate Banking Center Boards Page 50
Affiliate Presidents Page 51
Mid Am, Inc. Board of Directors Page 52
Shareholder Information Inside Back
FINANCIAL HIGHLIGHTS
(Dollars in thousands, except
per share and ratio data)
Percentage
1995 1994 Change
For the Year
Net income $24,967 $23,253 7.37
Return on:
Average total assets 1.17 1.14
Average common shareholders'
equity 14.51 13.88
Per Common Share Data
Primary net income $1.16 $1.07 8.41
Fully diluted net income 1.11 1.03 7.77
Dividends 0.63 0.59 6.78
Book value at year end 8.40 7.61 10.38
At Year End
Assets $2,204,751 $2,078,789 6.06
Loans 1,475,651 1,433,289 2.96
Deposits 1,860,142 1,736,492 7.12
Common shareholders' equity 159,269 145,052 9.80
Total shareholders' equity 194,838 185,252 5.17
Average for the Year
Assets $2,138,638 $2,038,637 4.91
Loans 1,450,629 1,327,397 9.28
Deposits 1,788,386 1,725,169 3.66
Common shareholders' equity 153,112 146,473 4.53
Total shareholders' equity 191,072 186,710 2.34
OTHER FINANCIAL DATA
(Dollars in thousands, except per share data)
Fully
Net Provision Primary Diluted
Interest For Credit Net Earnings Earnings
Income Losses Income Per Share Per Share
1995
Fourth Quarter $20,718 $ 994 $6,220 $0.29 $0.28
Third Quarter 20,444 864 6,472 0.30 0.29
Second Quarter 20,552 734 6,467 0.30 0.28
First Quarter 20,513 410 5,808 0.27 0.26
1994
Fourth Quarter $20,948 $1,065 $4,503 $0.20 $0.20
Third Quarter 20,648 (910) 6,465 0.30 0.29
Second Quarter 20,165 711 5,744 0.26 0.25
First Quarter 19,246 358 6,541 0.31 0.29
Page 1
MESSAGE FROM MANAGEMENT
1995 was a record year for the Company and a particularly
rewarding year for the Company's shareholders. 1995's net income
of $25 million represents the highest earnings in the Company's
history. Fully diluted earnings per share in 1995 were $1.11, as
compared to $1.03 in 1994. The Company's return on average
common shareholders' equity of 14.51 percent and return on total
assets of 1.17 percent represent solid operating performance near
the Company's long-term earnings objectives.
The acid test of the performance of any company is, or should be,
its ability to increase shareholder value over time. 1995 was a
good year for bank stocks in general and for our Company in
particular. We are very pleased that our common shareholders saw
the value of their stock increase from $13.52 at December 31,
1994, to $16.41 at December 31, 1995. This appreciation, combined
with the dividend yield of 4.7 percent, provides an overall
return of 26.5 percent. This represents an outstanding return
for our shareholders but, even more importantly, by taking
advantage of our dividend reinvestment program, many of our
shareholders have received an annually compounded rate of return
of 17.8 percent since December 31, 1988, the year our Company was
formed. As the accompanying chart illustrates, on average since
its inception, an investment in Mid Am, Inc.'s common stock has
proven to be a very wise one.
Return to Investors
Compound Average Total Return Since 1988
Mid Am, Inc. 17.8 percent
S and P 500 15.5 percent
S and P Major Regional Bank Index 17.5 percent
Page 2
Even though we achieved record earnings, 1995 was not without its
difficulties. Significant pressure was placed on our net interest
margin from the combination of a declining rate environment and
a flattening yield curve. Simply put, our net interest margin -
the difference between what we pay our depositors and what we
receive from our borrowers - accounts for 70.15 percent of our
total income. We found it necessary to compensate for this
decline in margin by reducing our non-interest (or operating)
expense, as well as by increasing our non-interest income. Our
ability to decrease our operating expense was made possible by
the success of "The Perfect 10," an expense reduction program
announced in mid-year 1994. The objective of this program was to
reduce our operating expense by nearly $6.5 million in 1995. This
program was very successful and contributed greatly to our 1995
performance. We were also quite successful in increasing our
non-interest income.
A very significant event in 1995 was our merger with MFI
Investments Corp., a broker/dealer firm headquartered in Bryan,
Ohio. The merger was consummated on July 31, 1995. MFI is a
36-year-old company with 40 employees, along with 250 independent
brokers operating in 75 offices in 19 states throughout the
country. Our merger with MFI is very unique and has been followed
with interest in the financial press. Consequently, Mid Am, Inc.
is recognized as being on the leading edge of the evolution of
traditional banking into more broad-based financial services.
As sometimes happens, some of our best strategic initiatives
develop differently than we have planned. As we pursued MFI, our
initial intent was to acquire the framework and the expertise to
establish full service brokerage offices throughout our 87 branch
locations. While this will, in fact, be accomplished by our
merger with MFI, throughout the process we recognized that the
potential impact may be much broader. MFI's core broker/dealer
business has the potential to grow significantly and add a
corresponding amount of fee-based income to the Company's bottom
line.
We are just beginning to understand the full impact of the nearly
250 independent brokers throughout the country. Focus group
sessions with top producers and other exploratory conversations
quickly evidenced the brokers' significant need to provide bank
products to their clientele. Many of these brokers are financial
advisors and need the ability to fully service their clients.
These sales-trained, commission-based professionals provide our
Company with a national distribution network without the cost
usually associated with an expansion of this magnitude. We intend
to develop a broad line of bank products to be sold on a
commission basis through this distribution network. We expect the
number of brokers to grow significantly and are quite excited
about the potential impact of this venture in the coming years.
Page 3
On June 1 we acquired Certified Credit Systems in Sarasota,
Florida, a small addition to the Company's collection affiliate,
CCB Services. The collection business is undergoing consolidation
and major technological change, providing unlimited
opportunities. We are pleased with the progress that we are
making with this relatively new line of business and expect to
experience significant growth.
Throughout 1995, our banking affiliates experienced strong
deposit growth. Total deposits increased $123 million or 7.1
percent over the prior year. On March 1, 1995, we completed a
merger with ASB Bankcorp, Inc., the parent of Adrian State Bank
in Adrian, Michigan. This is the Company's first venture
out-of-state. The $128 million Adrian State Bank is the beginning
of the Company's expected expansion into the southern Michigan
market. We are enthusiastic about this new market and
particularly pleased with the fine addition of the board of
directors, officers and employees to the Mid Am family. We
studied many other bank and savings and loan mergers and
acquisitions throughout 1995. However, the Company's continuing
policy of refusing to accept any significant dilution to its
existing shareholders precluded the possibility of these other
expansion opportunities.
Our Company has made a very significant investment in enhancing
our technological capabilities. Years ago we began to invest in
technology for the express purpose of reducing cost. Technology
is quite expensive, and the cost savings became less of a focus.
What technology has done, however, is greatly enhance customer
service and improve management information systems. Our Company
is dedicated to being on the leading edge of technology. We will
implement new technology that has been proven, and will carefully
evaluate experimental technology. While this strategy assumes
that some of the technology we implement will be very near the
cutting edge, we have chosen to be selective in implementing
products and services that meet existing and immediate customer
needs.
Our future remains challenging and quite exciting. We expect our
Company to become far more than just a bank. We are convinced
that five years from now banks will not even resemble banks of
five years ago. Overcapacity, consolidation, margin pressures,
cost containment, technological change, and nationwide banking
are combining to create an environment where change is not the
exception but, instead, the rule. Operating efficiently and
containing costs will be a key ingredient in our future success.
We have proven our ability to accomplish this objective
throughout 1994 and 1995. Most importantly, our ability to
generate non-interest income will determine the future success of
our Company. We have positioned ourselves for this effort, have
made significant progress and are committed to focusing all our
efforts on this, our primary objective. It is our plan to
increase our gross fee-based income by $20 million over the next
three years. These efforts are supported by a very strong balance
sheet with over $194 million in capital, a total market
capitalization of over $363 million and very little debt or
intangible burden.
Page 4
It's only fair to ask, "Well, that's all well and good, but I can
read that in most any company's annual report. What's different
about Mid Am, Inc. that will make it successful?" Many years ago,
Aristotle defined three significant characteristics that must be
present in a successful enterprise: logos, pathos and ethos. The
first is "logos" or ability. In an industry undergoing change at
a break-neck pace, a Company can only be as good as the knowledge
and ability of its management and employees allows. We are
dedicated to the education of our directors, officers and
employees, both internally and externally. We are committed to
attracting and retaining the best and the most talented
employees. We believe that, in fact, we have attracted one of the
finest teams of senior managers to be found in our business. We
are well prepared to succeed.
The second attribute, "pathos" or passion, is certainly a
requirement for success. Our Company's over 1,300 employees, 77
corporate and bank directors and 336 advisory board members
together provide extraordinary enthusiasm and an absolute passion
to excel. The Company's commitment to its employees, their
diversity, their empowerment, and the concept of teamwork combine
to create an environment of enthusiasm and, yes, outright
passion.
The third ingredient of success, "ethos" or ethics, is often more
elusive in corporate America. This attribute is perhaps the most
defining attribute of our Company. We are absolutely, totally
committed to doing what we say we'll do. We believe our Company
can only enjoy long-term success if we care not only for our
shareholders, but for our employees, customers and the
communities we serve. While downsizing and pink slips seem to be
standard practice in many companies, we feel an intense loyalty
to our employees and are pleased that even with our many
acquisitions, we have never had a layoff. We expect hard work,
long hours and total commitment from our employees. In turn, we
owe them our best efforts to ensure that their lives will not be
disrupted by a manager's short-sighted efforts to increase the
next month's or the next quarter's bottom line. We realize this
might seem old-fashioned to some of our competitors, but we are
confident that this dedication to our customers, our employees
and our communities will continue to be of substantial benefit to
our shareholders over time.
As the cover of this year's annual report aptly illustrates,
things change. Is Mid Am, Inc. a successful $2.2 billion bank
holding company? Take another look - we're becoming a whole lot
more.
Page 5
BANKING: A TRADITION OF INNOVATION
From the beginning, Mid Am, Inc. banking affiliates have done
things a little differently. In the 1960s, Mid American National
Bank & Trust Company was the first bank in Ohio to use Industrial
Revenue Bond financing to provide low cost funding for
businesses. In the 1970s, Mid Am became the first bank in the
country to provide an ESOP for its employees. In the '80s, the
bank became one of the first 25 Small Business Association
Preferred Lenders in the United States. In the 1990s, First
National Bank Northwest Ohio became the first national bank to
acquire an insolvent savings & loan without any government
assistance. Even with no layoffs, the merger was immediately
profitable. Doing things differently and leading the way to
change have become traditions for Mid Am, Inc. banks.
This innovative approach to a business long thought of as
conventional continues with all Mid Am, Inc. banking affiliates.
Mortgage lending is just one area in which Mid Am, Inc.
affiliates have challenged and improved long-standing practices.
The banks use third-party originators outside their market areas
to generate loans. Jim Burwell, President and CEO of First
National Bank Northwest Ohio, thinks this arrangement can be a
real advantage. "Not having bricks and mortar helps us to be
better. Many times, lenders tend to be anchored in banking
centers. This allows our lenders to be out in the market." The
third-party independent contractor originator concept has
expanded the banks' sales areas tremendously. In 1995, bank
affiliates' third-party originators were located in 15 cities
throughout the country and were responsible for over $10.5
million in new loans.
Another revolutionary mortgage lending innovation is the 1/10
Program. Mortgage loan applicants actually receive an approval
decision within one hour, and may close their loan in 10 days.
This timeframe was unheard of in the industry until it was
implemented by Pat Kennedy, President and CEO of Mid American
National Bank & Trust Company. As Pat explains, "Many banks
across the country have come to our bank to learn how to offer
this program. Most importantly, credit quality has been
scrupulously maintained, and customers are delighted with the
responsiveness and speed of the program."
The SchoolBus Card is another unique innovation that has become
quite popular. An affinity credit card, this eye-catching design
can be marketed on behalf of any school system to support school
activities. Developed in 1995, the card was used to support 35
schools and school districts by year-end.
Other innovations this year include the Instant Interest CD, a
certificate of deposit that pays all the interest upon purchase
instead of at the end of the term. Also new for Mid Am, Inc.
banks will be the offering of insurance financial products.
Page 6
In addition to First National Bank's successful conversion of a
savings and loan in the early 1990s, two Mid Am, Inc. affiliates
were actually formed by combining savings and loans to create
national banks. Converting the characteristICS of a savings and
loan balance sheet into those of a bank has been an ongoing
challenge for both. In 1992, Mid Am, Inc.'s Lima and
Bellefontaine affiliates merged and formed AmeriCom Bank. And in
1993, Xenia and Cincinnati affiliates merged as well, forming
AmeriFirst Bank.
AmeriCom President Cathy Oxner has completed extensive market
research in her communities. "We needed to determine what our
customers wanted and how to best meet their needs." A resulting
slogan, "Giving You More of What You're Asking For" aptly
describes the AmeriCom Bank philosophy.
The AmeriFirst affiliate not only began as a combination of two
savings and loans, it serves two very different geographic
markets, Xenia/Dayton and Cincinnati/Hamilton County. This, too,
creates ongoing challenges for President Don Southwick. "We have
implemented Business Team Unit Accounting to determine the profit
and loss for each banking center. In creating separate balance
sheets and profit and loss statements, each banking center
manager really functions as if he or she were a bank president."
This approach fosters empowerment and accountability of
AmeriFirst employees.
The newest Mid Am, Inc. banking affiliate is actually quite an
old institution. Founded in 1893, the Adrian State Bank became a
Mid Am, Inc. bank in February of 1995. Although the bank is long
established, President Bernie Sikorski is no stranger to
innovation. "We have traditionally chosen our customers; we know
them well and have a long-standing reputation for treating them
well. We combine this reputation with a responsiveness to their
changing needs." In recent surveys, for example, the bank
determined that customers wanted extended hours and indeed, the
new hours have been well received.
Some things have not changed for Mid Am, Inc. banking affiliates.
Asset quality, as always, remains quite strong and exceeds
industry performance. Banking center boards continue to provide
great support for each affiliate. The distinguished men and women
who serve on these boards provide vital information to the banks
to help them serve their communities. The autonomy and
independence of the affiliates are balanced with their
interrelationships and assistance to each other. All mergers have
been completed without any layoffs. This unique philosophy
creates an environment where employees are committed to the
success of the banks. These principles serve as a foundation for
the ever-increasing number of innovations initiated by each
banking affiliate.
"Banking, as it existed in the past, is no longer a viable
business. Dramatic changes in the industry are required to ensure
that banks retain their dominant position in the financial
system," says David Francisco, President and Chief Operating
Officer of Mid Am, Inc. "Our affiliates are leaders in creating
and implementing the dramatic changes required."
Page 7
TECHNOLOGY: IMPROVING CUSTOMER SERVICE THROUGH
TECHNOLOGICAL INNOVATION
Technological improvements for all Mid Am, Inc. affiliates have
been a strong focus for Mid Am Information Services, Inc.
(MAISI). While viewed in the beginning as primarily a cost
saving, efficiency measure, the focus has rapidly moved to
improvements in customer service.
In just the past 2 years, a number of client-focused banking
services have been provided through MAISI. These include:
MAXXUS_A direct deposit and bill collection service,
encompassing cash concentration, state tax payments and
corporate-to-corporate transfers.
EXECUBANC_A computer service where customers can access
account information, transfer funds, issue stop payments,
initiate wire transfers and communicate via E-mail.
TELEBANC_A telephone system for account transactions,
inquiries and payments, as well as deposit and loan rate
inquiries.
In 1995, MAISI's Loan Servicing Department responded to over
39,000 customer inquiries, and MAISI paid over 30,000 tax bills
for an aggregate of over $10 million. MAISI also created an
Internet Home Page to provide potential Mid Am, Inc. investors
with additional information (address:
http://www.wcnet.org/-midaminc).
This focus on customer service is reflected in MAISI's vision
statement. Expressed simply, MAISI employees want to give
customers a great experience and great service. As they say it,
the company is "In Pursuit of WOW!"
Customer service innovations are in addition to the advances made
in services provided to MAISI's internal customers, all Mid Am,
Inc. affiliates. MAISI staffs a 12-hour help desk for all
technology users in the Company. Last year, couriers logged a
million miles in travel, carrying interoffice mail. And
intra-company E-mail messages delivered over the wide-area
network numbered 330,000 in 1995.
The addition of non-banking affiliates is the newest challenge
for MAISI. Both MFI, the brokerage affiliate, and ICS/CCB, the
collections affiliates, rely extensively on the latest
technological developments. Working with MAISI, these two
affiliates can vastly improve the support to their own employees,
as well as service to their clients. MAISI will be an integral
part of their continued success and further development.
Says Mid Am, Inc. Chairman and CEO Edward J. Reiter, "MAISI will
continue to be at the forefront of technological innovation.
Their support and expertise fosters the competitive edge needed
by all of our affiliates."
Page 8
COLLECTIONS: AN INNOVATIVE PROFESSIONAL APPROACH
When Mark Mandula was originally approached about the collection
business in 1988, his first thought was based on stereotypes. "I
would never want to be in the collection business," he said to
his eventual partners, with whom he purchased both International
Credit Service (ICS) in Toledo, Ohio and CCB Services (CCB) in
Clearwater, Florida.
Mandula is now the President and CEO of both ICS and CCB. Why the
change? Mark learned that the collection business is primarily a
technology and sales business. His goal is to motivate consumers
to solve financial problems. He leads his employees in
accomplishing this in a professional and profitable manner. His
65 highly trained employees take a very professional approach in
working with delinquent consumers. Of those employees, 26 are
certified by the American Collectors Association of America.
Like banks, collection companies have had to learn to work
smarter, faster, and more profitably. "A common problem in the
collection industry is a lack of capital for technological
investment. This crucial need has been addressed by our
affiliation with Mid Am, Inc.," says Mandula.
ICS is a credit card collection agency, started in the late 1950s
to serve the oil and gas card industry. In addition, ICS now
serves banks, retail and private label card issuers. This
industry segment is extremely competitive, which is
understandable considering the prevalent use of credit cards.
Over one billion cards are in circulation, with the average
person holding 9.2 cards, and an average amount owed of $2,614.
The collection process gets more and more difficult as each
additional marginal account is added. ICS plans to expand into
check collections and into collections for all Mid Am, Inc.
affiliates.
CCB was 95 percent dependent on check collections when it was
acquired in 1993 by Mandula and his partners. This, too, is an
extremely significant market. Almost $170 million in checks
bounce every day. $60.98 billion in checks were written in 1994
alone. Mandula and his partners recognized the need for
diversification, and CCB now serves commercial accounts as well
as workers' compensation and medical industry collections.
Customers include the Home Shopping Network and Home Depot.
The addition of collection services to the Mid Am, Inc. family of
affiliates is a natural extension for the financial services
company. Not only can banking affiliates prosper from affiliated
collection professionals, but so can the banks' clients. Says
David Francisco, President and COO of Mid Am, Inc., "The
collection industry involves a business that we as bankers know
and understand. It is an industry in the early stages of
consolidation, and we expect these affiliates to grow
significantly, contributing to our non-interest income."
Page 9
BROKERAGE: A NATIONWIDE NETWORK OF INNOVATIVE ENTREPRENEURS
MFI Investments began as a small, storefront broker/dealer in
1959. Chairman and CEO, Cliff Oberlin, joined his father Earl
(one of the original founders) in 1977. The firm began using
independent contractor investment representatives, and its
network of experienced entrepreneurs has grown tremendously since
the firm's inception. MFI recruits only established brokers with
well developed books of business. MFI has increased its field
force by an average of 418 percent a year over the last five
years. MFI was named to the Inc. 500 list of America's Fastest
Growing Private Companies in each of the last three years.
MFI provides back office support, due diligence, continuing
education, flexibility, networking, and recognition to its reps.
The firm prides itself on its emphasis on compliance and its
commendable regulatory history. MFI brokers do not offer any
proprietary products, so they are free to offer products which
best suit their clients' needs.
In recent years, banks have struggled with their need to offer
clients a wider range of products and more competitive rates of
return. One answer has been the formation of alliances with
financial service providers, often providing space and support in
the banks themselves. Too often, this relationship has not been
particularly beneficial, especially to the banks.
Mid Am, Inc. has taken a different approach. Although the initial
plan was to purchase a full service brokerage operation to be
placed in banking centers, executives discovered a better way.
"Gradually, we realized that MFI has about 250 independent reps
in 19 states, which could become a nationwide distribution system
for a lot of our bank products, without the costs associated with
bricks and mortar," explains David Francisco, Mid Am, Inc.
President and COO.
MFI independent brokers will begin to offer home mortgages and
CDs, and will eventually expand to offer a full spectrum of
banking services to their existing clients. In-bank brokers will
also be placed by MFI, and they will be paid an extra incentive
to look for clients outside the bank's own client base. MFI's
brokers are extremely eager to begin selling bank products to
improve their overall client relationship. MFI President Robert
M. Gioia says, "Our experienced brokers are well suited to offer
this full range of products. The arrangement is perfect for our
entrepreneurial approach to the business."
The addition of MFI to the Mid Am, Inc. group aptly demonstrates
the Company's philosophies of support for entrepreneurs and full
financial service to clients.
Page 10
Mid Am, Inc. Selected Quarterly Data
Quarter Ended Dec.31 Sept.30 June 30 March 31
1995
Net interest income $20,718 $20,444 $20,552 $20,513
Provision for credit losses 994 864 734 410
Net income 6,220 6,472 6,467 5,808
Earnings per common share:
Primary 0.29 0.30 0.30 0.27
Fully diluted 0.28 0.29 0.28 0.26
Return on average
total assets (1) 1.13 1.19 1.21 1.13
Return on average common
shareholders' equity (1) 14.07 14.76 15.21 13.99
Net interest margin (1)(2) 4.16 4.13 4.24 4.41
Net charge-offs to
average loans (1) 0.31 0.21 0.17 0.11
1994
Net interest income $20,948 $20,648 $20,165 $19,246
Provision for
credit losses (3) 1,065 (910) 711 358
Net income 4,503 6,465 5,744 6,541
Earnings per common share:
Primary 0.20 0.30 0.26 0.31
Fully diluted 0.20 0.29 0.25 0.29
Return on average
total assets (1) 0.87 1.26 1.14 1.30
Return on average common
shareholders' equity (1) 10.20 15.54 13.72 16.18
Net interest margin (1)(2) 4.45 4.46 4.42 4.21
Net charge-offs to
average loans (1) 0.12 0.15 0.14 0.09
(1) Calculated on an annualized basis.
