SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 6, 1996
INDEPENDENT BANK CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN
(State or Other Jurisdiction of Incorporation)
0-7818 38-2032782
(Commission File Number) (I.R.S. Employer Identification No.)
230 West Main Street, P.O. Box 491, Ionia, Michigan 48846
(Address of Principal Executive Offices) (Zip Code)
(616) 527-9450
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K,
dated June 12, 1996, relating to events occurring on June 6, 1996, as set
forth in the pages attached hereto.
(List all such items, financial statements, exhibits of other portions
amended)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The financial statements for North Bank Corporation, the business
acquired, for the periods ended as of December 31, 1994 and
December 31, 1995, together with a report of independent public
accountants, and the unaudited financial statements of North Bank
Corporation for the periods ended as of March 31, 1995 and March 31,
1996, are hereby filed as part of this Report on Form 8-K/A in the
form attached as Exhibit A.
(b) Pro Forma Financial Information.
The required pro forma financial information for the transaction
that is the subject of this Report is hereby filed as part of this
Report on Form 8-K/A in the form attached as Exhibit B.
(c) Exhibits.
2.1 Agreement and Plan of Reorganization among Independent Bank
corporation, IBC Interim Co., and North Bank Corporation, dated
February 2, 1996.*
4.1 Amended and Restated Loan Agreement between The Northern Trust
Company, an Illinois banking corporation, and Independent Bank
Corporation, dated June 6, 1996.
23 Consent of Crowe Chizek and Company LLP
- ----------------------
* Previously Filed
<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.
INDEPENDENT BANK CORPORATION
Date: August 7, 1996 /s/ William R. Kohls
William R. Kohls, Executive Vice President
and Chief Financial Officer (Principal
Financial Officer)
<PAGE>
EXHIBIT A
CROWE CHIZEK
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
North Bank Corporation
Hale, Michigan
We have audited the accompanying consolidated balance sheets of North Bank
Corporation as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of North
Bank Corporation as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, the
Corporation changed its methods of accounting for impaired loans in 1995 and
investment securities and income taxes in 1993 to conform to new accounting
standards. The change in accounting for income taxes was made retroactively
to January 1, 1991.
/s/Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
March 8, 1996
<PAGE>
<TABLE>
<CAPTION>
NORTH BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(Dollars in thousands)
- -----------------------------------------------------------------------------
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks (Note 3) $ 6,421 $ 8,121
Federal funds sold 200
---------- ----------
Total cash and cash equivalents 6,621 8,121
Securities available for sale (Note 4) 48,665 26,503
Securities held to maturity
(estimated fair value
of $28,755) (Note 4) 30,584
---------- ----------
Total securities 48,665 57,087
Total loans (Note 5) 90,331 81,833
Less allowance for loan losses (Note 6) (988) (949)
---------- ----------
Net Loans 89,343 80,884
Premises and equipment - net (Note 7) 5,580 6,047
Accrued interest receivable 1,102 1,010
Other real estate 118 628
Other assets 1,287 2,496
---------- ----------
Total assets $ 152,716 $ 156,273
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing demand $ 17,872 $ 17,189
Interest-bearing transaction
accounts 19,858 19,292
Savings 38,444 40,157
Time (Note 8) 55,591 47,127
---------- ---------
Total deposits 131,765 123,765
Long-term borrowings (Note 10) 9,000 19,728
Federal funds purchased 1,100
Accrued interest payable 516 496
Other liabilities (Note 11) 789 1,661
---------- ---------
Total liabilities 142,070 146,750
Shareholders' Equity
Common stock, no par value,
1,500,000 shares authorized;
482,040 and 481,478 issued and
outstanding in 1995 and 1994,
respectively 1,207 1,204
Surplus 5,635 5,629
Retained earnings 3,841 4,159
Net unrealized appreciation
(depreciation) on available for
sale securities, net of tax of $19
in 1995 and $585 in 1994 (Note 4) (37) (1,136)
Minimum pension liability adjustment,
net of tax of $171 in 1994 (Note 11) (333)
---------- ---------
Total shareholders' equity 10,646 9,523
---------- ---------
Total liabilities and
shareholders' equity $ 152,716 $ 156,273
========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTH BANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands, except per share amounts)
- ----------------------------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income
Loans, including fees $ 7,765 $ 6,539 $ 6,406
