UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from <> to <>
Commission file number: 0-20167
NORTH COUNTRY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2062816
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
130 S. CEDAR STREET, MANISTIQUE, MI 49854
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (906) 341-8401
Indicate 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 periods 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
As of October 20, 1999, there were outstanding
7,010,253 shares of the registrant's common stock, no
par value.
<PAGE>
NORTH COUNTRY FINANCIAL CORPORATION
INDEX
PART 1. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1999 (Unaudited) and December 31, 1998 1
Condensed Consolidated Statements of Income -
Three and Nine Months Ended September 30, 1999
(Unaudited) and September 30, 1998 (Unaudited) 2
Condensed Consolidated Statements of Changes in
Shareholders' Equity - Three and Nine Months Ended
September 30, 1999 (Unaudited) and
September 30, 1998 (Unaudited) 3
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 (Unaudited) and
September 30, 1998 (Unaudited) 4
Notes to Condensed Consolidated Financial
Statements (Unaudited) 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>
NORTH COUNTRY FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
September 30, December 31,
1999 1998
(Unaudited)
ASSETS
Cash and due from banks $ 40,270 $ 16,593
Federal funds sold 411 6,048
--------- ---------
Total cash and cash equivalents 40,681 22,641
Securities available for sale 28,202 8,565
Federal Home Loan Bank stock 3,034 3,034
Total loans 446,902 411,720
Allowance for loan losses (6,253) (6,112)
--------- ---------
440,649 405,608
Premises and equipment 19,311 17,938
Other assets 15,735 13,595
--------- ---------
Total assets $ 547,612 $ 471,381
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 42,709 $ 42,077
Interest-bearing 410,736 362,885
--------- ---------
Total deposits 453,445 404,962
Other borrowings 37,145 23,270
Accrued expenses and other liabilities 4,429 3,680
--------- ---------
Total liabilities 495,019 431,912
Guaranteed preferred beneficial interests
in the Corporation's subordinated debentures 12,450 -
--------- ---------
Shareholders' equity
Preferred stock, no par value, 500,000 shares
authorized, no shares outstanding
Common stock, no par value, 18,000,000 shares
authorized, 7,010,605 and 7,130,760 issued and
outstanding at September 30, 1999
and December 31, 1998 16,619 19,436
Retained earnings 23,601 19,989
Accumulated other comprehensive income, net (77) 44
--------- ---------
Total shareholders' equity 40,143 39,469
--------- ---------
Total liabilities and shareholders' equity $ 547,612 $ 471,381
========= =========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NORTH COUNTRY FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
Interest income
Loans, including fees $10,201 $9,370 $29,546 $27,720
Securities
Taxable 414 185 767 582
Exempt from federal taxation 65 14 94 18
Other 111 98 303 345
-------- -------- -------- --------
10,791 9,667 30,710 28,665
Interest expense
Deposits 4,711 4,165 13,386 12,238
Other borrowings 572 382 1,436 975
-------- -------- -------- --------
5,283 4,547 14,822 13,213
Net interest income 5,508 5,120 15,888 15,452
Provision for loan losses 213 450 639 1,125
-------- -------- -------- --------
Net interest income after
provision for loan losses 5,295 4,670 15,249 14,327
Noninterest income
Service charges on deposit accounts 529 333 1,421 1,043
Gain (loss) on sales of loans 3 28 63 83
Gain on sales of securities - - - 44
Net gain on sale of branches 430 - - -
Other 261 301 1,003 750
-------- -------- -------- --------
1,223 662 2,487 1,920
Noninterest expense
Salaries and employee benefits 1,761 1,590 4,763 4,798
Occupancy and equipment 642 632 1,894 1,798
Other 1,888 1,509 5,237 4,789
-------- -------- -------- --------
4,291 3,731 11,894 11,385
-------- -------- -------- --------
Income before income tax expense 2,227 1,601 5,842 4,862
Income tax expense 500 453 1,267 1,247
-------- -------- -------- --------
Net income $ 1,727 $ 1,148 $ 4,575 $ 3,615
======== ======== ======== ========
Basic earnings per common share $ .25 $ .16 $ .65 $ .51
======== ======== ======== ========
Diluted earnings per common share $ .24 $ .16 $ .64 $ .50
======== ======== ======== ========
Dividends paid per common share $ .05 $ .04 $ .14 $ .13
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NORTH COUNTRY FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In thousands of dollars)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
Balance - beginning of period $39,035 $37,760 $39,469 $36,592
Net income for period 1,727 1,148 4,575 3,615
Net change in net unrealized gain
on securities available for sale (2) 9 (121) 1
-------- -------- -------- --------
Total comprehensive income 1,725 1,157 4,454 3,616
Cash dividends (323) (315) (963) (934)
Issuance of common stock 105 594 309 875
Common stock retired (399) - (3,126) (953)
-------- -------- -------- ---------
Balance - end of period $40,143 $39,196 $40,143 $39,196
======== ======== ======== =========
See accompanying notes to condensed consolisated financial statements.
<PAGE>
NORTH COUNTRY FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Nine months ended
September 30,
1999 1998
Cash flows from operating activities
Net income $ 4,575 $ 3,615
Adjustments to reconcile net income to
net cash from operating activities
Depreciation and amortization 1,706 1,574
Provision for loan losses 639 1,125
Gain on sales of securities - (44)
Net gain on sale of branches (430) -
Change in other assets 37 2,317
Change in other liabilities 804 (62)
--------- ---------
Net cash from operating activities 7,331 8,525
Cash flows from investing activities
Purchase of securities available for sale (23,634) (4,000)
Proceeds from sales of securities
available for sale 752
Proceeds from maturities, calls or paydowns
of securities available for sale 3,663 3,943
Net increase in loans (35,680) (26,929)
Purchase of premises and equipment (2,206) (1,900)
Net cash paid for sale of branches (10,801) -
Net cash received for net liabilities
assumed in acquisition of branches 15,504 -
--------- ---------
Net cash from investing activities (53,154) (28,134)
Cash flows from financial activities
Net increase in deposits 41,886 26,626
Proceeds from other borrowings 26,000 10,500
Payment on other borrowings (12,125) (6,052)
Proceeds from issuance of common stock 309 876
Retirement of common stock (3,126) (953)
Net proceeds from the issuance of guaranteed
preferred beneficial interests in the
Corporation's subordinated debentures 11,882 -
Payment of cash dividends (963) (934)
--------- ---------
Net cash from financing activities 63,863 30,063
--------- ---------
Net change in cash and cash equivalents 18,040 10,454
Cash and cash equivalents at beginning of period 22,641 11,143
--------- ---------
Cash and cash equivalents at end of period $40,681 $21,597
========= =========
Supplemental disclosures of cash flow information
Increases related to branch acquisitions:
Premises and equipment, net $ (286)
Core deposit intangibles and goodwill (1,680)
Deposits 17,463
Other liabilities 7
Decreases related to branch sales:
Premises and equipment, net 65
Deposits (10,866)
See accompanying notes to condensed consolidated financial statements.
<PAGE>
NORTH COUNTRY FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.BASIS OF PRESENTATION
The unaudited condensed consolidated financial
statements of North Country Financial Corporation
(the Registrant) have been prepared in accordance
with generally accepted accounting principles for
interim financial information and the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the
information and footnotes required by generally
accepted accounting principles for complete
financial statements. In the opinion of management,
all adjustments (consisting of normal recurring
accruals) considered necessary for a fair
presentation have been included. Operating results
for the nine-month period ended September 30, 1999
are not necessarily indicative of the results that
may be expected for the year ending December 31,
1999. The unaudited consolidated financial
statements and footnotes thereto should be read in
conjunction with the audited consolidated financial
statements and footnotes thereto included in the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998.
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and
expenses during the period. Actual results could
differ from those estimates.
2.FUTURE ACCOUNTING CHANGES
In June 1998, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial
Accounting Standards ("FAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities".
This Statement requires that all derivative
financial instruments be recognized as either assets
or liabilities in the Balance Sheet. Derivative
financial instruments not designated as hedges will
be measured at fair value with changes in fair value
being recognized in earnings in the period of
change. If a derivative is designated as a hedge,
the accounting for changes in fair value will depend
on the specific exposure being hedged. The
Statement is effective for fiscal years beginning
after June 15, 2000. Management, at this time,
cannot determine the effect adoption of this
Statement may have on the consolidated financial
statements of the Registrant as the effect is
dependent on the amount and nature of derivatives
and hedges held at the time of adoption of the
Statement.
3.EARNINGS PER SHARE
The factors used in the earnings per share computation follow.
(In thousands, except per share data)
Three months Nine months
ended ended
September 30, September 30,
1999 1998 1999 1998
Basic earnings per common share:
Net income $1,727 $1,148 $4,575 $3,615
Weighted average common shares
outstanding 7,015 7,132 7,040 7,133
------- ------- ------- ------
Basic earnings per common share $ .25 $ .16 $ .65 $ .51
======= ======= ======= ======
Diluted earnings per common share:
Net income $1,727 $1,148 $4,575 $3,615
Weighted average common shares outstanding
for basic earnings per common share 7,015 7,132 7,040 7,133
Add: Dilutive effect of assumed exercises
of stock options 58 92 84 92
Add: Dilutive effect of directors'
deferred stock compensation 5 - 7 -
Average shares and dilutive potential ------- ------- ------- ------
common shares 7,078 7,224 7,131 7,225
------- ------- ------- ------
Diluted earnings per common share $ .24 $ .16 $ .64 $ .50
All share and per share amounts in this filing have
been retroactively adjusted to reflect the August of
1998 3-for-1 stock split.
<PAGE>
4.INVESTMENT SECURITIES
The amortized cost and estimated fair value of
investment securities available for sale as of
September 30, 1999 and December 31, 1998 are as follows:
September 30, 1999 December 30, 1998
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
U.S. Treasury securities and
obligations of U.S.
Government agencies and
corporations $ 8,923,871 $ 8,649,650 $ 4,645,681 $ 4,692,221
Obligations of states and
political subdivisions 13,416,203 13,670,956 999,922 1,020,890
Other debt securities 500,000 500,000 - -
Mortgage-related securities 5,478,451 5,381,137 2,852,872 2,852,171
------------ ----------- ------------ ----------
Total investment securities
available for sale $28,318,525 $28,201,743 $8,498,475 $8,565,282
============ =========== ============ ==========
5.ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses for the
nine months ended September 30, 1999 and 1998, are
summarized as follows:
(In thousands of dollars)
September 30, September 30,
1999 1998
Balance at beginning of period $ 6,112 $ 5,600
Charge-offs (573) (533)
Recoveries 75 78
Provision for loan losses 639 1,125
$ 6,253 $ 6,270
Information regarding impaired loans follows:
(In thousands of dollars)
As of and As of and
for the nine for the year
months ended ended
September 30, December 31,
1999 1998
Average investment in impaired loans $ 5,438 $ 6,155
Balance of impaired loans 5,489 6,073
<PAGE>
6.OTHER BORROWINGS
Other borrowings consist of the following at
September 30, 1999 and December 31, 1998:
September 30, December 31,
1999 1998
(In thousands of dollars)
Federal Home Loan Bank advances
at various rates with various
maturities (see annual
financial statements
as referenced in Note 1) $35,334 $20,607
Farmers Home Administration,
$2,000,000 fixed rate line
agreement maturing
August 24, 2024, interest
payable at 1% 1,811 1,875
Notes payable to South
Range State Bank's former
stockholders, maturing in
three equal annual
installments beginning
February 1, 1997,
interest payable at 5.2% - 788
---------- -----------
$ 37,145 $ 23,270
The Federal Home Loan Bank borrowings are
collateralized by a blanket collateral agreement on
the Registrant's residential mortgage loans.
Prepayment of the advances is subject to the
provisions and conditions of the credit policy of
the Federal Home Loan Bank of Indianapolis in effect
as of September 30, 1999. Borrowings other than
Federal Home Loan Bank advances are not subject to
prepayment penalties.
7.CURRENT EVENTS
A business trust subsidiary of the Registrant sold
12,450 of Trust Preferred Securities at $1,000 per
preferred security in a May 1999 offering. The
proceeds from the sale of the Trust Preferred
Securities were used by the Registrant's subsidiary
to purchase an equivalent amount of Subordinated
Debentures of the Registrant. The Trust Preferred
Securities carry a distribution floating rate of the
3-month LIBOR plus 2.5%, have a stated maturity of
May 14, 2029, and are guaranteed by the Registrant.
The securities are redeemable at par after May 14,
2009. Distributions on the Trust Preferred
Securities are payable quarterly on February 14, May
14, August 14 and November 14. The first
distribution was paid on August 14, 1999.
In May 1999, the Registrant acquired branches in
Kaleva and Mancelona, Michigan from Huntington
National Bank. The transaction is accounted for
under the purchase method of accounting. The
Registrant assumed approximately $17.5 million in
deposits, and acquired approximately $286,000 in
premises, equipment and sundry assets, and $1.7
million of intangible assets, as more fully
disclosed in the Condensed Consolidated Statements
of Cash Flows.
On July 23, 1999, the Registrant sold two of its
branch offices located in Rudyard and Cedarville in
Michigan's Upper Peninsula with total deposits of
approximately $11 million resulting in a net gain on
sale of approximately $430,000, as more fully
disclosed in the Condensed Consolidated Statements
of Cash Flows. These branch dispositions are
consistent with the Registrant's strategy of
improving operating efficiency by maintaining a
presence only in locations such as commercial
centers where it can operate profitably.
In addition to the branch acquisitions and branch
sales noted above, the Registrant closed the
Watersmeet and Lake Linden branch offices in August
of 1999. The deposits and loans for these offices
were transferred to existing branches in nearby
locations. The Registrant also opened a private
banking branch in the Bay Harbor area of Petoskey,
Michigan in September of 1999.
<PAGE>
ITEM 2. MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERTATIONS
The following discussion and analysis of financial
condition and results of operations provides additional
information to assess the condensed consolidated
financial statements of the Registrant and its wholly-
owned subsidiaries through the third quarter of 1999.
The discussion should be read in conjunction with those
statements and their accompanying notes.
The Registrant is not aware of any market or
institutional trends, events, or circumstances that
will have or are reasonably likely to have a material
effect on liquidity, capital resources, or results of
operations except as discussed herein. Also, the
Registrant is not aware of any current recommendations
by regulatory authorities which will have such effect
if implemented.
Forward-Looking Statements:
This report contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Registrant
intends such forward-looking statements to be covered
by the safe harbor provisions for forward-looking
statements contained in the Private Securities Reform
Act of 1995, and is including this statement for
purposes of these safe harbor provisions. Forward-
looking statements, which are based on certain
assumptions and describe future plans, strategies and
expectations of the Registrant, are generally
identifiable by use of the words "believe", "expect",
"intend", "anticipate", "estimate", "project" or
similar expressions. The Registrant's ability to
predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which
could have a material adverse affect on the operations
and future prospects of the Registrant and the
subsidiaries include, but are not limited to, changes
in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal
policies of the U.S. Government, including policies of
the U.S. Treasury and the Federal Reserve Board, the
quality or composition of the loan or investment
portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the
Registrant's market area and accounting principles,
policies and guidelines. These risks and uncertainties
should be considered in evaluating forward-looking
statements and undue reliance should not be placed on
such statements. Further information concerning the
Registrant and its business, including additional
factors that could materially affect the Registrant's
financial results, is included in the Registrant's
filings with the Securities and Exchange Commission.
Financial Highlights:
Year to date consolidated net income was $4,575,000
through September 30, 1999 compared to $3,615,000 for
the same period in 1998. Diluted earnings per share
increased from $.50 through September 30, 1998, to $.64
for the same period in 1999. The loan portfolio
continues a significant growth trend with gross loans
increasing $35,182,000 or 8.5% since December 31, 1998.
Loan growth remains focused in the commercial lending
and leasing areas. The loan growth in 1999 has been
funded primarily through an increase in the deposit
portfolio. Deposits have increased $48,483,000 or
12.0% since December 31, 1998. The primary area of
deposit growth for the Registrant has been in interest-
bearing demand accounts.
Financial Condition:
Cash and Cash Equivalents: Cash and cash equivalents
increased $18.0 million through the third quarter of
1999. The increase was largely funded by an increase
in deposits as discussed more fully below, and is
available for planned future growth in the Bank's loan
and investment portfolios, as well as to provide
additional liquidity in anticipation of the Year 2000.
Investment Securities: Available for sale securities
increased approximately $19.6 million through the third
quarter of 1999. The mix of the portfolio has changed
from December 31, 1998, as more fully disclosed in Note
4 of Notes to Condensed Consolidated Financial
Statements contained herein. The growth is a result of
asset and liability strategies to manage interest rate
risk through the diversification of the balance sheet
from the purchase of investment securities funded by
additional borrowings. Management has utilized its
available capacity to borrow additional funds at the
Federal Home Loan Bank in order to match the pricing
and maturity of investment security purchases.
Loans: Through the third quarter of 1999, loan
balances increased by $35.2 million. Management
believes loans provide the most attractive earning
asset yield available to the Registrant and that
trained personnel and controls are in place to
successfully manage a growing portfolio. Accordingly,
management intends to continue to maintain loans at a
high level while maintaining adequate liquidity. As
shown in the table below, the loan mix remains
relatively constant with a slight increase in
commercial loans as a percent of total loans for the
nine months ended September 30, 1999 compared to
December 31, 1998.
<PAGE>
Management is aware of the risk associated with an
increase in average balances of loans but believes that
the current level in the allowance for loan losses is
adequate. At September 30, 1999 the allowance for loan
losses was equal to 1.40% of total loans outstanding
compared to 1.48% at December 31, 1998. The allocation
of the allowance for loan losses between portfolio
categories has not changed significantly since December
31, 1998.
Loans to general commercial businesses increased by
$34.1 million through the third quarter of 1999.
Management continues to focus on loan growth through an
increase in the commercial lending area. A significant
portion of the growth is due to the Bank's continued
ability to penetrate growth markets such as Marquette
and Sault Ste. Marie.
The other loan categories have remained fairly
consistent at September 30, 1999 when compared to
December 31, 1998.
(In thousands of dollars)
September 30, % of December 31, % of
1999 Total 1998 Total
Loans:
Commercial real estate $78,396 17.6% $82,207 20.0%
Commercial, financial,
and agricultural 170,914 38.2 136,820 33.2
Leases:
Commercial 22,699 5.1 20,097 4.9
Governmental 43,703 9.8 40,098 9.7
1-4 family residential
real estate 102,338 22.9 97,415 23.7
Consumer 18,074 4.0 23,160 5.6
Construction 10,778 2.4 11,923 2.9
-------- ------ --------- ------
$446,902 100.0% $411,720 100.0%
Credit Quality: Management analyzes the allowance for
loan losses in detail on a monthly basis to ensure that
the losses inherent in the portfolio are properly
reserved for in the allowance for loan losses. The
Registrant's success in maintaining excellent credit
quality is demonstrated in its historical charge-off
percentage. Net charge-offs to gross loans outstanding
was .11% for September 30, 1999 and 1998. Charge-offs
for the period ended September 30, 1999 increased only
$40,000 from the same period in 1998 despite strong
growth in the loan portfolio. This is mainly the
result of management's continued efforts to improve
credit quality in such portfolios. Accordingly, the
provision for loan losses was decreased from $1,125,000
in the nine-month period ended September 30, 1998 to
$639,000 for the same period in 1999.
The table presented below shows the balance of non-
performing loans, which include nonaccrual loans, loans
90 or more days past due and still accruing, and
renegotiated loans as of September 30, 1999 and
December 31, 1998.
(In thousands of dollars)
September 30, December 31,
1999 1998
Nonaccrual loans $ 498 $ 2,174
Loans 90 days or more past due and still accruing 1,467 1,238
<PAGE>
While loans 90 days or more past due have increased by
$229,000 or 18.5% since December 31, 1998, nonaccrual
loans have decreased by $1,676,000 or 77.1%.
Management is actively managing the current loan
delinquencies and has taken various actions to reduce
the level of non-performing loans. Non-performing
loans to total gross loans were .44% and .83% at
September 30, 1999 and December 31, 1998, respectively.
Deposits: Total deposits through the third quarter
have increased $48.5 million. Interest bearing deposit
balances increased through September 30, 1999,
continuing a trend from 1998. The increase in total
deposits of $17.5 million was the result of the branch
acquisitions during the second quarter of 1999, as more
fully disclosed in the Notes to the Condensed
Consolidated Financial Statements, contained herein.
The remaining growth has come from the branch network,
as management has continued to offer attractive deposit
products to its customers, generally through premium-
based certificate of deposit programs and higher
yielding savings accounts.
Borrowings: The Registrants branching network is a
relatively high cost network in comparison to peers.
Accordingly, the Registrant uses alternative funding
sources to provide funds for lending activities. Other
borrowings increased by $13.9 million through the third
quarter of 1999 (refer to the table presented in Note 6
of the Notes to Condensed Consolidated Financial
Statements contained herein) as a result of asset and
liability strategies utilized to grow the Bank's
investment security portfolio as described above. At
September 30, 1999, $35.3 million of the total
borrowings were from the Federal Home Loan Bank of
Indianapolis. Alternative sources of funding can be
obtained at interest rates which are competitive with,
or lower than, retail deposit rates and with minimal
administrative costs.
Guaranteed Preferred Beneficial Interests in the
Corporation's Subordinated Debentures: Consistent with
the Registrant's strategic plan, the Registrant
completed a private offering in May 1999 of Capital, or
Trust Preferred, securities in the amount of
$12,450,000. Such amounts will be used to support the
Registrant's current capital position allowing for
future growth and increased common shareholder value.
Under regulatory guidelines, such securities are
eligible as regulatory capital, as defined, subject to
certain limitations.