(2) Net interest income as a percentage of interest-earning
assets, on a tax equivalent basis.
(3) In the third quarter of 1994, First National reduced the
level of its allowance for credit losses by $1.6 million. See the
discussion of"Provision for Credit Losses" and "Summary of Credit
Loss Experience."
The following discussion and analysis represent a review of
Mid Am, Inc.'s consolidated financial condition and results of
operations. Mid Am, Inc. (the Company), a bank holding company,
has five bank subsidiaries, Mid American National Bank & Trust
Company (Mid Am Bank), First National Bank Northwest Ohio (First
National), American Community Bank, N.A. (AmeriCom), AmeriFirst
Bank, N.A. (AmeriFirst), and Adrian State Bank (Adrian); two
collection and credit services companies, Lucas County Credit
Bureau, Inc. dba International Credit Service (ICS) and CCB
Services, Inc. (CCBS); a securities broker/dealer, MFI
Investments Corp. (MFI); MFI Insurance Agency, Inc.; and a data
processing company, Mid Am Information Services, Inc. (MAISI).
This review should be read in conjunction with the consolidated
financial statements and other financial data presented elsewhere
herein. The financial information presented in the Summary
Financial Information and in Management's Discussion and Analysis
and Statistical Information on the following pages has been
restated for all prior periods for the Adrian and MFI mergers
which have been accounted for as poolings-of-interests. Also, all
per share data for prior periods have been restated to reflect
the stock dividend declared and paid in 1995. The major
components of the Company's results of operations and statements
of condition and selected financial ratios for the past five
years are summarized in the following table:
Page 11
<TABLE>
Mid Am, Inc. Summary Financial Data
Year Ended December 31,
(Dollars in thousands, except
shares, per share and ratio data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement
of Earnings Data 1995 1994 1993 1992 1991
Interest income $162,543 $140,571 $139,387 $129,735 $141,290
Interest expense 80,316 59,564 61,057 64,379 84,113
Net interest income 82,227 81,007 78,330 65,356 57,177
Provision for credit losses 3,002 1,224 3,991 4,917 15,142
Net interest income after
provision for credit losses 79,225 79,783 74,339 60,439 42,035
Non-interest and other income 35,955 32,554 34,002 20,002 15,566
Non-interest and other expense 78,416 78,579 72,962 56,151 48,790
Income before income taxes,
extraordinary item and change
in accounting principle 36,764 33,758 35,379 24,290 8,811
Applicable income taxes 11,797 10,505 10,698 6,454 1,798
Income before extraordinary
item and change in
accounting principle 24,967 23,253 24,681 17,836 7,013
Realization of operating
loss carryforward 433
Cumulative effect of change
in accounting principle 1,373
Net income $ 24,967 $ 23,253 $ 24,681 $ 19,209 $ 7,446
Net income available to
common shareholders $ 22,216 $ 20,336 $ 21,763 $ 17,602 $ 7,446
Year Ended December 31,
(Dollars in thousands, except
shares, per share and ratio data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Condition Data (Year End) 1995 1994 1993 1992 1991
Total assets $2,204,751 $2,078,789 $2,067,371 $1,871,849 $1,573,067
Securities available for sale 461,997 212,437 238,125 63,800
Investment and
mortgage-backed securities 252,009 270,623 349,749 360,260
Loans held for sale 12,642 12,963 88,131 68,968 31,506
Loans, net of unearned income 1,475,651 1,433,289 1,265,945 1,200,512 1,028,854
Allowance for credit losses 14,859 14,722 15,157 15,718 12,938
Total deposits 1,860,142 1,736,492 1,769,083 1,630,141 1,447,192
Shareholders' equity 194,838 185,252 183,425 164,792 101,545
Weighted average common shares
outstanding - primary 19,205,000 19,046,000 18,736,000 17,062,000 16,806,000
Weighted average common shares
outstanding - fully diluted 22,592,000 22,627,000 22,310,000 19,026,000 16,950,000
Per Common Share Data
Cash dividends declared $0.63 $0.59 $0.54 $0.50 $0.48
Shareholders' equity 8.40 7.61 7.76 7.29 6.41
Primary:
Income before extraordinary
item and change in
accounting principle 1.16 1.07 1.16 0.95 0.42
Net income 1.16 1.07 1.16 1.03 0.44
Fully diluted:
Income before extraordinary
item and change in
accounting principle 1.11 1.03 1.11 0.94 0.41
Net income 1.11 1.03 1.11 1.01 0.44
Year Ended December 31,
(Dollars in thousands, except
shares, per share and ratio data)
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
Selected Financial Ratios
Return on average total assets 1.17 1.14 1.23 1.18 0.49
Return on average common
shareholders' equity 14.51 13.88 16.39 16.22 7.36
Net interest margin 4.23 4.38 4.30 4.43 4.12
Average loans to average deposits 81.11 76.94 71.54 71.93 73.87
Leverage ratio (1) 8.44 8.36 8.19 8.40 6.16
Average total shareholders' equity
to average total assets 8.93 9.16 8.65 8.04 6.60
Allowance for credit losses to
period end loans 1.01 1.03 1.20 1.31 1.26
Allowance for credit losses to
total non-performing loans 151.14 196.66 156.35 161.66 125.25
Non-performing loans to
period end loans 0.67 0.52 0.77 0.81 1.00
Net charge-offs to average loans 0.20 0.12 0.41 0.31 1.21
(1) The leverage ratio has been calculated by dividing
shareholders' equity, lessintangible assets, by the quarterly
average total assets, less intangible assets.
Page 12
</TABLE>
MANAGEMENT'S DISCUSSION/ANALYSIS AND STATISTICAL INFORMATION
The following discussion and analysis represents a review of the
Company's consolidated financial condition, results of
operations, liquidity and capital resources. This review should
be read in conjunction with the consolidated financial
statements.
Results of Operations
Net income in 1995 increased $1,714,000 or 7 percent to
$24,967,000, as compared to net income in 1994 of $23,253,000 and
$24,681,000 in 1993. Fully diluted earnings per share were $1.11,
up from $1.03 in 1994 and no change from $1.11 in 1993. In 1995,
return on average common shareholders' equity was 14.51 percent,
and return on average assets was 1.17 percent as compared to
13.88 percent and 1.14 percent in 1994, and 16.39 percent and
1.23 percent in 1993. The increase in 1995 earnings was
primarily due to an increase in net gains on sales of loans of
$1,572,000 caused by increased volume in mortgage banking
activities and the adoption of Financial Accounting Standards
Board Statement No. 122, "Accounting for Mortgage Servicing
Rights," expense control and a decrease in deposit premium
expense. The decrease in 1994 earnings compared to 1993 was
primarily attributable to a decrease in net gains on sales of
loans of $6,757,000, offset partially by an increase in net
interest margin and a lower provision for credit losses.
The provision for credit losses increased $1,778,000 or 145
percent in 1995 to $3,002,000. The 1995 provision for credit
losses compared to 1993 was $989,000 lower, a decrease of 25
percent. The 1994 provision was lower than the provisions taken
in 1995 and 1993 because of the reversal of $1,600,000 in the
allowance for credit losses at First National in the third
quarter.
Acquisitions
On July 31, 1995, the Company completed its merger with MFI
Investments Corp. (MFI) of Bryan, Ohio, a full-service,
independent broker/dealer which has approximately 250 financial
consultants in over 19 states. The transaction was accounted for
as a pooling-of-interests and was consummated by the issuance of
314,530 shares of Mid Am, Inc. common stock to MFI shareholders,
of which 156,097 shares are held in escrow at December 31, 1995,
pending resolution of litigation filed against MFI prior to the
merger.
On March 1, 1995, the Company completed its merger with ASB
Bankcorp, Inc. (ASB), parent company of $128 million asset Adrian
State Bank, headquartered in Adrian, Michigan. The transaction
was accounted for as a pooling-of-interests and was consummated
by the issuance of 1,546,662 shares of Mid Am, Inc. common stock
to ASB shareholders.
On November 30, 1994, the Company completed its mergers with
International Credit Service (ICS) and CCB Services, Inc. (CCBS),
collection and credit service companies headquartered in Ohio and
Florida, repectively, with aggregate net collection fee revenues
of $2.4 million for the year ended December 31, 1993. The
transactions were accounted for as poolings-of-interests and were
consummated by the issuance of 483,998 shares of Mid Am, Inc.
common stock to ICS and CCBS shareholders.
On June 4, 1994, the Company completed its merger with Farmers
Savings Bank (Farmers), a $66 million asset bank in Northwood,
Ohio. The transaction was accounted for as a pooling-of-interests
and was consummated by the issuance of 688,084 shares of Mid Am,
Inc. common stock to Farmers shareholders.
On July 6, 1993, the Company completed its merger with Colonial
Federal Savings Bank (Colonial), a $79 million asset thrift in
Bellefontaine, Ohio. The transaction was accounted for as a
pooling-of-interests and was consummated by the issuance of
1,027,644 shares of Mid Am, Inc. common stock to Colonial
shareholders and the payment of $814,417 to dissenting Colonial
shareholders. Colonial was merged with and into AmeriCom on
July 6, 1993.
On April 16, 1993, the Company completed the purchase of four
branch facilities from Home Savings of America, F.S.B. In
connection with the purchase, the Company received tangible
assets of $4,290,000, identifiable intangible assets of
$1,120,000, assumed deposit liabilities of $186,905,000, recorded
goodwill of $4,118,000 and received cash of $177,377,000 which
was subsequently invested in marketable securities.
On March 19, 1993, the Company completed its merger with Apollo
Savings and Loan Company (Apollo), a $93 million asset thrift in
Cincinnati, Ohio. The transaction was accounted for as a
pooling-of-interests and was consummated by the issuance of
1,177,402 shares of Mid Am, Inc. common stock to Apollo
shareholders. At the time of the merger, Apollo merged with Ultra
Bancorp (Ultra), a wholly owned thrift subsidiary of the Company
acquired in 1992, to form AmeriFirst. In September 1993,
AmeriFirst converted from a thrift to a national bank.
Page 13
Net Interest Income
Net interest income, the difference between interest income
earned on interest-earning assets and interest expense incurred
on interest-bearing liabilities, is the most significant
component of the Company's earnings. Net interest income is
affected by changes in the volumes and rates of interest-earning
assets and interest-bearing liabilities and the type and mix of
interest-earning assets and interest-bearing liabilities.
The following table, presented on a tax equivalent basis,
summarizes net interest income for each of the three years in the
period ended December 31, 1995:
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Interest income (1) $164,794 $142,714 $141,378
Interest expense 80,316 59,564 61,057
Net interest income
(tax equivalent basis) $ 84,478 $ 83,150 $ 80,321
Change from prior year 1995 vs. 1994 1994 vs. 1993
Amount Percent Amount Percent
Interest income (1) $22,080 15.47 $ 1,336 0.94
Interest expense 20,752 34.84 (1,493) (2.45)
Net interest income
(tax equivalent basis) $ 1,328 1.60 $ 2,829 3.52
(1) Interest income on securities of states and political
subdivisions and certain loans is exempt from federal income tax.
A tax equivalent adjustment has been made to income received from
these sources to provide comparability to taxable income. Tax
equivalent adjustments reflect a federal tax rate of 35 percent
for 1995, 1994 and 1993. Included in interest income are
amortized loan fees of $1,965,000 in 1995, $2,725,000 in 1994 and
$1,609,000 in 1993.
1995 Average Interest-Earning Asset Mix
Average interest-earning assets in 1995 totalled $1,995,004,000
as compared with $1,897,079,000 in 1994 and $1,867,140,000 in
1993. In 1995, average loans (including loans held for sale) and
investment securities (including securities available for sale),
the two largest components of interest-earning assets, comprised
73 percent and 23 percent, respectively, of average
interest-earning assets as compared to 72 percent and 26 percent
in 1994, and 71 percent and 26 percent in 1993. The decline in
securities in volume and as a percentage of interest-earning
assets resulted from maturities and sales of securities during
1995, which in part were not reinvested in new securities because
of flattening of the yield curve and anticipated loan demand at
higher yields. Yields on new securities, even at extended
maturities, were not significantly better than overnight federal
funds investments.
1995 Average Interest-Bearing Liability Mix
Average interest-bearing liabilities in 1995 totalled
$1,756,602,000 as compared with $1,667,605,000 in 1994 and
$1,657,935,000 in 1993. In 1995, average time deposits and
savings deposits, the two largest components of interest-bearing
liabilities, comprised 59 percent and 26 percent, respectively,
of average interest-bearing liabilities as compared to 57 percent
and 31 percent, respectively, in both 1994 and 1993. The increase
in time deposits as a percentage of interest-bearing liabilities
from 1994 and 1993 is primarily the result of increased rates on
the first half of the year, introduction of new time deposit
products, and various special rates on time deposits throughout
the Company for the purpose of increasing deposits. As a result
of rising rates and special rates on time deposits, savings
deposits as a percentage of interest-bearing liabilities
declined. A number of customers moved their deposits from lower
rate savings deposits to money market accounts and time deposits.
1995 Average Interest-Earning Asset Mix
Loans Held for Sale 0.6 percent
Securities Available for Sale 12.4 percent
Investment Securities 11.0 percent
Other Short-term Investments 3.3 percent
Loans 72.7 percent
1995 Average Interest-Bearing Liability Mix
Short-term and Long-term Borrowings 8.1 percent
Savings Deposits 15.3 percent
Money Market Accounts 6.9 percent
Demand Interest-bearing 10.6 percent
Time Deposits 59.1 percent
The following table reflects the components of the Company's net
interest income, for each of the three years ended December 31,
1995, setting forth: (i) average assets, liabilities, and
shareholders' equity, (ii) interest income earned on
interest-earning assets and interest expense incurred on
interest-bearing liabilities, (iii) average yields earned on
interest-earning assets and average rates incurred on
interest-bearing liabilities, (iv) the net interest rate spread
(i.e., the average yield earned on interest-earning assets less
the average rate incurred on interest-bearing liabilities) and
(v) the net interest margin (i.e., net interest income divided by
average interest-earning assets). Rates are computed on a tax
equivalent basis. Non-accrual loans have been included in the
average balances.
Page 14
<TABLE>
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Interest Average Interest Average Interest Average
Average Income/ Yields/ Average Income/ Yields/ Average Income/ Yields/
Balance Expense Rates Balance Expense Rates Balance Expense Rates
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Interest-earning assets:
Securities available
for sale $ 250,886 $ 15,023 5.99 $ 223,800 $ 13,028 5.82 $ 103,644 $ 6,282 6.06
Fair value adj. (4,754) (2,201) (178)
Investment securities:
Taxable 165,773 10,793 6.51 205,150 11,973 5.84 336,032 21,001 6.25
Tax exempt 53,925 4,606 8.54 60,843 5,214 8.57 43,882 4,310 9.82
Federal funds sold 62,095 3,610 5.81 32,835 1,228 3.74 55,161 1,611 2.92
Loans held for sale 12,641 1,170 9.26 46,018 3,388 7.36 86,302 6,582 7.63
Loans and leases
receivable 1,450,629 129,374 8.92 1,327,397 107,759 8.12 1,236,086 101,379 8.20
Time deposits in
other banks 3,809 218 5.72 3,237 124 3.83 6,211 213 3.43
Total interest-
earning assets 1,995,004 164,794 8.26 1,897,079 142,714 7.52 1,867,140 141,378 7.57
Noninterest-earning assets:
Cash and due
from banks 66,647 63,431 62,172
Premises and
equipment 49,530 51,931 47,886
Other assets 42,496 41,446 39,874
Allowance for
credit losses (15,039) (15,250) (15,737)
Total noninterest-
earning assets 143,634 141,558 134,195
Total assets $2,138,638 $2,038,637 $2,001,335
Liabilities and Shareholders' Equity
Interest-bearing
liabilities:
Savings deposits $ 455,149 10,981 2.41 $ 522,324 12,446 2.38 $ 515,546 13,600 2.64
Money market acct 121,459 4,230 3.48 91,834 2,331 2.54 102,603 2,909 2.84
Time deposits 1,037,277 57,316 5.53 942,156 39,912 4.24 951,403 41,398 4.35
Total interest-
bearing deposit 1,613,885 72,527 4.49 1,556,314 54,689 3.51 1,569,552 57,907 3.69
Short-term
borrowings and
other liability 90,368 4,169 4.61 74,508 2,743 3.68 67,512 1,923 2.85
Long-term
liabilities 52,349 3,620 6.92 36,783 2,132 5.80 20,871 1,227 5.88
Total interest-
bearing
liabilities 1,756,602 80,316 4.57 1,667,605 59,564 3.57 1,657,935 61,057 3.68
Noninterest-bearing
liabilities:
Demand deposits 174,501 168,855 158,351
Other liabilities 16,463 15,467 11,977
Total noninterest-
bearing liability 190,964 184,322 170,328
Shareholders'equity 191,072 186,710 173,072
Total liabilities
and shareholders'
equity $2,138,638 $2,038,637 $2,001,335
Net interest income
(tax equivalent basis) 84,478 83,150 80,321
Reversal of tax
equivalent adjustment (2,251) (2,143) (1,991)
Net interest income $ 82,227 $ 81,007 $ 78,330
Net interest rate spread
(tax equivalent basis) 3.69 3.95 3.89
Net interest margin
(net interest income as
a percentage of
interest-earning assets,
tax equivalent basis) 4.23 4.38 4.30
Page 15
</TABLE>
The net interest margin decreased 15 basis points to 4.23 percent
in 1995 and increased 8 basis points in 1994 to 4.38 percent. The
decrease in the Company's net interest margin in 1995 is due
primarily to a decline in interest rates during the second half
of the year, a flattening of the yield curve, and a change in
deposit mix. The Company is slightly asset sensitive and,
therefore, as interest rates decline its earning asset yields
decline faster than its cost of funds. The flattening of the
yield curve resulted in an increase in investments of lower
yielding short-term liquid assets and a decline in longer term
marketable securities, where yields compared to short-term
investment yields did not justify the Company investing in these
assets. The change in the Company's deposit mix from lower cost
savings accounts to higher cost time deposits caused a
significant portion of the decline in the net interest margin.
The increase in the Company's net interest margin in 1994 is due
primarily to a slight decline in interest rates paid on deposits
and to a significant volume increase in net loans of
approximately $91,311,000 or 7 percent, which improved the
interest-earning asset mix between loans and other earning assets
which have lower yields. The increase in interest rates during
1994 improved the Company's net interest margin since the Company
was slightly asset sensitive throughout 1994, with a large
portion of its commercial and commercial real estate loan
portfolio tied to the prime rate.
Net interest income may also be analyzed by segregating the
volume and rate components of interest income and interest
expense. The following table presents an analysis of increases
and decreases in interest income and expense in terms of changes
in volume and interest rates during the three years ended
December 31, 1995. Changes not due solely to either a change in
volume or a change in rate have been allocated based on the
respective percentage changes in average balances and average
rates. The table is presented on a tax equivalent basis:
<TABLE>
(Dollars in thousands)
1995 vs. 1994 1994 vs. 1993
Increase (Decrease) Increase (Decrease)
Due to Change in Total Due to Change in Total
Average Average Increase Average Average Increase
Volume Rate (Decrease) Volume Rate (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Securities available
for sale $ 1,577 $ 418 $ 1,995 $ 7,283 $ (537) $ 6,746
Investment securities:
Taxable (2,298) 1,118 (1,180) (8,180) (848) (9,028)
Tax exempt (593) (15) (608) 1,666 (762) 904
Federal funds sold 1,094 1,288 2,382 (652) 269 (383)
Interest on
loans held for sale (2,457) 239 (2,218) (3,072) (122) (3,194)
Interest and fees
on loans (1) 10,004 11,611 21,615 7,489 (1,109) 6,380
Time deposits
in other banks 22 72 94 (102) 13 (89)
Total interest income 7,349 14,731 22,080 4,432 (3,096) 1,336
Interest Expense:
Savings (1,601) 136 (1,465) 179 (1,333) (1,154)
Money market accounts 752 1,147 1,899 (305) (273) (578)
Time 4,030 13,374 17,404 (402) (1,084) (1,486)
Total 3,181 14,657 17,838 (528) (2,690) (3,218)
Short-term borrowings
and other liabilities 584 842 1,426 199 621 820
Long-term borrowings 902 586 1,488 935 (30) 905
Total interest expense 4,667 16,085 20,752 606 (2,099) (1,493)
Change in
net interest income $ 2,682 $(1,354) $ 1,328 $ 3,826 $ (997) $ 2,829
(1) Included in loan interest income are amortized loan fees of
$1,965,000 in 1995, $2,725,000 in 1994 and $1,609,000 in 1993.
</TABLE>
Provision for Credit Losses
The provision for credit losses increased $1,778,000 or 145
percent to $3,002,000 in 1995. The increase was due primarily to
a low provision for credit losses in 1994 caused by improved
asset quality and a reversal of $1,600,000 in the allowance for
credit losses at First National. The Company's allowance for
credit losses as a percentage of loans at December 31, 1995, was
1.01 percent as compared to 1.03 percent and 1.20 percent at
December 31, 1994 and 1993, respectively. At December 31, 1995,
the Company's allowance for credit losses represented 151 percent
of non-performing loans as compared to 197 percent and 156
percent at December 31, 1994 and 1993, respectively. See "Summary
of Credit Loss Experience."
Page 16
Non-Interest Income
Non-interest income is an increasingly important source of
revenue to the Company as it continues to expand its offerings of
bank-related financial services. Non-interest income increased
$3,401,000 or 10 percent in 1995 to $35,955,000 and decreased
$1,448,000 or 4 percent in 1994 to $32,554,000. The increase in
non-interest income in 1995 was primarily due to an increase in
mortgage banking activities and brokerage commissions. The
primary non-interest income components are set forth below:
Trust service fees increased $142,000 or 12 percent in 1995 to
$1,337,000, and $285,000 or 31 percent in 1994 to $1,195,000. Of
the $142,000 1995 increase in trust fees, $102,000 is
attributable to reporting trust income on the accrual versus cash
basis used before 1995. Since 1993, the Company has had a trust
officer at each of its affiliate banks. Trust assets, which bear
a relationship to trust fees earned, have increased by 29 percent
in 1995 and 15 percnet in 1994.