Securities
Taxable 3,002 2,372 2,715
Tax-exempt 342 584 814
Federal funds sold 124 70 62
------- ------- -------
Total interest income 11,233 9,565 9,997
Interest expense
Deposits 4,401 3,127 3,917
Borrowings 983 803 226
------- ------- -------
Total interest expense 5,384 3,930 4,143
------- ------- -------
Net interest income 5,849 5,635 5,854
Provision for loan losses (Note 6) (307) (180) (150)
------- ------- -------
Net interest income after
provision for loan losses 5,542 5,455 5,704
Other operating income
Service charges on
deposit accounts 404 422 394
Net gain (loss) on sales
of securities (111) (374) 1,201
Gain on sales of loans 424 116 441
Gain on sale of mortgage
servicing rights 124
Other operating income 361 353 420
------- ------- -------
Total other operating income 1,202 517 2,456
Other operating expenses
Salaries and employee
benefits (Note 11) 2,738 2,745 3,076
Pension settlement (Note 11) 774
Net occupancy 468 407 373
Equipment 740 651 581
Legal fees 132 109 131
FDIC premium 144 274 304
Other operating expense 1,898 1,535 2,004
------- ------- -------
Total other
operating expense 6,894 5,721 6,469
------- ------- -------
Income(loss) before
federal income taxes (150) 251 1,691
Federal income tax expense
(benefit) (Note 9) (121) (82) 260
------- ------- -------
Net income(loss) $ (29) $ 333 $ 1,431
------- ------- -------
Net income(loss) per common
share (Note 2) $ (.06) $ .70 $ 2.97
------- ------- -------
- ------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTH BANK CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands, except per share amounts)
- -----------------------------------------------------------------------------
Net Unrealized
Appreciation
(Depreciation) Minimum
on Securities Pension
Common Retained Available Liability
Stock Surplus Earnings for Sale Adjustment Total
<S> <C> <C> <C> <C> <C> <C>
Balance -
January 1, 1993 $1,223 $5,757 $2,949 $ 9,929
Net income, 1993 1,431 1,431
Cash dividends
($.55 per share) (266) (266)
Retirement of
shares (19) (128) (147)
Net unrealized
appreciation
on securities
available for
sale $ 53 53
------ ------ ------ ------ -------
Balance -
December 31,
1993 1,204 5,629 4,114 53 11,000
Net income, 1994 333 333
Cash dividends
($.60 per share) (288) (288)
Net change in
unrealized
appreciation
(depreciation)
on securities
available for sale (1,189) (1,189)
Minimum pension
liability
adjustment
(Note 11) $ (333) (333)
------ ------ ------- ------ ------ ------
Balance -
December 31,
1994 1,204 5,629 4,159 (1,136) (333) 9,523
Net loss, 1995 (29) (29)
Cash dividends
($.60 per share) (289) (289)
Exercise of
options (Note 11) 3 6 9
Net change in
unrealized
appreciation
(depreciation)
on securities
available for sale 1,099 1,099
Minimum pension
liability
adjustment
(Note 11) 333 333
------ ------- ------ ------- ------ ------
Balance -
December 31,
1995 $ 1,207 $ 5,635 $ 3,841 $ (37) $ 0 $10,646
------- ------- ------- ------- ----- -------
- -----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NORTH BANK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
- ----------------------------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ (29) $ 333 $ 1,431
Adjustments to reconcile net
income (loss) to net
cash from operating activities:
Depreciation 534 613 546
Net amortization 86 87 76
Provision for loan losses 307 180 150
(Gain) loss on sales of other
real estate (76) 5
Gain on sales of loans (424) (116) (441)
Origination of loans for sale (24,592) (6,120) (18,765)
Proceeds from sales of loans
originated for sale 23,926 6,297 19,623
Gain on sale of mortgage
servicing rights (124)
Net (gain) loss on sales
of securities 111 374 (1,201)
Change in assets and liabilities
Securities available for sale (2,169)
Deferred taxes (178) (109) 28
Accrued interest receivable (92) (92) 354
Accrued interest payable 20 59 (13)
Other assets 639 (728) 292
Other liabilities (539) 224 (327)
------- ------- ------
Net cash from operating
activities (431) 1,007 (416)
Cash flows from investing activities
Proceeds from sales of securities
available for sale 62,290 20,612
Proceeds from maturities, calls,
and paydowns of securities
available for sale 3,572
Purchase of securities available
for sale (55,974) (8,550)
Proceeds from sales of securities
held to maturity 9,251
Proceeds from maturities of
securities held to maturity 2 3,594 600
Purchase of securities held to
maturity (6,558) (17,980)
Loan originations net of principal
payments on loans (7,905) (16,595) 7,177
Proceeds from sales of other real
estate 815 233
Proceeds from sale of mortgage
servicing rights 306
Premises and equipment expenditures (67) (137) (1,126)
------- ------ ------
Net cash from investing activities 3,039 (7,401) (2,078)
- -----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
1995 1994 1993