Shareholder's Equity: Total shareholder's equity
increased approximately $.7 million from December 31,
1998 to September 30, 1999. The increase primarily
resulted from net income of $4.6 million offset by the
repurchase of common stock of $3.1 million and cash
dividends paid of $1.0 million. The Registrant will
continue to selectively repurchase common stock as
opportunities arise.
Results of Operations:
Net Interest Income: Net interest income for the
quarter ended September 30, 1999 increased by 7.6%
compared to the same period one year ago. The increase
in net interest income was largely the result of an
increase in the average volume of the loan portfolio
for the third quarter of 1999 compared to the third
quarter of 1998. The increase related to volume was
partially offset by a decrease in the net interest
margin. The net interest margin, on a fully taxable
equivalent basis for the quarter ended
September 30, 1999 was 4.72%, compared to 5.04% for the
same period of 1998. The decrease in the net interest
margin has been impacted by the low interest rate
environment and the competitive nature of the
Registrant's market. Interest income from loans
represented 94.5% of total interest income for the
third quarter of 1999 compared to 96.9% for the same
period of 1998. In all cases, the total amount of
interest income and the yield on total earning assets
is strongly influenced by lending activities.
Net interest income for the nine months ended September
30, 1999 increased by 2.8% compared to the same period
in 1998. The net interest margin, on a fully taxable
equivalent basis for the nine months ended September
30, 1999 decreased from 5.15% for the same period in
1998 to 4.74% for the same reasons mentioned in the
preceding paragraph. Interest income from loans
represented 96.2% of total interest income through the
third quarter of 1999 compared to 96.7 % for the same
period of 1998.
<PAGE>
Provision for Loan Losses: The Registrant maintains
the allowance for loan losses at a level adequate to
cover losses inherent in the portfolio. The Registrant
records a provision for loan losses necessary to
maintain the allowance at that level after considering
factors such as loan charge-offs and recoveries,
changes in the mix of loans in the portfolio, loan
growth, and other economic factors. The provision for
loan losses decreased by $237,000 for the three months
ended September 30, 1999 and $486,000 for the nine
months ended September 30, 1999 compared to the same
periods in 1998 primarily as a result of the
Registrant's favorable net charge-off and non-
performing loan trends as previously discussed.
Management continues to fund the allowance at a rate
consistent with its analysis of problem credits, also
considering changes in the size and mix of its loan
portfolio. The allowance for loan losses to gross
loans was 1.40% and 1.48% at September 30, 1999 and
December 31, 1998, respectively.
Noninterest Income: Noninterest income increased by
$561,000 for the three months ended September 30, 1999
compared to the same period in 1998. The increase was
primarily due to an increase in other noninterest
income of $390,000, largely the result of the net gain
on the sale of the Rudyard and Cedarville branches as
discussed in Note 7, and an increase in service charges
on deposit accounts of $196,000.
Noninterest income increased by $567,000 for the nine
months ended September 30, 1999 compared to the same
period one year ago. The increase was the result of an
increase in service charges on deposits of $378,000 and
an increase in other noninterest income of $253,000.
As discussed above, the increase in other noninterest
income was mainly due to the net gain on the sale of
the Rudyard and Cedarville branches.
Noninterest Expenses: Noninterest expense increased
$560,000 for the three months ended September 30, 1999
compared to the same period of 1998. A primary
objective of management is to hold the rate of increase
in this category below future asset growth. Assets
increased 20% from September 30, 1998 to September 30,
1999. Salary expense increased by $171,000 during the
third quarter of 1999 compared to the second quarter of
1998. Occupancy expense increased by $10,000 for the
third quarter of 1999 compared to the same period in
1998. Other noninterest expense increased by $379,000
for the third quarter of 1999 compared to the same
period in 1998. This increase is mainly due to an
increase in professional fees related to data
processing.
Noninterest expense increased $509,000 or 4.5% for the
nine months ended September 30, 1999 compared to the
same period of 1998. Management believes this low
level of growth is attributable to significant
efficiencies obtained in operational areas of the Bank
based on a heightened level of management emphasis in
this area. The increase in noninterest expense was
primarily due to an increase in other noninterest
expense of $448,000 for reasons noted in the preceding
paragraph. Occupancy expense increased $96,000 and
salary expense decreased $35,000 for the nine months
ended September 30, 1999 compared to same period of
1998.
Federal Income Tax: The provision for income taxes was
22.5% of income before income tax for the quarter ended
September 30, 1999 compared to 28.3% for the quarter
ended September 30, 1998. For the nine months ended
September 30, 1999, the provision for income taxes was
21.7% of income compared to 25.6% for the same period
in 1998. The difference between the effective tax rate
and the federal corporate income tax rate of 34% is
primarily due to tax-exempt interest earned on loans,
leases, and investments. The effective tax rate has
decreased as tax-exempt income has become a larger
percentage of total interest income.
Interest Rate Risk:
Management actively manages the Registrant's interest
rate risk. In relatively low interest rate
environments which have been in place the last few
years, borrowers have generally tried to extend the
maturities and repricing periods on their loans and
place deposits in demand or very short term accounts.
Management has taken various actions to offset the
imbalance which those tendencies would otherwise
create. Commercial and real estate loans are written
at variable rates or, if necessary, fixed rates for
relatively short terms. Products have also been
offered to give customers an incentive to accept longer
term deposits. Management can also manage interest
rate risk with the maturity periods of securities
purchased, selling securities available for sale, and
borrowing funds with targeted maturity periods.
<PAGE>
As of September 30, 1999, the Registrant had a
cumulative liability gap position of approximately $205
million within the one-year timeframe. This position
suggests that if the market interest rates decline in
the next 12 months, the Registrant has the potential to
earn more net interest income. Conversely, if market
interest rates increase in the next 12 months, the
Registrant has the potential to earn less net interest
income. Management believes that it is properly
positioned against significant changes in rates without
severely altering operating results.
Liquidity:
The Registrant's sources of liquidity include principal
payments on loans and investments, sales of securities
available for sale, deposits from customers, borrowings
from the Federal Home Loan Bank, other bank borrowings,
and the issuance of common stock. The Registrant has
ready access to significant sources of liquidity on an
almost immediate basis. Management anticipates no
difficulty in maintaining liquidity at the levels
necessary to conduct the Registrant's day-to-day
business activities.
Capital Resources:
It is the policy of the Registrant to maintain capital
at a level consistent with both safe and sound
operations and proper leverage to generate an
appropriate return on shareholders' equity. The
capital ratios of the Registrant exceed the regulatory
minimum guidelines. The table below shows a summary of
the Registrant's capital position in comparison to
regulatory requirements.
Tier 1 Total
Risk-Based Risk-Based
Leverage Capital Capital
Ratio Ratio Ratio
Regulatory minimum 4.0% 4.0% 8.0%
The Registrant
September 30, 1999 8.6 12.0 13.2
December 31, 1998 7.2 9.4 10.7
The capital levels as of September 30, 1999 include
adjustment for the Capital, or Trust Preferred,
Securities issued in May 1999, subject to certain
limitations. Federal Reserve guidelines limit the
amount of cumulative preferred securities which can be
included in Tier 1 capital to 25% of total Tier 1
capital. As of September 30, 1999, all of the
$12,450,000 of Capital Securities were available as
Tier 1 capital of the Registrant. As previously noted,
the Capital Securities will be used to support the
Registrant's current capital position allowing for
future growth.
<PAGE>
Year 2000 Issue:
In January 1997, the Registrant and its subsidiary,
North Country Bank and Trust, began assessing the
impact of the century change associated with the
failure to renovate, validate, and implement mission
critical systems to ensure they were Year 2000 (Y2K)
ready. A Y2K Committee made up of a team of
professionals, representing all disciplines within the
organization, was actively involved in the assessment,
renovation, validation, and implementation of Y2K
issues.
All internal testing has been completed in accordance
with the regulatory requirements, and will continue to
be periodically validated and tested throughout the
fourth quarter of 1999. A Business Resumption
Contingency Plan was developed which involved
mitigating operational risks should core business
processes fail, regardless if mission-critical systems
were remediated for Y2K. All expenses made to date and
expected through the Y2K date change regarding
preparations necessary for Y2K are consistent with
amounts disclosed in prior Registrant filings.
In March 1999, the Registrant engaged Wipfli, Ulrich,
Bertelson to perform an independent third party review
of the Registrant's Y2K status. The objective of the
third party review is to provide management with an
independent review of the status and satisfaction of
regulatory requirements of Y2K, with completion
scheduled for the fourth quarter of 1999.
The regulators continue to monitor closely the Y2K
efforts of Financial Institutions. Regulators have
conducted their quarterly reviews, which look at the
overall progress that is made in the Registrant's Y2K
efforts, as well as its compliance with federally
mandated requirements. Examiners check to see that
financial institutions are performing any ongoing
system renovation and testing that may be needed,
establishing comprehensive contingency plans,
mitigating any identified Y2K related business risk,
and effectively informing their customers of their Y2K
preparedness. In August 1999, The Federal Financial
Institutions Examination Council issued a statement
that 99% of Insured Financial Institutions are prepared
for Y2K. In October 1999, the Registrant received its
latest regulatory rating from the Regulators, a
positive rating concluding "everything is in order."
Regulators will perform follow-up phone interviews
during the weekend of the Y2K change date to ensure
ending results are favorable.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part ofthis report
Number Exhibit
3.1 Articles of Incorporation, as amended.
3.2 Bylaws, as amended.
10.1 Consulting Agreement dated September 15,
1999 between the Company and Ronald G. Ford.
10.2 Second Amendment to Employment Agreement dated
August 18, 1999, between the Company and Ronald G. Ford.
10.3 Management Continuity Agreement dated May 22, 1996
between the Company and Sherry Littlejohn.
10.4 First Amendment to Employment Contract dated
August 18, 1999 between the Company and Sherry Littlejohn.
10.5 Employment Agreement dated September 1, 1997
between the Company and Anthony Palumbo.
10.6 North Country Financial Corporation Supplemental
Executive Retirement Plan.
27 Financial Data Schedule.
(b) There were no reports filed on Form 8-K during the
quarter ended September 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned,
thereunto duly authorized.
NORTH COUNTRY FINANCIAL CORPORATION
-----------------------------------
(Registrant)
11/5/99 /s/ Ronald G. Ford
- --------------- ---------------------------------
Date RONALD G. FORD, CEO
11/5/99 /s/ Sherry Littlejohn
- --------------- ---------------------------------
Date SHERRY LITTLEJOHN
CHIEF ACCOUNTING OFFICER,
PRESIDENT AND COO
RESTATED ARTICLES OF INCORPORATION
OF
FIRST MANISTIQUE CORPORATION
The following Restated Articles of Incorporation
are executed by the undersigned corporation pursuant to
the provisions of Sections 641-651, Act 284, Public
Acts of 1972, as amended.
1. The present name of the corporation, and
its only name since its incorporation is
First Manistique Corporation.
2. The corporation identification number
(CID) assigned by the bureau is 063-316.
3. All of the former names of the corporation are: None
4. The date of filing the original Articles
of Incorporation was December 6, 1974.
5. The following Restated Articles of
Incorporation supersede the original
Articles of Incorporation, as heretofore
amended, and shall be the Articles of
Incorporation of the corporation.
ARTICLE I
The name of the corporation is First Manistique Corporation.
ARTICLE II
The purpose or purposes for which the
corporation is organized is to engage in any activity
within the purposes for which corporations may be
organized under the Business Corporation Act of
Michigan, as amended from time to time, and including
without limitation the power to act as a bank holding
company as permitted by the Federal Bank Holding
Company Act of 1956, as amended, or hereafter
supplemented or amended.
ARTICLE III
The total authorized shares:
1. Common Shares 2,000,000
----------
Preferred Shares 25,000
---------
<PAGE>
2. A statement of all or any of the
relative rights, preferences and
limitations of the shares of each class
is as follows:
The Board of Directors may cause the
Corporation to issue Preferred Shares in
one or more series, each series to bear
a distinctive designation and to have
such relative rights and preferences as
shall be prescribed by resolution of the
Board. Such resolutions, when filed,
shall constitute amendments to these
Articles of Incorporation.
ARTICLE IV
1. The address of the current registered office
is: 130 South Cedar Street, P.O. Box 369,
Manistique, Michigan 49854, which is also the
mailing address of the current registered office.
2. The name of the current resident agent is: Ronald G. Ford
ARTICLE V
When a compromise or arrangement or a plan of
reorganization of this corporation is proposed between
this corporation and its creditors or any class of them
or between this corporation and its shareholders or any
class of them, a court of equity jurisdiction within
the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a
meeting of the creditors or class of creditors or of
the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or
reorganization, to be summoned in such manner as the
court directs. If a majority in number representing
3/4 in value of the creditors or class of creditors, or
of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement,
agree to a compromise or arrangement, or a
reorganization of this corporation as a consequence of
the compromise or arrangement, the compromise or
arrangement and the reorganization, if sanctioned by
the court to which the application has been made, shall
be binding on all the creditors or class of creditors,
or on all the shareholders or class of shareholders and
also on this corporation.
ARTICLE VI
A director of the Corporation shall not be
personally liable to the Corporation or its
shareholders for monetary damages for a breach of
fiduciary duty as a director, except for liability:
(a) for any breach of the director's duty of loyalty to
the Corporation or its shareholders; (b) for acts or
omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(c) resulting from a violation Section 551(1) of the
Michigan Business Corporation Act; or (d) for any
transaction from which the director derived an improper
personal benefit. In the event the Michigan Business
Corporation Act is amended, after approval by the
shareholders of this Article VII, to authorize
corporate action further eliminating or
<PAGE>
limiting the
personal liability of directors, then the liability of
a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Michigan
Business Corporation Act, as so amended. Any repeal,
modification or adoption of any provision in these
Articles of Incorporation inconsistent with this Article VI
shall not adversely affect any right or protection of a
director of the Corporation existing at the time of
such repeal, modification or adoption.
These Restated Articles of incorporation were
duly adopted by the Board of Directors without a vote
of the shareholders in accordance with the provisions
of Section 642, Act 284, Public Acts of 1972, as
amended. These Restated Articles of Incorporation only
restate and integrate and do not further amend the
provisions of the Articles of Incorporation as
heretofore amended and there is no material discrepancy
between those provisions and the provisions of these
Restated Articles.
Signed this 28th day of December, 1995.
FIRST MANISTIQUE
CORPORATION
By: /s/ Ronald G. Ford
--------------------------
(Name)
Its: President & CEO
--------------------------
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
Pursuant to the provisions of Act 284, Public
Acts of 1972, as amended, the undersigned corporation
executes the following Certificate:
1. The present name of the corporation is: First Manistique Corporation
2. The identification number assigned by the Bureau is: 063 316
3. The location of the registered office is:
130 South Cedar
P.O. Box 369
Manistique, MI 49854
4. The following amendments to the
Articles of Incorporation were duly
adopted on the 23rd day of April, 1996.
The amendments were duly adopted in
accordance with Section 611(2) of the
Act by the vote of the shareholders.
The necessary votes were cast in favor
of the amendments.
Article III of the Corporation's Articles of
Incorporation is hereby amended to read as follows:
ARTICLE III
The total number of shares of all classes of stock
which the corporation shall have authority to issue is
6,500,000 shares, of which 6,000,000 shares shall be of
a single class of common stock and 500,000 shares shall
be series preferred stock.
The authorized shares of common stock
are all of one class with equal voting power, and each
such share shall be equal to every other such share.
The Board of Directors of the corporation may cause the
corporation to issue preferred shares in one or more
series, each series to bear a distinctive designation
and to have such relative rights and preferences as
shall be prescribed by resolution of the Board. Such
resolutions, when filed, shall constitute amendments to
these Articles of Incorporation.
A new Article VII is added to the Corporation's
Articles of Incorporation and reads as follows:
<PAGE>
ARTICLE VII
BOARD OF DIRECTORS
Section 1. Authority and Size of Board.
The business and affairs of the corporation shall be
managed by or under the direction of the Board of
Directors. The number of directors of the
corporation that shall constitute the Board of
Directors shall be determined from time to time by
resolution adopted by the affirmative vote of:
A. At least eighty percent (80%) ofthe Board of Directors, and
B. A majority of the Continuing Directors (as hereinafter defined).
Section 2. Classification of Board and
Filling of Vacancies. Subject to applicable law, the
directors shall be divided into three (3) classes, each
class to be as nearly equal in number as possible.
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 and until their
successors shall be duly elected and qualified or their
resignation or removal. Any vacancies in the Board of
Directors for any reason, and any newly created
directorships resulting from any increase in the number
of directors, may be filled only by the Board of
Directors, acting by an affirmative vote of a majority
of the Continuing Directors (as hereinafter defined)
and an eighty percent (80%) majority of all 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 the director was
chosen and until his successor shall be duly elected
and qualified or his resignation or removal. No
decrease in the number of directors shall shorten the
term of any incumbent director.
Section 3. Removal of Directors.
Notwithstanding any other provisions of these Articles
of Incorporation or the Bylaws of the corporation (and
notwithstanding the fact that some lesser percentage
may be specified by law or by these Articles of
Incorporation or the Bylaws of the corporation), any
one or more directors of the corporation may be removed
at any time, with or without cause, but only by either
(i) the affirmative vote of a majority of the
Continuing Directors and at least eighty percent (80%)
of the Board of Directors or (ii) the affirmative vote,
at a meeting of the shareholders called for that
purpose, of the holders of at least eighty percent
(80%) of the voting power of the then outstanding
shares of capital stock of the corporation entitled to
vote generally in the election of directors (the
"Voting Stock") voting together as a single class.
Section 4. Certain Definitions. For the purposes of this Article VII:
A. A "person" shall mean any
individual, firm, corporation or
other entity.
B. "Interested Shareholder" shall mean
any person, other than the
corporation or any Subsidiary, who
or which:
<PAGE>
(i) is the beneficial
owner, directly or
indirectly, of ten percent
(10%) or more of the voting
power of the outstanding
Voting Stock; or
(ii) is an Affiliate of
the corporation and at any
time within the two (2) year
period immediately prior to
the date in question was
the beneficial owner,
directly or indirectly, of
ten percent (10%) or more of
the voting power of the then
outstanding Voting Stock; or
(iii) is an assignee of or
has otherwise succeeded to
any shares of Voting Stock
which were at any time
within the two (2) year
period immediately prior to
the date in question
beneficially owned by any
Interested Shareholder, if
such assignment or
succession shall have
occurred in the course of a
transaction or series of
transactions not involving a
public offering within the
meaning of the Securities
Act of 1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or
any of its Affiliates or
Associates (as hereinafter
defined) beneficially
owns, directly or
indirectly; or
(ii) which such person or
any of its Affiliates or
Associates has (a) the
right to acquire (whether
such right is exercisable
immediately or only after
the passage of time),
pursuant to any agreement,
arrangement or
understanding or upon the
exercise of conversion
rights, exchange rights,
warrants or
options, or otherwise, or
(b) the right to vote
pursuant to any agreement,
arrangement or
understanding; or
(iii) which are
beneficially owned,
directly or indirectly, by any
other person with which such
person or any of its
Affiliates or Associates
has any agreement, arrangement
or understanding for the
purpose of acquiring,
holding, voting or
disposing of any shares of
Voting Stock.
D. For the purposes of determining whether
a person is an Interested Shareholder
pursuant to paragraph B of this Section
4, the number of shares of Voting Stock
deemed to be outstanding shall include
shares deemed owned through
application of paragraph C of this
Section 4 but
<PAGE>
shall not include any
other shares of Voting Stock which may
be issuable pursuant to any agreement,
arrangement or understanding, or upon
exercise of conversion rights, warrants
or options, or otherwise.
E. "Affiliate" or "Associate" shall have
the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules
and Regulations under the Securities
Exchange Act of 1934, as in effect on
the date this Article of the Articles of
Incorporation is filed with the
Corporation Division of the Michigan
Department of Commerce.
F. "Subsidiary" means any corporation of
which a majority of any class of equity
security is owned, directly or
indirectly, by the corporation;
provided, however, that for the purposes
of the definition of Interested
Shareholder set forth in paragraph B of
this Section 4, the term "Subsidiary"
shall mean only a corporation of which a
majority of each class of equity
security is owned, directly or
indirectly, by the corporation.
G. "Continuing Director" means any member
of the Board of Directors of the
corporation (the "Board") who is
unaffiliated with the Interested
Shareholder and was a member of the
Board prior to the time that the
Interested Shareholder became an
Interested Shareholder, and any
successor of a Continuing Director who
is unaffiliated with the Interested
Shareholder and is recommended to
succeed a Continuing Director by a
majority of Continuing Directors then on
the Board.
Section 5. Powers of Continuing Directors.
A majority of the Continuing Directors of the
corporation shall have the power and duty to determine,
on the basis of information known to them after
reasonable inquiry, all facts necessary to determine
compliance with this Article VII, including without
limitation (i) whether a person is an Interested
Shareholder, (ii) the number of shares of Voting Stock
beneficially owned by any person and (iii) whether a
person is an Affiliate or Associate of another; and the
good faith determination of a majority of the
Continuing Directors on such matters shall be
conclusive and binding for all the purposes of this
Article VII.
Section 6. Nominations for Board.
Nominations for the election of directors may be made
by the Board of Directors or by a shareholder entitled
to vote in the election of directors. A shareholder
entitled to vote in the election of directors, however,
may make such a nomination only if written notice of
such shareholder's intent to do so has been given,
either by personal delivery or by United States
mail, postage prepaid, and received by the corporation
(a) with respect to an election to be held at an annual
meeting of shareholders, not later than sixty (60) nor
more than ninety (90) days prior to the first
anniversary of the preceding year's annual meeting (or,
if the date of the annual meeting is changed by more
than twenty (20) days from such anniversary date,
within ten (10) days after the date the corporation
mails or otherwise gives notice of the date of such
meeting), and (b) with respect to an election to be
held at a special meeting of shareholders called for
that purpose, not later than the close of business on
the tenth
<PAGE>
(10th) day following the date on which notice
of the special meeting was first mailed to the
shareholders by the corporation.