Service charges on deposit accounts increased $164,000 or 3
percent in 1995 to $6,200,000 and $217,000 or 4 percent in 1994
to $6,036,000, which is consistent with the growth in the number
of the Company's deposit accounts.
Net securities gains amounted to $350,000 in 1995 compared to
$1,231,000 in 1994, a decrease of $881,000 or 72 percent. The
decrease in net securities gains since 1993 is attributable to an
increase in interest rates which have made the sale of securities
available for sale less attractive, as the market values of these
securities have been depressed over most of this period.
Mortgage banking revenue increased $1,828,000 or 27 percent in
1995 to $8,522,000 and decreased $5,623,000 or 46 percent in 1994
to $6,694,000. Mortgage banking revenue consists primarily of net
gains on sale of loans and mortgage loan servicing fees. Net
gains on sale of loans increased $1,572,000 or 46 percent in 1995
to $5,002,000 and decreased $6,757,000 or 66 percent in 1994 to
$3,430,000. The increase in net gains on sales of loans in 1995
was primarily the result of the adoption of SFAS No. 122,
"Accounting for Mortgage Servicing Rights" which increased net
gains on sales of loans by $1,794,000. The remaining increase is
the result of higher margins realized on loans sold which more
than offset the effect of a $48,942,000 decrease in the amount of
loans sold. The decrease in net gains on sales of loans in 1994
was primarily due to lower volume of loans sold, a decrease of
$324,345,000 and lower profit margins. In 1993, a low interest
rate environment resulted in a significant increase in the volume
of mortgage loan refinancings in the marketplace, and the Company
took advantage of this increase in volume by increasing its
efforts in the mortgage loan area. Consequently, the Company was
able to originate and sell in excess of $675,000,000 of mortgage
loans. The Company believes that the volume of 1996's mortgage
banking activities will be slightly better than 1995.
Loan servicing fees grew to $3,520,000 in 1995 from $3,264,000 in
1994, an 8 percent increase. The Company achieved a 53 percent
increase in loan servicing fees in 1994 compared to 1993. These
loan servicing fee increases are directly related to the mortgage
loan volume growth, where the Company has retained servicing on
substantially all loans it has sold. The Company expects loan
servicing fee income to increase in 1996, but not at the same
rate of increase as experienced in 1995, primarily due to the
amortization of mortgage servicing rights caused by the adoption
of SFAS No. 122.
Brokerage commission fees increased $2,403,000 or 34 percent in
1995 to $9,540,000 and increased $1,979,000 or 38 percent in 1994
to $7,137,000. The increase in brokerage commission fees since
1993 is primarily due to the growth in revenue from the Company's
brokerage business (MFI) acquired during the year. MFI has
increased the number of independent brokers to approximately 250
operating in over 19 states throughout the country.
Collection agency fee income decreased $529,000 or 13 percent to
$3,399,000 in 1995 and increased $1,538,000 or 64 percent in 1994
to $3,928,000. This decrease is due primarily to the loss of a
large customer at the Florida collection operation and the
softening of the collection market in 1995. The increase in 1994
collection fees was primarily due to the growth in the Florida
collection activities.
Other income increased $274,000 or 4 percent in 1995 to
$6,607,000 and increased $1,644,000 or 35 percent in 1994 to
$6,333,000. Other income includes credit card fees, credit life
insurance commission fees, ATM fees, international fees and other
charges and fees.
Non-Interest Expense
Non-interest expense includes costs, other than interest, that
are incurred in the operation of the Company. Total non-interest
expense decreased $163,000 or less than 1 percent in 1995 to
$78,416,000 and increased $5,617,000 or 8 percent in 1994 to
$78,579,000. The Company introduced a formal program during 1994
to control its non-interest expense by decreasing the number of
employees through attrition, reducing marketing expenses and
controlling various discretionary expenses. The primary
non-interest expense components are set forth below:
Salaries and employee benefits expense increased $1,099,000 or
3 percent in 1995 to $41,282,000 and increased $4,742,000 or 13
percent in 1994 to $40,183,000. Salary costs in 1995 increased
primarily due to the rate of inflation. Salary costs deferred in
1994 as part of loan origination costs were $2,281,000 lower than
1993, which caused a corresponding increase in the amount of
salary and employee benefit expense reported in 1994. This
decrease is related to lower levels of mortgage loan
originations.
Net occupancy expense was $5,113,000 during 1995, a decrease of
$156,000 or 3 percent from 1994. Net occupancy expense was
$5,070,000 during 1994, an increase of $199,000 or 4 percent over
1993. The Company has been able to keep net occupancy expense
level through its cost control program.
Page 17
Equipment expense decreased $204,000 or 3 percent in 1995 to
$7,385,000 and increased $849,000 or 13 percent in 1994 to
$7,589,000. The decrease in 1995 consisted principally of
decreases in equipment repairs and maintenance and service
agreements. The increase in 1994 was primarily due to increases
in depreciation, data processing expense and service agreements.
Other expenses decreased $902,000 or 4 percent in 1995 to
$24,636,000 and decreased $173,000 or 1 percent in 1994 to
$25,538,000. The major components of the decrease in 1995 include
legal epenses ($433,000), FDIC assessments ($1,114,000),
directors fees ($458,000), offset partially by increases in
credit card fees ($425,000) and other professional fees
($299,000). Effective June 1, 1995, the Federal Deposit Insurance
Corporation reduced the bank insurance fund assessments from $.23
per $100 of deposits to $.04 per $100 of deposits. The U. S.
Congress is currently considering legislation which may result in
a significant one-time assessment for the Savings Association
Insurance Fund (SAIF). At December 31, 1995, the Company has in
excess of $600,000,000 of its deposits which are insured through
SAIF. If the one-time assessment is enacted by Congress, the
Company will incur a material nonrecurring deposit insurance
expense in the period that the legislation is enacted.
Post-retirement, Post-employment and Other Employee Benefits
The Company provided certain health care benefits for retired
employees prior to December 31, 1992. During 1992, the Company
decided to terminate its health care benefits for retired
employees. The effective date of termination was March 1, 1993,
and all retired employees received a lump sum cash distribution
representing the present value of estimated future health
insurance premiums. The Company has no further liability for any
post-retirement benefits other than pensions. The Company does
not offer any post-employment benefits.
At December 31, 1995, the Company had 668 employees who were
currently receiving health care benefits. In 1995, the Company's
total health care expense was $1,325,000 as compared to
$1,498,000 in 1994 and $1,403,000 in 1993. The decrease in health
care expense in 1995 is the result of a lower level of claims
experienced by the Company compared to 1994.
Income Taxes
The provision for income taxes increased to $11,797,000 in 1995
from $10,505,000 in 1994 due to an increase in pre-tax income.
The effective income tax rates for 1995, 1994 and 1993 were
32.2 percent, 32.1 percent and 30.8 percent, respectively. The
higher effective rates in 1995 and 1994 are primarily due to a
lower amount of tax exempt income relative to taxable income.
Liquidity
The liquidity of a financial institution reflects its ability to
provide funds to meet loan requests, to accommodate possible
outflows in deposits and to take advantage of interest rat market
opportunities. Funding of loan requests, providing for liability
outflows, and management of interest rate fluctuations require
continuous analysis in order to match the maturities of specific
categories of short-term loans and investments with specific
types of deposits and borrowings. Financial institution liquidity
is thus normally considered in terms of the nature and mix of the
institution's sources and uses of funds.
For the Company's bank subsidiaries, the primary sources of
liquidity at December 31, 1995, were federal funds sold of
$72,558,000, securities available for sale of $461,997,000 and
loans held for sale of $12,642,000. At December 31, 1994, the
primary sources of liquidity were federal funds sold of
$8,160,000, loans held for sale of $12,963,000 and securities
available for sale of $212,437,000.
Since the Company is a holding company and does not conduct
operations, its primary source of liquidity is dividends paid to
it by its subsidiary financial institutions. For national banks,
the approval of the Office of the Comptroller of the Currency is
required in order to pay dividends in excess of the subsidiaries'
earnings retained for the current year plus retained net profits
since January 1, 1993. As a result of these restrictions, at
December 31, 1995, dividends which can be paid to the Company by
its subsidiaries are limited to $13,435,000.
The Company's liquidity position increased in 1995 primarily due
to increased deposits and an increase in securities available for
sale resulting from the reclassification of all of the Company's
marketable securities to available for sale in November 1995.
Also, in October 1995, the Company entered into an agreement with
an unrelated financial institution which enables the Company to
borrow up to $20,000,000 for a period of one year. At the end of
the one year period, the Company has the option to pay off any
outstanding principal or refinance the principal under terms
subject to future negotiations. Through December 31, 1995, no
advances have been drawn against the available credit facility.
As shown in the consolidated statement of cash flows presented
elsewhere herein, cash and due from banks increased $17,268,000
during 1995 to $102,600,000 at December 31, 1995. The increase in
1995 reflected $23,705,000 of net cash provided by operating
activities, $91,000,000 provided by financing activities, offset
in part by the use of $97,437,000 cash for investing activities.
Page 18
Net cash provided by operating activities of $23,705,000 in 1995
resulted primarily from $24,967,000 of net income, increase in
interest receivable and other assets of $10,751,000 and non-cash
charges and credits of $11,852,000, offset by net gains on the
sales of assets of $5,962,000.
The decrease of $74,539,000 in cash provided by operating
activities for 1995 compared to 1994 is due primarily to the
Company's mortgage banking activities in 1994 which generated
cash of $70,848,000 compared to cash generated in 1995 of
$1,256,000. The $76,651,000 increase in cash provided by
operating activities in 1994 compared to 1993 is also due to the
Company's mortgage banking activities which generated cash in
1994 during a period of lower acquisitions.
Net cash used for 1995 investing activities of $97,437,000 was
largely comprised of a net increase in loans of $86,949,000, a
net increase of securities available for sale of $6,187,000 and
an increase in federal funds sold of $64,398,000, offset in part
by proceeds from sales of loans of $41,580,000 and proceeds from
maturities and paydowns of mortgage-backed securities of
$19,998,000. The $17,116,000 increase in cash used for investing
activities in 1995 compared to 1994 is primarily attributable to
the increase in federal funds sold of $115,305,000, offset in
part by a decrease in loan demand which caused a decrease in net
loan fundings of $98,297,000. The $95,605,000 decrease in cash
used for investing activities in 1994 compared to 1993 is
primarily attributable to the deployment of cash received for
deposits assumed in 193 branch acquisitions that was not
available in 1994. Mortgage-backed securities purchases in 1993
totalled $155,469,000 compared to 1994 purchases totalling
$29,030,000, a decrease of $126,439,000. Also, federal funds sold
decreased by $55,609,000 compared to 1993. This was partially
offset by a net increase in loans of $107,126,000 compared to
1993.
Net cash provided by financing activities of $91,000,000 was
primarily due to cash received from increases in demand deposits
and savings accounts of $41,189,000 and by $49,021,000 in cash
proceeds from the issuance of long-term debt, offset by payments
on capitalized lease obligations and debt of $66,050,000. Net
cash provided by financing activities increased $90,259,000 for
1995 compared to 1994 due primarily to the change in deposit
balances. Demand deposit and savings accounts plus other time
deposits increased $123,650,000 in 1995 compared to a net
decrease in these same deposits of $32,590,000 in 1994. The
increase in deposits in 1995 is primarily attributable to the
high interest rates in the first half of 1995 of which the
Company's time deposits increased substantially. The deposit mix
continues to change and the Company believes that the change in
the deposit mix in 1995 from short-term deposits to long-term
deposits was primarily the result of rising interest rates, an
increase in proceeds from the issuance of long-term debt of
$59,644,000 in the first half of 1995. This change in deposit mix
is expected to level off in 1996. Net cash provided by financial
activities decreased by $155,703,000 in 1994 compared to 1993.
The decrease in cash provided by financing activities is
attributed primarily to a decrease in demand deposits and savings
accounts of $43,066,000 in 1994 compared to an increase in these
deposits of $99,768,000 in 1993, offset partially by an increase
in proceeds from the issuance of long-term debt of $59,644,000.
Asset/Liability Management
Closely related to liquidity management is the management of
interest-earning assets and interest-bearing liabilities. The
Company manages its rate sensitivity position to avoid wide
swings in net interest margins and to minimize risk due to
changes in interest rates.
The difference between a financial institution's interest rate
sensitive assets (i.e., assets which will mature or reprice
within a specific time period) and interest rate sensitive
liabilities (i.e., liabilities which will mature or reprice
within the same time period) is commonly referred to as its
"interest rate sensitivity gap" or "gap." An institution having
more interest rate sensitive assets than interest rate sensitive
liabilities within a given time period is said to have a
"positive gap," which generally means that if interest rates
increase, a company's net interest income will increase and if
interest rates decrease, its net interest income will decrease.
An institution having more interest rate sensitive liabilities
than interest rate sensitive assets within a given time period is
said to have a "negative gap," which generally means that if
interest rates increase, a company's net interest income will
decrease and if interest rates decrease, its net interest income
will increase.
At December 31, 1995, the Company had a manageable positive gap
and therefore does not expect to experience any significant
fluctuations in its net interest income as a consequence of
changes in interest rates.
The following table sets forth the cumulative maturity
distributions as of December 31, 1995, of the Company's
interest-earning assets and interest-bearing liabilities, its
interest rate sensitivity gap, cumulative interest rate
sensitivity gap for such assets and liabilities, and cumulative
interest rate sensitivity gap as a percentage of total
interest-earning assets. This table indicates the time periods in
which certain interest-earning assets and certain
interest-bearing liabilities will mature or may reprice in
accordance with their contractul terms. However, this table does
not necessarily indicate the impact of general interest rate
movements on the Company's net interest yield, because the
repricing of various categories of assets and liabilities is
discretionary and is subject to competition and other pressures.
As a result, various assets and liabilities indicated as
repricing within the same period may in fact reprice at different
times and at different rate levels. Subject to these
qualifications, the table reflects a cumulative positive gap for
assets and liabilities maturing or repricing in 1996. The
Company's Asset/Liability Management Committee monitors the
interest rate sensitivity position and currently intends to maintain a
slightly positive gap during 1996 primarily as a result of the Company's
view of the economy and the anticipated interest rate scenario for
1996.
Page 19
<TABLE>
After 3 After 6 After 1
Months Months Year But
Within 3 But Within But Within Within After
(Dollars in thousands) Months 6 Months 1 Year 5 Years 5 Years Total
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (net of
unearned income) $568,501 $180,544 $244,562 $362,017 $120,027 $1,475,651
Securities
available for sale 47,768 9,610 48,096 101,287 255,236 461,997
Loans held for sale 12,642 12,642
Federal funds sold 72,558 72,558
Interest-bearing deposit
in other banks 3,372 3,372
Total $704,841 $190,154 $292,658 $463,304 $375,263 $2,026,220
Interest-bearing liabilities:
Interest-bearing
deposits $547,611 $188,874 $252,864 $443,575 $203,273 $1,636,197
Short-term borrowings
and other liabilities 93,377 13,769 7,969 20,752 86 135,953
Total $640,988 $202,643 $260,833 $464,327 $203,359 $1,772,150
Interest rate
sensitivity gap $ 63,853 $(12,489) $ 31,825 $ (1,023) $171,904 $ 254,070
Cumulative interest
rate sensitivity gap 63,853 51,364 83,189 82,166 254,070
Cumulative interest rate
sensitivity gap as a
percentage of total
interest-earning assets 3.15 2.53 4.11 4.06 12.54
</TABLE>
Capital Resources
The Federal Reserve Board (FRB) has established risk-based
capital guidelines that must be observed by bank holding
companies and banks. Under these guidelines, total qualifying
capital is categorized into two components - Tier I and Tier II
capital. Tier I capital generally consists of common
shareholders' equity, perpetual preferred stock (subject to
limitations) and minority interests in subsidiaries. Subject to
limitations, Tier II capital includes certain other preferred
stock and debentures, and a portion of the reserve for credit
losses. These ratios are expressed as a percentage of
risk-adjusted assets, which include various risk-weighted
percentages of off-balance-sheet exposures, as well as assets on
the balance sheet. The FRB regulations governing the various
capital ratios do not recognize the effects of SFAS 115,
"Accounting for Certain Investments in Debt and Equity
Securities" on capital relating to changes in market value of
securities available for sale.
At December 31, 1995, a minimum Tier I capital ratio of 4 percent
and a total capital ratio of 8 percent are required. The
Company's qualifying capital at December 31, 1995, exceeds both
the Tier I and Tier II risk-based capital guidelines. In
addition, a capital leverage ratio is used in connection with the
risk-based capital standards which is defined as Tier I capital
divided by total assets adjusted for certain items. The minimum
leverage ratio under this standard is 3 percent for the highest
rated bank holding companies which are not undertaking
significant expansion programs. An additional 1 percent to 2
percent may be required for other companies, depending upon
their regulatory ratings and expansion plans. The primary
regulatory authorities of the Company and its subsidiaries have
not advised the Company of its minimum Tier I leverage ratio, and
therefore, it is not possible to calculate the minimum leverage
ratio.
Page 20
The following table presents the various capital and leverage
ratios of the Company:
December 31, (Dollars in thousands)
1995 1994 1993
Total fourth quarter
average assets $2,176,413 $2,060,483 $2,077,304
Average unrealized losses
(gains) on securities
available for sale 1,626 6,852
Average unrealized
(losses) gains on
equity securities (393) (306) 304
Average goodwill and
other intangibles (12,225) (14,169) (13,707)
Total adjusted assets
for leverage ratio $2,165,421 $2,052,860 $2,063,901
Total assets $2,204,751 $2,078,789 $2,067,371
Effect of risk-weighted
assets and
off-balance-sheet
financial instruments (663,747) (620,574) (709,699)
Risk-weighted assets and
off-balance-sheet
financial instruments
for capital ratios $1,541,004 $1,458,215 $1,357,672
Total shareholders'
equity $ 194,838 $ 185,252 $ 183,425
Unrealized losses
(gains) on securities
available for sale (1,466) 6,186 (2,844)
Unrealized (losses) gain
on equity securities (85) (596) 198
Goodwill and
other intangibles (12,024) (13,068) (14,543)
Tier 1 capital 181,263 177,774 166,236
Allowance for credit losses
includable in capital
under 1991 rules 14,859 14,722 15,157
Total capital $ 196,122 $ 192,496 $ 181,393
Leverage ratio 8.44 8.36 8.19
Tier 1 capital ratio 11.76 12.19 12.24
Total capital ratio 12.73 13.20 13.36
Capital ratios applicable to the Company's banking subsidiaries
at December 31, 1995, are as follows:
Total
Tier I Risk-based
Leverage Capital Capital
Regulatory Capital Requirements
Minimum 3.00 4.00 8.00
Well-capitalized 6.00 8.00 10.00
Bank Subsidiaries
Mid American 7.06 8.96 10.16
First National 7.22 9.88 10.30
AmeriCom 6.80 11.43 12.45
AmeriFirst 6.86 9.96 10.95
Adrian 6.91 10.40 11.65
Effects of Inflation
The effect of inflation on financial institutions differs from
the impact on non-financial institutions. Financial institutions,
as financial intermediaries, have assets and liabilities which
may move in concert with inflation. This is especially true for
financial institutions with a high percentage of rate-sensitive
interest-earning assets and interest-bearing liabilities. A
financial institution can reduce the impact of inflation by
managing its interest rate sensitivity gap. See "Asset/Liability
Management" above.
Investment Portfolio and Securities Available for Sale
In November 1995, all investment and mortgage-backed securities
classified as held to maturity were transferred to securities
available for sale. The decision to transfer the securities was
based on management's assessment of the Company's held to
maturity securities portfolio and guidance by the interpretations
contained in the Financial Accounting Standards Board Guide to
Implementation of Statement 115 on Accounting for Certain
Investments in Debt and Equity Securities which was issued in
November 1995.
Page 21
The following table sets forth the carrying value of the
Company's investment and mortgage-backed securities at December
31, 1994 and 1993:
(Dollars in thousands) 1994 1993
U.S. Treasury securities $ 3,623 $ 9,351
Securities of other
U.S. Government agencies
and corporations 5,523 14,991
Mortgage-backed
investment securities 180,309 187,661
Obligations of states and
political subdivisions 62,032 57,667
Other securities 522 953
Total $252,009 $270,623
The following table sets forth the carrying value at market at
the respective year end for each of the last three years and
aggregate cost of the Company's securities available for sale at
December 31, 1995:
(Dollars in thousands) Cost 1995 1994 1993
U.S. Treasury securities $ 73,219 $ 73,792 $ 79,353 $ 91,781
Securities of other
U.S. Government agencies
and corporations 67,415 67,526 61,401 89,855
Mortgage-backed
securities 230,398 230,417 45,056 26,922
Obligations of states and
political subdivisions 57,313 58,996 200 3,596
Equity securities 31,397 31,266 26,427 25,971
Total $459,742 $461,997 $212,437 $238,125
Both the investment and available for sale portfolios contain
mortgage-backed securities and, to a limited extent, other
securities which have unknown cash flow characteristics. The
variable cash flows present additional risk to the bondholders in
the form of prepayment or extension risk primarily caused by
market interest rate changes. This additional risk is generally
rewarded in the form of higher yields to the investor.
Mid Am, Inc. utilizes tools to minimize and monitor this risk,
requiring the security to pass a stress test at the time of
purchase. This testing measures prepayment and extension risk
under severe changes in interest rates. Additionally, the
corporate investment policy defines certain types of high risk
securities as ineligible for purchase, icluding securities which
may not return full principal to the Company. It is also the
practice of the Company to minimize premiums paid on mortgage
securities to avoid yield reduction if prepayments speed up.
These policies help insure that there will be no material impact
from these investments to the financial statements due to
changing interest rates.
The internal accounting systems and controls are in place to
account for amortization and accretion of premiums and discounts.
As prepayments of principal are received, the system
automatically adjusts premiums and discounts to reflect the
proper book values.
There are no securities available for sale of any single issuer
where the aggregate carrying value of such securities exceeded
10 percent of shareholders' equity, except those of U.S. Treasury
and U.S. Government agencies.