---- ---- ----
Cash flows from financing activities
Acquisition of deposits $ 6,767
Net change in deposits 1,233 $ (360) $ (16,076)
Dividends (289) (288) (266)
Proceeds from FHLB advances 3,000 4,728 15,000
Repayment of FHLB advances (13,728)
Change in Federal funds purchased (1,100) 1,100
Exercise of stock options 9
Stock retired (147)
------- ------- -------
Net cash from financing
activities (4,108) 5,180 (1,489)
Net change in cash and cash
equivalents (1,500) (1,214) (3,983)
Cash and cash equivalents
at beginning of year 8,121 9,335 13,318
------- ------- -------
Cash and cash equivalents at
end of year $ 6,621 $ 8,121 $ 9,335
======= ======= =======
Supplemental disclosures of
cash flow information
Cash paid during the year for
Interest $ 5,364 $ 3,871 $ 4,156
Income taxes 35 645
Supplemental disclosures on
noncash investing activities
Transfer from loans to
other real estate 289 25 542
Transfer of securities to
available for sale upon
adoption of SFAS 115 40,753
Transfer of securities from
held to maturity to
available for sale
(Note 4) 29,499
- -----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ---------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS
The consolidated financial statements include the accounts of North Bank
Corporation and its wholly-owned subsidiary, North Bank (the Bank), and the
Bank's wholly-owned subsidiary, First Central Mortgage Corporation, after
elimination of significant inter-company transactions and accounts.
On October 3, 1994, North Bank acquired First Central Mortgage Corporation, a
residential mortgage originating company headquartered in Saginaw, Michigan.
The acquisition was recorded under the purchase method. Intangible assets
acquired are being amortized over their estimated economic lives.
In October 1995, North Bank acquired a branch of First of America in Hubbard
Lake, Michigan. Deposits acquired were approximately $6.8 million.
Intangible assets associated with this acquisition are being amortized over
their estimated economic lives.
The Bank grants commercial, installment and residential loans to customers
primarily in Northeastern Michigan. Although the loan portfolio is
diversified, a substantial portion of its debtors' ability to honor their
contracts is dependent upon the tourism industry. Primarily all installment
and residential loans are secured by personal property and real estate.
Approximately 96% of the commercial loans are secured by business assets and
the remaining 4% are largely unsecured.
The Bank's revenues primarily arise from interest income from residential
mortgage lending activities, investments and revenue derived from mortgage
banking through origination of, and sales of mortgage loans to the secondary
market with servicing retained, and related servicing income. The Bank
maintains eleven branches within Iosco, Ogemaw, Alpena, Presque Isle, Alcona
and Montmorency counties of Michigan.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following summarize the significant accounting and reporting policies
used in the preparation of the consolidated financial statements:
Use of Estimates in Preparing Financial Statements: 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, liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. The primary estimates incorporated into
the Corporation's financial statements which are susceptible to change in
the near term include the allowance for loan losses, the determination and
carrying value of impaired loans, the determination and carrying value of
intangibles, the determination and carrying value of certain financial
instruments and the realization of deferred tax assets.
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ---------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Securities: At December 31, 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities (SFAS No. 115). As required by SFAS No. 115,
securities classified as available for sale are reported at their fair value
and the related unrealized holding gain or loss is reported, net of related
income tax effects, as a separate component of shareholders' equity, until
realized. Securities available for sale consist of those securities not
classified as held to maturity. Such securities might be sold prior to
maturity due to changes in interest rates, prepayment risks, yield and
availability of alternative investments, liquidity needs or other factors.
Securities for which management has the positive intent and the Corporation
has the ability to hold to maturity are reported at amortized cost.
Premiums and discounts on securities are recognized in interest income using
the interest method over the period to maturity. Gains and losses on the
sale of securities available for sale are determined using the specific
identification method.