Each shareholder's notice of intent to make a
nomination shall set forth: (i) the name(s) and
address(es) of the shareholder who intends to make the
nomination and of the person or persons to be
nominated; (ii) a representation that the shareholder
(a) is a holder of record of stock of the corporation
entitled to vote at such meeting, (b) will continue to
hold such stock through the date on which the meeting
is held, and (c) intends to appear in person or by
proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all
arrangements or understandings between the shareholder
and each nominee and any other person or persons
(naming such person or persons) pursuant to which the
nomination is to be made by the shareholder; (iv) such
other information regarding each nominee proposed by
such shareholder as would be required to be included in
a proxy statement filed pursuant to Regulation 14A
promulgated under Section 14 of the Securities Exchange
Act of 1934, as amended, as now in effect or hereafter
modified; and (v) the consent of each nominee to serve
as a director of the corporation if so elected. The
corporation may require any proposed nominee to furnish
such other information as may reasonably be required by
the corporation to determine the qualifications of such
proposed nominee to serve as a director.
No person shall be eligible for election as a
director unless nominated (i) by a shareholder in
accordance with the foregoing procedure or (ii) by the
Board of Directors.
A new Article VIII is added to the
Corporation's Articles of Incorporation and reads as
follows:
ARTICLE VIII
NOTIFICATION OF SHAREHOLDER PROPOSALS
The Board of Directors of the corporation shall
submit for consideration and vote by the shareholders,
at annual meetings of the shareholders, only those
proposals that are first brought before the
meeting by or at the direction of the Board of
Directors, or by any shareholder entitled to vote at
such meeting (a) who submits to the corporation a
timely Notice of Proposal in accordance with the
requirements of this Article VIII and the proposal is a
proper subject for action by shareholders under
Michigan law, or (b) whose proposal is included in the
corporation's proxy materials in compliance with all
the requirements set forth in the applicable rules and
regulations in the Securities and Exchange Commission.
Each shareholder's Notice of Proposal shall set forth:
(a) The name and address of the
shareholder submitting the proposal, as
they appear on the corporation's books
and records;
(b) A representation that the
shareholder (i) is a holder of record of
stock of the corporation entitled to
vote at such meeting, (ii) will continue
to hold such stock through the date on
which the meeting is held, and (iii)
<PAGE>
intends to appear in person or by proxy
at the meeting to submit the proposal
for shareholder vote;
(c) A brief description of the
proposal desired to be submitted to the
meeting for shareholder vote and the
reasons for conducting such business at
the meeting; and
(d) A description of any financial
or other interest of such shareholder in
the proposal.
A Notice of Proposal must be given, either by
personal delivery or by United States mail, postage
prepaid, and received by the corporation not less than
thirty (30) days prior to the date of the originally
scheduled meeting, regardless of any adjournments
thereof to a later date; provided that, if less than
forty (40) days' notice of the meeting of shareholders
is given by the corporation, the Notice of
Proposal must be received by the corporation not later
than the close of business on the tenth (10th) day
following the date on which the notice of the scheduled
meeting was first mailed to the shareholders.
The secretary of the corporation shall
notify a shareholder in writing whether his or her
Notice of Proposal has been made in accordance with all
the requirements of this Article VIII. The chairman of
the meeting may refuse to acknowledge the proposal of
any shareholder not made in compliance with all such
requirements.
A new Article IX is added to the Corporation's
Articles of Incorporation and reads as follows:
ARTICLE IX
AMENDMENT OF ARTICLES VII, VIII OR IX
Notwithstanding anything contained in
these Articles of Incorporation to the contrary, the
affirmative vote of at least 80% of the outstanding
shares of voting stock of the corporation, voting
as a single class, shall be required to amend or repeal
Article VII, Article VIII or Article IX of these
Articles of Incorporation or to adopt any provision
inconsistent therewith, unless, such amendment or
repeal or inconsistent provision has been recommended
for approval by at least 80% of all directors then
holding office and by a majority of the Continuing
Directors. The term "Continuing Directors" is
defined in Article VII.
A new Article X is added to the Corporation's
Articles of Incorporation and reads as follows:
<PAGE>
ARTICLE X
BOARD EVALUATION OF CERTAIN OFFERS
Section 1. Matters to be Evaluated.
The Board of Directors of this corporation shall not
approve, adopt or recommend any offer of any person or
entity, other than the corporation, to make a tender or
exchange offer for any capital stock of the
corporation, to merge or consolidate the corporation
with any other entity or to purchase or otherwise
acquire all or substantially all of the assets or
business of the corporation unless and until the Board
of Directors shall have first evaluated the offer and
determined that the offer would be in compliance with
all applicable laws and that the offer is in the best
interests of the corporation and its shareholders. In
connection with its evaluation as to compliance
with laws, the Board of Directors may seek and rely
upon an opinion of legal counsel independent from the
offeror and it may test such compliance with laws
in any state or federal court or before any state or
federal administrative agency which may have
appropriate jurisdiction. In connection with its
evaluation as to the best interests of the
corporation and its shareholders, the Board of
Directors shall consider all factors which it deems
relevant, including without limitation: (i) the
adequacy and fairness of the consideration to be
received by the corporation and/or its shareholders
under the offer considering historical trading prices
of the corporation's stock, the price that might be
achieved in a negotiated sale of the corporation as a
whole, premiums over trading prices which have been
proposed or offered with respect to the securities of
other companies in the past in connection with similar
offers and the future prospects for this
corporation and its business; (ii) the potential social
and economic impact of the offer and its consummation
on this corporation, and its subsidiaries and their
respective employees, depositors and other customers
and vendors; (iii) the potential social and economic
impact of the offer and its consummation on the
communities in which the corporation and any
subsidiaries operate or are located; (iv) the business
and financial condition and earnings prospects of the
proposed acquiror or acquirors; and (v) the competence,
experience and integrity of the proposed acquiror
or acquirors and its or their management.
Section 2. Amendment, Repeal, etc.
Notwithstanding any other provision of these Articles
of Incorporation or the Bylaws of the corporation to
the contrary (and notwithstanding the fact that a
lesser percentage may be specified by law, these
Articles of Incorporation or the Bylaws of the
corporation), the affirmative vote of the holders of
eighty percent (80%) or more of the outstanding shares
of capital stock entitled to vote for the election of
directors, voting together as a single class, shall be
required to amend, repeal or adopt any provision
inconsistent with this Article X; provided, however,
that this Section 2 of Article X shall be of no force
or effect if the proposed amendment, repeal or other
action has been recommended for approval by at least
eighty percent (80%) of all directors then holding
office.
Signed this 25th day of April, 1996.
By: /s/Ronald G. Ford
-------------------------
Ronald G. Ford, President
and Chief Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
Pursuant to the provisions of Act 284, Public
Acts of 1972, as amended, the undersigned corporation
executes the following Certificate:
1. The present name of the corporation is: First Manistique Corporation
2. The identification number assigned by the Bureau is: 063 316
3. The location of the registered office is:
130 South Cedar
Manistique, MI 49854
4. The following amendments to the Articles of
Incorporation were duly adopted on the 14th day of
April, 1998. The amendment was duly adopted in
accordance with Section 611(2) of the Act by the vote
of the shareholders. The necessary votes were cast in
favor of the amendment.
Article I is hereby amended to read as follows:
ARTICLE I
The name of the Corporation is
North Country Financial Corporation.
Signed this 18th day of August, 1998.
By: /s/Ronald G. Ford
-------------------------
Ronald G. Ford, President
and Chief Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
Pursuant to the provisions of Act 284, Public
Acts of 1972 (profit corporations), or Act 162, Public
Acts of 1982 (nonprofit corporations), the undersigned
corporation executes the following Certificate:
1. The present name of the corporation is:
North Country Financial Corporation
2. The identification number assigned by the Bureau is: 063 316
3. The location of the registered office is:
130 South Cedar
P.O. Box 369
Manistique, MI 49854
4. The first paragraph of Article III of the Articles
of Incorporation is hereby amended to read as follows:
The total number of shares of
all classes of stock which the
corporation shall have
authority to issue is
18,500,000 shares of which
18,000,000 shares shall be a
single class of common stock
and 500,000 shares shall be
series preferred stock.
5. The foregoing amendments to the Articles
of Incorporation was duly adopted on the
11th day of August, 1998 by the
shareholders if a profit corporation, or
by the shareholders or members if a
nonprofit corporation at a meeting. The
necessary votes were cast in favor of
the amendment.
Signed this 11th day of August, 1998.
By: /s/Ronald G. Ford
-------------------------
Ronald G. Ford, President
and Chief Executive Officer
AMENDED AND RESTATED BYLAWS
OF
NORTH COUNTRY FINANCIAL CORPORATION
ARTICLE I. OFFICES
Section 1. Registered Office. The registered
office of the Corporation shall be as specified in the
Articles of Incorporation. The Corporation shall keep
records containing the names and addresses of all
shareholders, the number, class and series of shares
held by each, and the dates when they respectively
became holders of record thereof, at its registered
office or at the office of its transfer agent.
Section 2. Other Offices. The business of
the Corporation may be transacted in such locations
other than the registered office, within or outside the
State of Michigan, as the Board of Directors may from
time to time determine.
ARTICLE II. CAPITAL STOCK
Section 1. Stock Certificates. Certificates
representing shares of the Corporation shall be in such
form as is approved by the Board of Directors.
Certificates shall be signed by the Chairman of the
Board of Directors, Vice Chairman of the Board of
Directors, Chief Executive Officer, President or a Vice
President, and by the Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary of the Corporation, and shall be
sealed with the seal of the Corporation, or a facsimile
thereof, if one be adopted. The signatures of the
officers may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a
registrar other than the Corporation itself, or its
employees. In the event an officer who has signed, or
whose facsimile signature has been placed upon, a certificate ceases
to be such officer before the certificate is issued, it
may be issued by the Corporation with the same effect
as if he were such officer at the date of issue.
Section 2. Replacement of Lost or Destroyed
Certificates. In the event of the loss or destruction
of a stock certificate, no new certificate shall be
issued in place thereof until the Corporation has
received from the registered holder such assurances,
representations, warranties and/or guarantees as the
Board of Directors, in its sole discretion, shall deem
advisable, and until the Corporation receives
sufficient indemnification protecting it against any
claim that may be made on account of such loss or
destroyed certificate, or the issuance of any new
certificate in place thereof, including an indemnity
bond in such amount and with sureties, if any, as the
Board of Directors, in its sole discretion, deems
advisable. Any new certificate issued in place of any
such lost or destroyed certificate shall be plainly
marked "duplicate" upon its face.
<PAGE>
Section 3. Registered Owner. The Corporation
shall be entitled to recognize the exclusive rights of
a person registered on its books as the owner of shares
to receive dividends and to vote as such owner, and to
hold liable for calls and assessments a person
registered on its books as the owner of shares; the
Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share
or shares on the part of any other person, whether or
not it shall have express or other notice thereof,
except as otherwise provide by the laws of Michigan.
Section 4. Transfer of Shares. Shares of stock
of the Corporation shall be transferable only upon the
books of the Corporation. The old certificates shall
be surrendered to the Corporation by delivery thereof
to the person in charge of the stock transfer books of
the Corporation, or to such other person as the Board
of Directors may designate, properly endorsed for
transfer, and such certificates shall be cancelled
before a new certificate is issued. The
Corporation shall be entitled to treat the person in
whose name any share, right or option is registered as
the owner thereof for all purposes, and shall not be
bound to recognize any equitable or other claim with
respect thereto, regardless of any notice thereof,
except as may be specifically required by the laws of
the State of Michigan.
Section 5. Rules Governing Stock
Certificates. The Board of Directors shall have the
power and authority to make all such rules and
regulations as they may deem expedient concerning the
issue, transfer and registration of certificates of
stock, and may appoint a transfer agent and a registrar
of transfer, and may require all such certificates to
bear the signature of such transfer agent and/or such
registrar of transfers.
Section 6. Record Date for Stock Rights.
The Board of Directors may fix, in advance, a date not
exceeding sixty (60) days preceding the date of payment
of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, as a
record date for the determination of the shareholders
entitled to receive payment of any such dividends, or
any such allotment of rights, or to exercise the rights
with respect to any such change, conversion, or
exchange of capital stock; and in such case, only
shareholders of record on the date so fixed shall be
entitled to receive payment of such dividends, or
allotment of rights, or exercise such rights, as the
case may be, notwithstanding any transfer of any stock
on the books of the Corporation after any such record
date is fixed.
In the event the Board of Directors shall
fail to fix a record date as provided in this Section 6
of Article II, the record date for the purposes
specified herein shall be the close of business on the
day on which the resolution of the Board of Directors
relating thereto is adopted.
Section 7. Dividends. The Board of
Directors, in its discretion, may from time to time
declare and direct payment of dividends or other
distributions upon its outstanding shares out of funds
legally available for such purposes, which dividends
may be paid in cash, the Corporation's bonds or the
Corporation's property, including the shares or bonds
of other corporations. In the event a dividend is paid or any
other distribution made, in any part, from sources
other than earned surplus, payment or distribution
thereof shall be accompanied by written notice to the
shareholders (a) disclosing the amounts by which the
dividend or
<PAGE>
distribution affects stated capital,
capital surplus and earned surplus, or (b) if such
amounts are not determinable at the time of the notice,
disclosing the approximate effect of the dividend or
distribution upon stated capital, capital surplus and
earned surplus, and stating that the amounts are not
yet determinable.
In addition to the declaration of dividends and
other distributions provided in the preceding paragraph
of this Section 7 of Article II, the Board of
Directors, in its discretion, from time to time may
declare and direct the payment of a dividend in shares
of this Corporation, upon its outstanding shares, in
accordance with and subject to the provisions of the
Michigan Business Corporation Act. A share dividend or
other distribution of shares of the Corporation shall
be accompanied by a written notice to shareholders (a)
disclosing the amounts by which the distributions
affects stated capital, capital surplus and earned
surplus, or (b) if such amounts are not determinable at
the time of the notice, disclosing the approximate
effect of the distribution upon stated capital, capital
surplus and earned surplus, and stating that the
amounts are not yet determinable.
Section 8. Acquisition of Shares. Subject
to the limitations of the Michigan Business Corporation
Act, the Board of Directors may authorize the
Corporation to acquire its own shares, and shares so
acquired shall constitute authorized but unissued
shares.
Section 9. Redemption of Control Shares.
Control shares acquired in a control share acquisition,
with respect to which no acquiring person statement has
been filed with the Corporation, shall, at any time
during the period ending 60 days after the last
acquisition of control shares or the power to direct
the exercise of voting power of control shares by the
acquiring person, be subject to redemption by the
Corporation. After an acquiring person
statement has been filed with the Corporation and after
the meeting at which the voting rights of the control
shares acquired in a control share acquisition are
submitted to the shareholders, the shares shall be
subject to redemption by the Corporation unless the
shares are accorded full voting rights by the
shareholders as provided in Section 798 of the Michigan
Business Corporation Act or any successor provision
thereof. Redemptions of shares pursuant to this
Section 9 of Article II of the Bylaws shall be at the
fair value of the shares pursuant to procedures adopted
by the Board of Directors of the Corporation.
The terms "control shares," "control share
acquisition," "acquiring person statement," "acquiring
person" and "fair value" as used in this Section 9 of
Article II of the Bylaws, shall have the meanings
ascribed to them, respectively, in Chapter 7B of the
Michigan Business Corporation Act or any successor
provision thereof.
ARTICLE III. SHAREHOLDERS
Section 1. Place of Meetings. Meetings of
shareholders shall be held at the registered office of
the Corporation or at such other place, within or
outside the State of Michigan, as may be determined
from time to time by the Board of Directors; provided,
however, if a meeting of shareholders is to be held at
a place other than the registered office of the
Corporation, the notice
<PAGE>
of the meeting shall designate such place.
Section 2. Annual Meeting. Annual meetings
of shareholders for election of directors and for such
other business as may come before the meeting shall be
held on the third Tuesday of April in each year but, if
such day is a legal holiday, then the meeting shall be
held on the first full business day following, at such
hour as may be fixed in the notice. If the annual
meeting is not held as specified, the Board of
Directors shall cause a meeting to be held as soon
thereafter as convenient.
Section 3. Special Meetings. Special
meetings of shareholders may be called by the Chairman
of the Board, the President or the Secretary, and shall
be called by either of them pursuant to resolution
therefor by the Board of Directors.
Section 4. Record Date for Notice and Vote.
For the purpose of determining shareholders entitled to
notice of and to vote at a meeting of shareholders or
an adjournment of a meeting, the Board of Directors may
fix a record date which shall not precede the date on
which the resolution fixing the record date is adopted
by the Board. The date shall be not more than sixty
(60) nor less than ten (10) days before the date of the
meeting. If a record date is not fixed, the record
date for determination of shareholders entitled to
notice of or to vote at a meeting of shareholders shall
be the close of business on the day next preceding the
day on which notice is given or, if no notice is given,
the day next preceding the day on which the meeting is
held. When a determination of shareholders of record
entitled to notice of or to vote at a meeting of
shareholders has been made as provided in this Section
4, the determination applies to any adjournment of the
meeting, unless the Board fixes a new record date under
this section for the adjourned meeting.
For the purpose of determining shareholders
entitled to express consent to or to dissent from a
proposal without a meeting, the Board of Directors may
fix a record date which shall not precede the date on
which the resolution fixing the record date is adopted
by the Board and shall be not more than ten (10) days
after the Board resolution. If a record date is not
fixed and prior action by the Board is required with respect to
the corporate action to be taken without a meeting, the
record date shall be the close of business on the day
on which the resolution of the Board is adopted. If a
record date is not fixed and prior action by the Board
is not required, the record date shall be the first
date on which a signed written consent is delivered to
the Corporation as provided in Section 407 of the
Michigan Business Corporation Act.
Section 5. Notice of Shareholder Meetings.
Written notice of the time, place and purposes of any
meeting of shareholders shall be given not less than
ten (10) nor more than sixty (60) days before the date
of the meeting to each shareholder of record entitled
to vote at the meeting. Such notice may be given
either by delivery in person to such shareholders or by
mailing such notice to shareholders at their addresses
as the same appear on the stock books of the
Corporation.
<PAGE>
A shareholder's attendance at a meeting, in
person or by proxy, constitutes a waiver of his
objection to lack of notice or defective notice of the
meeting unless, at the beginning of the meeting, the
shareholder objects to holding the meeting or
transacting business at the meeting, and constitutes a
waiver of his objection to consideration of a
particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the
matter when it is presented.
Section 6. Voting Lists. The Corporation's
officer or agent having charge of its stock transfer
books shall prepare and certify a complete list of the
shareholders entitled to vote at a shareholders'
meeting or any adjournment thereof, which list shall be
arranged alphabetically within each class and series,
and shall show the address of, and the number of shares
held by each shareholder. The list shall be produced
at the time and place of the meeting of shareholders
and be subject to inspection by any shareholder at any
time during the meeting. If for any reason the
requirements with respect to the shareholder list
specified in this Section 6 of Article III have not
been complied with, any shareholder, either in person
or by proxy, who in good faith challenges the existence
of sufficient votes to carry any action at the meeting,
may demand that the meeting be adjourned and the same
shall be adjourned until the requirements are complied
with; provided, however, that failure to comply with
such requirements does not affect the validity of any
action taken at the meeting before such demand is made.
Section 7. Voting. Except as may otherwise
be provided in the Articles of Incorporation, each
shareholder entitled to vote at a meeting of
shareholders, or to express consent or dissent without
a meeting, shall be entitled to one (1) vote, in person
or by proxy, for each share of stock entitled to vote
held by such shareholder, provided however, no proxy
shall be voted after three (3) years from its date
unless such proxy provides for a longer period. A vote
may be cast either orally or in writing as announced or
directed by the chairperson of the meeting prior to the
taking of the vote. When an action other than the
election of directors is to be taken by vote of the
shareholders, it shall be authorized by a majority of
the votes cast by the holders of shares entitled to
vote thereon, unless a greater plurality is required by
express requirement of the Michigan Business
Corporation Act or of the Articles of Incorporation, in
which case such express provision shall govern and
control the decision of such question. Except as
otherwise expressly required by the Articles of
Incorporation, directors shall be elected by a
plurality of the votes cast at an election.
Section 8. Quorum. Shares equaling a majority of
all of the voting shares of the capital stock of the
Corporation issued and outstanding represented in
person or by proxy, shall constitute a quorum at the
meeting. Meetings at which less than a quorum is
represented may be adjourned by a vote of a majority of
the shares present to a further date without further
notice other than the announcement at such meeting, and
when the quorum shall be present upon such adjourned
date, any business may be transacted which might have
been transacted at the meeting as originally called.
Shareholders present in person or by proxy at any
meeting of shareholders may continue to do business
until adjournment, notwithstanding the withdrawal of
shareholders to leave less than a quorum.
<PAGE>
Section 9. Conduct of Meetings. The
Chairman of the Board of Directors of the Corporation
or his designee shall call meetings of the shareholders
to order and shall act as chairman of such meetings
unless otherwise determined by the affirmative vote of
a majority of all the voting shares of the capital
stock of the Corporation issued and outstanding. The
Secretary of the Corporation shall act as secretary of
all meetings of shareholders, but in the absence of the
Secretary at any meeting of shareholders, or his
inability or refusal to act as secretary, the presiding
officer may appoint any person to act as secretary of
the meeting.
Section 10. Inspector of Elections. The
Board of Directors may, in advance of a meeting of
shareholders, appoint one or more inspectors to act at
the meeting or any adjournment thereof. In the event
inspectors are not so appointed, or an appointed
inspector fails to appear or act, the person presiding
at the meeting of shareholders may, and on request of a
shareholder entitled to vote shall, appoint one or more
persons to fill such vacancy or vacancies, or to act as
inspector. The inspector(s) shall determine the number
of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine
challenges and questions arising in connection with the
right to vote, count and tabulate votes, ballots or
consents, determine the results, and do such acts as
are proper to conduct the election or vote with
fairness to all shareholders.