The following table shows the maturities and weighted average
yields of the Company's securities available for sale as of
December 31, 1995. The weighted average yields on income from tax
exempt obligations of state and political subdivisions have been
adjusted to a tax equivalent basis:
<TABLE>
Securities Available for Sale
After 1 Year But After 5 Years After
Within 1 Year Within 5 Years Within 10 Years 10 Years
(Dollars in thousands) Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities $19,384 5.17 $ 49,166 5.74 $ 2,998 6.39 $ 2,244 6.80
Securities of other
U.S. Government agency
and corporations 17,162 5.91 33,772 6.06 12,654 6.70 3,938 6.82
Mortgage-backed
securities 2,373 6.70 66,953 5.97 44,828 6.30 116,263 6.52
Obligations of states and
political subdivisions 7,048 7.45 25,027 7.48 20,623 7.85 6,298 8.58
Equity securities 5,719 8.20 25,547 6.49
Total $45,967 5.88 $180,637 6.21 $81,103 6.76 $154,290 6.61
</TABLE>
Page 22
Loan Portfolio
The amount of loans outstanding and the percent of the total
represented by each type on the dates indicated were as follows:
<TABLE>
December 31,
(Dollars in 1995 1994 1993 1992 1991
thousands) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans
Construction $ 63,086 4.3 $ 69,942 4.9 $ 39,150 3.1 $ 35,760 3.0 $ 20,612 2.0
Mortgage 885,714 60.0 871,704 60.7 783,635 61.8 750,406 62.4 568,194 55.1
Commercial,
financial and
agricultural
loans 357,290 24.2 327,871 22.8 294,297 23.2 282,263 23.5 288,750 28.0
Installment and
credit card
loans 164,055 11.1 155,380 10.8 138,534 10.9 118,849 9.9 137,456 13.3
Other loans 6,335 0.4 10,040 0.8 11,690 1.0 15,440 1.2 15,353 1.6
Total loans 1,476,480 100.0 1,434,937 100.0 1,267,306 100.0 1,202,718 100.0 1,030,365 100.0
Less:
Unearned interest (22) (38) (50) (107) (258)
Unamortized
loan fees (807) (1,610) (1,311) (2,099) (1,253)
Allowance for
credit losses (14,859) (14,722) (15,157) (15,718) (12,938)
Total net loans $1,460,792 $1,418,567 $1,250,788 $1,184,794 $1,015,916
</TABLE>
Real estate loans, including construction and mortgage loans,
approximated 64 percent of total loans at December 31, 1995.
Collateral evaluations and the historical data of the Company's
mortgage loan losses are used to determine the amount necessary
for the allowance for credit losses. The Company's general
collateral policy for residential real estate mortgages is to
follow FNMA and FHLMC guidelines, which generally require a
loan-to-value ratio of 80 percent or private mortgage insurance
for loan-to-value ratios in excess of 80 percent.
A significant portion (24 percent) of the loan portfolio is
composed of commercial loans. Personal and business financial
status, credit standing, and available collateral of commercial
borrowers, plus management's judgment as to prevailing and
anticipated economic conditions and the historical data of the
Company's commercial loan losses, are taken into consideration
when determining the amount of the allowance for credit losses
needed for commercial loans. The amount of collateral required on
commercial loans is generally determined based on a loan-by-loan
assessment. Average loan-to-value ratios for commercial loans
typically range from 50 percent to 80 percent. Factors which are
considered include, among other things, the purpose of the loan,
the current financial status of the borrower and the borrower's
prior credit history.
The remaining portion (12 percent) of the Company's loan
portfolio are installment, credit card loans and other loans and
leases. A thorough credit examination is done at the time of the
extension of credit. The Company makes consumer loans on both a
secured and unsecured basis depending, in part, on the nature,
purpose and term of the loan. Loan-to-value ratios for secured
consumer loans range from 70 percent to 90 percent as a general
rule. The historical data of the Company's consumer loan losses
and the Company's credit evaluations are used to determine the
necessary amount for its allowance for credit losses.
The following table shows the amount of commercial, financial and
agricultural loans and real estate construction loans outstanding
as of December 31, 1995, which, based on remaining scheduled
repayments of principal, are due in the periods indicated. Also,
the amounts due after one year are classified according to their
sensitivity to changes in interest rates:
After 1 After 5
Year But Years But
Within Within Within
(Dollars in thousands) 1 Year 5 Years 10 Years Total
Commercial, financial
and agricultural $131,748 $126,564 $ 98,978 $357,290
Real estate -
construction 39,081 8,109 15,896 63,086
Total $170,829 $134,673 $114,874 $420,376
Interest Sensitivity
Fixed Variable
(Dollars in thousands) Rate Rate
Due after one but within five years $35,418 $ 99,255
Due after five years 20,940 93,934
Total $56,358 $193,189
Page 23
Actual maturities of loans will differ from the contractual
maturities presented in the previous table because of
prepayments, rollovers and renegotiation of payment terms, among
other factors.
The following table presents the aggregate amounts of
non-performing assets and respective ratios on the dates
indicated:
December 31,
(Dollars in thousands)
1995 1994 1993 1992 1991
Non-accrual $ 8,499 $6,017 $ 8,660 $ 7,786 $ 7,122
Contractually past
due 90 days or
more as to
principal or
interest 1,253 1,140 813 1,233 2,164
Restructured 79 329 221 704 1,044
Total non-performing
loans 9,831 7,486 9,694 9,723 10,330
Other real estate
owned 763 1,102 1,836 6,109 9,986
Total non-performing
assets $10,594 $8,588 $11,530 $15,832 $20,316
Non-performing loans
to total loans 0.67 0.52 0.77 0.81 1.00
Non-performing
assets to total
loans plus other
real estate owned 0.72 0.60 0.91 1.31 1.96
Allowance for credit
losses to total
non-performing
loans 151.14 196.66 156.35 161.66 125.25
Allowance for credit
losses to total
non-performing
assets 140.26 171.43 131.46 99.28 63.68
SFAS 114, "Accounting by Creditors for Impairment of a Loan", and
SFAS 118, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures" were adopted effective
January 1, 1995. Residential mortgage, installment and credit
card loans are collectively evaluated for impairment. Individual
commercial loans exceeding size thresholds established by
management are evaluated for impairment. Impaired loans are
recorded at the loan's fair value by the establishment of a
specific allowance where necessary. The fair value of the
underlying collateral-dependent loans is determined by the fair
value of the underlying collateral. The fair value of
noncollateralized-dependent loans is determined by discounting
expected future interest and principal payments at the loan's
effective interest rate.
Non-accrual loans are comprised principally of loans 90 days past
due, as well as certain loans which are current but where serious
doubts exist as to the ability of the borrower to comply with the
repayment terms. Interest previously accrued on non-accrual loans
and not yet paid is reversed or charged against the allowance for
credit losses during the period in which the loan is placed on
non-accrual status, except where the Company has determined that
such loans are adequately secured as to principal and interest.
Interest earned thereafter is included in income only to the
extent that it is received in cash. In certain cases, interest
received may be credited against principal outstanding under the
cost recovery method. The amount of interest income that would
have been recorded had all non-accrual loans been current in
accordance with their terms approximated $1,237,000 in 1995.
Actual interest included in income which was collected
approximated $345,000 in 1995. The amount of interest collected
and the amount of interest income that would have been recorded
during 1995 on restructured loans based on their original terms
was insignificant.
Loans 30 to 89 days past due,excluding non-accrual and
restructured loans included in the previous table, amounted to
$8,035,000 or .54 percent of total loans at December 31, 1995, as
compared to $3,558,000 or .25 percent at December 31, 1994. Loans
now current but where some concerns exist as to the ability of
the borrower to comply with present loan repayment terms,
excluding non-performing loans, approximated $32,715,000 and
$39,379,000 at December 31, 1995 and 1994, respectively, and are
being closely monitored by management and the Boards of Directors
of the subsidiaries. The classification of these loans, however,
does not mean to imply that management expects losses on each of
these loans, but believes that a higher level of scrutiny is
prudent under the circumstances. At December 31, 1995 and 1994
specific allocations of the allowance for credit losses related
to these loans aggregated $3,359,000 and $3,408,000,
respectively. The decrease in loans where some concern exists is
primarily attributable to the Company's continuous process of
loan review which has identified various improvements in the
financial condition of certain of the individual borrowers. In
the opinion of management, these loans require close monitoring
despite the fact that they are performing according to their
terms. Such classifications relate to specific concerns relating
to each individual borrower and do not relate to any concentrated
risk elements common to all loans in this group.
Other real estate owned amounted to $763,000 and $1,102,000 at
December 31, 1995 and 1994, respectively. The decrease in other
real estate owned is due primarily to 1995 sales of foreclosed
commercial properties and residential property which was held at
December 31, 1994.
As of December 31, 1995, the Company did not have any loan
concentrations which exceeded 10 percent of total loans.
Page 24
The following table presents asset quality information for each
of the Company's bank subsidiaries at December 31, 1995:
December 31, 1995
(Dollars in Mid Am First
thousands) Bank National AmeriCom AmeriFirst Adrian
Non-accrual $5,623 $ 431 $1,241 $ 983 $ 221
Contractually past
due 90 days or
more as to
principal or
interest 115 374 444 238 82
Restructured 79
Total non-performing
loans 5,738 805 1,764 1,221 303
Other real estate
owned 54 337 22
Total non-performing
assets $5,738 $ 859 $2,101 $1,243 $ 316
Non-performing loans
to total loans 1.04 0.23 0.72 0.54 0.30
Non-performing
assets to total
loans plus other
real estate owned 1.04 0.24 0.86 0.55 0.30
Allowance for credit
losses to total
non-performing
loans 133.41 192.42 138.66 164.54 396.04
Allowance for credit
losses to total
non-performing
assets 133.41 180.33 116.42 161.63 396.04
Net charge-offs to
average loans
outstanding 0.38 0.07 0.09 0.15 0.00
Allowance for credit
losses to total
loans 1.39 0.44 1.00 0.89 1.19
At December 31, 1995, the recorded investment in impaired loans
measured in accordance with SFAS 114 amounted to $9,245,000, of
which $7,868,000 of impaired loans have a specific allowance of
$2,307,000 and the remaining $1,377,000 of impaired loans have no
specific allowance because the fair value of the collateral
securing the loan exceeded the investment in the loan. The
average recorded investment in impaired loans for the year ended
December 31, 1995, was $9,939,000. Interest income recognized in
1995 related to impaired loans was $686,000, most of which was
recognized on the cash basis.
The following table reflects impaired loans by type of loan at
December 31, 1995:
Impaired Amount
Commercial real estate $4,752,000
Commercial 4,493,000
Total $9,245,000
The total amount of impaired loans using (1) the present value of
expected future cash flows was $5,744,000, (2) the fair value of
the loans' collateral was $2,771,000, and (3) the observable
market price of the loans was $730,000.
Summary of Credit Loss Experience
December 31,
(Dollars in thousands)
1995 1994 1993 1992 1991
Balance of allowance
at beginning
of year $14,722 $15,157 $15,718 $12,938 $10,307
Loans actually
charged-off:
Real estate 167 455 558 656 1,428
Commercial,
financial and
agricultural 2,783 2,122 4,767 3,047 9,297
Installment and
credit card 1,429 815 1,768 2,301 2,782
Industrial
development bonds 67
Other 14 15 18 77
Total loans actually
charged-off 4,379 3,406 7,175 6,022 13,584
Recoveries of
loans previously
charged-off:
Real estate 305 127 221 106 270
Commercial,
financial and
agricultural 727 1,059 1,082 1,880 222
Installment and
credit card 446 561 816 773 571
Other 4 10
Total recoveries of
loans previously
charged-off 1,478 1,747 2,119 2,763 1,073
Net charge-offs 2,901 1,659 5,056 3,259 12,511
Addition to
allowance charged
to expense 3,002 2,864 3,991 4,917 15,142
Reversal of
allowance credited
to expense (1,640)
Effect of conforming
year ends of
pooled entities 504
Transfer of other
real estate owned
allowance
relating to
in-substance
foreclosure loans 36
Addition to
allowance from
purchase of
financial
institutions 1,122
Balance of
allowance at
end of year $14,859 $14,722 $15,157 $15,718 $12,938
Net charge-offs
to average loans
outstanding 0.20 0.12 0.41 0.31 1.21
Allowance for
credit losses
to total loans 1.01 1.03 1.20 1.31 1.26
Allowance for
credit losses
to total
non-performing
loans 151.14 196.66 156.35 161.66 125.25
Page 25
The provision for credit losses reflects the amount necessary in
management's opinion to maintain an adequate reserve, based upon
its analysis of the loan portfolio (including the loan growth
rate and change in the mix of the loan portfolio) and general
economic conditions and that necessary to state certain
individual loans at their estimated fair value.
The Company's banking subsidiaries monitor the adequacy of their
allowances for credit losses on a monthly basis. The banking
subsidiaries formally document their evaluations of the adequacy
of their allowances for credit losses on a quarterly basis, and
the evaluations are reviewed and discussed with each bank's
respective Board of Directors. The Company's Asset Quality
Department presents a quarterly consolidated evalution of the
adequacy of the allowance for credit losses to the Company's
Board of Directors. These evaluations of potential losses include
a review of the current financial status and credit standing of
commercial borrowers and their prior history, an evaluation of
available collateral, a review of loss experience in relation to
outstanding loans, and management's judgment as to prevailing and
anticipated economic conditions, among other relevant factors.
Such factors include, among others, changes in the credit grade
assigned to the loan by either the assigned officer or by the
Company's Asset Quality Department from its periodic reviews of
segments of the loan portfolios, and increases or decreases in
specific reserves assigned to individual loans. Residential
mortgage and consumer portfolios are collectively evaluated,
giving consideration to delinquency, charge-off trends and
current and anticipated economic conditions.
The following table sets forth the allocation of the allowance
for credit losses for the periods indicated:
December 31,
(Dollars in thousands)
1995 1994 1993 1992 1991
Specific allowance
Real estate $ 320 $ 1,178 $ 708 $ 823 $ 502
Commercial 3,989 2,384 2,334 4,763 2,918
Installment 560 50 76 53 4
Other
Total 4,869 3,612 3,118 5,639 3,424
General allowance
Real estate 594 729 1,186 915 1,004
Commercial 1,266 3,609 3,394 2,415 3,420
Installment 659 1,364 1,640 1,785 1,641
Other 474 422 579 553 659
Total 2,993 6,124 6,799 5,668 6,724
Unallocated
allowance 6,997 4,986 5,240 4,411 2,790
Allowance for
credit losses $14,859 $14,722 $15,157 $15,718 $12,938
Provisions for credit losses have decreased each year since 1991,
with the exception of a small increase in 1995, reflecting
improved asset quality. The provision for credit losses in 1991
aggregated $15,142,000, which included a special provision of $10
million in the third quarter to provide for certain losses,
specifically identified by management and to increase the
allowance for credit losses to a level commensurate with
management's evaluation of potential losses, given increases in
non-performing assets and uncertain economic conditions in the
Northwest Ohio market area. The 1992 provision for credit losses
decreased to $4,917,000. In 1992, the Company's asset quality
began to improve as non-performing assets to total loans and OREO
decreased to 1.31 percent from 1.96 percent, and the
non-performing loan ratio improved to .81 percent from 1.00
percent. Since 1992, the Company's asset quality has continued to
remain strong. Non-performing loans to total loans were .67
percent, .52 percent, and .77 percent at December 31, 1995, 1994,
and 1993, respectively. The Company's provision for credit losses
continued to remain steady at $3,002,000 in 1995 and $2,864,000
($1,224,000 net of reversal of a portion of allowance) in 1994
and net charge-off ratios have remained favorable.
The 1994 provision for credit losses was favorably impacted by a
$1,600,000 reduction in the allowance for credit losses at the
Company's First National subsidiary during the third quarter. As
a result, the 1994 third quarter provision for credit losses was
a net credit provision of $910,000. The reduction in First
National's allowance wasthe culmination of a number of events and
factors. Asset quality and charge-off experience at First
National improved rapidly in 1992. In recognition of the
favorable loss experience and asset quality, management suspended
provisions to First National's allowance for credit losses in
September 1992. No credit loss provisions were charged to First
National's operations in 1993 as First National experienced net
charge-offs in 1993 of only $40,000. During the second quarter of
1994, the Company's Asset Quality Department performed a detailed
review of First National's loan portfolio. The review confirmed
First National's management's conclusions that a reduction in the
allowance for credit losses was appropriate. During the second
quarter, the Office of the Comptroller of the Currency (OCC)
commenced an examination at First National which included an
assessment of First National's asset quality. The OCC's
examination was concluded and the results were communicated
during the third quarter of 1994. The OCC examination also
confirmed management's assessment of the allowance. Shortly afer
the issuance of the OCC report of examination, economic
conditions in First National's market area became available. It
indicated, among other things, a sharp drop in unemployment rates
between the months of July and August of 1994. Based on all of
the information available to management, the decision was made to
reduce First National's allowance by $1,600,000. At December 31,
1995, First National's ratio of allowance for credit losses to
total loans was .44 percent compared to Mid Am Bank, which was
1.39 percent. Because of First National's favorable
non-performing loans to total loans ratio of .23 percent at
December 31, 1995, its allowance at First National is considered
adequate. At December 31, 1995, the allowance for credit losses
for First National is 180 percent of non-performing loans and
other real estate owned.
Page 26
Allowance for Credit Losses to Non-Performing Loans
At December 31,
1991 125.25 percent
1992 161.66 percent
1993 156.35 percent
1994 196.66 percent
1995 151.14 percent
Deposits
The following table sets forth the average balances of and
average rates paid on deposits for the periods indicated:
December 31,
(Dollars in 1995 1994 1993
thousands) Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
Demand
Noninterest-
bearing $ 174,501 $ 168,855 $ 158,351
Interest-
bearing 185,841 2.09 194,850 2.06 183,478 2.30
Savings 269,308 2.63 327,474 2.57 332,068 2.82
Money market 121,459 3.48 91,834 2.54 102,603 2.84
Time 1,037,277 5.53 942,156 4.24 951,403 4.35
Total $1,788,386 $1,725,169 $1,727,903
The maturity distribution of time certificates of deposit issued
in amounts of $100,000 or more as of December 31, 1995 was:
(Dollars in thousands)
Three months or less $ 70,331
Over three months to six months 29,726
Over six months to twelve months 20,251
Over twelve months 45,199
Total $165,507
Deposit Mix - 1995 Average Balances
Savings Deposits 15.1 percent
Money Market Accounts 6.8 percent
Demand Noninterest-bearing 9.7 percent
Demand Interest-bearing 10.4 percent
Time Deposits 58.0 percent
Deposit Mix - 1994 Average Balances
Savings Deposits 19.0 percent
Money Market Accounts 5.3 percent
Demand Noninterest-bearing 9.8 percent
Demand Interest-bearing 11.3 percent
Time Deposits 54.6 percent
Page 27
Short-Term Borrowings
A summary of certain information regarding federal funds
purchased and securities sold under agreements to repurchase is
presented below. The latter represent securities sold to
customers subject to an obligation of the Company to repurchase
such securities at a specified time, usually 30 to 60 days after
the date of the sale. Such agreements provide customers with the
opportunity to make short-term investments of substantial sums,
usually in excess of $100,000, secured by obligations of the
United States Treasury or United States government agencies.
Year Ended December 31,
(Dollars in thousands)
1995 1994 1993
Average for the year:
Amount outstanding $87,128 $73,843 $67,512
Weighted average
interest rate 4.55 3.59 2.85
At year end:
Amount outstanding $87,548 $80,136 $71,772
Weighted average
interest rate 4.43 4.03 2.63
Maximum amount outstanding
at any month end
during the year $93,579 $101,823 $71,513
Return on Equity and Assets
(Dollars in thousands) 1995 1994 1993
Return on average total assets 1.17 1.14 1.23
Return on average common
shareholders' equity 14.51 13.88 16.39
Cash dividend payout ratio 54.51 52.72 40.32
Average total shareholders'
equity as a percentage
of average total assets 8.93 9.16 8.65
Page 28
Report of Independent Accounts
Price Waterhouse LLP
To the Board of Directors and Shareholders of Mid Am, Inc.
In our opinion, the accompanying consolidated statement of
condition and the related consolidated statements of earnings, of
changes in shareholders equity and of cash flows present fairly,
in all material respects, the financial position of Mid Am, Inc.
and its subsidiaries at December 31, 1995 and 1994 and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles. These financial
statements are the responsibility of the Company s management; or
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 1 to the financial statements, the Company
changed its method of accounting for mortgage servicing rights
and for impaired loans in 1995 and its method of accounting for
certain investments in debt and equity securities effective
December 31, 1993.
Price Waterhouse LLP
Price Waterhouse LLP
January 22, 1996
Toledo, Ohio
Page 29
CONSOLIDATED STATEMENT OF CONDITION
December 31, (Dollars in thousands) 1995 1994
Assets
Cash and due from banks $ 102,600 $ 85,332
Int-bearing deposits in other banks 3,372 2,232
Federal funds sold 72,558 8,160
Securities available for sale 461,997 212,437
Investment securities 71,700
Mortgage-backed investment securities 180,309
Loans held for sale 12,642 12,963
Loans, net of unearned fees and
income of $829 and $1,648 1,475,651 1,433,289
Allowance for credit losses (14,859) (14,722)
Net loans 1,460,792 1,418,567
Bank premises and equipment 49,489 50,171
Interest receivable and other assets 41,301 36,918
TOTAL ASSETS $2,204,751 $2,078,789
Liabilities
Demand deposits(non-interest-bearing) $ 223,945 $ 190,423
Savings deposits 593,807 586,140
Other time deposits 1,042,390 959,929
Total deposits 1,860,142 1,736,492
Federal funds purchased and securities
sold under agreements to repurchase 87,548 80,136
Capitalized lease obligations and debt 48,405 65,434
Interest payable and other liablities 13,818 11,475
Total Liabilities 2,009,913 1,893,537
Shareholders' Equity
Preferred stock - no par value
Authorized - 2,000,000 shares
Issued and outstanding - 1,422,744
and 1,608,000 shares in 1995 and
1994, respectively 35,569 40,200
Common stock - stated value of
$3.33 per share
Authorized - 35,000,000 shares
Issued - 19,492,726 and 17,359,629
shares in 1995 and 1994,
respectively 64,975 57,865
Surplus 91,723 75,624
Retained earnings 9,529 17,769
Treasury stock - 522,361 and 1,400
common shares in 1995 and 1994,
respectively (8,424) (20)
Unrealized gains (losses) on
securities available for sale 1,466 (6,186)
Commitments and contingencies
(Notes 13 and 14)
Total Shareholders' Equity 194,838 185,252
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $2,204,751 $2,078,789
The accompanying notes are an integral part of the financial
statements.