Loans and Interest and Fees on Loans: Loans are stated at their principal
amount outstanding. Interest on loans is accrued over the term of the loan
based upon the amount of the principal outstanding. The accrual of interest
is discontinued on a loan when management believes serious doubt exists as to
the collectibility of the loan principal or interest. Loan fees and certain
direct loan origination costs are deferred and amortized into interest income
over the term of the loans using the level yield method.
Allowance for Loan Losses: Because some loans may not be repaid in full, an
allowance for loan losses is recorded. Increases to the allowance are
recorded by a provision for possible loan losses charged to expense.
Estimating the risk of loss and the amount of loss on any loan is necessarily
subjective. Accordingly, the allowance is maintained by management at
a level considered adequate to cover possible losses that are currently
anticipated based on past loss experience, general economic conditions,
information about specific borrower situations including their financial
position and collateral values, and other factors and estimates which are
subject to change over time. While management may periodically allocate
portions of the allowance for specific problem loan situations, the whole
allowance is available for any loan charge-offs that occur. A loan is charged
off by management as a loss when deemed uncollectible, although collection
efforts continue and further recoveries may occur.
Statement of Financial Accounting Standards No. 114, Accounting by Creditors
for Impairment of a Loan (SFAS No. 114), as amended by SFAS No. 118, was
adopted by the Corporation on January 1, 1995. Under this Standard, loans
considered to be impaired are reduced to the present value of expected future
cash flows or to the fair value of collateral, by allocating a portion of the
allowance for loan losses to such loans. If these allocations cause the
allowance for loan losses to require an increase, such an increase is reported
as bad debt expense. The adoption of this Standard was immaterial to the
1995 consolidated financial statements.
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ---------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The carrying values of impaired loans are periodically adjusted to reflect
cash payments, revised estimates of future cash flows, and increases in the
present value of expected cash flows due to the passage of time. Cash
payments representing interest income are reported as such. Other cash
payments are reported as reductions in the carrying value of the loan.
Increases or decreases due to changes in estimates of future payments and
due to the passage of time are reported within the provision for loan losses.
The Corporation has defined "impaired loans" as those loans for which it is
probable that all principal and interest due will not be repaid in accordance
with the original loan agreement. The Corporation has set minimum balance
and condition requirements before a loan may be considered to be impaired.
Loans Held for Sale: Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of cost or market value in the
aggregate. Net unrealized losses are recognized in a valuation allowance by
adjustments to income.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
provided primarily on the straight-line basis over the estimated useful lives
of the assets. Maintenance and repairs are expensed and major improvements
are capitalized. At the time of sales or disposition of an asset, the
applicable cost and accumulated depreciation amounts are removed from the
books.
Other Real Estate: Other real estate includes properties acquired through,
or in lieu of, loan foreclosure and are initially recorded at fair value at
the date of foreclosure establishing a new cost basis. After foreclosure,
valuations are periodically performed by management and the real estate is
carried at the lower of carrying amount or fair value less costs to sell.
Revenue and expenses from operations and changes in the valuation allowance
are included in loss on other real estate.
Intangible Assets and Goodwill: The value of core deposits acquired in a
1995 branch acquisition are amortized on an accelerated method over their
expected lives. The excess of purchase price over the fair value of assets
and liabilities acquired (goodwill) is amortized on a straight-line basis
over 12 years.
Income Taxes: In 1995, the Corporation retroactively adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS No.
109), by restating 1991 and subsequent years. The Corporation records income
tax expense based on the amount of taxes due on its tax return plus deferred
taxes computed based on the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, using enacted tax rates. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
- -----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Income (Loss) Per Common Share: Net income (loss) per common share is
based on the weighted average common shares outstanding during the years
presented, retroactively adjusted for a two-for-one stock split effected
December 31, 1993. The stock split was recorded at par value. Beginning in
1994, Employee Stock Ownership Plan shares are considered outstanding for net
income (loss) per share calculations as they are committed to be released;
unallocated shares are not considered outstanding. The weighted average
number of common shares used in the per share computations were 481,759 in
1995, 472,876 in 1994 and 482,532 in 1993.
Statement of Cash Flows: For purposes of this statement, cash and cash
equivalents include cash on hand, demand deposits in other institutions,
federal funds sold and short-term investments. The Corporation reports net
cash flows for customer loan and deposit transactions.