Section 11. Notification of Shareholder
Proposals. The Board of Directors of the Corporation
shall submit for consideration and vote by the
shareholders, at any meetings of the shareholders, only
those proposals that are first brought before the
meeting by or at the direction of the Board of
Directors, or by any shareholder entitled to vote at
such meeting (a) who submits to the Corporation a
timely Notice of Proposal in accordance with the
requirements of this Section 11 and the proposal is a
proper subject for action by shareholders under
Michigan law, or (b) whose proposal is included in the
Corporation's proxy materials in compliance with all
the requirements set forth in the applicable rules and
regulations in the Securities and Exchange
Commission.
Each shareholder's Notice of Proposal shall set forth:
(a) The name and address of the shareholder
submitting the proposal, as they appear on the
Corporation's books and records;
(b) A representation that the shareholder (i)
is a holder of record of stock of the Corporation
entitled to vote at such meeting, (ii) will
continue to hold such stock through the date on
which the meeting is held, and (iii) intends to
appear in person or by proxy at the meeting to
submit the proposal for shareholder vote;
(c) A brief description of the proposal
desired to be submitted to the meeting for
shareholder vote and the reasons for conducting
such business at the meeting; and
<PAGE>
(d) A description of any financial or other
interest of such shareholder in the proposal.
A Notice of Proposal must be given, either by
personal delivery or by United States mail, postage
prepaid, and received by the Corporation not less than
thirty (30) days prior to the date of the originally
scheduled meeting, regardless of any adjournments
thereof to a later date; provided that, if less than
forty (40) days' notice of the meeting of shareholders
is given by the Corporation, the Notice of Proposal
must be received by the Corporation not later than the
close of business on the tenth (10th) day following the
date on which the notice of the scheduled meeting was
first mailed to the shareholders.
The secretary of the Corporation shall notify
a shareholder in writing whether his or her Notice of
Proposal has been made in accordance with all the
requirements of this Section 11. The chairman of the
meeting may refuse to acknowledge the proposal of any
shareholder not made in compliance with all such
requirements.
ARTICLE IV. DIRECTORS
Section 1. Board of Directors. Except as
may otherwise be provided in the Articles of
Incorporation or these Bylaws, the general management
of the business and affairs of the corporation shall be
vested in a Board consisting of not less than five (5)
directors and not more than fifteen (15) directors, as
determined by the Board from time to time. Commencing
with the annual meeting of the shareholders at which
this by-law Section 1 is adopted, the directors shall
be divided into three (3) classes, with the first class
consisting of one-third (1/3) of the total number of
directors, rounded up to the nearest whole number, the
second class consisting of one-third (1/3) of the total
number of directors, rounded up to the nearest whole
number, and the third class consisting of one-third
(1/3) of the total number of directors, rounded down to
the nearest whole number. The term of office of
directors in the first class shall expire at the first
annual meeting of the shareholders after their
election, the second class shall expire at the second
annual meeting after their election, and the third
class shall expire at the third annual meeting after
their election. At each succeeding annual meeting, a
number of directors equal to the number of the class
whose term expires at the time of the meeting shall be
elected to hold office until the third succeeding
annual meeting. A director's term of office may not be
shortened by a Board action reducing the number of
directors on the Board. If the Board authorizes an
increase in the number of directors in between annual
meetings of the shareholders, the new director
positions so created shall be treated as vacancies, and
the new director positions shall be distributed among
the three classes of directors so that the classes will
be as nearly equal in number as possible. Vacancies in
the Board of Directors may be filled by the remaining
members of the Board as provided in the Articles of
Incorporation, and each person so elected shall be a
director until the next election of directors by the
shareholders. No person shall be eligible for election
as a director after he or she has attained age 65.
Section 2. Nominations for Board.
Nominations of candidates for election to the Board of
Directors shall be made in the manner provided in the
Articles of Incorporation.
<PAGE>
Section 3. Resignation. A director may resign by
written notice to the Corporation. A director's
resignation is effective upon its receipt by the
Corporation or a later time set forth in the notice of
resignation.
Section 4. Place of Meetings and Records.
The directors shall hold their meetings, and maintain
the minutes of the proceedings of meetings of
shareholders, Board of Directors, and executive and
other committees, if any, and keep the books and
records of account for the Corporation, in such place
or places, within or outside the State of Michigan, as
the Board may from time to time determine.
Section 5. Annual Meetings of Directors.
The newly elected Directors shall hold their first
meeting, without notice other than these Bylaws, at the
same place and immediately after the annual meeting of
the Shareholders at which they are elected, or the time
and place of such meeting may be fixed by consent in
writing of all the Directors.
Section 6. Regular Meetings of the Board.
Regular meetings of the Board of Directors may be held
at such times and places and pursuant to such notice,
if any, as may be established from time to time by
resolution of the Board of Directors.
Section 7. Special Meetings of the Board.
Special meetings of the Board of Directors may be
called by the Chairman of the Board, the President or
the Secretary, and shall be called by one of them upon
the written request of a majority of the Directors.
Written notice of the time and place of special
meetings of the Board shall be delivered personally or
mailed to each director at least forty-eight (48) hours
prior thereto. Attendance of a Director at a special
meeting constitutes a waiver of notice of the meeting,
except where a director attends the meeting for the
express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or
convened.
Section 8. Meeting Participation By Means Of
Communication Equipment. Members of the Board of
Directors or any committee designated by the Board of
Directors may participate in the meeting of the Board
of Directors or of such committee by means of a
conference telephone or similar communication equipment
by means of which all persons participating in the
meeting can hear each other, and participation in a
meeting pursuant to this Section 8 shall constitute
presence in person at such meeting.
Section 9. Quorum and Vote. At all meetings
of the Board or a committee thereof, a majority of the
members of the Board of Directors then in office or
members of such committee, but not less than two (2)
(if there are at least two (2) members of the Board or
such committee), shall constitute a quorum for the
transaction of business. The act of a majority of the
members present at any meeting at which there is a
quorum shall be the act of the Board of Directors or
the committee. If a quorum shall not be present at any
meeting of the Board of Directors or a committee, a
majority of the members present thereat may adjourn the
meeting from time to time
<PAGE>
into another place without notice other than an announcement
at the meeting until a quorum shall be present.
Section 10. Action of the Board Without a
Meeting. Any action required or permitted to be taken
pursuant to authorization voted at a meeting of the
Board of Directors, or any committee thereof, may be
taken without a meeting if, before or after the action,
all members of the Board of Directors then in office,
or of such committee, consent thereto in writing. Such
written consent shall be filed with the minutes of the
proceedings of the Board of Directors and the consent
shall have the same effect as a vote of the Board of
Directors for all purposes.
Section 11. Committees. The Board of
Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate
one or more directors as alternate members of any
committee, who may replace any absent or disqualified
member of any committee. In the absence or in the event
of the disqualification of a member of a committee, the
member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting
in the place of any such absent or disqualified member.
A committee and each member thereof shall serve at the
pleasure of the Board.
Any committee, to the extent provided in the
resolution of the Board or in these Bylaws, shall have
and may exercise the powers of the Board of Directors
in the management of the business and affairs of the
Corporation. No committee, however, shall have the
power or authority to amend the Articles of
Incorporation or Bylaws of the Corporation, adopt an
agreement of merger or consolidation, recommend to the
shareholders the sale, lease or exchange of all or
substantially all of the Corporation's property and
assets, recommend to the shareholders a dissolution of
the Corporation or a revocation of a dissolution, or
fill vacancies in the Board of Directors. The
committee shall not have the power or authority to
declare a distribution, dividend or authorize the
issuance of stock unless such power is granted to such
committee by specific resolution of the Board of
Directors. Such committee or committees shall have
such name or names as may be determined from time to
time by resolution adopted by the Board of Directors.
The committees shall keep regular minutes of their
proceedings and report the same to the Board when
required. If a committee is designated as an Executive
Committee, its members shall consist of the Chairman of
the Board, the President, and such other directors as
shall be designated by the Board of Directors.
Section 12. Compensation. By resolution of
the Board of Directors, the directors may be paid their
expenses, if any, of attendance at each meeting of the
Board or of any committees of which they are a member,
and may be paid a fixed sum for attendance at each
meeting of the Board or such committee, or a stated fee
for serving as a director or for serving on any such
committee. No such payment shall preclude any director
from serving the Corporation in any other capacity and
receiving compensation therefor.
<PAGE>
ARTICLE V. OFFICERS
Section 1. Designation of Officers. The
officers of the Corporation shall consist of such
officers as the Board of Directors shall determine from
time to time, and may include a Chairman of the Board,
a Chief Executive Officer, a President, a Secretary, a
Treasurer, one or more Vice Presidents, and such other
or different offices as may be established by the Board
of Directors. The officers of the Corporation need not be
directors or shareholders. Any two or more offices may
be held by the same person, but an officer shall not
execute, acknowledge or verify any instrument in more
than one capacity if the instrument is required by law
to be executed, acknowledged or verified by two or more
officers. An officer has such authority and shall
perform such duties in the management of the
Corporation as provided in these Bylaws, or as may be
determined by resolution of the Board of Directors not
inconsistent with these Bylaws, and as generally
pertain to their offices, subject to the control of the
Board of Directors.
Section 2. Election of Officers. The
officers of the Corporation shall be elected at the
first meeting of the Board of Directors, or by action
taken pursuant to written consent, after the annual
meeting of shareholders. Officers shall hold office
for the term of their election and until their
respective successors are elected and qualified, or
until resignation or removal. The election or
appointment of an officer does not, by itself, create
contract rights.
Section 3. Resignation and Removal. Each
officer shall serve at the pleasure of the Board of
Directors. An officer may resign by written notice to
the Corporation, which resignation is effective upon
its receipt by the Corporation or at a subsequent time
specified in the notice of resignation. The Chairman
and Chief Executive Officer may be removed at any time,
with or without cause, but only on the affirmative vote
of a majority of the full Board of Directors. The
President and all vice presidents, the secretary and
the treasurer may be removed at any time, with or
without cause, by the Chief Executive Officer or by
majority vote of the directors present at any meeting.
Any assistant secretary or assistant treasurer, or
subordinate officer or agent appointed pursuant to
Section 2 of Article V of these Bylaws may be removed
at any time, with or without cause, by a majority vote
of directors present in a meeting, by the Chief
Executive Officer, or any committee or other officer in
power to do so by resolution of the Board. Any vacancy
in any office of the Corporation shall be filled by the
Board of Directors.
Section 4. Compensation of Officers. The
Board of Directors, by affirmative vote or a majority
or Directors in office and irrespective of any personal
interest of any of them, may establish reasonable
compensation of officers for services to the
Corporation.
Section 5. Chairman of the Board. The
Chairman of the Board of Directors, if one be elected,
shall be elected by the directors from among the
directors then serving. The Chairman of the Board
shall preside at all meetings of the Board of Directors
and meetings of the shareholders, and shall perform
such other duties as from time to time may be
determined by resolution of the Board of Directors not
inconsistent with these Bylaws.
<PAGE>
Section 6. Chief Executive Officer. The
Chief Executive Officer of the Corporation shall have
such authority and shall perform such duties in the
management of the Corporation as usually are vested in
or incident to the office of a chief executive officer
of a corporation. In the absence or nonelection of the
Chairman of the Board of Directors, the Chief Executive
Officer shall preside at all meetings of the Board of
Directors and meetings of the shareholders.
Section 7. President. The President of the
Corporation shall have such authority and shall perform
such duties as shall be assigned to him by the Board of
Directors.
Section 8. Vice Presidents. The Vice
Presidents shall have such authority and shall perform
such duties as shall be assigned to them by the Board
of Directors and may be designated by such special
titles as the Board of Directors shall approve.
Section 9. Treasurer. The Treasurer, or
other officer performing the duties of a Treasurer,
shall have custody of the corporate funds and
securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the
Corporation. The Treasurer shall deposit all money and
other valuables in the name and to the credit of the
Corporation in such depositories as may be designated
by the Board of Directors. The Treasurer shall
disburse the funds of the Corporation as may be ordered
by the Board of Directors or the
Chief Executive Officer taking proper vouchers for such
disbursements. The Treasurer shall render to the Chief
Executive Officer and Board of Directors, or any member
thereof, at such times as they may request within
reason, an account of all his transactions as Treasurer
and of the financial condition of the Corporation. In
general the Treasurer shall perform all duties incident
to the office of Treasurer and such other duties as may
be assigned by the Board of Directors. The Treasurer
may be required to give bond for the faithful
performance of his duties in such sum and with such
surety, at the expense of the Corporation, as the Board
of Directors may from time to time require.
Section 10. Secretary. The Secretary shall give
or cause to be given notice or all meetings of
shareholders and Directors and all other notices
required by law or by these Bylaws, and in case of his
absence or refusal or neglect to do so, any such notice
may be given by the shareholders upon whose requisition
the meeting is called, as provided in these Bylaws.
The Secretary shall record all the proceedings of the
meetings of the shareholders and of the Directors in
one or more books provided for that purpose. The
Secretary shall have custody of the seal of the
Corporation, if one be provided, and shall affix the
same to all instruments requiring it when authorized by
the Directors or the Chief Executive Officer. The
Secretary shall have such authority and perform such
other duties as may be assigned by the Board of
Directors. All records in the possession or custody of
the Secretary shall be open to examination by the
Chairman of the Board, Chief Executive Officer and
Board of Directors, or any member thereof, during
regular business hours.
Section 11. Other Offices. Other officers
elected by the Board of Directors shall have such
authority and shall perform such duties in the
management of the Corporation as may be determined by
resolution of the Board of Directors not inconsistent
with these Bylaws.
<PAGE>
Section 12. Bonds. If the Board of
Directors shall so require, the treasurer, and the
assistant treasurer and/or other officer or agent of
the Corporation, shall give bond to the Corporation in
such amount and with such surety as the Board of
Directors may deem sufficient, conditioned upon the
faithful performance of the respective duties and
offices.
Section 13. Absence. In the case of the absence
or inability to act of any officer, or for any other
reason that the Board of Directors may deem sufficient,
the Board of Directors or the Chief Executive Officer
may delegate for the time being the powers or duties of
such officer to any other director or officer.
ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of
Directors may authorize any officer or officers, agent
or agents to enter into any contract or execute and
deliver any instrument in the name of and on behalf of
the Corporation, and such authority may be general or
confined to specific instances.
Section 2. Loans. No loans shall be
contracted on behalf of the Corporation, and no
evidences of indebtedness shall be issued in its name,
unless authorized by resolution of the Board of
Directors. Such authorization may be general or
confined to specific instances.
Section 3. Checks. All checks, drafts or
other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in
such manner as shall from time to time be determined by
resolution of the Board of Directors. Any signature on
any check, draft or other order may be signed by the
facsimile signature of any person authorized to sign
under this Section 3 of Article VI. If any officer who
has signed or whose facsimile signature has been used
shall cease to be such officer, such document may
nevertheless be signed by means of such facsimile
signature and delivered as though the person who signed
such document or whose facsimile signature has been
used thereon had not ceased to be such officer.
Section 4. Deposits. All funds of the
Corporation, not otherwise employed, shall be deposited
from time to time to the credit of the Corporation in
such banks, trust companies or other depositories as
the Board of Directors may determine.
ARTICLE VII. INDEMNIFICATION
Section 1. Indemnification for Actions
Brought by Third Parties. Any person who was or is a
party or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right
of the Corporation) by reason of the fact that he or
she is or was a director or officer of the Corporation
or a subsidiary, or, while serving as such a director
or officer, is or was serving at the request of the
Corporation or a subsidiary as a director, officer,
<PAGE>
partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture,
trust or other enterprise, whether for profit or not,
shall be indemnified by the Corporation against
expenses (including attorneys' fees), judgments,
penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interests of the Corporation or its shareholders, and,
with respect to any criminal action or proceeding, had
no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which
he or she reasonably believed to be in or not opposed
to the best interests of the Corporation or its
shareholders, or with respect to any criminal action or
proceeding, that he or she had reasonable cause to
believe that his or her conduct was unlawful. Persons
who are not directors or officers of the Corporation or
a subsidiary may be similarly indemnified in respect of
such service to the extent authorized at any time by
the Board of Directors, except as otherwise provided by
statute or the Articles of Incorporation.
Section 2. Indemnification in Actions
Brought for the Benefit of the Corporation. Any person
who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or
she is or was a director or officer of the Corporation
or a subsidiary, or, while serving as such a director
or officer, is or was serving at the request of the
Corporation or a subsidiary as a director, officer,
partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture,
trust or other enterprise, whether for profit or not,
shall be indemnified by the Corporation against
expenses (including attorneys' fees) and amounts paid
in settlement actually and reasonably incurred by him
or her in connection with the action or suit if he or
she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best
interests of the Corporation or its shareholders.
Indemnification shall not be made for any claim, issue
or matter in which such person has been found liable to
the Corporation except to the extent authorized in
Section 7 of this Article VII. Persons who are not
directors or officers of the Corporation or a
subsidiary may be similarly indemnified in respect of
such service to the extent authorized at any time by
the Board of Directors, except as otherwise provided by
statute or the Articles of Incorporation.
Section 3. Limitation of Director Liability.
Notwithstanding Sections 1 and 2 of this Article VII,
and in accordance with Article VI of the Articles of
Incorporation, the Corporation shall indemnify a
director for expenses and liabilities without a
determination that the director has met the standard of
conduct set forth in Sections 1 and 2, except with
respect to settlements of actions by or on behalf of
the corporation; provided, however, that no
indemnification may be made without court approval if
the director received a financial benefit to which he
or she was not entitled, intentionally inflicted harm
on the Corporation or its shareholders, violated
Section 551 of the Michigan Business Corporation Act,
or intentionally committed a criminal act.
<PAGE>
Section 4. Expenses. To the extent that a
director or officer, or other person whose
indemnification is authorized by the Board of
Directors, has been successful on the merits or
otherwise, including the dismissal of an action without
prejudice, in the defense of any action, suit or
proceeding referred to in Section 1 or 2 of this
Article VII, or in the defense of any claim, issue or
matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection
therewith and any action, suit or proceeding brought to
enforce the mandatory indemnification provided in this
Section VII.
Section 5. Authorization of Indemnification.
Except as otherwise provided in Section 3 of this
Article VII, any indemnification under Section 1 or 2
of this Article VII (unless ordered by a court) shall
be made by the Corporation only as authorized in the
specific case upon a determination that indemnification
is proper in the circumstances because the person has
met the applicable standard of conduct set forth in
this Article VII and upon an evaluation of the
reasonableness of expenses and amounts paid in
settlement. Such determination shall be made (a) by
the Board of Directors by a majority vote of a quorum
consisting of directors who are not parties or
threatened to be made parties to such action, suit or
proceeding, or if such a quorum cannot be obtained, by
a majority vote of a committee duly designated by the
Board consisting solely of two or more directors not at
the time parties or threatened to be made parties to
such action, suit or proceeding; (b) by independent
legal counsel (who may be the regular counsel of the
Corporation) in a written opinion, which counsel shall
be selected as provided in (a) above, provided that if
a committee cannot be designated as provided in (a)
above, then the Board shall select such independent
counsel; (c) by all Independent Directors (as that term
is defined in the Michigan Business Corporation Act)
who are not parties or threatened to be made parties to
such action, suit or proceeding; or (d) by the
shareholders, but shares held by directors, officers,
employees or agents who are parties or threatened to be
made parties to such action, suit or proceeding may not
be voted. In designating a committee under (a) above,
or in the selection of independent legal counsel in the
event a committee cannot be designated pursuant to (b)
above, all directors may participate. The Corporation
may indemnify a person for a portion of expenses
(including reasonable attorneys' fees), judgments,
penalties, fines and amounts paid in settlement for
which the person is entitled to indemnification under
Section 1 or 2 of this Article VII, even though the
person is not entitled to indemnification for the total
amount of such expenses, judgments, penalties, fines
and amounts paid in settlement. An authorization of
indemnification under this Section 5 of Article VII
shall be made (a) by the Board of Directors in one of
the following ways: (i) by a majority vote of the Board
of Directors consisting of two or more directors not at
the time parties or threatened to be made parties to
such action, suit or proceeding, (ii) by a majority
vote of a committee consisting solely of two or more
directors not at the time parties or threatened to be
made parties to such action, suit or proceeding, (iii)
by a majority vote of one or more Independent Directors
who are not parties or threatened to be made parties to
such action, suit or proceeding, or (iv) if there are
no Independent Directors and less than 2 directors who
are not parties or threatened to be made parties to the
action, suit or proceeding, by the full Board of
Directors in accordance with Section 523 of the
Michigan Business Corporation Act, or (b) by the
shareholders, but shares held by directors, officers,
employees or agents who are parties or threatened to be
made parties to the action, suit or proceeding may not
be voted on the authorization.
<PAGE>
Section 6. Advancing of Expenses. Expenses
incurred by any person who is or was serving as a
director or officer of the Corporation or a subsidiary
in defending a civil or criminal action, suit or
proceeding described in Section 1 or 2 of this Article
VII shall be paid by the Corporation in advance
of the final disposition of such action,
suit or proceeding if (a) the person furnishes
the Corporation a written affirmation of his or her
good faith belief that he or she has met the applicable
standard of conduct set forth in Section 1 or 2 of this
Article VII; (b) the person furnishes the Corporation a
written undertaking, executed personally or on his or
her behalf, to repay the advance if it is ultimately
determined that he or she did not meet the applicable
standard of conduct; and (c) a determination is made
that the facts then known to those making the
determination would not preclude indemnification under
the Michigan Business Corporation Act. Persons who are
or were not serving as a director or officer of the
Corporation or a subsidiary may receive similar
advances of expenses to the extent authorized at any
time by the Board of Directors, except as otherwise
provided by statute or the Articles of Incorporation.