Page 30
CONSOLIDATED STATEMENT OF EARNINGS
Year Ended December 31, (Dollars in
thousands, except per share data) 1995 1994 1993
Interest Income
Interest and fees on loans $130,300 $110,917 $107,688
Interest on deposits in other banks 218 146 218
Interest on federal funds sold 3,610 1,206 1,606
Interest on taxable investments 25,209 24,750 26,683
Interest on tax exempt investments 3,206 3,552 3,192
Total interest income 162,543 140,571 139,387
Interest Expense
Interest on deposits 72,527 54,689 57,907
Interest on borrowed funds 7,789 4,875 3,150
Total interest expense 80,316 59,564 61,057
Net interest income 82,227 81,007 78,330
Provision for credit losses 3,002 1,224 3,991
Net interest income after
provision for credit losses 79,225 79,783 74,339
Non-interest Income
Trust department 1,337 1,195 910
Service charges on deposit accounts 6,200 6,036 5,819
Mortgage banking 8,522 6,694 12,317
Brokerage commissions 9,540 7,137 5,158
Collection agency fees 3,399 3,928 2,390
Net gains on sales of securities 350 1,231 2,719
Other income 6,607 6,333 4,689
Total non-interest income 35,955 32,554 34,002
Non-interest Expense
Salaries and employee benefits 41,282 40,183 35,441
Net occupancy expense 5,113 5,269 5,070
Equipment expense 7,385 7,589 6,740
Other expenses 24,636 25,538 25,711
Total non-interest expense 78,416 78,579 72,962
Income before income taxes 36,764 33,758 35,379
Applicable Income Taxes
Currently payable 9,587 9,732 9,392
Deferred 2,210 773 1,306
Total applicable income taxes 11,797 10,505 10,698
Net income $ 24,967 $ 23,253 $ 24,681
Net income available to
common shareholders $ 22,216 $ 20,336 $ 21,763
Earnings Per Common Share
Primary $ 1.16 $ 1.07 $ 1.16
Fully diluted $ 1.11 $ 1.03 $ 1.11
The accompanying notes are an integral part of the financial
statements.
Page 31
<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands, except for per share data)
Unrealized
Gain (Loss) Total
On Security Share-
Preferred Common Retained Treasury Available holders'
Stock Stock Surplus Earnings Stock For Sale Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1992 $40,250 $50,696 $53,221 $20,625 $164,792
Net income for the year 24,681 24,681
Dividends declared:
Preferred cash
dividends (2,918) (2,918)
Common cash dividends
of $.54 per share (8,774) (8,774)
Issuance of
common stock 1,449 3,300 4,749
Unrealized gains on
securities available
for sale $2,844 2,844
Cash paid to Colonial
shareholders (814) (814)
Effect of conforming
the year ends of
pooled entities 220 503 (1,861) (1,138)
Fractional shares
and other items 13 (10) 3
Balances at
December 31, 1993 40,250 52,365 57,037 30,929 2,844 183,425
Net income for the year 23,253 23,253
Dividends declared:
Preferred cash
dividends (2,917) (2,917)
Common cash dividends
of $.59 per share (10,721) (10,721)
10 percent common
stock dividend
(1,515,613 shares) 5,052 17,693 (22,745)
Issuance of common stock 428 1,465 1,893
Unrealized losses on
securities available
for sale (9,030) (9,030)
Treasury shares acquired $ (655) (655)
Treasury shares issued (635) 635
Preferred stock
conversions,
fractional shares
and other items (50) 20 64 (30) 4
Balances at
December 31, 1994 40,200 57,865 75,624 17,769 (20) (6,186) 185,252
Net income for the year 24,967 24,967
Dividends declared:
Preferred cash
dividends (2,751) (2,751)
Common cash dividends
of $.63 per share (12,111) (12,111)
10 percent common
stock dividend
(1,705,761 shares) 5,686 12,314 (18,000)
Unrealized gains on
securities available
for sale 7,652 7,652
Treasury shares acquired (9,197) (9,197)
Treasury shares issued 793 793
Preferred stock
conversions (4,631) 1,358 3,273
Fractional shares
and other items 66 512 (345) 233
Balances at
December 31, 1995 $35,569 $64,975 $91,723 $9,529 $(8,424) $1,466 $194,838
The accompanying notes are an integral part of the financial
statements.
Page 32
</TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Operating Activities
Net income $ 24,967 $ 23,253 $ 24,681
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for credit losses 3,002 1,224 3,991
Provision for depreciation
and amortization of assets 8,850 9,341 9,056
Proceeds from sales of
securities available for sale 138,215
Proceeds from maturities and
paydowns of securities
available for sale 29,801
Purchases of securities
available for sale (155,508)
Proceeds from sales of mortgage
and other loans held for sale 302,655 351,597 675,942
Mortgage and other loans
originated for sale (301,399) (280,749) (692,919)
Net gains on sales of assets (5,962) (4,631) (13,387)
(Increase) decrease in interest
receivable and other assets (10,872) 1,315 3,405
Increase (decrease) in interest
payable and other liabilities 2,319 (3,106) (1,684)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 23,560 98,244 21,593
Investing Activities
Net (increase) decrease in
interest-bearing deposits
in other banks (1,140) 3,206 5,741
Net (increase) decrease in
federal funds sold (64,398) 50,907 (4,702)
Proceeds from sales of
securities available for sale 27,771 91,398
Proceeds from maturities and
paydowns of securities
available for sale 49,105 33,251
Purchases of securities
available for sale (83,063) (82,727)
Proceeds from sales of
investment securities 4,066
Proceeds from maturities and
paydowns of investment securities 7,213 12,347 54,883
Purchases of investment securities (1,579) (19,601) (60,536)
Proceeds from maturities and
paydowns of mortgage-backed
securities 19,998 33,082 60,446
Purchases of mortgage-backed
securities (2,503) (29,030) (155,469)
Proceeds from sales of loans 41,580 13,989 5,044
Net increase in loans (86,949) (185,246) (78,120)
Proceeds from sales of
other real estate owned 1,712 1,686 3,920
Proceeds from sales of
bank premises and equipment 848 568 1,478
Purchases of bank premises
and equipment (6,063) (4,151) (14,185)
Cash acquired through acquisitions 31 1,508
NET CASH USED FOR
INVESTING ACTIVITIES (97,437) (80,321) (175,926)
Page 33
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Financing Activities
Net increase (decrease) in demand
deposits and savings accounts 41,189 (43,066) 99,768
Net increase in other time deposits 82,461 10,476 29,586
Net increase in federal funds
purchased andsecurities sold
under agreements to repurchase 7,412 8,363 17,729
Repayment of capitalized lease
obligations and debt (66,050) (41,638) (2,319)
Proceeds from issuance of
long-term debt 49,021 79,002 19,358
Proceeds from issuance of
common stock 1,893 4,749
Cash dividends paid (14,862) (13,638) (11,692)
Cash paid to Colonial shareholders (814)
Preferred stock conversions,
fractional shares and oher items 233 4 79
Treasury stock
(net of reissuance of 793) (8,404) (655)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 91,000 741 156,444
Net increase in cash and
due from banks 17,123 18,664 2,111
Effect on cash of conforming the
year ends of pooled entities 145 923
Cash and due from banks at the
beginning of the year 85,332 66,668 63,634
Cash and due from banks at
the end of the year $102,600 $ 85,332 $ 66,668
Supplemental Schedule of Noncash
Investing and Financing Activities:
Securitization of loans
held for sale $ 3,685 $ 9,067
Investment securities transfer 66,096 $117,369
Mortgage-backed investment
securities transfer 162,477 2,642 37,378
Transfer to securities
available for sale $232,258 $ 11,709 $154,747
Transfers from loans to
other real estate owned $ 893 $ 989 $ 3,114
Loans on other real
estate owned sold $ 16 $ 462 $ 3,238
Noncash portion of acquisitions
(Note 2)
Fair value of assets acquired
(excluding cash) $ 17 $ 4,290
Intangible assets 246 5,238
Fair value of liabilities assumed (44)
Noncash cost of acquisitions $ 219 $ 9,528
Unrealized gains (losses) on
securities available for sale $ 11,748 $(13,893) $ 4,376
Adjustment to deferred tax 4,096 (4,863) 1,532
Adjustments to shareholders' equity $ 7,652 $ (9,030) $ 2,844
Treasury shares issued in merger $ 635
The accompanying notes are an integral part of the financial
statements.
Page 34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies
The accounting and reporting policies followed by Mid Am, Inc.
conform to generally accepted accounting principles and to
general practices within the financial services industry. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Actual
results could differ from those estimates.
Prior to 1994, Mid Am, Inc.'s business related solely to
commercial banking and related services which for financial
reporting purposes was considered a single business segment. In
1994, two collection companies were acquired, and in 1995, a
broker/dealer company was acquired (see Note 2) which are
considered to be additional business sgments; however, the
revenues, operating profit and assets of the collection business
and broker/dealer business are not material for separate
disclosure and Mid Am s predominant business continues to be
banking. A summary of the significant accounting policies
follows.
Consolidation
The consolidated financial statements of Mid Am, Inc. (the
Company) include the accounts of Mid American National Bank and
Trust Company (Mid Am Bank), First National Bank Northwest Ohio
(First National), American Community Bank, N.A. (AmeriCom),
AmeriFirst Bank, N.A. (AmeriFirst), Adrian State Bank (Adrian),
International Credit Service, Inc. (ICS), CCB Services, Inc.
(CCBS), MFI Investments Corp. (MFI), MFI Insurance Agency, Inc.,
and Mid Am Information Services, Inc. (MAISI). All significant
intercompany transactions and accounts have been eliminated in
consolidation.
Cash and Due from Banks
The Company is required to maintain average reserve balances with
the Federal Reserve Bank. The average reserve balance at December
31, 1995 and 1994 approximated $25,184,000 and $23,951,000,
respectively.
Securities Available for Sale
Securities classified as available for sale are carried at
market. The unrealized appreciation or depreciation from the
securities acquisition cost is recorded in a valuation account,
net of applicable income tax effect, in the shareholders equity
section of the balance sheet. The amount of unrealized
appreciation or depreciation relating to a security which is
available for sale is recognized in the income statement upon
sale of the security using the specific identification method to
determine the security's cost.
The adoption of Statement of Financial Accounting Standards
No.115, Accounting for Certain Investments in Debt and Equity
Securities (SFAS 115) as of December 31, 1993, did not have a
material effect on net income or earnings per share. Prior to the
adoption of SFAS 115, purchases and sales or maturities of
securities classified as available for sale were presented in
operating activities for purposes of reporting cash flows. Such
transactions have been presented as investing activities since
adoption of the statement.
Held to Maturity Securities
The Company holds certain of its securities for investment
purposes (held to maturity) where it has both the ability and
intent to hold the securities to maturity. Such securities are
stated at cost, adjusted for amortization of premiums and
accretion of discounts computed under the level yield method.
Such premium amortization and discount accretion are recognized
as adjustments to interest income. The rate of prepayment
activity on mortgages underlying mortgage-backed securities is
monitored and compared to expected prepayments. Prepayment
activity is affected primarily by movements in interest rates.
Yields on mortgage-backed securities are adjusted as prepayments
occur through charges to premium amortization or discount
accretion.
Derivative Financial Instruments
The Company's hedging policies permit the use of interest rate
swaps, caps and floors to manage interest rate risk or to hedge
specified assets and liabilities. Derivative financial
instruments are not used for trading purposes. Through December
31, 1995, the Company has not invested in any derivative
financial instruments, but may do so in the future.
Pledged Securities
The carrying value of securities pledged to secure public and
trust deposits, securities sold under agreements to repurchase
and for other purposes as required by law amounted to
$220,070,000 and $188,722,000 at December 31, 1995 and 1994,
respectively.
Mortgage Servicing Rights
The Company adopted SFAS 122, Accounting for Mortgage Servicing
Rights effective January 1, 1995. The cost of mortgage loans
which the Company originates or purchases under a definitive plan
to sell or securitize is allocated between the mortgage servicing
rights and the cost of the mortgage based on the relative fair
values at date of origination or purchase. The fair value of the
mortgage servicing rights is determined by discounting expected
servicing income cash flows, net of certain servicing costs, by a
rate which is comparable to the current interest-only strip rate.
The cost of those mortgage loans which are originated or
purchased without a definitive plan to sell or securitize is not
allocated between mortgage servicing rights and the cost of the
mortgage until the date of sale or securitization.
Mortgage servicing rights assets are amortized in proportion to
and over the period of estimated net servicing income.
Management periodically evaluates mortgage servicing assets for
impairment for established strata, (considering type of
mortgages, interest rates of the underlying mortgages and year of
origination) by discounting the expected future cash flows of
each strata, taking into consideration the estimated level of
prepayments based upon current industry expectations.
The adoption of SFAS 122 increased 1995 gains on sales of loans
and net income by $1,560,000 and $1,020,000, respectively, or
$.05 per share.
Loans
Interest income on loans is calculated using the simple-interest
method on the outstanding principal amounts.
All non-refundable fees and costs associated with the Company's
lending activities are recognized over the life of the related
loan or lease as an adjustment of yield.
Page 35
Residential mortgage loans held for sale are stated at the lower
of the cost to originate or purchase the loan (net of deferred
loan fees and costs and amounts assigned to mortgage servicing
rights), or market. Market is determined on the basis of rates
quoted in the secondary mortgage market. The Company generally
sells its residential mortgage loans at a premium or discountfrom
the carrying amount of the loans. Such premium or discount is
recognized at the date of sale. The Company also sells certain
mortgage and other loans or participations in such loans for cash
equal to the principal amount of loans sold, but with yield rates
which reflect the current market interest rate rather than the
contractual interest rate of the loans. A gain or loss is
recognized at the date of sale in an amount reflecting the
discounted present value of this yield differential, less a
provision for a normal servicing fee, over the estimated life of
the underlying loans.
The Company prospectively adopted SFAS 114, Accounting by
Creditors for Impairment of a Loan and SFAS 118, Accounting by
Creditors for Impairment of a Loan-Income Recognition and
Disclosures on January 1, 1995. Residential mortgage,
installment and credit card loans are collectively evaluated for
impairment. Individual commercial loans exceeding size
thresholds established by management are evaluated for
impairment. Impaired loans are recorded at the loan s fair value
by the establishment of a specific allowance where necessary.
The fair value of collateral-dependent loans is determined by the
fair value of the underlying collateral. The fair value of
noncollateral-dependent loans is determined by discounting
expected future interest and principal payments at the loan's
effective interest rate. The adoption f SFAS 114 and SFAS 118
did not have a material impact on 1995 results of operations.
Accrual of interest on loans is discontinued when principal or
interest remains due and unpaid for 90 days or more, dependent
upon collateral and whether the loan is in the process of
collection. Income on such loans is then recognized only to the
extent that cash is received and when the future collection of
principal is probable. Interest accruals are resumed on such
loans only when they are brought fully current with respect to
interest and principal and when, in the judgment of management,
the loans are estimated to be fully collectible as to both
principal and interest. Restructured loans are those loans on
which concessions in terms have been granted because of a
borrower's financial difficulty. Interest is generally accrued on
such loans in accordance with the new terms.
Allowance for Credit Losses
The allowance fo credit losses is established through a provision
for credit losses charged to expense. Loans and leases are
charged against the allowance for credit losses when management
believes the full collectibility of the loan is unlikely. The
allowance is an amount that management believes will be adequate
to absorb losses inherent in existing loans and commitments to
extend credit. The allowance and provision take into
consideration such factors as changes in the nature and volume of
the portfolio, overall portfolio quality, loan concentrations,
specific problem loans, leases and commitments, and current and
anticipated economic conditions that may affect the borrowers
ability to pay. Specific allowances are established for certain
individual impaired loans based on the evaluation of the fair
value of the impaired loan. Allowances established to provide
for losses under commitments to extend credit, or recourse
provisions under servicing agreements are classified with other
liabilities, if material.
Other Real Estate Owned
Real estate acquired by foreclosure is carried in other assets at
the lower of the recorded investment in the property or its fair
value. Prior to foreclosure, the value of the underlying loan is
written down to the fair value of the real estate to be acquired
by a charge to the allowance for credit losses, if necessary. At
the time of foreclosure, an allowance is established for
estimated selling costs. Any subsequent writedowns required by
changes in estimated fair value or disposal expenses are provided
through this allowance and the provision is charged to operating
expense. Carrying costs of such properties, net of related
income, and gains and losses on their disposition are charged or
credited to operating expense as incurred.
Bank Premises and Equipment
Bank premises an equipment are stated at cost, less accumulated
depreciation which is computed using the straight-line method.
Intangible Assets
Goodwill is amortized using the straight-line method over 15
years. Core deposit intangible assets acquired before 1992 are
amortized using the straight-line method over 10 years. Core
deposit intangible assets recorded after January 1, 1992, are
amortized using an accelerated method over 10 years. The
difference between the straight-line method and interest method
for amortization of the pre-1992 core deposit intangible assets
is not material. Goodwill and core deposit intangible assets at
December 31, 1995 and 1994 aggregated $20,715,000 and $18,726,000
respectively, net of accumulated amortization of $8,691,000 and
$5,658,000, respectively.
Income Taxes
The Company utilizes an asset and liability approach for
financial accounting and reporting of income taxes. The provision
for income taxes is based on pre-tax income which differs in some
respects from taxable income. Deferred income taxes/benefits are
provided on cumulative differences between pre-tax income for
income tax and financial reporting purposes using the current tax
rate.
Trust Department
Trust Department income has been recognized on the accrual basis.
Assets held by the Company in fiduciary or agency capacities
(oher than cash on deposit at the Company's bank subsidiaries)
for its customers are not included in the consolidated statement
of condition as such items are not assets of the Company.
Earnings Per Share
Earnings per share is computed using the weighted average number
of shares outstanding during the period, as restated for shares
issued in business combinations accounted for as
poolings-of-interests, stock dividends (10 percent stock
dividends were declared and paid in 1995 and 1994), and stock
splits (a three-for-two split was declared and effected in 1993),
and all common stock equivalents, applied to net income. Fully
diluted earnings per share is computed using the weighted average
number of shares determined for the primary computation plus the
number of shares of common stock that would be issued assuming
all preferred shares were converted and certain outstanding stock
options not included in the primary computation were exercise.
Page 36
The weighted average number of common shares outstanding for
primary and fully diluted earnings per share computations were as
follows:
Year Ended December 31,
1995 1994 1993
Weighted average
common shares
outstanding -
primary 19,205,000 19,046,000 18,736,000
Weighted average
common shares
outstanding -
fully diluted 22,592,000 22,627,000 22,310,000
Preferred Stock
The nonvoting $1.8125 cumulative convertible Series A preferred
shares may be redeemed, at the option of the Company, after June
1997 at $25.00 plus accrued and unpaid dividends. Dividends on
common stock are not permitted to be declared unless all
cumulative dividends on preferred stock have been declared and
paid. At December 31, 1995, each share of Series A preferred
stock is convertible into the Company's common stock at a
conversion price of $11.27. The Series A preferred stock is not
considered to be a common stock equivalent for purposes of
primary earnings per share. The amount of common shares that
would be issuable assuming conversion of all preferred shares
outstanding is used for purposes of determining fully diluted
earnings per share.
Treasury Stock
Shares of the Company's stock are acquired for purposes of
issuance in connection with the stock option plan and for future
stock dividend declarations. The treasury shares acquired are
recorded at cost.
Stock-Based Compensation
During 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation
(SFAS 123). SFAS 123 introduces a fair value based method of
accounting for stock compensation arrangements. The statement
also permits entities to retain the intrinsic value based method
of accounting for stock compensation arrangements. The Company
accounts for stock-based compensation arrangements under the
intrinsic value method which, at present, it plans to continue to
use in the future. Entities which retain the intrinsic value
method for accounting for stock compensation will be required
under the new standard to provide certain pro forma disclosures
of the difference between compensation cost, if any, under the
intrinsic value and that which would result had the entity used
the fair value method.
SFAS 123 is effective for 1996, accordingly, the Company will be
required to make the pro forma disclosures for stock awards
granted in 1995 and afterwards in its 1996 financial statements.
SFAS 123 will have no effect on the reported results of
operations.
Statement of Cash Flows
The Company considers cash on hand, deposits maintained with the
Federal Reserve Bank and cash due from other banks, all of which
are included in the caption Cash and Due from Banks, as cash for
purposes of the Statement of Cash Flows.
Note 2. Mergers and Acquisitions
Completed Acquisitions On July 31, 1995, the Company completed
its merger with MFI Investments Corp., a broker/dealer with 1994
revenue of $6,300,000. MFI shareholders received 314,530 shares
of Mid Am, Inc. common stock, of which 156,097 shares are held in
escrow at December 31, 1995, pending resolution of litigation
filed against MFI prior to the merger. Under the escrow
agreement, 1,167 shares of Mid Am, Inc. stock were returned to
the Company during 1995 for costs incurred in defending the
action. Shares returned under the escrow agreement are treated
as retired shares. Dividends declared and paid on the shares are
not returned. The transaction has been accounted for as a
pooling-of-interests.
On March 1, 1995, the Company completed its merger with ASB
Bankcorp, Inc., parent company of $128 million asset Adrian State
Bank. ASB Bankcorp, Inc. shareholders received 1,546,662 shares
of Mid Am, Inc. common stock (after adjustment for the 10 percent
common stock dividend paid in May 1995). The transaction was
accounted for as a pooling-of-interests.
The 1995 results of operations of the Company include the
pre-merger results of operations for Adrian for the period
January 1, 1995, through February 28, 1995, and for MFI for the
period January 1, 1995, through July 31, 1995. Summarized
operating activity for Adrian and MFI for the 1995 periods prior
to their respective mergers with the Company are as follows:
(Dollars in thousands) Adrian MFI
Net interest income $809 $ 16
Brokerage commissions 3,957
Net income 203 86
Other changes in
shareholders' equity (121)
On November 30, 1994, the Company completed its mergers with ICS
and CCBS, collection and credit service companies headquartered
in Ohio and Florida, respectively, with aggregate net collection
fee revenues of $2.4 million for the year ended December 31,
1993. The transactions were accounted for as
poolings-of-interests and were consummated by the issuance of
483,998 shares of Mid Am, Inc. common stock (after adjustment for
the 10 percent stock dividend in 1995) to ICS and CCBS
shareholders.