Determinations under this Section VII shall be made in
the manner specified in Section 5 of this Article.
Notwithstanding the foregoing, in no event shall any
advance be made in instances where the Board or
independent legal counsel reasonably determines that
such person deliberately breached his or her duty to
the Corporation or its shareholders.
Section 7. Right to Indemnification upon
Application; Procedure upon Application. A director,
officer or other person who is a party or threatened to
be made a party to an action, suit or proceeding may
apply for indemnification to the court conducting the
proceeding or to another court of competent
jurisdiction. On receipt of an application, the court
may order indemnification if it determines that the
person is fairly and reasonably entitled to
indemnification in view of all the relevant
circumstances, whether or not he or she met the
applicable standard of conduct set forth in Section 1
or 2 of this Article VII or was adjudged liable as
described in Section 2 of this Article VII, provided,
however, that if he or she was adjudged liable, his or
her indemnification shall be limited to reasonable
expenses incurred.
Section 8. Non-Exclusivity of Rights. The
right to indemnification conferred in this article
shall not be exclusive of any other right that any
person may have or acquire under any statute, provision
of the articles of incorporation, bylaws, agreement,
vote of shareholders or disinterested directors, or
otherwise.
Section 9. Insurance. The Corporation may
maintain insurance, at its expense, to protect itself
and any director, officer, employee, or agent of the
corporation or of another corporation, partnership,
joint venture, trust, or other enterprise against any
expense, liability, or loss, whether or not the
corporation would have the power to indemnify the
person against the expenses, liability, or loss under
the MBCA.
Section 10. Mergers. For the purposes of this
Article VII, references to the "Corporation" include
all constituent Corporations absorbed in a
consolidation or merger, as well as the resulting or
surviving Corporation, so that any person who is or was
a director, officer, employee or agent of such
constituent Corporation, or is or was serving at the
request of such
<PAGE>
constituent Corporation as a director,
officer, partner, trustee, employee or agent of another
foreign or domestic Corporation, partnership, joint
venture, trust or other enterprise, whether for profit
or not, shall stand in the same position under the
provisions of this Article VII with respect to the
resulting or surviving Corporation if he or she had
served the resulting or surviving Corporation in the
same capacity.
Section 11. Savings Clause. If this Article
VII or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director,
officer or other person whose indemnification is
authorized by the Board of Directors as to expenses
(including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action,
suit or proceeding, whether civil, criminal,
administrative or investigative, including a grand jury
proceeding and an action by the Corporation, to the
full extent permitted by any applicable portion of this
Article VII that shall not have been invalidated or by
any other applicable law.
Section 12. Amendment. If this Article VII
is repealed, amended or modified, it shall not affect
any right or protection existing at the time of such
repeal, amendment or modification.
ARTICLE VIII. MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of
this Corporation shall end on the last Saturday of
December of each year.
Section 2. Notices. Whenever any notice is
required to be given under the provisions of any law,
the Articles of Incorporation for this Corporation, or
by these Bylaws, it shall not be construed or
interpreted to mean personal notice, unless expressly
so stated, and any notice so required shall be deemed
to be sufficient if given in writing by mail, by
depositing the same in a Post Office box, postage
prepaid, addressed to the person entitled thereto at
his last known Post Office address, and such notice
shall be deemed to have been given on the day of such
mailing. Shareholders not entitled to vote shall not be
entitled to receive notice of any meetings, except as
otherwise provided by law or these Bylaws.
Section 3. Waiver of Notice. Whenever any
notice is required to be given under the provisions of
any law, or the Articles of Incorporation for this
Corporation, or these Bylaws, a waiver thereof in
writing, signed by the person or persons entitled to
said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
Section 4. Voting of Securities. Securities
of another corporation, foreign or domestic, standing
in the name of this Corporation which are entitled to
vote shall be voted, in person or by proxy, by the
Chief Executive Officer of this Corporation or by such
other or additional persons as may be designated by the
Board of Directors.
<PAGE>
ARTICLE IX. AMENDMENTS
Except as may otherwise be provided in the
Articles of Incorporation or these Bylaws, these Bylaws
may be amended, repealed or new Bylaws adopted either
by a majority vote of the Board of Directors at a
regular or special meeting of the Board, or by vote of
the holders of a majority of the outstanding voting
stock of the Corporation at any annual or special
meeting, if notice of the proposed amendment, repeal or
adoption be contained in the notice of such meeting.
CONSULTING AGREEMENT
THIS AGREEMENT, made effective as of September 15,
1999 between NORTH COUNTRY FINANCIAL CORPORATION (the
"Company"), with its principal executive offices at 130
South Cedar Street, Manistique, Michigan, and RONALD G.
FORD ("Executive").
RECITALS
Executive has over 22 years of experience with the
Company, NORTH COUNTRY BANK & TRUST (the "Bank"),
and/or their affiliates and is currently employed as
Chairman of the Board and Chief Executive Officer of
the Company and the Bank. Executive possesses intimate
knowledge of the business and affairs of the Company,
the Bank, and their affiliates and their respective
policies, markets and financial and human resources.
By virtue of his employment, Executive has acquired
certain confidential information and data (as described
further herein) with respect to the Company, the Bank,
and their affiliates.
The Company and the Bank desire to assure the
continued services of Executive on their own behalf
and/or on behalf of their affiliates following
termination of his employment by the Company and the
Bank for the period provided in this Agreement, and
Executive is willing to continue to provide certain
services to the Company, the Bank, and/or their
affiliates for such period, upon the terms and
conditions hereinafter set forth. In addition, the
Company and the Bank wish to prevent Executive from
competing with them for the period provided in this
Agreement and Executive is willing to consent to such a
limitation.
NOW, THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the parties
agree as follows:
1. Consulting. As of the Retirement Date, as
defined herein, Executive agrees to provide the
services described in Paragraph 3 hereof for the period
stated in Paragraph 2 hereof, subject to the other
terms and conditions herein provided. For the purposes
of this Agreement, "Retirement Date" means the day
after the date the Executive leaves the full-time
employ of the Company other than because of death or
Disability (as defined in Paragraph 5A hereof).
2. Term. The term shall commence as of the
Retirement Date and shall continue until the tenth
anniversary of such date, unless this Agreement is
sooner terminated as hereinafter set forth (the
"Term").
3. Duties. During the Term, Executive shall
devote his best efforts and such of his business time,
attention, skill and efforts as he deems necessary to
consult with the executive officers of the Company and
the Bank with respect to such matters as may be
reasonably requested by the Company and the Bank;
provided, however, that nothing in this Agreement shall
preclude Executive from devoting reasonable periods
required for serving as a director or consultant to any
business organization which does not involve a material
conflict of interest
<PAGE>
with the Company's business, from
engaging in charitable and community activities, and
from managing his personal investments. The parties
hereto acknowledge and agree that (i) Executive shall
be free to reside and work at the geographical location
of his choice, (ii) in most circumstances, Executive
may respond to the Company's requests for his services
by telephone, mail, facsimile or similar means of
communication, (iii) in requiring Executive's services
hereunder, the Company shall consider the reasonable
convenience of Executive and the demands of his other
commitments and shall require his physical attendance
at meetings and events remote from his residence only
in matters for which Executive's presence is essential;
(iv) the conduct and control of the consulting services
to be performed hereunder shall be the sole
responsibility of Executive, and (v) the Company shall
have no power to direct or dictate Executive's schedule
or the hours during which he shall be required to
perform consulting services hereunder. The Company
hereby acknowledges and agrees that Executive shall
continue to receive compensation and benefits pursuant
to this Agreement as set forth in Paragraph 4 hereof
notwithstanding the failure or refusal of the Company
to request the performance of consulting services by
Executive hereunder. The Company may terminate this
Agreement only for Cause as set out in Paragraph 5B
hereof.
4. Compensation. As compensation for the
services to be provided pursuant to this Agreement,
Executive shall receive from the Company or its
affiliates the compensation, expense reimbursement and
other benefits set forth below:
A. Cash Compensation. The Company will pay
to Executive Seven Thousand Dollars ($7,000.00)
per month for the Term. The payments shall be
made on a monthly basis in arrears.
B. Reimbursement of Expenses. The Company
shall pay or reimburse Executive for all
reasonable travel and other expenses incurred by
Executive in the performance of his duties
hereunder. Upon the Executive's request, the
Company shall, during the Term and at its expense,
furnish Executive with secretarial services and
office space sufficient for the Executive to
perform his duties hereunder at a location
mutually convenient for the Company and the
Executive.
C. Benefits. For the Term, the Company
shall continue to provide medical and dental
benefits to the Executive and/or the Executive's
spouse and dependents at the Company's expense in
accordance with the most favorable plans,
practices, programs or policies of the Company and
its affiliated companies applicable generally to
other peer executives who are active employees and
their spouse and dependents as in effect from time
to time thereafter; provided, however, that (1) if
the Executive becomes reemployed with another
employer and is eligible to receive medical or
other benefits under another employer provided
plan, the medical and other benefits described
herein shall be secondary to those provided under
such other plan during such applicable period of
eligibility, provided that the aggregate coverage
of the combined benefit plans is no less favorable
to the Executive, in terms of amounts, deductibles
and costs to him, than the coverage required
hereunder, and (2) that if the Executive and/or
the Executive's spouse qualifies for coverage by
Medicare or any successor program, the Company may require
<PAGE>
that the Executive and/or the Executive's
spouse fully participate in Medicare and pay the
premiums therefor personally.
D. Company Car. The Executive shall have
the right to purchase the car provided to him by
the Company or its affiliates during the twelve
(12) month period immediately preceding the
Retirement Date (or a comparable car acceptable to
the Executive if such car is no longer owned by
the Company or its affiliates), at the book value
thereof on the Retirement Date, exercisable within
thirty (30) days after the Retirement Date. If
the car is not purchased, Executive shall return
the car to the Company.
5. Consequences of Executive's Death or
Disability, Voluntary Termination or
Termination by the Company for Cause.
A. Death or Disability. Executive's
obligations under this Agreement shall terminate
upon the death or Disability of Executive. The
Company's obligations to pay the cash compensation
discussed in Paragraph 4A shall also terminate
upon the death or Disability of Executive. The
Company will have the obligation to reimburse the
Executive for expenses allowed under Paragraph 4B
hereof which were incurred prior to the date of
death or Disability. Thereafter, the Company's
obligations under Paragraph 4B will cease. The
health benefits discussed in Paragraph 4C will
continue for ten years from the Retirement Date,
notwithstanding the death or Disability of
Executive or, if shorter, until the death of the
last to die of the Executive or his spouse. For
purposes of this Agreement, the Executive shall
have suffered a "Disability" if he is disabled
within the meaning of the Company's long-term
disability plan. If the Company does not have
such a plan, the Executive shall have suffered a
"Disability" if he is unable to perform his duties
with or without reasonable accommodation for
ninety (90) consecutive business days or one
hundred twenty (120) business days in the
aggregate during a 365-day period as a result of
incapacity due to mental or physical illness which
is determined to be total and permanent by a
physician selected by the Company or its insurers
and acceptable to the Executive or the Executive's
legal representative, provided if the parties are
unable to agree, the parties shall request that
the President of the Schoolcraft County Medical
Society choose such physician.
B. Termination by the Company for Cause.
The Company may terminate the Executive's
employment hereunder for Cause. There will be
Cause for termination under any of the following
circumstances: (i) any act of Personal Dishonesty
(as hereinafter defined) by the Executive; (ii)
any act of Willful Misconduct (as hereinafter
defined) by the Executive; (iii) any act by the
Executive constituting a breach of his fiduciary
duty to the Company which results or is intended
to result in gain to, or personal enrichment of,
the Executive at the Company's expense; or (iv)
any breach by Executive of Paragraph 6A through 6D
of this Agreement (noncompetition, confidential
information, and nonsolicitation). For purposes
of this Agreement: "Personal Dishonesty" means
conduct on the part of the Executive which evinces
a want of integrity or an intentional breach of
trust and which directly causes (or the Board of
Directors determines is reasonably likely
<PAGE>
to cause) material injury to the Company; and
"Willful Misconduct" means conduct on the part of
the Executive which evinces a deliberate disregard
of the interest of the Company and which causes
(or the Board of Directors determines is
reasonably likely to cause) material injury to the
Company. Executive acknowledges and agrees that
after the Termination Date, he shall no longer be
entitled to receive any of the compensation
provided under Paragraph 4 hereof but that
Paragraphs 6A through 6D hereof shall continue to
apply to the extent provided therein.
C. Termination by Executive. Executive may
terminate this Agreement at any time by giving
ninety (90) days' prior written notice to the
Company. In such event, Executive shall receive
no further compensation hereunder after the
Termination Date as defined herein. After the
Termination Date, the provisions of Paragraphs 6A
through 6D hereof shall continue to apply to the
extent provided therein. The term "Termination
Date" shall mean (A) the date the Company notifies
the Executive that his duties hereunder are being
terminated for Cause; (B) the day after expiration
of the ninety (90) day period specified in
Paragraph 5C if this Agreement is terminated by
the Executive pursuant to Paragraph 5C unless the
Executive and the Company agree on an earlier
date; provided, however, that (1) any such Notice
of Termination shall be given in accordance with
Paragraph 5D hereof, and (2) if a dispute exists
concerning the termination, the Termination Date
shall be the date on which the dispute is finally
settled, either by mutual written agreement of the
parties, or by arbitration as provided in
Paragraph 7F hereof.
D. Termination Notice and Procedure. Any
termination by the Company for Cause as provided
under Paragraph 5B hereof or by Executive as
provided under Paragraph 5C hereof, shall be made
by written Notice of Termination to the other
party delivered by hand or certified mail (postage
prepaid), return receipt requested, addressed, if
to the Company, at its main office at 130 South
Cedar Street, Manistique, Michigan, or if to the
Executive, at the address set forth on the
signature page of this Agreement (or such other
address as shall be specified in writing by either
party to the other). Any such Notice of
Termination shall be made in accordance with the
following procedures:
(i) Any Notice of Termination for
Cause under Paragraph 5B shall indicate the
specific termination provision in this
Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances
alleged to provide a basis for termination.
Any termination of employment by Executive
under Paragraph 5C shall state such fact
therein.
(ii) Any Notice of Termination by the
Company for Cause under Paragraph 5B hereof
shall be approved by a resolution duly
adopted by a majority of the Directors of the
Company (or any successor corporation) then
in office, specifying in detail the basis for
such termination.
(iii) In the event of a purported
termination by the Company for Cause, if
within thirty (30) days following the date of
receipt of the Notice of Termination, one
party notifies the other that a dispute
exists concerning the basis for
<PAGE>
termination, this Agreement shall not be terminated
until the dispute is finally resolved either by
mutual written agreement of the parties, or
by arbitration as provided in Paragraph 7F hereof.
6. Obligations of Executive During and After the Term.
A. Competition. Executive agrees that
during the Term, and for the two-year period
following the Term, he shall not, either directly
or indirectly as an agent, stockholder, employee,
officer, director, trustee, partner, member,
proprietor or otherwise, render advice or
assistance to (other than on behalf of the
Company) or be employed by or render services to
any person, company, business entity, or other
organization which is engaged in the business of
commercial banking within a sixty (60) mile radius
of any branch office of the Bank or any other
affiliated entity of the Company. The Company,
Bank and any other affiliated entity of the
Company are hereafter referred to as the "Company
Affiliated Group."
B. Confidential Information. The Executive
shall not make any Unauthorized Disclosure. For
purposes of this Agreement, "Unauthorized
Disclosure" shall mean disclosure by the Executive
without the consent of the Board of Directors to
any person, other than an employee of the Company
Affiliated Group or a person to whom disclosure is
reasonably necessary or appropriate in connection
with the performance by the Executive of his
duties hereunder or as may be legally required, of
any confidential information obtained by the
Executive while rendering services to the Company
Affiliated Group (including, but not limited to,
any confidential information with respect to any
of the Company Affiliated Group's customers or
methods of operation) the disclosure of which he
knows or has reason to believe will be materially
injurious to the Company Affiliated Group;
provided, however, that such term shall not
include the use or disclosure by the Executive,
without consent, of any information known
generally to the public (other than as a result of
disclosure by him in violation of this Paragraph
6B) or any information not otherwise considered
confidential by a reasonable person engaged in the
same business as that conducted by the Company
Affiliated Group.
C. Solicitation of Employees. The
Executive will not, during the Term and for the
two-year period following the Term, directly or
indirectly, induce, solicit, entice or procure any
person who is an employee of the Company
Affiliated Group, or has been such an employee
within the three months preceding such contact by
Executive, to terminate his or her employment with
the Company Affiliated Group so as to accept
employment with any person, company, business
entity, or other organization whatsoever in which
the Executive owns, directly or indirectly, at
least a 5% equity interest or from which the
Executive receives compensation.
D. Solicitation of Customers. During the Term and
for the two-year period following the Term, the
Executive will not, directly or indirectly, contact any
customer or prospective customer of the Company
Affiliated Group with whom the Executive has had
contact on behalf of the Company Affiliated Group
during the two-year period preceding
<PAGE>
the date of
termination of the Term or any customer or prospective
customer about whom the Executive has obtained
confidential information in connection with the
Executive's services to the Company Affiliated Group
during such two-year period so as to cause or attempt
to cause such customer or prospective customer of the
Company Affiliated Group not to do business or to
reduce such customer's business with the Company
Affiliated Group or divert any business from the
Company Affiliated Group.
E. Enforcement of Covenants. The Executive
recognizes that irreparable and incalculable
injury will result to the Company Affiliated
Group, its businesses or properties in the event
of his breach of any of the restrictions imposed
by this Section 6. The Executive therefore agrees
that, in the event of any such actual, impending
or threatened breach, the Company or any affiliate
thereof will be entitled, in addition to any other
remedies and damages, to temporary and permanent
injunctive relief (without the necessity of
posting a bond or other security) restraining the
violation, or further violation, of such
restrictions by the Executive and by any other
person or entity for whom the Executive may be
acting or who is acting for the Executive or in
concert with the Executive.
7. General Provisions.
A. Successors and Assigns. (i) This
Agreement shall be binding upon and shall inure to
the benefit of the Company, its successors and
assigns, and the Company shall require any
successor or assign (whether direct or indirect,
by purchase, merger, consolidation or otherwise)
to expressly assume and agree to perform this
Agreement in the same manner and to the same
extent that the Company would be required to
perform if no such succession or assignment had
taken place. The term "Company" as used herein
shall include such successors and assigns. The
term "successors and assigns" as used herein shall
mean a corporation or other entity acquiring all
or substantially all the assets and business of
the Company (including this Agreement) whether by
operation of law or otherwise.
(ii) Neither this Agreement nor any
right or interest hereunder shall be assignable or
transferable by the Executive, nor shall
Executive's rights hereunder be subject to
encumbrance or to the claims of the Executive's
creditors. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of
and be enforceable by Executive's personal or
legal representatives, Estate, executors,
administrators, heirs and beneficiaries.
B. Enforcement. The provisions of this
Agreement shall be regarded as divisible, and if
any of said provisions or any part hereof are
declared invalid or unenforceable by a court of
competent jurisdiction, the validity and
enforceability of the remainder of such provisions
or parts hereof and the applicability thereof
shall not be affected thereby.
C. Amendment. This Agreement may not be
amended or modified except by written instrument
executed by the Company and Executive.
<PAGE>
D. Independent Contractor. The parties
hereto acknowledge and agree that Executive shall
be an independent contractor during the Term and
that he shall not be deemed an employee of the
Company. In acknowledging that he is providing
services as an independent contractor, Executive
acknowledges and agrees that, except as
specifically provided in Paragraph 4 hereof, he
shall not be entitled to participate in any
insurance, qualified or nonqualified benefit plans
or other fringe benefits provided by the Company
to its employees and that, except as required by
federal, state or local law, the Company shall not
be required to withhold nor shall the Company
withhold any income, social security, unemployment
or other taxes or similar payments from the
amounts payable to Executive hereunder. In the
event the Company shall be required by law to
withhold any such taxes or payments from amounts
payable to Executive under Paragraph 4 hereof, the
amounts payable to Executive thereunder shall be
reduced accordingly.
E. Governing Law. This Agreement and the
rights and obligations hereunder shall be governed
by and construed in accordance with the internal
laws of the State of Michigan without giving
effect to its principles of conflicts of laws.
F. Arbitration. Any controversy or claim
arising out of or relating to this Agreement, or
the breach thereof, other than a controversy or
claim arising in connection with Section 6 hereof
(the noncompetition, confidentiality and
nonsolicitation provisions) where the Company is
seeking injunctive relief, shall be settled
exclusively by arbitration by a single arbitrator
mutually agreed to by the disputing parties in
accordance with the Commercial Arbitration Rules
of the American Arbitration Association as then in
effect. Such arbitration will be held in
Manistique, Michigan or such other place as is
mutually agreed to by the disputing parties.
Judgment on the award rendered by the arbitrator
may be entered in any court having jurisdiction
thereof. The arbitrator may award costs and
reasonable attorneys' fees to the prevailing party
in such an arbitration.
G. Notice. Notices given pursuant to this
Agreement shall be in writing and shall be
considered to be given and received in all
respects when personally delivered, when
transmitted by facsimile or on the second business
day following the date deposited in the United
States mail, certified mail, postage pre-paid,
return receipt requested, addressed to the parties
as set forth below or at such other address as
each party may specify by notice to the other
party, or in the case of a facsimile, to the
facsimile number indicated:
If to Company: North Country Financial Corporation
130 South Cedar Street
Manistique, Michigan 49854
Attention: President
Facsimile: 906.341.8702
<PAGE>
If to Executive: HC 01, Box 3288A
Manistique, Michigan 49854
Attention: Ronald G. Ford
Facsimile: 906.341.5992
H. No Waiver. No waiver by either party at
any time of any breach of the other party of, or
compliance with, any condition or provision of
this Agreement to be performed by the other party
shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same time or any
prior or subsequent time.