On June 4, 1994, the Company completed its merger with Farmers
Savings Bank (Farmers), a $66 million asset bank in Northwood,
Ohio. The transaction was accounted for as a pooling-of-interests
by the issuance of 688,084 shares of Mid Am, Inc. common stock
(after adjustment for the 10 percent common stock dividends in
1994 and 1995) to Farmers shareholders.
Page 37
The following table reconciles amounts previously reported by the
Company to the restated amounts for the years ended December 31,
1994 and 1993:
1994 (Dollars in thousands,
except per share data) Primary
Net Earnings
Interest Non-interest Net Per
Income Income Income Share
Mid Am, Inc. -- as
previously reported $75,741 $25,352 $22,873 $1.16
Effect of Adrian and
MFI poolings 5,266 7,202 380
$81,007 $32,554 $23,253 $1.07
1993 (Dollars in thousands,
except per share data) Primary
Net Earnings
Interest Non-interest Net Per
Income Income Income Share
Mid Am, Inc. -- as
previously reported $73,239 $28,060 $23,337 $1.21
Effect of Adrian and
MFI poolings 5,091 5,942 1,344
$78,330 $34,002 $24,681 $1.16
Note 3. Securities and Securities Available for Sale
The aggregate cost and carrying value at market of securities
available for sale at December 31, 1995 and 1994 are as follows:
1995 (Dollars in thousands)
Gross Gross Carrying
Unrea- Unrea- Value
lized lized at
Cost Gains Losses Market
U.S. Treasury securities $ 73,219 $ 715 $ (142) $ 73,792
Securities of other
U.S. Government agencies
and corporations 67,415 571 (460) 67,526
Obligations of states and
political subdivisions 57,313 2,208 (55) 58,996
Equity securities 31,397 299 (430) 31,266
Mortgage-backed securities 230,398 1,628 (1,609) 230,417
Total $459,742 $5,421 $(3,166) $461,997
1994 (Dollars in thousands)
Gross Gross Carrying
Unrea- Unrea- Value
lized lized at
Cost Gains Losses Market
U.S. Treasury securities $ 82,502 $ 71 $ (3,220) $ 79,353
Securities of other
U.S. Government agencies
and corporations 64,241 75 (2,915) 61,401
Obligations of states and
political subdivisions 200 200
Equity securities 27,344 64 (981) 26,427
Mortgage-backed securities 47,628 360 (2,932) 45,056
Total $221,915 $ 570 $(10,048) $212,437
The aggregate carrying value (at amortized cost) and approximate
market value of investment and mortgage-backed investment
securities classified as held to maturity at December 31, 1994,
are as follows:
(Dollars in thousands)
Gross Gross
Unrea- Unrea-
Carrying lized lized Market
Value Gains Losses Value
U.S. Treasury securities $ 3,623 $ (202) $ 3,421
Securities of other
U.S. Government agencies
and corporations 5,523 $ 23 (203) 5,343
Obligations of states and
political subdivisions 62,032 1,535 (2,512) 61,055
Other securities 522 (3) 519
Total $ 71,700 $1,558 $ (2,920) $ 70,338
Mortgage-backed securities $180,309 $ 254 $(11,561) $169,002
Page 38
Following the issuance of the Financial Accounting Standards
Board's Guide to Implementation of Statement 115 on Accounting
for Certain Investments in Debt and Equity Securities in November
1995, management assessed the held to maturity portfolio. As a
result, investment and mortgage-backed securities with an
mortized cost of $66,096,000 and $162,477,000, respectively,
were transferred from held to maturity to securities available
for sale. The net unrealized gain (loss) of the investment and
mortgage-backed securities transferred was $1,120,000 and
$(1,553,000), respectively.
The carrying value and market value of securities available for
sale at December 31, 1995, by contractual maturity, are shown to
the right. Expected maturities will differ from contractual
maturities because issuers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Carrying Value
(Dollars in thousands) at Market Cost
Due in one year or less $ 40,388 $ 40,308
Due after one year through
five years 118,035 116,809
Due after five years through
ten years 31,718 31,214
Due after ten years 41,439 41,013
231,580 229,344
Mortgage-backed securities
available for sale 230,417 230,398
$461,997 $459,742
Proceeds from sales of securities available for sale were
$27,771,000, $91,398,000 and $142,281,000 for 1995, 1994 and
1993, respectively.
Gains of $429,000, $1,343,000 and $3,006,000 and losses of
$79,000, $112,000 and $287,000 were realized on sales of
available for sale securities in 1995, 1994 and 1993,
respectively.
Note 4. Loans and Allowance for Credit Losses
Loans outstanding are as follows:
December 31,
(Dollars in thousands) 1995 1994
Real estate loans
Construction $ 63,086 $ 69,942
Mortgage 885,714 871,704
Commercial, financial and
agricultural loans 357,290 327,871
Installment and credit card loans 164,055 155,380
Other loans 6,335 10,040
Total 1,476,480 1,434,937
Less:
Unearned income (22) (38)
Unamortized loan fees (807) (1,610)
Allowance for credit losses (14,859) (14,722)
Total net $1,460,792 $1,418,567
Most of the Company's business activity is with customers located
within the respective local business area of its banks which
encompasses Western Ohio and Southeastern Michigan. The portfolio
is well diversified, consisting of commercial, residential,
agri-business, consumer and small business loans. There are no
significant concentrations in any one industry and the amounts
related to highly leveraged transactions are not significant.
The Company evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained is based on
management s evaluation of the customer. Collateral held relating
to commercial, financial, agricultural and commercial mortgages
varies but may include accounts receivable, inventory, property,
plant and equipment and income-producing commercial properties.
Changes in the allowance for credit losses are as follows:
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Balance at beginning of period $14,722 $15,157 $15,718
Additions (reductions):
Provision for credit losses 3,002 1,224 3,991
Charge-offs (4,379) (3,406) (7,175)
Recoveries on loans charged off 1,478 1,747 2,119
Transfer of other real estate
owned allowance relating to
in-substance foreclosure loans 36
Effect of conforming year ends
of pooled entities 504
Balance at end of period $14,859 $14,722 $15,157
At December 31, 1995, the recorded investment in impaired loans
amounted to $9,245,000, of which $7,868,000 of impaired loans
have a specific allowance of $2,307,000 and the remaining
$1,377,000 of impaired loans have n specific allowance as the
fair value of the collateral securing the loans exceeded the
investment in the loan. The average recorded investment in
impaired loans for the year ended December 31, 1995, was
$9,939,000. Interest income recognized on the cash basis in 1995
related to impaired loans was $686,000.
At December 31, 1994, the outstanding principal balance of loans
placed on non-accrual status amounted to $6,017,000.
Other non-performing assets at December 31, 1995 and 1994 include
other real estate owned of $763,000 and $1,102,000, respectively,
which have been recorded at estimated fair value less estimated
selling costs.
Page 39
In the normal course of business, the Company has made loans to
certain directors, executive officers and their associates under
terms consistent with the Company s general lending policies.
Loan activity relating to these individuals for the three years
ended December 31, 1995, is as follows:
(Dollars in thousands)
Balances New
at Origi- Loan Balances
Beginning nations/ Repay- at End
of Period Advances ments Other of Period
Year ended
December 31, 1995 $21,787 $11,558 $ 9,736 $(4,234) $19,375
Year ended
December 31, 1994 $20,406 $14,120 $10,774 $(1,965) $21,787
Year ended
December 31, 1993 $19,466 $ 9,369 $ 7,135 $(1,294) $20,406
Note 5. Bank Premises and Equipment
Bank premises and equipment consist of the following:
December 31,
(Dollars in thousands) 1995 1994
Land and land improvements $ 8,833 $ 8,008
Buildings 42,614 42,049
Furniture and fixtures 35,023 30,970
Leasehold improvements 905 660
Construction-in-progress 674 287
88,049 81,974
Less
accumulated depreciation
and amortization (38,560) (31,803)
$ 49,489 $ 50,171
Included in the above are buildings, land and land improvements
which secure capitalized leases with a cost of $5,720,000, less
accumulated amortization and depreciation of $2,979,000 and
$2,759,000 at December 31, 1995 and 1994, respectively.
Substantially all of property recorded under capital leases
relates to transactions with Bancsites, Inc., a former
subsidiary, which the Company continues to significantly
influence through common shareholders and management. The
capital lease premises represent 13 branch bank facilities owned
by Bancsites and leased to the Company under long-term lease
agreements entered into in the normal course of business and
under terms no more favorable than those prevailing in the
marketplace. Lease payments amounted to $551,000 in 1995,
$561,000 in 1994 and $543,000 in 1993. Rental payments for land
are treated as operating lease expense.
All of the future minimum payments under capital lease agreements
at December 31, 1995, presented below relate to the Bancsites
agreements, and substantially all future minimum lease payments
under operating lease agreements are with unrelated parties:
(Dollars in thousands) Bancsites Bancsites Other
Capital Operating Operating
Leases Leases Leases
1996 $ 569 $ 29 $ 777
1997 525 29 309
1998 472 26 215
1999 386 143
2000 390 121
Thereafter 2,032 1,268
Total minimum lease payments 4,374 $ 84 $2,833
Amounts representing interest (1,212)
Present value of minimum
lease payments $ 3,162
Note 6. Deposits
Included in other time deposits are certificates of deposit of
$100,000 or more totalling $165,507,000 and $136,594,000 at
December 31, 1995 and 1994, respectively.
Included in savings deposits are negotiable order of withdrawal
(NOW) accounts totalling approximately $198,333,000 and
$194,080,000 at December 31, 1995 and 1994, respectively.
The Company paid $77,786,000, $61,049,000 and $64,746,000 in
interest on deposits and other borrowings in 1995, 1994 and 1993,
respectively.
Note 7. Federal Home Loan Bank Borrowings and Advances and
Other Borrowings
All of the Company s banking subsidiaries, except for Adrian, are
members of the Federal Home Loan Bank (FHLB) and have lines of
credit with the FHLB which enables the Company, through its bank
subsidiaries, to borrow up to $104,618,000 at December 31, 1995.
Amounts outstanding at December 31, 1995 and 1994 aggregated
$12,952,000 and $15,623,000, respectively. Outstanding borrowings
under these lines of credit are secured by FHLB stock totalling
$2,661,000 and $5,131,000 at December 31, 1995 and 1994,
respectively, and mortgages owned by the institutions totalling
150 percent of the outstanding borrowings. The weighted average
interest rate on outstanding floating rate borrowings at December
31, 1995 and 1994 was 6.65 percent and 6.66 percent,
respectively.
Page 40
The Company may also borrow from the FHLB on a fixed-rate basis.
At December 31, 1995 and 1994, FHLB fixed-rate advances amounted
to $32,231,000 and $46,121,000, respectively, and are
collateralized by FHLB stock with a book value of $7,002,000 and
a pledge of loans having a book value equal to 150 percent of the
advances. The interest rate on the amounts owed at December 31,
1995 and 1994 was 6.98 percent and 6.79 percent, respectively,
and is paid monthly.
The Company entered into an agreement with an unrelated financial
institution in October 1995 which enables the Company to borrow
up to $20,000,000 through October 29, 1996. Interest on advances
taken on the facility is accrued at either a floating rate based
on the financial institution s corporate base rate or a
Eurodollar rate formula. The Company may elect the interest rate
method to be applied against each advance. The agreement
provides for an annual commitment fee of .25 percent to be
applied against the unused portion of the line of credit. The
fee is payable on a quarterly basis. The agreement also contains
covenants which require the Company, among other things, to
maintain specified ratios such as debt to total equity and
non-performing assets to total equity. Through December 31,
1995, no advances have been drawn against the available credit
facility.
The contractual maturities of the outstanding borrowings for the
five years subsequent to December 31, 1995, are:
1996, $19,951,000; 1997, $8,355,000; 1998, $2,497,000;
1999, $2,649,000; and 2000, $1,569,000. See Note 5 for
information relating to capital lease obligations.
Note 8. Fair Value of Financial Instruments
The following presents the estimated fair value of the Company's
financial instruments at December 31, 1995 and 1994:
December 31, 1995 1994
(Dollars in Carrying Fair Carrying Fair
thousands) Amount Value Amount Value
Assets
Cash and due from
banks, interest-
bearing deposits
in other banks
and federal
funds sold $ 178,530 $ 178,530 $ 95,724 $ 95,724
Securities
available for
sale, investment
securities and
mortgage-backed
investment
securities 461,997 461,997 464,446 451,169
Loans held for
sale and loans 1,488,293 1,446,252
Less
Allowance for
credit losses (14,859) (14,722)
Loan held for sale
and loans, net 1,473,434 1,440,882 1,431,530 1,384,603
Liabilities
Deposits 1,860,142 1,868,834 1,736,492 1,738,438
Federal funds
purchased and
securities sold
under agreements
to repurchase 87,548 87,548 80,136 80,136
Debt 45,243 45,334 61,996 59,740
Off-balance-sheet
Commitments:
Commitments to extend
credit ($421,673
and $247,266 at
December 31, 1995
and 1994,
respectively) 420,983 245,549
Basis of Fair Value Determination:
The table above has presented fair value disclosures in
accordance with SFAS 107, Disclosure about Fair Value of
Financial Instruments whether or not the financial instruments
are recognized in the balance sheet. In cases where quoted
market prices are not available, fair values are based on
estimates using present value or other valuation techniques.
These techniques are materially affected by the assumptions used
(estimates of future cash flows and discount rates, among
others). Because of the judgment and subjective considerations
required in determining appropriate and reasonable assumptions,
the derived fair value estimates cannot be substantiated by
comparison to independent markets. Furher, the amounts which
could be realized in immediate settlement of te instrument could
vary significantly from the fair value estimate depending upon
bulk versus individual settlements or sales as well as other
factors. SFAS 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate net fair value amounts presented do
not represent the underlying value of the Company.
Page 41
Cash and due from banks, interest-bearing deposits in other banks
and federal funds sold:
Due to the frequency of repricing of these items, the fair value
is assumed to equal the carrying amount.
Securities available for sale, investment securities and
mortgage-backed investment securities:
The fair value of securities is based on quoted market prices or
dealer quotes. For purposes of determining the fair market value
of Federal Reserve Bank and Federal Home Loan Bank stock, for
which quoted market prices are not available, the carrying amount
of the stock has been considered the fair value.
Loans held for sale and loans:
For certain categories of loans (including loans held for sale),
such as residential mortgages and certain guaranteed loans, fair
value is estimated using the quoted market prices for securities
backed by similar loans, adjusted for differences in loan
characteristics. The fair value of commercial and other types of
loans is estimated by discounting the expected future cash flows
based on current rates being offered, the credit risk involved
and the time to maturity. Due to the frequency of repricing of
credit card receivables, the fair value is assumed to equal the
carrying amount.
Deposits:
The fair value of demand deposits, savings accounts and NOW
accounts is assumed to be the carrying amount. The fair value of
certificate of deposit accounts is estimated using the rates
currently offered for deposits of similar remaining maturities.
Federal funds purchased and securities sold under agreements to
repurchase:
Due to the frequency of repricing of these items, the fair market
value is assumed to equal the carrying amount.
Capitalized lease obligations and debt:
The fair value of debt is estimated based on the rates currently
available to the Company for debt with similar terms and
maturities. The capital lease obligations are not included in the
fair value disclosures.
Commitments to extend credit:
For commitments to extend credit, the fair value is estimated
based on the discounted future cash flows based on current market
interest rates, assuming that the entire commitment will be drawn
upon.
Note 9. Federal Income Taxes
The deferred tax provisions for the years ended December 31,
1995, 1994 and 1993 have been determined based on the cumulative
temporary differences and tax rates in effect at each respective
year end and consist of the following:
December 31,
(Dollars in thousands) 1995 1994 1993
Gross deferred tax assets:
Loan loss reserve $ 2,493 $2,410 $2,522
Unrealized losses on
securities available for sale 3,316
Deferred compensation 1,008 981 1,119
Deferred loan fees 281 554 51
Deferred interest 219 263 333
Other 300 370 214
4,301 7,894 4,639
Gross deferred tax liabilities:
Bank premises and equipment 1,888 1,675 1,482
Unrealized gains on securities
available for sale 789 1,484
Federal Home Loan Bank
dividends 1,063 816 644
Mortgage servcing rights 515
Prepaid deposit interest 1,136
Prepaid FDIC premium 240 627
Prepaid expenses 799 384 419
Loan and deposit purchase
accounting adjustments, net 312 419 354
Other 253 284 591
6,995 4,205 4,974
Net deferred tax (liability)
asset at end of year $(2,694) $3,689 $ (335)
At December 31, 1995, 1994 and 1993 there were no valuation
reserves recorded against the deferred tax assets as realization
of the entire deferred tax asset was considered more likely than
not.
The following schedule reconciles the statutory federal income
tax rate to the Company s effective tax rate:
Year Ended December 31, 1995 1994 1993
Statutory federal income tax rate 35.0 35.0 35.0
Effect of interest income which
is not subject to taxation (3.5) (4.1) (3.8)
Nondeductible interest expense 0.4 0.4 0.2
Other items, net 0.2 (0.5) (1.2)
32.1 30.8 30.2
Page 42
Note 10. Other Non-interest Income and Other Non-interest Expense
Other non-interest income and other non-interest expense consist
of the following:
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Other non-interest income:
Credit card fees $1,696 $1,274 $1,132
Banclub fees 904 779 617
International department fees 762 628 499
Credit life insurance 551 702 228
Other 2,694 2,950 2,213
Total $6,607 $6,333 $4,689
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Other non-interest expense:
FDIC expense $ 2,754 $ 3,868 $ 3,947
Marketing 2,247 1,976 2,614
Franchise taxes 2,473 2,490 2,184
Telephone 1,884 1,939 1,998
Printing and supplies 1,868 1,919 1,849
Legal and other
professional fees 1,915 2,081 1,516
Credit card processing costs 1,431 1,006 844
Amortization of
intangible assets 1,600 1,579 1,391
Postage 1,442 1,460 1,391
Other 7,022 7,220 7,977
Total $24,636 $25,538 $25,711
Note 11. Retirement and Deferred Compensation Plans
The Company and its subsidiaries provide retirement benefits for
substantially all of their employees under several retirement
plans. The Company does not provide post-retirement benefits
other than through its retirement plans and does not provide
post-employment benefits.
The Company has an Employee Stock Ownership and Savings Plan for
the benefit of all eligible employees who have completed 12
months of service with the Company. The plan provides for annual
contributions by the Company based upon income (as defined by the
plan) after providing for a specified return on shareholders
equity, and under the 401(k) portion of the Plan employees may
contribute a percentage of their eligible compensation with a
company-match of such contributions up to a maximum match of
3 percent. The Company also sponsors an Employee Stock Ownership
Pension Plan which provides for an annual contribution by the
Company equal to 6 percent of eligible employees annual
compensation.
The Company has a supplemental employee retirement plan. This
plan replaces retirement benefits eliminated under the Company's
qualified retirement plans because of eligible compensation
limitations under current tax law. The Company contributes
authorized shares o its common stock to a trust establishd to
hold the shares on behalf of participating employees. The
Company's contribution under the plan is determined by
multiplying the excess of employees compensation over the
established limitation by the contribution level established by
the Board of Directors for the Company's qualified plans
(9 percent, 9 percent and 12 percent in 1995, 1994 and 1993,
respectively). At December 31, 1995, the liability recorded for
the participants in the plan was not material. The funding of
shares occurs in January of the succeeding year.
Expenses relating to these plans amounted to $2,017,000,
$2,330,000 and $2,336,000 in 1995, 1994 and 1993, respectively.
Note 12. Stock Options
In 1988, the Board of Directors of the Company approved the
continuation of an Incentive Stock Option Plan adopted by one of
the bank holding companies it acquired. All of the 74,072 options
outstanding at December 31, 1992, were exercised during 1993 at
an option price of $3.60 per share.
In 1992, the Board of Directors of the Company approved an
Incentive Stock Option Plan which covers certain key employees
and all Directors of the Company and its subsidiary companies. In
1994, the Plan was amended to include additional employees and to
allow certain individuals, including directors, the ability to
elect to receive options, determined under a formula, in lieu of
a portion of their salary, or director fees, as applicable. Under
the terms of the plan, the maximum number of option shares which
can be granted is limited to 7 percent (subject to shareholder
approval) of the Company's issued and outstanding common shares.
Options granted under the plan expire 10 years after the date of
grant and are issued at an option price that is not less than the
market price of the Company s stock on the date of grant.
Options granted to Directors are immediately exercisable, except
for those granted in lieu of director fees which are exercisable
as they are earned. Options granted to officers and other key
employees are exercisable in annual 20 percent increments, except
for options received in lieu of salary, which are immediately
exercisable.
Page 43
The following table presents a summary of pertinent information
with respect to the Company's stock options:
1995 1994
Option Option
Shares Price Shares Price
Outstanding
at beginning
of year 853,760 $ 5.47-13.52 268,355 $5.47-12.81
Granted 346,350 13.18-16.41 613,379 8.22-13.52
Exercised (81,796) 5.47-13.52 (3,252) 9.92
Cancelled (14,708) (24,722)
Outstanding
at end
of year 1,103,606 5.47-16.41 853,760 5.47-13.52
Exercisable
at end
of year 914,363 5.47-16.41 481,344 5.47-13.52
1993
Option
Shares Price
Outstanding
at beginning
of year 139,619 $5.47-12.81
Granted 131,264 6.74-11.98
Exercised (1,842) 6.01- 9.92
Cancelled (686)
Outstanding
at end
of year 268,355 5.47-12.81
Exercisable
at end
of year 164,600 5.47-12.81
Note 13. Commitments and Contingencies
One of the Company s non-bank subsidiaries is a co-defendant in
several actions filed by customers of a money manager not
affiliated with the subsidiary who directed business to that
subsidiary. The suits seek recovery of losses of approximately
$2,700,000 plus punitve damages, attorneys fees and costs of
litigation. The litigation in the matters has been stayed and
the parties have agreed to enter into arbitration. The Company
denies liability to the plaintiffs in each of the actions and is
vigorously contesting the claims. No formal discovery has been
made in these actions, and management and the Company s legal
counsel have been unable to form an opinion as to the likely
outcome of the litigation; accordingly, no provision for any
liability that may result from the resolution of these matters
has been recorded. In the event of an unfavorable outcome, the
effect on the Company s results of operations could be material.