I. Headings. The headings herein contained
are for reference only and shall not affect the
meaning or interpretation of any provision of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first above
written.
NORTH COUNTRY FINANCIAL CORPORATION:
By: /s/ Paulette M. Demers
------------------------------
Title: Secretary
EXECUTIVE:
/s/ Ronald G. Ford
---------------------------------
Ronald G. Ford
SECOND AMENDMENT TO EMPLOYMENT CONTRACT
This Agreement is made and is effective this 18th
day of August, 1999, and amends that Employment
Contract between FIRST NORTHERN BANK & TRUST n/k/a
NORTH COUNTRY BANK & TRUST (the "Bank"), FIRST
MANISTIQUE CORPORATION n/k/a NORTH COUNTRY FINANCIAL
CORPORATION (the "Company") and RONALD G. FORD ("Ford")
dated July 1, 1994, as amended on July 26, 1996.
RECITAL
The parties wish to amend the Employment Contract
in certain respects as described in this Second
Amendment. Accordingly, the Boards of Directors of the
Bank and the Company have approved this Second
Amendment and authorized its execution and delivery on
behalf of the Bank and the Company.
AGREEMENT
1. Section 7(d) of the Employment Contract is
amended to add at the end thereof the following:
For purposes of this Section 7(d), any good
faith determination by Ford that there is
Good Reason shall be conclusive. Anything in
this Agreement to the contrary
notwithstanding, a voluntary termination of
employment by Ford for any reason or no
reason during the ninety (90) day period
commencing on the date six (6) month is after
the Change in Control shall be deemed to be a
termination for Good Reason for purposes of
this Agreement.
2. Except as amended hereby, the Employment
Contract is ratified and confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Second Amendment effective as of the day first written
above.
NORTH COUNTRY BANK & TRUST
By: /s/ Sherry Littlejohn
----------------------------------------
Its: President and Chief Operating Officer
NORTH COUNTRY FINANCIAL CORPORATION
By: /s/ Sherry Littlejohn
----------------------------------------
Its: President and Chief Operating Officer
/s/ Ronald G. Ford
-------------------------------------------
Ronald G. Ford
FORM A
MANAGEMENT COMMUNITY AGREEMENT
THIS IS AN AGREEMENT between First Manistique
Corporation (the "Corporation"), whose principal
offices are located at 130 South Cedar, Manistique,
Michigan 49854, and Sherry Littlejohn (the
"Executive"), who resides at Route 1, Box 1930,
Glenwood Drive, Manistique, MI 49854 dated May 22,
1996.
RECITALS
The Executive is a key executive officer of the
Corporation whose continued dedication, availability,
advice and counsel to the Corporation is deemed
important to the Board of Directors of the Corporation
("Board"), the Corporation and its shareholders. The
services of the Executive, his experience and knowledge
of the affairs of the Corporation and his reputation
and contacts in the industry are extremely valuable to
the Corporation. The Corporation wishes t6lattract and
retain such well-qualified executives, and it is in the
best interests of the Corporation and of the Executive
to secure the continued services of the Executive
notwithstanding any change in control of the
Corporation. The Corporation considers the
establishment and maintenance of a sound and vital
management to be part of its overall corporate strategy
and to be essential to protecting and enhancing the
best interests of this Corporation and its
shareholders. Accordingly, the Board has approved this
Agreement with the Executive and authorized its
execution and delivery on behalf of the Corporation.
AGREEMENT
1. Term of Agreement. "This Agreement will
begin on the date entered above (the "Commencement
Date") and will continue in effect through the third
anniversary of the Commencement Date. However, on the
third anniversary of the Commencement Date, and on each
third anniversary date thereafter, the term of this
Agreement will be extended automatically for three (3)
additional years unless, not later than six (6) months
prior to such anniversary date, the Corporation gives
written notice to the Executive that it has elected not
to extend this Agreement. In addition, if a Change of
Control occurs during the term of this Agreement, this
Agreement will continue in effect for at least thirty-
six (36) months beyond the end of the month in which
any Change of Control occurs.
2. Definitions. The following defined terms
shall have the meanings set forth below, for purposes
of this Agreement:
(a) Change of Control. "Change of Control"
means an occurrence of a nature that would be
required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Without limiting
the inclusiveness of the definition in the
preceding sentence, a Change of Control of the
Corporation shall be deemed to have, occurred if:
<PAGE>
(i) Any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities
of the Corporation representing twenty-five
percent (25%) or more of the combined voting
power of the Corporation's then outstanding
securities; or
(ii) At any time a majority of the Board
of Directors of the Corporation is comprised
of other than Continuing Directors (for
purposes of this paragraph, the term
Continuing Director means a director who was
either (A) first elected or appointed as a
Director prior to the date of this Agreement;
or (B) subsequently elected or appointed as a
director if such director was nominated or
appointed by at least a majority of the then
Continuing Directors); or
(iii) Any of the following occur:
(A) Any merger or consolidation of
the Corporation, other than a merger or
consolidation in which the voting
securities of the Corporation
immediately prior to the merger or
consolidation continue to represent
(either by remaining outstanding or
being converted into securities of the
surviving entity) fifty-one percent
(51%) or more of the combined voting
power of the Corporation or surviving
entity immediately after the merger or
consolidation with another entity;
(B) Any sale, exchange, lease,
mortgage, pledge, transfer, or other
disposition (in a single transaction or
a series of related transactions) of all
or substantially all of the assets of
the Corporation which shall include,
without limitation, the sale of assets
or earning power aggregating more than
fifty percent (50%) of the assets or
earning power of the Corporation on a
consolidated basis;
(C) Any liquidation or dissolution
of the Corporation;
(D) Any reorganization, reverse
stock split, or recapitalization of the
Corporation which would result in a
Change of Control; or
(E) Any transaction or series of
related transactions having, directly or
indirectly, the same effect as any of
the foregoing; or any agreement,
contract, or other arrangement providing
for any of the foregoing.
(b) Disability. "Disability" means that, as
a result of Executive's incapacity due to physical
or mental illness, the Executive shall have been
found to be eligible for the receipt of benefits
under the Corporation's long term disability plan.
(c) Cause. "Cause" means (i) the willful
commission by the Executive of a criminal or other
act that causes or will probably cause substantial
economic damage, to the Corporation or a
Subsidiary or substantial injury to the business
reputation of the Corporation or a Subsidiary;
(ii) the commission by the Executive of an act of
fraud in
<PAGE>
the performance of such Executive's
duties on behalf of the Corporation or a
Subsidiary; (iii) the continuing willful failure
of the Executive to perform the duties of such
Executive to the Corporation or a Subsidiary
(other than any such failure resulting from the
Executive's incapacity due to physical or mental
illness) after written notice thereof (specifying
the particulars thereof in reasonable detail) and
a reasonable opportunity to be heard and cure such
failure are given to the Executive by the
Nominating and Salary Committee of the Board; or
(iv) the order of a federal or state bank
regulatory agency or a court of competent
jurisdiction requiring the termination of the
Executive's employment. For purposes of this
subparagraph, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not
in good faith and without reasonable belief that
the action or omission was in the best interest of
the Corporation or a Subsidiary.
(d) Good Reason. For purposes of this
Agreement, "Good Reason" means the occurrence of
any one or more of the following without the
Executive's express written consent:
(i) The assignment to Executive of
duties which are materially different from or
inconsistent with the duties,
responsibilities, and status of Executive's
position at any time during the six (6) month
period prior to the Change of Control of the
Corporation, or which result in a significant
reduction in Executive's authority and
responsibility as a senior executive of the
Corporation;
(ii) A reduction by the Corporation in
Executive's base salary or salary grade as of
the day prior to the Change of Control, or
the failure to grant salary increases and
bonus payments on a basis comparable to those
granted to other executives of the
Corporation, or reduction of Executive's most
recent incentive bonus potential prior to the
Change of Control under the Corporation's
Management Bonus Plan, or any successor plan;
(iii) The Corporation requiring
Executive to be based at a location in excess
of forty (40) miles from the location where
Executive is currently based, or in the event
of any relocation of the Executive with the
Executive's express written consent, the
failure of the Corporation or a Subsidiary to
pay (or reimburse the Executive for) all
reasonable moving expenses by the Executive
relating to a change of principal residence
in connection with such relocation and to
indemnify the Executive against any loss
realized in the sale of the Executive's
principal residence in connection with any
such change of residence, all to the effect
that the Executive shall incur no loss on an
after tax basis;
(iv) The failure of the Corporation to
obtain a satisfactory agreement from any
successor to the Corporation to assume and
agree to perform this Agreement, as
contemplated in Paragraph 6 hereof;
(v) Any termination by the Corporation
of Executive's employment that is not
effected pursuant to a Notice of Termination;
<PAGE>
(vi) Any termination of Executive's
employment, reduction in Executive's
compensation or benefits, or adverse change
in Executive's location or duties, if such
termination, reduction or adverse change (aa)
occurs within six (6) months before a Change
of Control, (bb) is in contemplation of such
Change in Control, and (cc) is taken to avoid
the effect of this Agreement should such
action occur after such Change in Control;
(vii) The failure of the Corporation
to provide the Executive with substantially
the same fringe benefits (including, without
limitation, Benefit Restoration Plan, health
care, insurance, stock options and paid
vacations) that were provided to him
immediately prior to the Change in Control,
or with a package of fringe benefits that,
though one or more of such benefits may vary
from those in effect immediately prior to
such Change in Control, is substantially
comparable in all material respects to such
fringe benefits taken as a whole.
The existence of Good Reason shall not be
affected by Executive's incapacity due to physical
or mental illness. Executive's continued
employment shall not constitute a waiver of
Executive's rights with respect to any
circumstance constituting Good Reason under this
Agreement.
(e) Notice of Termination. Notice of
Termination" means a written notice indicating the
specific termination provision in this Agreement
relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a
basis for termination of the employment under the
provision so indicated. The Executive shall not
be entitled to give a Notice of Termination that
the Executive is terminating employment for Good
Reason more than six (6) months following the
occurrence of the event alleged to constitute Good
Reason, except with respect to an event which
occurred before the Change of Control, in which
case the Notice of Termination must be given
within six (6) months Mowing the Change of
Control.
Any termination by the Corporation for Cause
or due to Executive's Disability, or by Executive
for Good Reason shall be communicated by Notice of
Termination to the other party.
(f) Retirement. "Retirement" means having
reached normal retirement age as defined in the
Corporation's noncontributory pension plan or
taking early retirement in accordance with the
terms of the Corporation's noncontributory pension
plan.
(g) Subsidiary. "Subsidiary," means a
corporation with at least eighty percent (80%) of
its outstanding capital stock owned by the
Corporation.
3. Eligibility for Severance Benefits. Subject
to Paragraph 5, the Executive shall receive the
Severance Benefits described in Paragraph 4 if the
Executive's employment is terminated during the term of
this Agreement, and
(a) The termination occurs within thirty-six
(36) months after a Change of Control, unless the
termination is (i) because of Executive's death or
Disability, (ii) by the Corporation for Cause, or
(iii) by the Executive other than for Good Reason; or
<PAGE>
(b) The Corporation terminates the
employment within six (6) months before a Change
of Control, in contemplation of such Change of
Control, and to avoid the effect of this Agreement
should such action occur after such Change of
Control.
4. Severance Benefits. Subject to Paragraph 5,
the Executive shall receive the following Severance
Benefits (in addition to accrued compensation and
vested benefits) if eligible under Paragraph 3:
(a) A lump sum cash amount equal to
Executive's annual base salary at the highest
annual rate in effect during the twelve (12) month
period immediately prior to the Change of Control
or, if greater, at the rate in effect at the time
Notice of Termination is given (or on the date the
employment is terminated if no Notice of
Termination is required), multiplied by 3;
(b) One hundred percent (100%) of
Executive's incentive bonus potential under the
Corporation's Management Bonus Plan in effect at
the time Notice of Termination is given (or on the
date the employment is terminated if no Notice of
Termination is required) or, if greater, the
average bonus paid to Executive over the preceding
three (3) year period, multiplied by 3;
(c) For a three (3) year period after the
date the employment is terminated, the Corporation
will arrange to provide `to Executive at the
Corporation's expense, with:
(i) Health care coverage equal to that
in effect for Executive prior to the
termination (or, if more favorable to
Executive, that furnished generally to
salaried employees of the Corporation),
including, but not limited to, hospital,
surgical, medical, dental, prescription and
dependent coverages. Upon the expiration of
the health care benefits required to be
provided pursuant to this subparagraph 4(c),
the Executive shall be entitled to the
continuation of such benefits under the
provisions of the Consolidated Omnibus Budget
Reconciliation Act. Health care benefits
otherwise receivable by Executive pursuant to
this subparagraph 4(c) shall be reduced to
the extent comparable benefits are actually
received by Executive from a subsequent
employer during the three (3) year period
following the date the employment is
terminated and any such benefits actually
received by Executive shall be reported to
the Corporation;
(ii) Life and accidental death and
dismemberment insurance coverage (including
supplemental coverage purchase opportunity
and double indemnity for accidental death)
equal (including policy terms) to that in
effect at the time Notice of Termination is
given (or on the date the employment is
terminated if no Notice of Termination is
required) or, if more favorable to Executive,
equal to that in effect at the date the
Change of Control occurs; and
(iii) Disability insurance coverage
(including policy terms) equal to that in
effect at the time Notice of Termination is
given (or on the date employment is
terminated if no Notice of Termination is
required) or, if more favorable to Executive,
equal to that in effect immediately prior to
the Change of Control;
<PAGE>
provided, however,
that no income replacement benefits will be
payable under such disability policy with
regard to the three (3) year period following
a termination of employment provided that the
payments payable under subparagraphs 4(a) and
(b) above have been made;
(d) The Executive will be entitled to
receive retirement benefits as provided herein, so
that the total retirement benefits the Executive
receives from the Corporation will approximate the
total retirement benefits the Executive would have
received under all retirement plans (which shall
not include severance plans) and other employment
contracts of the Corporation in which the
Executive participates were the Executive hilly
vested under such retirement plans and entitled to
all benefits payable under such other employment
contracts and had the Executive continued in the
employ of the Corporation for thirty-six (36)
months following the date of his termination or
until his retirement, if earlier (provided that
such additional period shall be inclusive of and
shall not be in addition to any period of service
credited under any severance plan of the
Corporation). The benefits specified in this
subparagraph will include all ancillary benefits,
such as early retirement and survivor rights and
benefits available at retirement. The amount
payable to the Executive or his beneficiaries
under this subparagraph shall equal the excess of
(1) the benefits that would be paid to the
Executive or his beneficiaries, under all
retirement plans and other employment contracts of
the Corporation in which the Executive
participates if (A) the Executive were fully
vested under such plans and entitled to all
benefits payable under such other employment
contracts; (B) the thirty-six (36) month period
(or the period until his Retirement, if less)
following the date of his termination were added
to his credited service under such plans and
contracts, (C) the terms of such plans were those
most favorable to the Executive which were in
effect at any time during the period commencing
prior to the Change of Control and ending on the
date of Notice of Termination (or on the date
employment is terminated if no Notice of
Termination is required), and (D) the Executive's
highest average annual compensation as defined
under such retirement plans and other employment
contracts were calculated as if the Executive had
been employed by the Corporation for a thirty-six
(36) month period (or the period until his
Retirement, if earlier) following the date of his
termination and bad the Executive's compensation
during such period been equal to the Executive's
compensation used to calculate his benefit under
subparagraphs 4(a) and 4(b); over (2) the benefits
that are payable to the Executive or his
beneficiaries under all retirement plans and other
employment contracts of the Corporation in which
the Executive participates. These Special
Retirement Benefits are to be provided on an
unfunded basis, are not intended to meet the
qualification requirements of Section 401 of the
Internal Revenue Code and shall be payable solely
from the general assets of the Corporation. These
Special Retirement Benefits shall be payable at
the time and in the manner provided in the
applicable retirement plans and other employment
contracts to which they relate;
(e) The Corporation shall pay all fees for
outplacement services for the Executive up to a
maximum equal to fifteen percent (15%) of the
Executive's base salary used to calculate his
benefit under subparagraph 4(a) plus provide a
travel expense account of up to $5000 to reimburse
job search travel;
<PAGE>
(f) In computing and determining Severance
Benefits under subparagraphs 4(a), (b), (c), (d)
and (e) above, a decrease in Executive's salary,
incentive bonus potential, or insurance benefits
shall be disregarded if such decrease occurs
within six (6) months before a Change of Control
is in contemplation of such Change of Control, and
is taken to avoid the effect of this Agreement
should such action be taken after such Change of
Control; in such event, the salary , incentive
bonus potential, and/or insurance benefits used to
determine Severance Benefits shall be that in
effect immediately before the decrease that is
disregarded pursuant to this subparagraph 4(f);
(g) Executive shall not be required to
mitigate the amount of any payment provided for in
this Paragraph 4 by seeking other employment or
otherwise, nor shall the amount of any payment
provided for in this Paragraph 4 be reduced by any
compensation earned by Executive as the result of
employment by another employer after the date the
employment is terminated, or otherwise, with the
exception of a reduction in health insurance
coverage as provided in subparagraph 4(c)(i).
The payments provided in subparagraphs 4(a) and
(b) above shall be made not later than thirty (30)
business days following the date the employment
terminates.
5. Tax Gross-Up. If any payments or other
benefit paid or provided under Paragraph 4 or the
acceleration of stock option vesting or the payment or
distribution of consideration in satisfaction of any
share appreciation rights are subject to excise tax
pursuant to Section 4999 of the Internal Revenue Code
of 1986, as amended, the Corporation shall pay to the
Executive such additional compensation as is necessary
(after taking into account all Federal, state and local
income taxes payable by the Executive as a result of
the receipt of such compensation) to place the
Executive in the same after-tax position he would have
been in had no such excise tax (or any interest or
penalties thereon) been paid or incurred. The
Corporation shall pay such additional compensation at
the time when the Corporation withholds such excise tax
from any payments to the Executive. The calculation of
the tax gross-up shall be approved by the Corporation's
independent certified public accounting firm engaged by
the Corporation immediately prior to the Change in
Control.
6. Successors; Binding Agreements. This
Agreement shall inure to the benefit of and be
enforceable by Executive's personal and legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees.
Executive's rights and benefits under this Agreement
may not be assigned, except that if Executive dies
while any amount would still be payable to Executive
hereunder if Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement, to
the beneficiaries designated by the Executive to
receive benefits under this Agreement in a writing on
file with the Corporation at the time of the
Executive's death or, if there is no such beneficiary,
to Executive's estate. The Corporation win require any
successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the
Corporation (or of any division or Subsidiary thereof
employing Executive) to expressly assume and agree to
perform this Agreement in the same manner and to the
same extent that the Corporation would be required to
perform it if no such succession had taken place.
Failure of the Corporation to obtain such assumption
and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and
shall entitle
<PAGE>
Executive to compensation from the
Corporation in the same amount and on the same terms to
which Executive would be entitled hereunder if
Executive terminated the employment for Good Reason
following a Change of Control.
7. Withholding of Taxes. The Corporation may
withhold from any amounts payable under this Agreement
all federal, state, city, or other taxes as required by
law.
8. Notice. For the purpose of this Agreement,
notices and all other communications provided for in
this Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by
United States registered mail, return receipt
requested, postage prepaid, addressed to the respective
addressees set forth on the first page of this
Agreement, or at such other addresses as the parties
may designate in writing.
9. Miscellaneous. No provision of this
Agreement may be modified, waived, or discharged unless
such waiver, modification, or discharge is agreed to in
writing and signed by Executive and such officer as may
be specifically designated by the Board of Directors of
the Corporation. The validity, interpretation,
construction, and performance of this Agreement shall
be governed by the laws of the State of Michigan.
10. Employment Rights. This Agreement shall not
confer upon Executive any right to continue in the
employ of the Corporation or its subsidiaries and shall
not in any way affect the right of the Corporation or
its subsidiaries to dismiss or otherwise terminate
Executive's employment at any time with or without
cause.
11. No Vested Interest. Neither Executive nor
Executive's beneficiary shall have any right, title, or
interest in any benefit under this Agreement prior to
the occurrence of the right to the payment thereof, or
in any property of the Corporation or its subsidiaries
or affiliates.
12. Prior Agreements. This Agreement contains
the understanding between the parties hereto with
respect to Severance Benefits in connection with a
Change of Control of the Corporation and supersedes any
such prior agreement between the Corporation (or any
predecessor of the Corporation) and Executive. If
there is any discrepancy or conflict between this
Agreement and any plan, policy, or program of the
Corporation regarding any term or condition of
Severance Benefits in connection with a Change of
Control of the Corporation, the language of this
Agreement shall govern.
13. Validity. The invalidity or unenforceability
of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement, which shall remain in full force and
effect.
14. Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed
to be an original but all of which together shall
constitute one and the same instrument.
15. Arbitration. The sole and exclusive method
for resolving any dispute arising out of this Agreement
shall be arbitration in accordance with this paragraph.
Except as provided otherwise in this paragraph,
arbitration pursuant to this paragraph shall be
governed by the Commercial Arbitration Rules of the
American Arbitration Association. A party wishing to
<PAGE>
obtain arbitration of an issue shall deliver written
notice to the other party, including a description of
the issue to be arbitrated. Within fifteen (15) days
after either party demands arbitration, the Corporation
and the Executive shall each appoint an arbitrator.
Within fifteen (15) additional days, these two
arbitrators shall appoint the third arbitrator by
mutual agreement; if they fail to agree within said
fifteen (15) day period, then the third arbitrator
shall be selected promptly pursuant to the rules of the
American Arbitration Association for Commercial
Arbitration. The arbitration panel shall hold a
hearing in Schoolcraft County, Michigan, within ninety
(90) days after the appointment of the third
arbitrator. The fees and expenses of the arbitrator,
and any American Arbitration Association fees, shall be
paid by the Corporation. Both the Corporation and the
Executive may be represented by counsel and may present
testimony and other evidence at the hearing. Within
ninety (90) days after commencement of the hearing, the
arbitration panel will issue a written decision; the
majority vote of two of the three arbitrators shall
control. The majority decision of the arbitrators
shall be final and binding on the parties, and shall be
enforceable in accordance with law. Judgment may be
entered on the arbitrators' award in any court having
jurisdiction. The Executive shall be entitled to seek
specific controversy arising under or in connection
with this Agreement. The Corporation will reimburse
Executive for all reasonable attorney fees incurred by
Executive as the result of any arbitration with regard
to any issue under this Agreement (or any judicial
proceeding to compel or to enforce such arbitration);
(i) which is initiated by Executive if the Corporation
is found in such proceeding to have violated this
Agreement substantially as alleged by Executive; or
(ii) which is initiated by the Corporation, unless
Executive is found in such proceeding to have violated
this Agreement substantially as alleged by the
Corporation.
IN WITNESS WHEREOF, the parties have signed this
Agreement as of the day and year written above.
FIRST MANISTIQUE CORPORATION:
By: /s/ John Lindroth
---------------------------------------
John Lindroth, Chairman of the
Compensation Committee
EXECUTIVE:
/s/ Sherry Littlejohn
-------------------------------------------
Sherry Littlejohn, Executive Vice President
FIRST AMENDMENT TO EMPLOYMENT CONTRACT
This Agreement is made and is effective this 18th
day of August, 1999, and amends an Employment Contract
between FIRST NORTHERN BANK & TRUST n/k/a NORTH COUNTRY
BANK & TRUST (the "Bank"), FIRST MANISTIQUE CORPORATION
n/k/a NORTH COUNTRY FINANCIAL CORPORATION (the
"Company") and SHERRY LITTLEJOHN ("Littlejohn") dated
May 22, 1996.
RECITAL
The parties wish to amend the Employment Contract
in certain respects as described in this First
Amendment. Accordingly, the Boards of Directors of the
Bank and the Company have approved this First Amendment
and authorized its execution and delivery on behalf of
the Bank and the Company.
AGREEMENT
1. Section 7(d) of the Employment Contract is
amended to add at the end thereof the following:
"For purposes of this Section 7(d), any good
faith determination by Littlejohn that there
is Good Reason shall be conclusive. Anything
in this Agreement to the contrary
notwithstanding, a voluntary termination of
employment by Littlejohn for any reason or no
reason during the ninety (90) day period
commencing on the date six (6) months after
the Change in Control shall be deemed to be a
termination for Good Reason for purposes of
this Agreement."
2. Except as amended hereby, the Employment
Contract is ratified and confirmed in all respects.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Amendment Agreement, effective as of the day first
written above.
NORTH COUNTRY BANK & TRUST
By: /s/ Ronald G. Ford
----------------------------------------
Its: Chairman and Chief Executive Officer
NORTH COUNTRY FINANCIAL CORPORATION
By: /s/ Ronald G. Ford
----------------------------------------
Its: Chairman and Chief Executive Officer
/s/ Sherry Littlejohn
------------------------------------------
Sherry Littlejohn
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into this 1st day of
September, 1997, but as of the Effective Date
hereinafter defined, by and between NORTH COUNTRY BANK
AND TRUST, a Michigan banking corporation ("Bank") and
Anthony Palumbo ("Employee");
RECITAL:
The parties desire to set forth the terms of the
employment relationship between the Bank and the
Employee.
NOW, THEREFORE, IT IS AGREED as follows:
1. Employment. The Employee is employed to
render such executive services to Bank as may from time
to time be reasonably directed by Bank's President and
CEO and/or the Bank board of directors. Among his
other duties, it is contemplated that he will serve as
the Vice President of Central Credit of Bank.
2. Compensation. Bank agrees to pay the
Employee during the term of this Agreement a salary in
the sum of Sixty Five Thousand Dollars ($65,000) per
annum. The salary provided herein shall be payable in
accordance with the periodic payment procedures for all
employees of Bank. The Employee's salary shall be
reviewed by the board of directors of Bank not less
often than annually beginning as of September 1, 1997
and may be adjusted from time to time in such amounts
as the board in its discretion may determine. The
Employee's salary shall be subject to the usual
withholding taxes required with respect to compensation
paid by a corporation to an employee.
3. Bonuses. In addition to the salary provided
for in Section 2, the Employee shall be entitled to
participate in discretionary or performance goal
bonuses as may be from time to time authorized and
declared by the board of directors of Bank to its
executive employees. However, the Employee shall not
be entitled to participate in or to receive all or any
portion of any such bonus unless he is employed by Bank
on the last day of the calendar year for which the
bonus is to be paid.
4. Retirement Employee Benefit Plans and Fringe
Benefits. The Employee shall also be entitled to the
following:
(a) The Employee shall be entitled to
participate in any plan of Bank relating to
pension, thrift, deferred profit-sharing, group
life insurance, medical coverage, education, or
other retirement or employee benefits that Bank
may have in effect or adopt for the benefit of its
executive employees.
(b) The Employee shall be eligible to
participate in any other fringe benefits which may
be applicable to Bank's executive employees,
including, but not limited to, the following: use
of a company automobile; membership in various
social, business and trade organizations; a
reasonable expense account; the payment of
reasonable expenses
<PAGE>
for attending annual and
periodic meetings of trade associations; and any
other benefits which are commensurate with the
responsibilities and functions to be performed by
the Employee under this Agreement.
5. Term. The term of employment under this
Agreement shall be a period commencing on the Effective
Date hereof and ending at midnight on ________________.
6. Effective Date. For purposes of this
Agreement, the "Effective Date" is ______________.
7. Standards and Policies. The Employee shall
perform his duties under this Agreement in accordance
with reasonable standards and policies established from
time to time by the board of directors of Bank.
8. Paid Time Off. At such reasonable times as
the board of directors of Bank shall in their
discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself voluntarily from
the performance of his employment under this Agreement,
all such voluntary absences to count as paid time off,
provided that:
(a) The Employee shall be entitled to paid
time off of not less than ______ (__) weeks per
full calendar year of employment, with paid time
off prorated for employment for any period of less
than a full calendar year.
(b) The timing of paid time off shall be
scheduled in a reasonable manner by Bank. The
Employee shall not be entitled to receive any
additional compensation from Bank on account of
his failure to take paid time off, nor shall he be
entitled to accumulate paid time off from one
calendar year to the next except that up to, but
no more than, twenty (20) days of paid time off
may be accumulated and carried forward. Any
accumulated paid time off not used by Employee
prior to termination of his employment shall be
forfeited, unless Bank terminates his employment
without "cause" (as defined in Section 10) in
which case he shall be compensated for any unused
paid time off.
9. Confidentiality, Noncompetition, Etc.
Employee acknowledges that (i) the Bank business is
intensely competitive and that the Employee's
employment by Bank requires that the Employee have
access to and knowledge of confidential information of
Bank, including, but not limited to, the identity of
Bank's customers, the kinds of services provided by
Bank to customers and offered to be performed for
potential customers, the service needs of actual or
prospective customers, product and service pricing
information, computer software applications and other
programs, personnel information and other trade secrets
("Confidential Information"); (ii) the direct and
indirect disclosure of any such Confidential
Information to existing or potential competitors of
Bank would place Bank at a competitive disadvantage and
would cause damage, monetary or otherwise, to Bank's
business; and (iii) the engaging by the Employee in any
of the activities prohibited by this Section 9 may
constitute improper appropriation and/or use of such
information and trade secrets. The Employee expressly
acknowledges the trade secret status of the
Confidential Information and that the Confidential
Information constitutes a protectable business interest
of Bank. Accordingly, Bank and the Employee agree as
follows:
<PAGE>
(a) For purposes of this Section 9, Bank
shall be construed to include Bank and its
affiliates.
(b) During the term of this Agreement and at
all times after the termination of the Employee's
employment by expiration of the term or otherwise,
the Employee shall not, directly or indirectly,
whether individually, as a director, stockholder,
owner, partner, employee, principal or agent of
any business, or in any other capacity, make
known, disclose, furnish, make available or
utilize any of the Confidential Information, other
than in the proper performance of the duties
contemplated herein, or as required by a court of
competent jurisdiction or other administrative or
legislative body; provided that, prior to
disclosing any of the Confidential Information to
a court or other administrative or legislative
body, Employee shall promptly notify Bank so that
Bank may seek a protective order or other
appropriate remedy. Employee agrees to return all
Confidential Information, including all
photocopies, extracts and summaries thereof, and
such information stored electronically on tapes,
computer discs or in any other manner to Bank upon
termination of his employment for any reason.
(c) Employee shall not, so long as he is
employed by Bank, engage in "Competition" with
Bank. For purposes of this Agreement, Competition
by Employee shall mean Employee's engaging in, or
otherwise directly or indirectly being employed by
or acting as a consultant or lender to, or being a
director, officer, employee, principal, licensor,
trustee, broker, agent, stockholder, member,
owner, joint venturer or partner of, or permitting
his name to be used in connection with the
activities of any other business or organization
anywhere which competes directly or indirectly,
with business of Bank as the same shall be
constituted at any time during his employment.
(d) For a period of two (2) years following
the termination of the Employee's employment,
whether upon expiration of the term or otherwise,
the Employee shall not engage in Competition, as
defined above, with Bank in any locality or region
in which Bank had operations at the time of, or
within six (6) months prior to the Employee's
termination, or in which, during the six (6) month
period prior to the Employee's termination, Bank
had made substantial plans with the intention of
establishing operations in such locality or
region; provided that, it shall not be a violation
of this subparagraph for the Employee to become
the registered or beneficial owner of up to 5% of
any class of the capital stock of a competing
corporation registered under the Securities
Exchange Act of 1934, as amended, provided that
the Employee does not actively participate in the
business of such corporation until such time as
this covenant expires; provided further that this
subparagraph shall not apply or have any effect if
the Employee is terminated by Bank without "cause"
(as defined in Section 10) and for reasons other
than the Employee's Disability (as defined in
Section 10).
(e) For a period of three (3) years after he
ceases to be employed hereunder by Bank, whether
upon expiration of the term or otherwise, the
Employee agrees that he will not, directly or
indirectly, for his benefit or for the benefit of
any other person, firm or entity, do any of tile
following:
<PAGE>
(i) Solicit from any customer doing
business with Bank as of the Employee's
termination, business of the same or of a
similar nature to the business of Bank with
such customer;
(ii) Solicit from any known potential
customer of Bank business of the same or of a
similar nature to that which has been the
subject of a known written or oral bid, offer
or proposal by Bank, or of substantial
preparation with a view to making such a bid,
proposal or offer, within six (6) months
prior to the Employee's termination;
(iii) Solicit the employment or
services of, or hire any person who was known
to be employed by or was a known consultant
to Bank upon termination of the Employee's
employment, or within six months prior
thereto; or
(iv) Otherwise interfere with the
business or accounts of Bank including the
making of any statements or comments of a
defamatory or disparaging nature to third
parties regarding Bank or its officers,
directors, personnel or services.
(f) Employee acknowledges that Bank would
not be adequately compensated by damages in an
action at law as a result of a material breach of
this Agreement and that a material breach or
threatened breach by him of any of the provisions
contained in this Section 9 would cause Bank
irreparable injury. Employee therefore agrees
that Bank shall be entitled, in addition to any
other right or remedy, to a temporary, preliminary
and permanent injunction, without the necessity of
proving the inadequacy of monetary damages or the
posting of any bond or security, enjoining or
restraining Employee from any such violation or
threatened violations.
(g) Employee further acknowledges and agrees
that due to the uniqueness of his services and
confidential nature of the information he will
possess, the covenants set forth herein are
reasonable and necessary for the protection of the
business and goodwill of Bank.
10. Termination of Employment.
(a) The Employee's employment under this
Agreement may be terminated at any time by the
board of directors of Bank with or without "cause"
(as defined below). The Employee shall have no
right to receive severance pay or any other
remuneration whatsoever under this Agreement for
any period after his voluntary termination or
termination for cause. For purposes of this
Agreement, for "cause" shall mean termination for
only the following reasons:
(i) Personal dishonesty materially
affecting Bank or any of its affiliates;
(ii) Willful misconduct;
<PAGE>
(iii) Willful breach of a fiduciary
duty involving personal profit;
(iv) Intentional failure to perform
stated duties;
(v) WHIM violation of any law, rule, or
regulation relating to the operation of Bank
or any of its affiliates;
(vi) The order of any court or
supervising agency with jurisdiction over the
affairs of Bank or any of its affiliates; or
(vii) The Employee's violation of
any material provision of this Agreement or
any Bank policy.
(b) This Agreement may be terminated by the
Employee at any time upon ninety (90) days'
written notice to Bank or upon such shorter period
as may be agreed upon between the Employee and the
board of directors of Bank. In the event of such
termination, Bank shall be obligated only to
continue to pay the Employee's salary and provide
the other benefits provided by this Agreement up
to the date of the termination.
(c) If the Employee's employment is
terminated by Bank without cause, and for reasons
other than the Employee's Disability (as defined
below), then, in lieu of any and all damages or
other compensation to which Employee might
otherwise be entitled under this Agreement, Bank
shall continue to pay to the Employee as severance
pay, the full amount of the salary required by
Section 2 of this Agreement, without reduction,
discount or a duty to mitigate damages, until the
end of the employment term specified in Section 5;
subject, however, to Bank's right to discontinue
such payments in the event of the Employee's
breach of any of the provisions of Section 9 of
this Agreement.
(d) If the Employee's employment is
terminated by Bank because of the Employee's
Disability (as defined below), he shall be
entitled to receive whatever benefits may be
provided by the Bank disability plan in effect at
that time for executive officers but he shall have
no right to receive severance payments or any
other remuneration or other benefits under this
Agreement of any kind subsequent to tile date of
his termination because of his Disability. For
purposes of this Agreement, "Disability" shall
mean an illness, injury or other incapacitating
condition as a result of which the Employee is
unable to perform the services required to be
performed under this Agreement for (i) ninety (90)
consecutive days during the term of this
Agreement, or (ii) a period or periods aggregating
more than ninety (90) days in any six (6)
consecutive months. In any such event, Bank may,
in its discretion reasonably exercised, terminate
this Agreement by giving notice to the Employee of
termination for Disability. The Employee agrees
to submit to such medical examinations as may be
necessary to determine whether a Disability
exists, pursuant to such reasonable request made
by Bank from time to time.
(e) In the event of the death of the
Employee during the term of this Agreement, the
Employee's estate shall be entitled to receive the
salary due the
<PAGE>
Employee through the last day of
the calendar month in which his death shall have
occurred plus such other benefits as shall have
accrued under this Agreement.
(f) If the Employee is temporarily
prohibited from participating in the conduct of
Banks affairs at the request of or by the order of
any court or supervising agency with jurisdiction
over Bank, Bank's obligations under this Agreement
shall not terminate and the Employee shall be
placed on administrative leave with or without pay
in the discretion of Bank's board of directors.
If the charges in the proceeding out of which such
request or order is issued mature into a permanent
prohibition order, unless stayed by appropriate
proceedings, Bank's obligations hereunder shall
terminate as of the effective date of such
permanent order.
(g) If the Employee is permanently
prohibited from participating in the conduct of
Bank's affairs by the final order of any court or
supervising agency with jurisdiction over Bank,
all obligations of Bank under this Agreement shall
terminate, as of the effective date of the order,
but vested rights of the parties shall not be
affected
(h) All obligations under this Agreement may
be terminated, except to the extent determined
that continuation of the Agreement is necessary
for the continued operation of Bank:
(i) By the Federal Deposit Insurance
Corporation ("FDIC") at the time the FDIC
enters into an agreement to provide
assistance to or on behalf of Bank; and
(ii) By the FDIC, or any other agency,
at the time the FDIC or other agency approves
a supervisory merger to resolve problems
related to the operation of Bank or when Bank
is determined by the FDIC or other agency to
be in an unsafe or unsound condition. Any
rights of the parties that have already
vested, however, shall not be affected by
such action.
11. Affiliate Defined. For purposes of this
Agreement, the term "affiliate" means any corporation
or other entity that controls, is controlled by or
under common control with Bank, and includes, without
limitation, First Manistique Corporation and each of
its subsidiaries, as well as any subsidiary of Bank.
12. No Assignments. This Agreement is personal
to each of the parties hereto, and neither party may
assign or delegate any of the rights or obligations
hereunder without first obtaining the written consent
of the other party.
13. Other Contracts. As of the Effective Date,
all other prior agreements regarding conditions of
employment, whether written or oral, are hereby
terminated and superseded by this Agreement.
14. Notices. Any notices under this Agreement
shall be deemed given when in writing and delivered
personally or sent by certified mail, postage prepaid,
to the last known
<PAGE>
address of the party to whom notice
is given. If sent by mail, notice shall be deemed
given on the second day after mailing.
15. Amendments. No amendments or additions to
this Agreement shall be binding unless in writing and
signed by both parties.
16. Paragraph Headings. The paragraph headings
used in this Agreement are included solely for
convenience and shall not affect or be used in
connection with the interpretation of this Agreement.
17. Severability. The provisions of this
Agreement shall be deemed severable, and the invalidity
or unenforceability of any provision shall not affect
the validity or enforceability of the other provisions
hereof. Moreover, if any one or more of the provisions
contained in this Agreement shall be held to be
excessively broad as to duration, activity or subject,
such provision shall be construed by limiting and
reducing them so as to be enforceable to the maximum
extent allowed by applicable law.
18. Arbitration. Any dispute, controversy, or
claim arising under or in connection with this
Agreement shall be settled exclusively by arbitration,
conducted in Manistique, Michigan, before a panel of
three arbitrators, each of whom is a resident of
Schoolcraft County, in accordance with the rules of the
American Arbitration Association then in effect.
Judgment may be entered on the arbitrators award in any
court having jurisdiction. Unless otherwise provided
in the Rules of the American Arbitration Association,
the arbitrators shall, in their award, allocate between
the parties the costs of arbitration, which shall
include reasonable attorneys fees and expenses of the
parties, as well as the arbitrators fees and expenses,
in such proportions as the arbitrators deem just.
19. Governing Law. This Agreement shall be
governed by the laws of the United States of America
and the State of Michigan.
IN WITNESS WHEREOF, the parties have executed
this Agreement on the day and year first above written.
Employer: Employee:
NORTH COUNTRY BANK AND TRUST
/s/ Anthony Palumbo
------------------------
By: /s/ Sherry Littlejohn
---------------------------
Its: President
NORTH COUNTRY FINANCIAL CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
Establishment of Plan and Purpose
1.01. Establishment of Plan. This document
contains the North Country Financial Corporation
Supplemental Executive Retirement Plan, effective as of
November 1, 1999 (the "Plan").
1.02. Preamble and Purpose. North Country
Financial Corporation is a sponsoring employer of the
North Country Financial Corporation 401(k) Profit
Sharing Plan (the "401(k) Profit Sharing Plan"), a
defined contribution retirement plan, qualified under
Section 401(a) of the Code. Allocations for any given
plan year under the 401(k) Profit Sharing Plan may be
restricted for certain employees because of the
compensation limit under Code Section 401(a)(17), the
nondiscrimination test for elective deferrals under
Code Section 401(k)(3), the nondiscrimination test for
matching contributions under Code Section 401(m)(2),
the limit on elective deferrals under Code Section
402(g), and/or the limit on annual additions under Code
Section 415(c)(1). If it is necessary to restrict
allocations to such employees under the 401(k) Profit
Sharing Plan as a result of the rules of Code Sections
401(a)(17), 401(k)(3), 401(m)(2), 402(g), and/or
415(c)(1), North Country Financial Corporation desires
to provide supplementary unfunded payments under this
Plan designed to maintain the level of total retirement
benefits, which, but for the limitations on benefits
required by Code Sections 401(a)(17), 401(k)(3),
401(m)(2), 402(g), and/or 415(c)(1), would otherwise be
payable under the 401(k) Profit Sharing Plan.
The parties intend that, for purposes of Title I
of ERISA, the arrangement described herein be unfunded
and maintained primarily for the purpose of providing
deferred compensation to a select group of management
or highly compensated Employees.
ARTICLE II
Definitions and Construction
As used herein, the following words shall have the
following meanings:
2.01. Definitions.
(a) "Account" means the bookkeeping account
maintained for each Participant pursuant to
Article IV, below.
<PAGE>
(b) "Administrator" means the person or
persons selected pursuant to Article VII below to
control and manage the operation and
administration of the Plan.
(c) "Beneficiary" or "Beneficiaries" means
the person or persons designated by a Participant,
on the Beneficiary Designation Form provided by
the Administrator, to receive benefits hereunder
or, failing such a designation, the Participant's
spouse or, if none, his estate.
(d) "Beneficiary Designation Form" means a
form filed by a Participant with the Administrator
which indicates the Beneficiary or Beneficiaries
who will receive the remainder of his Account, if
any, in the event of his death, as provided in
Section 6.02.