In connection with this action, 156,097 of Mid Am, Inc. common
shares are being held in escrow pending resolution of the
litigation. Such shares will be returned to the Company for any
liability which may result from or for costs incurred in
defending the action. See Note 2 Mergers and Acquisitions.
There are also various other lawsuits and claims pending against
the Company, which arise in the normal course of business. In the
opinion of management, any liabilities that may result from these
lawsuits and claims will not materially affect the financial
position or results of operations of the Company.
Note 14. Financial Instruments With Off-Balance-Sheet Risk
The Company is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers located primarily within the
local business area. These instruments include commitments to
extend credit, standby letters of credit and international
commercial letters of credit.
The Company's exposure to credit loss in the event of
non-performance by the other party to the financial instrument
for commitments to extend credit, standby letters of credit and
letters of credit is represented by the contractual amount of
those instruments. The Company uses the same credit policies in
making commitments and conditional obligations as it does for
on-balance-sheet instruments.
Financial instruments whose contract amounts represent credit
risk are presented below:
December 31,
(Dollars in thousands) 1995 1994
Commitments to extend credit $421,673 $247,266
Standby letters of credit 26,920 26,455
Letters of credit 1,609 1,941
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates
ranging from one to five years, variable interest rates tied to
the prime rate and Treasury bill rates and may require payment of
a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do no
necessarily represent future cash requirements.
Standby letters of credit are conditional commitments issued by
the Company to guarantee the performance of a customer to a third
party. Those guarantees are primarily issued to support public
and private borrowing arrangements, including bond financing and
similar transactions. The expiration date of substantially all
standby letters of credit extend for a period ranging from 30
days to 18 years. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan
facilities to customers. The Company holds marketable securities,
certificates of deposit, real estate, inventory and equipment as
collateral supporting those commitments for which collateral is
deemed necessary.
Page 44
Letters of credit are instruments used to facilitate trade, most
commonly international trade, by substituting the Company's
credit for that of a commercial importing company. The terms are
generally one to three months. The letters of credit are
primarily unsecured.
The Company services residential mortgage loan portfolios with
recourse provisions with outstanding principal amounts of
$6,031,000 and $9,207,000 at December 31, 1995 and 1994,
respectively. Under recourse provisions contained in the service
agreements, the Company is obligated to bear any credit losses on
residential mortgages in the portfolios. The Company assesses the
potential for losses under the recourse provisions as a part of
its allowance for credit losses. The amount of the allowance for
credit losses specifically allocated to these portfolios at
December 31, 1995 and 1994 was not material.
Note 15. Mortgage Banking Activities
The Company conducts mortgage banking operations through its
banking subsidiaries. The primary activity relates to the
origination and sale of fixed and variable rate residential
mortgages in the secondary market. The Company usually retains
the servicing of the loans it sells. Loans are primarily
originated in the Northwest Ohio market area; however, the
Company also has employees and agents in Nevada, Illinois,
Colorado and New Jersey who also originate loans for sale in the
secondary market.
The following table summarizes information relating to the
Company's mortgage banking activity as of December 31, 1995 and
1994:
December 31,
(Dollars in thousands) 1995 1994
Amounts held in agency accounts $ 7,463 $ 4,535
Amounts held in escrow accounts 6,925 6,960
Mortgage banking receivables for
advanced funds 256 4,385
Unpaid mortgage loan principle for
loans serviced for investors 1,286,590 1,221,232
Unpaid mortgage loan principle
for loans serviced for
affiliated investors 3,673 5,088
Excess servicing asset 70 141
At December 31, 1995, capitalized mortgage servicing rights and
accumulated amortization aggregated $1,794,000 and $250,000,
respectively. An allowance for impairment of capitalized mortgage
servicing rights was established in 1995 in connection with the
adoption of SFAS 122. The provision charged to operations in
1995 aggregated $63,000. There was no other activity relating to
the allowance in 1995. The fair value of capitalized mortgage
servicing assets at December 31, 1995, approximates carrying
value, net of the impairment allowances.
In 1995 and 1994, the Company sold certain servicing rights on
mortgages which had an outstanding principal balance of
$31,471,000 and $17,664,000, respectively, and realized gains of
$245,000 and $175,000, respectively. There were no sales of
servicing rights in 1993. At December 31, 1995, the Company had
firm commitments for the sale of approximately $10,534,000 of
loans held for sale. No provision for loss on the carrying amount
on loans held for sale is considered necessary at December 31,
1995.
Note 16. Restrictions on Subsidiary Dividends, Loans or Advances
Dividends paid by the Company are mainly provided by dividends
from its subsidiaries. However, certain restrictions exist
regarding the ability of its subsidiaries to transfer funds to
the Company in the form of cash dividends, loans or advances. For
national banks, the approval of the Office of the Comptroller of
the Currency is required in order to pay dividends in excess of
the subsidiaries earnings retained for the current year plus
retained net profits since January 1, 1993. As of December 31,
1995, $13,435,000 was available for distribution to the Company
as dividends without prior regulatory approval.
Page 45
Note 17. Condensed Parent Company Financial Information
A summary of condensed financial information of the parent
company at December 31, 1995 and 1994 and for three years then
ended is as follows:
Statement of Condition
December 31, (Dollars in thousands) 1995 1994
Assets:
Cash and due from banks $ 14,996 $ 2,349
Securities available for sale 441 331
Investment in bank subsidiaries 170,424 174,669
Investment in nonbank subsidiaries 8,609 6,906
Other assets 3,204 2,506
Total assets $197,674 $186,761
Liabilities and Shareholders' Equity:
Other liabilities $ 2,836 $ 1,509
Shareholders' equity
Preferred stock 35,569 40,200
Common stock 64,975 57,865
Surplus 91,723 75,624
Retained earnings 9,529 17,769
Treasury stock (8,424) (20)
Unrealized (losses) gains on
securities available for sale 1,466 (6,186)
Total liabilities and
shareholders' equity $197,674 $186,761
Statement of Earnings
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Income:
Interest income $ 104 $ 595 $ 633
Net investment securities gains 303
Dividends from bank
subsidiaries 38,021 20,854 7,791
Dividends from nonbank
subsidiaries 2,419 176
Management fees 5,996 4,226 4,472
Other income 351 236 27
44,472 28,330 13,402
Expenses:
Salaries and employee benefits 4,648 3,064 3,164
Net occupancy expense 195 165 88
Equipment expense 415 304 236
Other expenses 2,162 2,453 1,947
7,420 5,986 5,435
Income before equity in
undistributed net income
of subsidiaries 37,052 22,344 7,967
Equity in undistributed net
income of bank subsidiaries (11,781) 2,875 16,700
Equity in undistributed net
income of nonbank subsidiaries (304) (1,966) 14
Net income $24,967 $23,253 $24,681
Net income available to
common shareholders $22,216 $20,336 $21,763
Statement of Cash Flows
Year Ended December 31,
(Dollars in thousands) 1995 1994 1993
Operating Activities:
Net income $24,967 $23,253 $24,681
Adjustments to Reconcile Net
Income to Net Cash Provided
By Operating Activities:
Equity in undistributed net
income of bank subsidiaries 11,781 (2,289) (16,693)
Equity in undistributed net
income of nonbank subsidiaries 304 1,966 (14)
Provision for depreciation
and amortization of assets 155 120 111
Net gains on sales of assets 1 (6) (306)
Proceeds from sales of
securities available for sale 19,595
Proceeds from maturities and
paydowns of securities
available for sale 57
Purchases of securities
available for sale (1,246)
Increase in other assets (895) (856) (575)
(Decrease) increase in
other liabilities 1,327 (255) (389)
Net cash provided by
operating activities 37,640 21,933 25,221
Investing Activities:
Capital contributions to
bank subsidiaries (13,446) (14,428)
Capital contributions to
nonbank subsidiaries (1,896) (3,054) (3,000)
Proceeds from maturities and
paydowns of securities
available for sale 8,351
Purchases of securities
available for sale (64) (1,687)
Effects of conforming the
year ends of pooled entities (1,710)
Net cash used for
investing activities (1,960) (9,836) (19,138)
Financing Activities:
Cash dividends paid (14,862) (13,638) (11,692)
Proceeds from issuance of
common stock 1,893 4,749
Cash in lieu of fractional
shares and other items 233 4 79
Treasury stock (8,404) (655)
Net cash used for
financing activities (23,033) (12,396) (6,864)
Net (decrease) increase in cash 12,647 (299) (781)
Effect of conforming year ends
of pooled entities 923
Cash at the beginning of the year 2,349 2,648 2,506
Cash at the end of the year $14,996 $ 2,349 $ 2,648
Supplemental Schedule of Noncash
Investing and Financing Activities:
Treasury shares issued in merger $ 635
Transfers from investments to
securities available for sale $ 171
Unrealized (losses) gains on
investments from the adoption
of SFAS 115 $ 46 $ (64) $ 119
Deferred tax liability 16 (22) 42
Adjustment to shareholders' equity $ 30 $ (42) $ 77
Affiliates unrealized (losses)
gains on investments from the
adoption of SFAS 115 $ 7,622 $(8,988) $ 2,767
Page 46
<TABLE>
Mid Am, Inc. Eight Year Performance Summary (Unaudited)
(Dollars in thousands, except per share and ratio data)
Yearly Average Balances Year-End Balances
Total Common Earning Loans/ Total
Year Assets Equity Assets Leases Deposits Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet 1995 $2,138,638 $153,112 $1,995,004 $1,475,651 $1,860,142 $2,204,751
1994 2,038,637 146,473 1,897,079 1,433,289 1,736,492 2,078,789
1993 2,001,335 132,822 1,867,140 1,265,945 1,769,083 2,067,371
1992 1,623,070 108,546 1,521,663 1,200,512 1,630,141 1,871,849
1991 1,532,940 101,190 1,440,082 1,028,854 1,447,192 1,573,067
1990 1,286,919 86,140 1,214,041 1,022,765 1,369,486 1,496,026
1989 1,151,287 71,357 1,081,509 840,407 1,096,868 1,207,602
1988 1,086,073 62,450 1,017,116 797,502 1,018,526 1,127,675
Annual Growth 1995/94 4.91 4.53 5.16 2.96 7.12 6.06
Average Growth 1995/88 10.41 13.84 10.33 9.43 9.24 10.31
Net Income Cash Book Stock Total Market
Year Pooled Historic Dividends Value Price Equity $(000)
<S> <C> <C> <C> <C> <C> <C> <C>
Data per 1995 $1.16 $1.16 $0.63 $8.40 $16.41 $311,233
Common Share 1994 1.07 1.28 0.59 7.61 13.52 232,631
1993 1.16 1.39 0.54 7.76 12.40 197,212
1992 1.03 1.30 0.50 7.29 10.74 166,126
1991 0.44 0.50 0.48 6.41 9.77 137,674
1990 0.73 1.01 0.48 6.01 8.01 103,111
1989 0.81 0.98 0.44 5.03 10.13 104,668
1988 0.85 0.82 0.38 4.87 7.35 75,909
Annual Growth 1995/94 8.41 6.78 10.38 21.38 33.79
Average Growth 1995/88 13.39 7.56 8.29 13.53 23.01
Mid Am, Inc. Eight Year Performance Summary (Unaudited)
(Dollars in thousands, except per share and ratio data)
Average Common Year-End
Shares Shares Stock Cash Price/
Outstanding Traded Common Dividends Dividend Earnings
Year (000) (000) Shareholders (Percent) Payout Ratio Ratio
<C> <C> <C> <C> <C> <C> <C> <C>
Common Stock Data 1995 19,205 4,377 8,208 10 54.51 14.36x
(as originally 1994 15,623 3,500 7,899 10 52.23 11.62
reported) 1993 12,976 3,097 6,360 41.21 9.80
1992 9,968 1,903 5,543 10 39.92 9.70
1991 9,801 1,580 4,339 88.89 20.38
1990 8,745 1,491 4,379 10 46.76 8.51
1989 6,710 604 3,701 10 42.14 11.14
1988 5,533 264 3,301 5 36.12 9.77
Page 47
Total Net Interest Other Other Net
Year Revenue Income (1) Income Expenses Income
<S> <C> <C> <C> <C> <C> <C>
Income and 1995 $198,498 $84,478 $35,955 $78,416 $24,967
Expense 1994 173,125 83,150 32,554 78,579 23,253
1993 173,389 80,321 34,002 72,962 24,681
1992 149,737 67,453 20,002 56,151 19,209
1991 156,856 59,387 15,566 48,790 7,446
1990 140,158 53,014 10,923 41,995 10,371
1989 126,140 47,368 10,875 37,128 10,343
1988 111,471 42,126 11,048 33,480 10,380
Annual Growth 1995/94 14.66 1.60 10.45 (0.21) 7.37
Average Growth 1995/88 8.85 10.59 20.87 13.24 22.82
Mid Am, Inc. Eight Year Performance Summary (Unaudited)
(Dollars in thousands, except per share and ratio data)
Other Net
Return on Net Income Employees Income/
Average Interest To Other Overhead Per Million FTE(4)
Year Assets Margin(2) Expenses Ratio(3) of Assets Employee
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Ratios 1995 1.17 4.23 45.85 65.11 0.53 $21
1994 1.14 4.38 41.43 67.91 0.53 21
1993 1.23 4.30 46.60 63.82 0.60 20
1992 1.18 4.43 35.62 64.21 0.56 18
1991 0.49 4.12 31.90 65.09 0.54 9
1990 0.81 4.37 26.01 65.68 0.51 14
1989 0.90 4.38 29.29 63.75 0.59 15
1988 0.96 4.14 33.00 62.96 0.59 15
Average 1995/88 0.99 4.29 36.21 64.82 0.56 17
Average Market
Return Common Value to Total
On Common Equity to Book Return to
Year Equity Average Assets Value Investors(5)
<S> <C> <C> <C> <C> <C>
Equity Ratios 1995 14.51 7.16 195.36 26.50
1994 13.88 7.18 177.70 13.94
1993 16.39 6.64 159.75 20.51
1992 16.22 6.69 147.38 15.52
1991 7.36 6.60 152.37 28.72
1990 12.04 6.69 133.28 (16.38)
1989 14.49 6.20 201.57 45.15
1988 16.62 5.75 150.87 12.08
Average 1995/88 13.94 6.61 164.78 18.26
</TABLE>
(1) Net interest income on a tax equivalent basis.
(2) Net interest income as a percentage of interest-earning
assets, on a tax equivalent basis.
(3) Other expense divided by net interest income on a tax
equivalent basis plus other income.
(4) Full time equivalent.
(5) Market change year to year plus dividends.
Page 48
Executive Officers, Boards of Directors, Directors Emeriti
Mid Am, Inc. Executive Officers
Edward J. Reiter Chairman and CEO
David R. Francisco President and COO
Dennis L. Nemec Executive Vice President and CFO
W. Granger Souder Executive Vice President/General Counsel
Jerry R. Biederman Senior Vice President/Audit
Donald P. Hileman Senior Vice President/Finance
Christine Koster Senior Vice President/Training and
Development
David L. Mead Senior Vice President/Finance
Cynthia A. Rossman Senior Vice President/Corporate
Administration
Jeffrey S. Schatz Senior Vice President/Funds Management
Robin Wooddall Senior Vice Pesident/Human Resources
Mid Am, Inc. Directors Emeriti
Ralph O. Benington Jr.
Dr. Edwin C. Bomeli
Ashel G. Bryan
Dr. Marjorie Conrad
Charles W. Daley
Kenneth H. Harger
Charles F. Kurfess
William S. Pepple Sr.
Adrian State Bank Executive Officers
Bernard A. Sikorski President and CEO
Ronald A. Wilson Executive Vice President
Adrian State Bank Board of Directors
Steven C. Benz M.D.
Frank Dick
Robert E. Doyle
O. Herbert Farver
Thomas Fenstemacher
David R. Francisco
Richard L. Germond
Stephen L. Hickman
Daryl P. McDonald
Dane Nelson
Jack C. Patterson
Douglas J. Shierson
Bernard A. Sikorski
John D. Thurman
James E. Toncre
Adrian State Bank Director Emeritus
Carl A. Benz M.D.
American Community Bank, N.A. Executive Officers
Cathleen F. Oxner President and CEO
Mark A. Klein Executive Vice President
C. Bruce Wells Senior Vice President
Ivy Conklin Senior Vice President
American Community Bank, N.A. Board of Directors
Richard Axline
Eugene Cornwell
Anita Donnelly
David R. Francisco
Thomas Heydinger
D. James Hilliker
Jack Markel
Violet Meek
James Moore
Cathleen Oxner
Donald Spath
American Community Bank, N.A. Directors Emeriti
Wilson Anderson
Dr. Douglas W. Beach
Charles W. Daley
Dr. W. Robert Dodge
J. Roderick Gray
Rob Heil
Fred Krouskop
Harold D. Marker
Melvin Niece
Thomas L. Notestine
Walter Potts
Mick Reed
Jerome W. Ritter
Richard L. Snapp
Freda Taylor
Q. Craig Tone
Myron Van Horn
AmeriFirst Bank, N.A. Executive Officers
Donald P. Southwick President and CEO
David J. McMacken Senior Vice President
Gerald C. Craig Senior Vice President
AmeriFirst Bank, N.A. Board of Directors
Carl J. Fletcher
David R. Francisco
John L. Henderson
James E. Laughlin
Richard H. LeSourd, Jr.
Herman N. Menapace
J. Robert Routt
Frank W. Ruggerie
Clara M. Smith
Donald P. Southwick
Richard G. Tessendorf Jr.
AmeriFirst Bank, N.A. Directors Emeriti
Richard T. Adair
Howard W. Coy
Robert J. Imbus
Francis W. Ruggerie
Burton B. Pease
CCB Services Executive Officers
Mark S. Mandula President and CEO
Michael Buccina Senior Vice President and COO
First National Bank Northwest Ohio Executive Officers
James F. Burwell President and CEO
Michael R. Klein Executive Vice President
Marvin D. Miller Executive Vice President
Michael L. Williams Executive Vice President
First National Bank Northwest Ohio Board of Directors
James F. Burwell
Wayne E. Carlin
David R. Francisco
Ralph W. Gallagher
James A. Meier
Gene K. Metz
Marvin D. Miller
Thomas S. Noneman
William G. Rupp
Thomas J. Short
C. Gregory Spangler
D. Jane Zeller
First National Bank Northwest Ohio Directors Emeriti
O. Jay Beck
D. Keith Humbert
Richard B. Lutterbein
Roy E. Nofziger
Kenneth E. Oberlin
William S. Pepple Sr.
International Credit Service Executive Officers
Mark S. Mandula President and CEO
Bill Guntsch Executive Vice President and COO
International Credit Service/CCB Services Board of Directors
David R. Francisco
Mark S. Mandula
Bill Guntsch
James E. Laughlin
Richard G. Tessendorf Jr.
Donald D. Thomas
MFI Investments Corp. Executive Officers
E. Clifford Oberlin, III Chairman and CEO
Robert M. Gioia President and COO
MFI Investments Corp. Board of Directors
Robert M. Gioia
David R Francisco
Thomas S. Noneman
E. Clifford Oberlin, III
Earl C. Oberlin
Douglas J. Shierson
Jerry Staley
Mid American National Bank and Trust Company Executive Officers
Edward J. Reiter Chairman
Patrick A. Kennedy President and CEO
John H. McDermott Executive Vice President
Kenneth R. Nagel Executive Vice President
Michael J. Rose Executive Vice President
Phillip C. Clinard Senior Vice President
Darlene M. Minnick Senior Vice President
Sharon S. Speyer Senior Vice President
Mid American National Bank & Trust Company Board of Directors
Gerald D. Aller
Joel S. Beren
Paul C. Betz
James F. Bostdorff
David A. Bryan
Levi Cook Jr.
Floyd D. Craft
David R. Francisco
Candy Graham
Kathleen S. Hanley
T. L. Sam Irmen
Patrick J. Johnson
Patrick A. Kennedy
Harry W. Kessler
Marilyn O. McAlear
Richard H. Metzger
Blair D. Miller
Paul J. Olscamp
Edward J. Reiter
Emerson J. Ross Jr.
Jerry L. Staley
Dr. Robert E. Stearns
Mid American National Bank and Trust Company Directors Emeriti
Jack Dale
Albert Nietz
Robert Manor
Wilfred Williams
Mid Am Information Services, Inc. Executive Officers
James C. Burkhart President and CEO
Caren L. Cantrell Senior Vice President
Ronald R. Earl Senior Vice President
Judi Leck Senior Vice President
Mid Am Information Services, Inc. Board of Directors
James C. Burkhart
James F. Burwell
David R. Francisco
Patrick A. Kennedy
Mark S. Mandula
Dennis L. Nemec
E. Clifford Oberlin III
Cathleen F. Oxner
Jeffrey S. Schatz
Bernard A. Sikorski
W. Granger Souder
Donald P. Southwick
Page 49
Affiliate Banking Center Boards
Adrian State Bank Banking Centers
Main Office
Plaza Office
Mall Office
Beecher Office
Tecumseh Downtown Office
Tecumseh West Office
First National Bank Northwest Ohio Banking Centers
ARCHBOLD, SOUTHSIDE, PETTISVILLE, and RIDGEVILLE CORNERS Banking Centers
Norris E. Allan
John F. Arnos
Stephen H. Brannan
Jack D. Gooding
Richard L. Grieser
Dencel W. Miller
Gene Roth
Lowell E. Rupp
J. Joseph Rychener
Jodi L. Stuckey
EDGERTON Banking Centers
Edgerton Drive-up
Marvin D. Dietsch
Dr. John W. Granger
J. Michael Krill
Roger D. Strup
Wayne M. Wilson
DEFIANCE Banking Center
Randall L. Buchman
William W. Goller
William M. Hughes
Thomas L. Kime
Ted T. Pohlmann
Dr. Robert Southworth
BRYAN and WEST Banking Centers
Henry W. Falk
Thomas M. Herman
William S. Pepple, Jr.