(e) "Change of Control," with respect to the
Company, means any of the following: (a) the
commencement by any person or group of persons,
other than one or more of the Companies, of a
tender or exchange offer for twenty-five percent
(25%) or more of the outstanding shares of the
common stock of the Company; (b) the acceptance by
the board of directors of the Company of, or the
public recommendation by such board that the
stockholders of the Company accept, an offer from
any person or group of persons, other than one or
more of the Companies, to acquire twenty-five
percent (25%) or more of either the outstanding
shares of the common stock of the Company or the
consolidated assets of the Company; (c) the
acquisition, by any person or group of persons, of
the beneficial ownership or the right to acquire
beneficial ownership of twenty-five percent (25%)
or more of the outstanding shares of the common
stock of the Company (the term "group" and
"beneficial ownership" as used in this paragraph
having the meanings assigned thereto in Section
13(d) of the Securities Exchange Act of 1934 and
the regulations promulgated thereunder); or (d)
the Company (or any of the Companies in the
aggregate representing at least twenty-five (25%)
of the consolidated assets of the Companies),
shall have entered into an agreement with any
person, or any person shall have filed a draft or
final application or notice with the Board of
Governors of the Federal Reserve System or the
Office of the Comptroller of the Currency or any
other federal or state regulatory agency for
approval, to (i) merge or consolidate with, or
enter into any similar transaction with, the
Company or such Companies, in which the Company or
one of the Companies is not the survivor,
(ii) purchase, lease or otherwise acquire all or
substantially all of the assets of the Company or
such Companies, or (iii) purchase or otherwise
acquire (including by way of merger,
consolidation, share exchange or any similar
transaction) or otherwise hold or own, securities
representing twenty-five percent (25%) or more of
the voting power of the Company or such Companies.
(f) "Code" means the Internal Revenue Code
of 1986, as amended.
(g) "Companies" means North Country
Financial Corporation and any subsidiary thereof
now or hereinafter created.
<PAGE>
(h) "Company" means North Country Financial
Corporation, a Michigan corporation, or a
successor thereof.
(i) "Disability" shall have the same meaning
as in the Company's Long-Term Disability Plan.
(j) "Employee" means an employee of any one
or more of the Companies.
(k) "Employment" means employment with any
one or more of the Companies.
(l) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
(m) "Excess Amount" means, for each Plan
Year, the amount of contributions which would have
been allocated to a Participant's account under
the 401(k) Profit Sharing Plan without giving
effect to the limitations imposed by Code Sections
401(a)(17), 401(k)(3), 401(m)(2), 402(g), and/or
415(c)(1) for such Plan Year, less the amount of
contributions actually allocated to the
Participant's 401(k) Profit Sharing Plan account
for such Plan Year.
(n) "401(k) Profit Sharing Plan" means the
North Country Financial Corporation 401(k) Profit
Sharing Plan, as amended from time to time.
(o) "Investment Election" means the form
filed by the Participant with the Administrator
from time to time, which designates the
Participant's investment choices.
(p) "Participant" means any select
management or highly compensated Employee who
(i) is entitled to an allocation of contributions
for any Plan Year under the 401(k) Profit Sharing
Plan but such allocation is reduced by reason of
the application of the limitations of Code
Sections 401(a)(17), 401(k)(3), 401(m)(2), 402(g),
and/or 415(c)(1), and (ii) is designated by the
Company, in its sole discretion, as eligible to
participate in this Plan.
(q) "Payment Election Form" means a form
provided by the Administrator on which a
Participant may designate the payment method by
which he will receive a benefit he is due under
the Plan.
(r) "Plan" means the North Country Financial
Corporation Supplemental Executive Retirement
Plan, as stated herein and as amended from time to
time.
(s) "Plan Year" means (i) the two (2)-month
period beginning on November 1, 1999 and ending on
December 31, 1999, and (ii) thereafter, the 12-
month period beginning on each January 1 and
ending on the following December 31.
<PAGE>
(t) "Year of Service" shall have the same
meaning as in the 401(k) Profit Sharing Plan.
2.02. Construction. The laws of the State of
Michigan, as amended from time to time, shall govern
the construction and application of this Plan. Words
used in the masculine gender shall include the feminine
and words used in the singular shall include the
plural, as appropriate. All references to statutory
sections shall include the section so identified as
amended from time to time or any other statute of
similar import. If any provisions of the Code, ERISA,
or other statutes or regulations render any provisions
of this Plan unenforceable, such provision shall be of
no force and effect only to the minimum extent required
by such law.
ARTICLE III
Eligibility
Any Employee who meets the definition of
Participant in Section 2.01(p), above, shall be
eligible to participate in this Plan in any Plan Year.
Eligibility to participate in the Plan for one Plan
Year does not guarantee eligibility for a subsequent
Plan Year.
ARTICLE IV
Account
4.01. Establishment of Account. Only for the
purpose of measuring payments due Participants
hereunder, the Company shall maintain on behalf of each
Participant an Account to which the Company shall
credit the Excess Amounts and earnings thereon for each
Plan Year as set forth in Section 4.03, below.
4.02. Nature of Account. The Account hereunder
and assets, if any, acquired by the Company to measure
a Participant's benefits hereunder, shall not
constitute or be treated for any reason as a trust for,
property of, or a security interest for the benefit of,
a Participant, his Beneficiaries or any other person.
Participants and the Company acknowledge that the Plan
constitutes a promise by the Company to pay benefits to
the Participants or their Beneficiaries, that a
Participant's rights hereunder are limited to those of
a general unsecured creditor of the Company and that
the establishment of the Plan or acquisition of assets
to measure a Participant's benefits hereunder does not
prevent any property of the Company from being subject
to the right of all the Company's creditors.
4.03. Maintenance of Account.
(a) Accounts shall be reconciled no less
frequently than semi-annually. The Company shall
increase the Account of each Participant by (i)
the Excess Amount, if any, which shall be credited
as of December 31 of the Plan Year, and (ii) any
income or gains resulting as if the Account,
computed in accordance with Subsection 4.03(b),
below, were invested pursuant to the timely-filed
Investment Elections in effect from time to time
<PAGE>
during such Plan Year and decrease the Account by
(i) any withdrawals from the Account during any
Plan Year, and (ii) any losses resulting as if the
Account, computed in accordance with Subsection
4.03(b), below, were invested pursuant to the
timely-filed Investment Elections in effect from
time to time during such Plan Year.
(b) For purposes of computing the investment
return on the Account for any Plan Year, the
principal balance as of the first day of the
relevant Plan Year shall equal the balance as of
the final day of the preceding Plan Year,
including the Excess Amount, if any, credited to
the Account for the prior Plan Year, pursuant to
Subsection 4.03(a) hereof, and decreased by any
distributions made to the Participant or his
Beneficiaries during the Plan Year.
4.04. Investment Elections.
(a) A Participant may file an Investment
Election with the Administrator setting forth his
investment preferences used to value his Account.
The initial investment options available to
Participants are (i) the Moody's A Long-Term
Corporate Bond Rate (the "fixed rate investment
option") adjusted annually to equal the average
yield for the month of September of the previous
year, and (ii) the total return of the Standard &
Poor's 500 Index for the applicable period. All
Investment Elections must be in increments of 10%.
If a Participant does not file an Investment
Election with the Administrator, the Account shall
be deemed to be invested in the fixed rate
investment option. The Participant may change his
Investment Election as of January 1 or July 1 in
any Plan Year by delivering to the Administrator a
new Investment Election at least 15 days prior to
such January 1 or July 1.
(b) A Participant's Account shall reflect
only the performance of such investment indices
and the Participant shall have no property right
or security interest in the actual investment
performance of any assets invested by the Company
to provide for the payment of benefits under this
Plan.
(c) Upon a Change of Control, the Company,
the Administrator, or any successor thereto, may
not change the investment choices available to
Participants hereunder without the consent of a
majority of the holders of Account balances under
the Plan.
ARTICLE V
Vesting
Subject to the rights of the Company's creditors
as set forth in Section 4.02 above, the Account of a
Participant, including all earnings accrued thereto,
shall become fully vested only after such Participant
has three Years of Service, as defined in the 401(k)
Profit Sharing Plan. Notwithstanding anything herein
to the contrary, if a Participant terminates Employment
prior to completing three Years of Service, he shall be
entitled to nothing under this Plan.
<PAGE>
ARTICLE VI
Distributions
6.01. For Reasons Other Than Death.
(a) In the event that the value of a
Participant's Account exceeds $25,000 as of
January 1 of the Plan Year in which his Employment
terminates, the Company shall pay an amount equal
to the balance of a Participant's Account to him
in accordance with his choice on the Payment
Election Form that he has filed with the
Administrator prior to the date his Employment
terminates.
(b) If a Participant's Employment terminates
on or after the date he reaches age 55, other than
because of death or Disability, and after he has
completed at least ten Years of Service, he may
elect to have his Account balance distributed in
accordance with one of the following methods:
(i) In a lump sum, on or before
February 15 of the Plan Year immediately
following the Plan Year in which the
Participant's Employment terminates.
(ii) In monthly installments, starting
on January 1 of the Plan Year immediately
following the Plan Year in which the
Participant's Employment terminates, over
five years, using the declining balance
method, computed annually.
(iii) In monthly installments, starting
on January 1 of the Plan Year immediately
following the Plan Year in which the
Participant's Employment terminates, over ten
years, using the declining balance method,
computed annually.
(iv) In monthly installments, starting
on January 1 of the Plan Year immediately
following the Plan Year in which the
Participant's Employment terminates, over
fifteen years, using the declining balance
method, computed annually.
(v) In monthly installments, starting
on January 1 of the sixth Plan Year following
the Plan Year in which the Participant's
Employment terminates, over five years, using
the declining balance method, computed
annually.
(vi) In monthly installments, starting
on January 1 of the sixth Plan Year following
the Plan Year in which the Participant's
Employment terminates, over ten years, using
the declining balance method, computed
annually.
(c) Notwithstanding the foregoing provisions
of this Section 6.01, if the Participant's
Employment terminates (i) before the date he
reaches age 55, (ii) on or after
<PAGE>
the date he reaches age 55 because of death or Disability,
or (iii) on or after the date he reaches age 55 with
fewer than ten Years of Service, and he has
elected pay-out pursuant to one of the monthly
installment options above, his Account balance
will be paid in monthly installments, starting on
January 1 of the Plan Year immediately following
the Plan Year in which his Employment terminates,
over five years, regardless of his election.
(d) A Participant may change his Payment
Election Form at any time; provided, however, that
the change will only be effective if he files a
new Payment Election Form with the Administrator
at least one year prior to his termination of
Employment, except in the case of his initial
Payment Election Form under the Plan.
Notwithstanding any other provision of this
Section 6.01 and any Payment Election Form
previously filed by the Participant with the
Administrator, in the event that the value of the
Account of the Participant is less than $25,000 as
of January 1 of the Plan Year in which his
Employment terminates, any distribution to, or on
behalf of, such Participant shall be in the form
of a lump sum paid on or before February 15 of the
Plan Year immediately following the Plan Year in
which the Participant's Employment terminates. If
a Participant does not timely file a Payment
Election Form with the Administrator, he will be
deemed to have elected payment in a lump sum.
6.02. Upon Death.
(a) Upon a Participant's death, any balance
remaining in his Account shall be paid by the
Company in accordance with his most recent Payment
Election Form on file with the Administrator,
except that such payments shall be made to the
Beneficiary or Beneficiaries specified by the
Participant on such Beneficiary Designation Form,
or, if none, to his surviving spouse or, if none,
to his estate. Each Participant may file a
Beneficiary Designation Form with the
Administrator on which he shall designate a
Beneficiary or Beneficiaries to receive the unpaid
balance of his Account upon his death and may
revoke or modify such Beneficiary Designation Form
at any time and from time to time by submitting to
the Administrator a new Beneficiary Designation
Form.
(b) If a Participant dies prior to the
payment of any amount to him from his Account, his
Beneficiary or Beneficiaries shall receive
payments in accordance with Section 6.01 hereof.
(c) If a Participant designates multiple
Beneficiaries on his Beneficiary Designation Form
as either primary or contingent Beneficiaries, and
one of the Beneficiaries has predeceased the
Participant, the deceased Beneficiary's share
shall be paid to the Beneficiary's estate unless
the Participant provides otherwise in his
Beneficiary Designation Form. For example, if a
Participant designates his spouse on his
Beneficiary Designation Form as his sole primary
Beneficiary and his three children as equal
contingent Beneficiaries, and if his spouse and
one such child predecease the Participant, each of
the two surviving children would receive one-third
of the
<PAGE>
distributions from the Participant's
Account, the predeceased child's one-third share
would be paid to his estate, and no distributions
would be paid to his spouse's estate.
(d) If a Beneficiary survives a Participant
but dies before he receives the entire amount in
the Account due him, the Company shall make
payments to the estate of the Beneficiary in
accordance with the Participant's most recent
Payment Election Form on file with the
Administrator. For example, if a Participant
designates his spouse as his sole primary
Beneficiary and his three children as equal
contingent Beneficiaries, and if his spouse
survives the Participant and begins to receive
distributions from the Participant's Account
pursuant to the terms of this Plan, but dies
before receiving all of the distributions to which
she is entitled, any remaining distributions shall
be paid to the spouse's estate and not to the
Participant's contingent Beneficiaries.
ARTICLE VII
Administration of the Plan
7.01. Appointment of Separate Administrator. The
Company shall be the Administrator of the Plan, unless
the Company designates an individual or individuals to
administer the Plan on its behalf. Persons serving as
Administrator may resign by written notice to the
Company and the Company may appoint or remove such
persons. An Administrator consisting of more than one
person (for example, a committee of individuals) shall
act by a majority of its members at the time in office.
An Administrator consisting of more than one person may
authorize any one or more of its members to execute any
document or documents on behalf of the Administrator,
in which event the Administrator shall notify the
Company of the member or members so designated. The
Company shall accept and rely upon any document
executed by such member or members as written evidence
of such designation. No person serving as
Administrator shall vote or decide upon any matter
relating solely to himself or solely to any of his
rights or benefits pursuant to the Plan.
7.02. Powers and Duties. The Administrator shall
administer the Plan in accordance with its terms. The
Administrator shall have full and complete authority
and control with respect to Plan operations and
administration unless the Administrator allocates and
delegates such authority or control pursuant to the
procedures stated in Subsection 7.02(b) or (c), below.
Any decisions of the Administrator or its delegate
shall be final and binding upon all persons dealing
with the Plan or claiming any benefit under the Plan.
The Administrator shall have all powers which are
necessary to manage and control Plan operations and
administration including, but not limited to, the
following:
(a) To employ such accountants, counsel, or
other persons as it deems necessary or desirable
in connection with Plan administration. The
Company shall bear the costs of such services and
other administrative expenses.
(b) To designate in writing persons other
than the Administrator to perform any of its
powers and duties hereunder.
<PAGE>
(c) The discretionary authority to construe
and interpret the Plan, including the power to
construe disputed provisions.
(d) To resolve all questions arising in the
administration, interpretation, and application of
the Plan including, but not limited to, questions
as to the eligibility or the right of any person
to a benefit.
(e) To adopt such rules, regulations, forms,
and procedures from time to time as it deems
advisable and appropriate in the proper
administration of the Plan.
(f) To prescribe procedures to be followed
by any person in applying for distributions
pursuant to the Plan and to designate the forms or
documents, evidence, and such other information as
the Administrator may reasonably deem necessary,
desirable, or convenient to support an application
for such distribution.
7.03. Records and Notices. The Administrator
shall maintain all books of accounts, records, and
other data as may be necessary for proper Plan
administration.
7.04. Compensation and Expenses. The expenses
incurred by the Administrator in the proper
administration of the Plan shall be paid by the
Company. An Administrator who is an Employee shall not
receive any additional fee or compensation for services
rendered as an Administrator.
7.05. Limitation of Authority. The Administrator
shall not add to, subtract from, or modify any of the
terms of the Plan, change or add to any benefits
prescribed by the Plan, or waive or fail to apply any
Plan requirement for benefit eligibility.
7.06. Claim and Appeal Procedures. Any
Participant or Beneficiary, or the duly authorized
representative of either such person (a "Claimant") may
file a written claim with the Administrator if he
believes he is being denied any rights or benefits
under the Plan. The Claimant must file any such claim
by certified mail, return receipt requested, to the
address for notice contained in Section 8.04 hereof.
If the Claimant's claim is wholly or partially denied,
the Administrator will notify him of its decision on
the claim in writing. The Administrator's notice to
the Claimant will be given to the Claimant within 90
days after the Administrator receives his claim (or
within 180 days, if special circumstances require an
extension of time for processing his claim, and if the
Administrator notifies the Claimant, in writing, within
the initial 90-day period, of such extension and
circumstances). If the Administrator's notice is not
provided to the Claimant within such period, the claim
will be considered denied as of the last day of the
period and the Claimant may request an appeal of his
denied claim. The Administrator's notice to the
Claimant will set forth:
<PAGE>
(a) The specific reasons for the denial;
(b) Specific references to pertinent Plan
provisions on which the Administrator based its
denial;
(c) A description of any additional material
and information necessary for the Claimant to
perfect his claim and an explanation of why the
material or information is necessary; and
(d) That if the Claimant wishes to appeal
the denial of his claim, he may file a written
appeal with the Administrator, by certified mail,
return receipt requested, to the address for
notice contained in Section 8.04 hereof, within 60
days after he receives the Administrator's written
notice of the denial of his claim. The
Administrator's written notice of the denial of
his claim will also inform the Claimant that if he
fails to appeal the Administrator's denial of his
claim, in writing, within the 60-day period for
filing such appeals, the Administrator's denial of
his claim will become final, binding, and
conclusive upon the expiration of such 60-day
period. The Administrator's written notice of the
denial of the Claimant's claim must identify the
persons who serve as the Administrator and the
name and address of the Administrator to whom the
Claimant may file his appeal.
Within the 60-day period described in
Section 7.06(d) above, the Claimant (or his duly
authorized representative) may (i) file a written
appeal with the Administrator for a review of his
denied claim and of pertinent documents, and
(ii) submit written issues and comments to the
Administrator. The Administrator will notify the
Claimant (or his duly authorized representative) of its
decision in writing. Such notice will be written in a
manner calculated to be understood by such person and
will contain specific references to pertinent Plan
provisions. The Administrator's decision on appeal
will be made within 60 days after the Administrator
receives the Claimant's written appeal (or within 120
days, if special circumstances require an extension of
time for processing the appeal, such as an election by
the Administrator to hold a hearing, and if written
notice of such extension and circumstances is given by
the Administrator to such person within the initial 60-
day period). If the Administrator does not make its
decision on appeal within such period, the Claimant's
claim will be considered denied.
ARTICLE VIII
General Provisions
8.01. Assignment. No Participant or Beneficiary
may sell, assign, transfer, encumber, or otherwise
dispose of the right to receive payments hereunder. A
Participant's rights to benefit payments under the Plan
are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of
a Participant or a Beneficiary.
<PAGE>
8.02. Employment Not Guaranteed by Plan. The
establishment of this Plan and the Company's
designation of an eligible Employee as a Participant,
shall not give any Participant the right to continued
Employment or limit the right of the Company to dismiss
or impose penalties upon the Participant or modify the
terms of his Employment.
8.03. Termination and Amendment. The Company may
at any time terminate, suspend, alter, or amend this
Plan and no Participant or any other person shall have
any right, title, interest, or claim against the
Company, its directors, officers, or employees for any
amounts, except that (i) the Participant shall be fully
vested in his Account hereunder as of the date on which
the Plan is terminated or suspended if he has met the
vesting requirements contained in Article V hereof,
(ii) no amendment shall eliminate the crediting of an
investment return on an Account prior to the complete
distribution thereof or provide for a distribution
method which accelerates the timing of distributions
hereunder without the consent of a Participant, and
(iii) subsequent to a Change of Control, unless a
majority of the holders of Account balances agree to
the contrary, the Company or the Administrator may not
alter (a) the choice of investments in the Investment
Election as in effect immediately before the Change of
Control, and (b) the payout options contained in the
Payment Election Form as in effect immediately before
the Change of Control.
8.04. Notice. Any and all notices, designations
or reports provided for herein shall be in writing and
delivered personally or by certified mail, return
receipt requested, addressed, in the case of the
Company, to the Secretary of the Company at 130 South
Cedar Street, Manistique, Michigan 49854; in the case
of the Administrator, to the Administrator, in care of
the Secretary of the Company, at such address; and, in
the case of a Participant or Beneficiary, to his home
address as shown on the records of the Company. The
addresses referenced herein may be changed by a notice
delivered in accordance with the requirement of this
Section 8.04.
8.05. Limitation on Liability. In no event shall
the Company, Administrator, or any employee, officer,
or director of the Company incur any liability for any
act or failure to act unless such act or failure to act
constitutes a lack of good faith, willful misconduct,
or gross negligence with respect to the Plan or the
trust established in connection with the Plan.
8.06. Indemnification. The Company shall
indemnify the Administrator and any employee, officer,
or director of the Company against all liabilities
arising by reason of any act or failure to act unless
such act or failure to act is due to such person's own
gross negligence or willful misconduct or lack of good
faith in the performance of his duties to the Plan.
Such indemnification shall include, but not be limited
to, expenses reasonably incurred in the defense of any
claim, including reasonable attorney and legal fees,
and amounts paid in any settlement or compromise;
provided, however, that indemnification shall not occur
to the extent that it is not permitted by applicable
law. Indemnification shall not be deemed the exclusive
remedy of any person entitled to indemnification
pursuant to this section. The indemnification provided
hereunder shall continue as to a person who has ceased
acting as a director, officer, member, agent, or
employee of the Administrator or as an officer,
director, or employee of the Company and such person's
rights shall inure to the benefit of his heirs and
representatives.
<PAGE>
8.07. Headings. All articles and section
headings in this Plan are intended merely for
convenience and shall in no way be deemed to modify or
supplement the actual terms and provisions stated
thereunder.
8.08. Severability. Any provision of this Plan
prohibited by law shall be ineffective to the extent of
any such prohibition, without invalidating the
remaining provisions hereof. The illegal or invalid
provisions shall be fully severable and this Plan shall
be construed and enforced as if the illegal or invalid
provisions had never been inserted in this Plan.
<TABLE> <S> <C>
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<S> <C>
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0
0
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