Connie L. Zimmerman
CONTINENTAL Banking Center
Marjorie Frankart
Daniel J. Heitzman
James R. Miles
Dwight Niese
Blaine Okuley
Leonard Verhoff
Lois eller
FAYETTE Banking Centers
Fayette Drive-up
Curtis D. Cooley
Elaine Eagle
L. Dolores Ferguson
James Fruchey
Wayne R. Williams
LIBERTY CENTER Banking Center
Daniel D. Hefflinger
Jack M. Krueger
James A. Leatherman
Norma M. Miller
MONTPELIER Banking Center
Dr. Clarence Bell, Jr.
John T. Ressler
Roger Saneholtz
Ned D. Snyder
James E. Thompson
Shirley Young
NAPOLEON Banking Centers
E.A. Andy Anderson
Robert Cole
Judy Heilman
Lou Ann Limbird
Charlotte Zgela
PAULDING Banking Center
Michael L. Arend
Lauren Brown
Terry Buehler
John Manz
Gregory Stoller
STRYKER Banking Center
Ray E. Brown
Gene K. Carlin
Darrell J. Goebel
William D. Woolace
WAUSEON Banking Center
Timothy W. Hallett
Sally Boyers Lutz
Douglas Shaw
American Community Bank, N.A. Banking Centers
BELLEFONTAINE SOUTH and DOWNTOWN Banking Centers
Gary E. Contner
Michael J. Hall
Dean H. Horn
Luan F. Lamb
Mark O. McIntyre
Dottie L. Tuttle
HUNTSVILLE, RUSSELLS POINT, and LAKEVIEW Banking Centers
Robert C. Beck
Richard W. Campbell
Pat Kemper
Max L. Wallace
Russell D. Williams
LIMA Banking Centers
John Albanese
Phyllis Henderson
Oscar Marshall
Ellen Nelson
Lynn Metzger
Paul Woehlke
Tom Yazel
Chris Yetman
MARION Banking Center
Karen Bame
Dr. Wayne Butterworth
Shirley Carozza
Barbara Greetham
Gary Iams
Dr. Assad Sabag
Roger Vanover
MARYSVILLE Banking Center
Ronald Chapman
Barry Cordell
Dale Corbin
Charlotte Coleman Eufinger
David Laslow
David Shull
Dr. Susan McGinnis Truitt
Jeffrey Wilson
AmeriFirst Bank, N.A. Banking Centers
BEAVERCREEK and FAIRFIELD COMMONS Banking Centers
Norma Delebar
Tom Koogler
Susan Phillips
Dr. Surinder Saini
Dr. David Stewart
CENTRAL XENIA and NORTH XENIA Banking Centers
Marsha Bayless
Mike Dennis
Sherri Mash
Roger McColaugh
Thomas Zajbel
GOLF MANOR Banking Center
Chris Dolle
Thomas Fruth
Wayne Miller
Ethel Mitzman
Dr. George Willis Reid
HYDE PARK Banking Center
Marlene Beale
James Burke
Elva Kelly
Dr. Terrence Poole
KETTERING Banking Center
Richard Coy
Bob Potter
Katrina Seiter-Farmer
LEBANON Banking Center
William Duning
Laurie Kanta
Dale Peach
Ryan Richardson
MONTGOMERY Banking Center
Beth Stratman
Lawrence Hawkins
Patrick Sheeran
SPRINGBORO Banking Center
Dr. Stephan Lucht
Paul Music
Bryce Skinn
WESTWOOD Banking Center
Beverly Bepler
Earl Brown
Leo Rolfes
Thomas Smith
Michael Schmidt
Page 50
Mid American National Bank and Trust Company Banking Centers
AIRPORT HIGHWAY Banking Center
Dwayne Clark, Sr.
Robert Floyd
David Miller
Harold Steinberg
George Oravecz
Marilyn Yoder
ARLINGTON Banking Center
Mervin Alexander, Sr.
William Alge, Jr.
Robert Federspill
Jack Jolliff
Betty Knight
Joseph Metzger
Jessica Jane Rossman
James Smith
Dr. Emily Walton
ARROWHEAD Banking Center
Thomas Brell
Clifford Dussel
William Horst
Richard Krieger
Martha Marsh
Ron Mickel
Michael Osterman
Ardenia Terry
Donald Tillman
Nick Wagener
Joseph Zigray
BOWLING GREEN, NORTHSIDE, SOUTHSIDE, and UNIVERSITY Banking Centers
Charles Codding
Joan Gordon
Drew Hanna
Robert Holley
Dr. Melvin Hyman
Ruth Ann Kramer
Jerry Lahey
Dr. Reginald Noble
Jeffrey Snook
Dr. Winifred Stone
CORPORATE, ONE SEAGATE, and TOLEDO Banking Centers
Dr. Gilbert Bucholz
Andrew Fisher
Jack Jones
Sharon Lange
Larry Ulrich
Susan Utterback
John White
ELMORE Banking Center
Janice Bench
John Bock
Bruce Card
Dennis Dolph
Jerry Haar
Jay Hovis
Linda Millhime
Daryl Sherman
Kenton Weis
FINDLAY Banking Center
Flint Heidlebaugh
Paul Kramer
L. Don Manley
Becky Noack
John Urbanski
Michael Whalen
Kathy Williams
FRANKLIN PARK Banking Center
Carol Fuelling
Dana Johnson
James Loss
James McGowan
James Ostrowski
FRANKLIN PARK IN THE MALL Banking Center
Gloria Granata
Truman Irving
Rochelle Pfaff
Michael Podracky
Rosemary Talmadge
Peter Winegarden
GENOA Office
Ernest Cottrell, Jr.
Larry Detzel
Lowell Hartman
Gregory Schafer
Rosemary Schlievert
Robert Waidmann
GLENGATE Banking Center
Thomas Balyeat
James Holzemer
John Kahle
Betty Lazzaro
William Smith III
Garth Tebay
GRAND RAPIDS Banking Center
Rick Ellis
Audrey Entenman
David LaRoe
Michael Marsh
Judy Peper
Erle Radel
Chuck Thomas
Raymond Wright
JERMAIN PARK Banking Center
Rev. Raymond Bishop, Jr.
Nabelah Ghareeb
Jacqueline Martin
Charles Thayer
McCLURE Banking Center
Linda Armstrong
Dennis Ehlers
John Harding, Jr.
Bert Richard
Paul Richard
Sarah Rowland
MIRACLE MILE Banking Center
Robert Good
Oscar Hernandez
Jack Knauer
Thomas Manders
Thomas Moore
Kenneth Myer
Gary Walker
NORTH BALTIMORE Banking Center
Janis Dukes
Douglas Hanna
Donald Miller
James Rider
Ingrid Roberts
Douglas Troutner
Mona Wittlinger
NORTHWOOD and WOODVILLE MALL Banking Centers
Dennis Ebel
Mary Jane Finch
Anthony Judson
Donald Kowalka
Elvio Pescara
Clyde Sharlow
Ruston Simon
Virginia Whiteman
OREGON Banking Center
Joseph Christen
Dr. Nevin Esenler
Dennis Galayda
Donald Granger
John Hatfield
Donn Meinert
Robert McDonald
Leonard Wasserman
OTTAWA Banking Center
Donald Kimmet
Philomena Kistler
Robert Kruse
Delbert Westrick
PERRYSBURG and VILLAGE SQUARE Banking Centers
Harold Hanna
Donald LaHote
Ted Reiter
Robert Reitze
Robert Richard
Ronald Sattler
Laurie Seibold
Dr. Richard Weaver
ROSSFORD Banking Center
Richard Goeke
E. Lee Ison
Dale Kohl
Kenneth Lay, Jr.
James Rossler, Sr.
Thomas Warns
Mark Wasylyshyn
Norma Woods
SAXON SQUARE Banking Center
Paul Arndt
Robert Falk
R. Jeffre Lydy
Boyd Montgomery
Michael Powder
James Schwerkoske
Candyce Sturtz
STONY RIDGE Banking Center
Willard Brinker
Beverly Jacobs
Helyn Kurfess
Maxine Haas
Robert Sibbersen
SYLVANIA Banking Center
Sandra Brown
Joseph Giovannucci
Alix Greenblatt
Thomas Lindsley
Thomas A. Ramsdell
Dr. Bahu S. Shaikh
Mike Sofo
UPPER SANDUSKY Banking Center
James Barnes
Dr. Claude Beitler
Maria Browne
Jeffrey Roth
Dr. Matthew Thiel
Darrell Walton
WESTGATE Banking Center
David Hanson
C. Allen McConnell
James Scheib
Gerald Smolen, Ph.D.
James Weber
Don Weiher
Richard Zerner
WESTON Banking Center
Ray Chapman
Leroy David
Mary Ann Hillier
Robert Nicholson
Danny Roe
Hugh Sheline
795 Banking Center
Gary Akenberger
Janeen Barrett
Steve Delventhal
Richard Heidebrink
Michael McAlear
Kathleen Steingraber
Affiliate Presidents
Patrick A. Kennedy
President and CEO
Mid American National Bank and Trust Company
Mark S. Mandula
President and CEO
International Credit Service/CCB Services
Donald P. Southwick
President and CEO
AmeriFirst Bank, N.A.
E. Clifford Oberlin III
Chairman and CEO
MFI Investments Corp.
James C. Burkhart
President and CEO
Mid Am Information Services,Inc.
James F. Burwell
President and CEO
First National Bank Northwest Ohio
Bernard A. Sikorski
President and CEO
Adrian State Bank
Cathleen F. Oxner
President and CEO
American Community Bank, N.A.
Robert M. Gioia
President and COO
MFI Investments Corp.
Page 51
Mid Am, Inc. Board of Directors
Gerald D. Aller
President
Aller s Pharmacy, Inc.
Director Since: 1988
Chair of the Special Projects Committee
James F. Bostdorff
Farmer - Self Employed
Director Since: 1988
Member of the Special Projects Committee
David A. Bryan
Partner
Wasserman, Bryan, Landry & Honold
Director Since: 1991
Member of the Compliance and Special Projects Committees
Wayne E. Carlin
President
Carlin Farms, Inc.
Director Since: 1988
Chair of the Examination Committee
David R. Francisco
President and Chief Operating Officer
Mid Am, Inc.
Director Since: 1988
Charles G. Hilbert
Retired
Former Senior Vice President, Mid Am Bank
Director Since: 1988
Member of the Examination Committee
D. James Hilliker
Vice President/Treasurer
Better Food Systems, Inc.
Director Since: 1995
Member of the Compliance and Examination Committees
Harry W. Kessler
Retired
Former Mayor of Toledo, Ohio
Director Since: 1988
Member o the Examination Committee
Walter L. Lamb, Jr.
Chairman
Mid States Container Corp.
Director Since: 1991
Member of the Special Projects Committee
James E. Laughlin
Retired
Former Chairman and Chief Executive Officer of
AmeriFirst Bank, N.A.
Director Since: 1993
Member of the Compliance and Examination Committees
Marilyn O. McAlear
Vice President and Treasurer
Service Spring Corp.
Director Since: 1988
Member of the Retirement Plan and Special Projects Committees
Blair D. Miller
Development Director
Ohio District, Lutheran Church Missouri Synod (LCMS)
Director Since: 1988
Member of the Examination Committee
Thomas S. Noneman
President
Tomco Plastic, Inc.
Director Since: 1988
Member of the Special Projects Committee
Edward J. Reiter
Chairman and Chief Executive Officer
Mid Am, Inc.
Director Since: 1988
Emerson J. Ross, Jr.
Manager, Corporate Community Relations
Owens Corning
Director Since: 1988
Chair of the Retirement Plan Committeeand Member of the
Examination Committee
Douglas J. Shierson
Private Investor
Director Since: 1995
Member of the Compliance and Examination Committees
C. Gregory Spangler
President and Chief Executive Officer
Spangler Candy Company
Director Since: 1993
Member of the Compliance and Special Projects Committees
Jerry L. Staley
Retired
Former Senior Vice President, Mid Am Bank
Director Since: 1988
Member of the Special Projects and Retirement Plan Committees
Dr. Robert E. Stearns
President
Dr. Stearns - Dr. Zouhary, D.D.S. Inc.
Director Since: 1988
Member of the Special Projects Committee
Richard G. Tessendorf, Jr.
Owner and Chief Executive Officer
R.I.C. Security Consultants& Services, Inc.
Director Since: 1993
Member of the Examination Committee
Pete Thomas
President
Thomas Farms, Inc.
Director Since: 1988
Chair of the Compliance Committee and Member of the Examination
Committee
Page 52
Inside back
Shareholder Information
Selected Quarterly Data (Unaudited)
Common Stock Prices, Dividends and Yields
Book Value Dividend Dividend
High Low Per Share Per Share Yield
1995
Fourth Quarter $17.00 $16.25 $8.40 $0.16 3.85
Third Quarter 16.50 15.38 8.17 0.16 4.02
Second Quarter 15.38 12.95 8.07 0.16 4.52
First Quarter 13.86 12.73 7.83 0.15 4.51
1994
Fourth Quarter $13.52 $11.82 $7.61 $0.15 4.74
Third Quarter 13.53 11.98 7.66 0.15 4.70
Second Quarter 12.19 11.16 7.57 0.15 5.14
First Quarter 13.02 11.78 7.60 0.14 4.52
Stock Information
At December 31, 1995 Common Stock Preferred Stock
Shares authorized 35,000,000 2,000,000
Shares issued 19,492,726 1,422,744
Treasury shares 522,361
Number of shareholders of record 8,208 299
Closing market price per share $16.406 $36.375
Book value per share 8.40 N/A
Stock exchange NASDAQ NASDAQ
Stock symbol MIAM MIAMP
Stock Performance
Value
January 1989 100 Shares $1,775
Without dividends reinvested
December 1995 242 Shares $3,963 (1)
With dividends reinvested
December 1995 302 Shares $4,954 (2)
(1) Cash dividends of $576
(2) Reinvested dividends of $675
Dividend Reinvestment Plan
The Company offers a Dividend Reinvestment Plan which allows
shareholders to reinvest their Mid Am, Inc. dividends in
additional Company common stock at the prevailing market price.
The plan has 4,362 participants, or 51 percent of our common
shareholders. Plan information may be obtained by calling the
Shareholder Relations Department at (419) 352-5271, or by
writing: Mid Am, Inc. Dividend Reinvestment Plan, P.O.
Box 428, 222 South Main Street, Bowling Green, Ohio 43402.
Other Information
Annual Meeting
Toledo Club Date: April 17, 1996
Toledo, Ohio Time: 10:00 a.m.
Headquarters
Write: Mid Am, Inc. Telephone: (419) 352-5271
222 South Main Street
Bowling Green, Ohio 43402
Form 10-K
Write: Mid Am, Inc. Telephone: Shareholder
P.O. Box 428 Relations
222 South Main Street Department
Bowling Green, Ohio 43402 (419) 352-5271
Investor Relations
Kelly Semer Telephone: (419) 352-5271
Mid Am, Inc.
222 South Main Street
Bowling Green, Ohio 43402
Transfer Agent
Boston EquiServe Telephone: (800) 426-5523
P.O. Box 8200
Boston, Mass. 02266-8200
1995 Mid Am, Inc. Corporate Awards
The following employees and board members were recognized this
year for their service to their communities and to our Company:
Chairman's Award
For Service in Education
R. Sue Kotts (Adrian State Bank)
President's Award
For Cultural Diversity Initiatives
Raquel Ribe (Mid Am Bank)
Golden Eagle Award
For Community Service
Michael Figgins (First National Bank)
Business Development Award
To an Outstanding Banking Center Board Member
Elvio Pescara (Mid Am Bank, Northwood)
CEO's Award of Excellence
For Outstanding Service Quality
This award is a rotating, quarterly award for Mid Am, Inc.
employees. This year, however, the first-ever permanent Award of
Excellence was given to David R. Francisco, in recognition of 25
years of exemplary service with the Company and its predecessors.
Notice of Appreciation
With great appreciation for his service, the Company accepted the
retirement of Diretor Charles W. Daley, Partner in the firm of
Daley, Balyeat, Balyeat & Leahy. Mr. Daley was a Director since
1991, and also served as a Director of AmeriCom Bank. He was
Chairman and Director of AmeriCom Bank and its predecessor from
1965 until his retirement. His contributions and expertise will
be sorely missed. The Company wishes him abundant success in his
future endeavors.
These customers and shareholders are responsible for this year's
annual report:
Industrial Printing Printing, electronic imaging
NovaVision Hologram design
Patricia A. Wise Copy and oversight
Corey Gray Coin photography
A special thanks to those employees who assisted in producing the
report:
Julianne Bejarano
Jenean Barrett
Kim Casado
Diane Critchet
John Cuckler
Vicky Dielman
Tim Dirrim
Miguel Every
Tom Funk
Don Hileman
Dennis Nemec
Linda Rathge
Jeff Schatz
Kelly Semer
Terry Sobczak
Dave Walter
Nicole Woodard
Design, illustration, and typesetting by the Marketing
Communications Department, Mid Am Bank
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
Mid Am, Inc.
Bowling Green, Ohio
A. Bank Subsidiaries
1. Mid American National Bank and Trust Company
Bowling Green, Ohio
Mid Am, Inc. owns 100 percent
a. Mid-Am Financial Services, Inc.
Bowling Green, Ohio
Mid American National Bank owns 100 percent
1. NB5 Financial Services
Dublin, Ohio
Mid-Am Financial Services, Inc. owns 20 percent
2. First National Bank Northwest Ohio
Bryan, Ohio
Mid Am, Inc. owns 100 percent
a. Defiance Financial Corp.
Defiance, Ohio
First National Bank Northwest Ohio owns 100 percent
1. HS&L Financial Agency, Inc.
Defiance, Ohio
Defiance Financial Corp. owns 100 percent
3. American Community Bank, National Association
Lima, Ohio
Mid Am, Inc. owns 100 percent
4. AmeriFirst Bank, National Association
Xenia, Ohio
Mid Am, Inc. owns 100 percent
5. Adrian State Bank
Adrian, Michigan
Mid Am, Inc. owns 100 percent
a. MFI Holding Company
Bryan, Ohio
Adrian State Bank owns 100 percent
1. MFI Insurance Agency, Inc.
Bryan, Ohio
MFI Holding Company owns 100 percent
b. MFI Investments Corp.
Bryan, Ohio
Adrian State Bank owns 100 percent
B. Other Bank Holding Company
1. Mid Am of Michigan
Grand Rapids, Michigan
Mid Am, Inc. owns 100 percent
C. Non-Bank Subsidiaries
1. Mid Am Information Services, Inc.
Bowling Green, Ohio
Mid Am, Inc. owns 100 percent
2. International Credit Service
Toledo, Ohio
Mid Am, Inc. owns 100 percent
3. CCB Services, Inc.
St. Petersburg, Florida
Mid Am, Inc. owns 100 percent
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statement of
Form S-3 (no. 33-38892), of the Registration Statement of Form S-
8 (No. 33-43141), of the Registration Statement on Form S-8 and
S-3, (No. 33-73290), and of the Registration Statement on Form S-
8 and S-3 (No. 33-73294) of Mid Am, Inc. of our report dated
January 22, 1996 appearing on page 29 of the Annual Report to
Shareholders which is incorporated in this Annual Report on Form
10-K.
PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Toledo, Ohio
March 26, 1996
EXHIBIT 24.1
POWER OF ATTORNEY
The undersigned directors of Mid Am, Inc. hereby authorize and
appoint David R. Francisco, President and C.O.O., and/or Dennis
L. Nemec, Executive Vice President and C.F.O., as our agents, as
attorneys-in-fact, with full power to act for us and all of us,
for the purpose of subscribing our names to the Form 10-K thereof
to be filed with the Securities and Exchange Commission, and for
the purpose of making any changes or amendments necessary tr
desirable to such documents and to any documents ancillary
thereto, with the same posers and to the same effect as we may do
if personally present:
Dated this 22nd day of February, 1996.
Gerald D. Aller James F. Bostdorff
Gerald D. Aller James F. Bostdorff
David A. Bryan Wayne E. Carlin
David A. Bryan Wayne E. Carlin
D. James Hilliker
Charles G. Hilbert D. James Hilliker
Walter L. Lamb, Jr.
Harry W. Kessler Walter L. Lamb, Jr.
Marilyn O. McAlear
James E. Laughlin Marilyn O. McAlear
Blair D. Miller Thomas S. Noneman
Blair D. Miller Thomas S. Noneman
Edward J. Reiter Emerson J. Ross, Jr.
Edward J. Reiter Emerson J. Ross, Jr.
C. Gregory Spangler Jerry L. Staley
C. Gregory Spangler Jerry L. Staley
Robert E. Stearns Richard G. Tessendorf, Jr.
Robert E. Stearns Richard G. Tessendorf, Jr.
Donald D. Thomas Douglas J. Shierson
Donald D. Thomas Douglas J. Shierson
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Condition, the Consolidated Statement of Earnings and
Management's Discussion/Analysis and Statistical Information and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1995
<CASH> 102,600
<INT-BEARING-DEPOSITS> 3,372
<FED-FUNDS-SOLD> 72,558
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 474,639
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,475,651
<ALLOWANCE> 14,859
<TOTAL-ASSETS> 2,204,751
<DEPOSITS> 1,860,142
<SHORT-TERM> 87,548
<LIABILITIES-OTHER> 13,818
<LONG-TERM> 48,405
<COMMON> 64,975
0
35,569
<OTHER-SE> 94,294
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<INTEREST-LOAN> 130,300
<INTEREST-INVEST> 28,415
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<INTEREST-TOTAL> 162,543
<INTEREST-DEPOSIT> 72,527
<INTEREST-EXPENSE> 80,316
<INTEREST-INCOME-NET> 82,227
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<SECURITIES-GAINS> 350
<EXPENSE-OTHER> 78,416
<INCOME-PRETAX> 36,764
<INCOME-PRE-EXTRAORDINARY> 36,764
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,967
<EPS-PRIMARY> 1.16
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<YIELD-ACTUAL> 4.23
<LOANS-NON> 8,499
<LOANS-PAST> 1,253
<LOANS-TROUBLED> 79
<LOANS-PROBLEM> 32,715
<ALLOWANCE-OPEN> 14,722
<CHARGE-OFFS> 4,379
<RECOVERIES> 1,478
<ALLOWANCE-CLOSE> 14,859
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<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 6,997
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