Impact of New Accounting Standards: The following new accounting standards
have been issued by the Financial Accounting Standards Board that will apply
in 1996. Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets, requires a review of long-term assets
for impairment of recorded value and resulting write-downs if value is
impaired. Statement of Financial Accounting Standards No. 122, Accounting
for Mortgage Servicing Rights, requires recognition of an asset when servicing
rights are retained on in-house originated loans that are sold. Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, requires proforma disclosure of the effect on net income of
valuing future option grants at their estimated fair value. These Statements
are not expected to have a material effect on the Corporation's financial
position or results of operations.
Reclassification: Certain reclassifications have been made to prior period
consolidated financial statements to place them on a basis comparable with
the current year's consolidated financial statements.
NOTE 3 - CASH AND DUE FROM BANKS
Included in cash and due from banks are amounts required to be deposited with
the Federal Reserve Bank. These reserve balances vary, depending on the
level of customer deposits in the Corporation's subsidiary bank. At
December 31, 1995 and 1994, the Federal Reserve balances were $717,000 and
$694,000, respectively.
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ----------------------------------------------------------------------------
NOTE 4 - SECURITIES
The amortized cost and fair value of securities are as follows at December 31,
in thousands:
Available for Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
1995
[S] [C] [C] [C] [C]
U.S. Government agencies $ 20,660 $ 120 $ (9) $ 20,771
Obligations of states and
political subdivisions 2,282 6 (16) 2,272
Mortgage-backed securities 24,786 54 (210) 24,630
Equity securities 992 992
------- ----- ----- --------
$ 48,720 $ 180 $(235) $ 48,665
------- ----- ----- --------
1994
U.S. Government agencies $ 462 $ (3) $ 459
Mortgage-backed securities 26,769 (1,718) 25,051
Equity securities 993 993
-------- ----- --------
$ 28,224 $(1,721) $ 26,503
-------- ----- --------
Held to Maturity
1994
U.S. Government agencies $ 952 $ (7) $ 945
Obligations of states
and political
subdivisions 12,965 $ 65 (580) 12,450
Mortgage-backed securities 16,667 (1,307) 15,360
-------- ----- ------ --------
$ 30,584 $ 65 $(1,894) $ 28,755
-------- ----- ------ --------
Transfer of Securities from HTM to AFS: Effective in May 1995, the entire
portfolio of securities held to maturity were reclassified as securities
available for sale. The amount of securities transferred had a book value
of $30,249,000, a fair value of $29,499,000, and a net unrealized loss of
$750,000 at the time of transfer. Management believes that classification
of all securities as available for sale will provide the Bank with greater
flexibility in managing the Bank's assets and liabilities.
- -----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 4 - SECURITIES (Continued)
The amortized cost and fair value of securities at December 31, 1995, by
contractual maturity, are shown below in thousands. Maturities may differ
from contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
Available for Sale
Amortized Fair
Cost Value
<S> <C> <C>
Due in one year or less $ 1,243 $ 1,239
Due after 1 year through 5 years 6,507 6,522
Due after 5 years through 10 years 15,192 15,282
Mortgage-backed securities 24,786 24,630
Equity securities 992 992
------- --------
$ 48,720 $ 48,665
======== ========
</TABLE>
Because of their variable payments, mortgage-backed securities are not
reported by a specific maturity grouping.
Sales activities for the years ended December 31 were as follows, in
thousands:
<TABLE>
Available for Sale Held to Maturity
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Sales proceeds $62,290 $20,612 $78,981 $ 9,251
Gross gains 334 104 980 411
Gross losses 445 478 167 23
</TABLE>
At December 31, 1995, mortgage-backed securities with a carrying value of
approximately $11,995,000 were pledged to secure public deposits and advances
from the Federal Home Loan Bank (Note 10).
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 5 - LOANS
Total loans consist of the following at December 31, in thousands:
<TABLE>
1995 1994
<S> <C> <C>
Commercial $ 20,923 $ 17,349
Consumer 30,335 25,907
Real Estate 39,073 38,577
--------- ---------
$ 90,331 $ 81,833
========= =========
</TABLE>
Loans held for sale totaled $1,115,000 and $25,000 at December 31, 1995 and
1994, respectively. Loans sold with servicing retained totaled $1,671,000
and $32,088,000 at December 31, 1995 and 1994, respectively.
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
An analysis of activity in the allowance for loan losses for the years ended
December 31, follows in thousands:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Balance - January 1 $ 949 $ 902 $ 993
Provision charged to expense 307 180 150
Loans charged off (386) (207) (348)
Recoveries 118 74 107
----- ----- ------
Balance - December 31 $ 988 $ 949 $ 902
===== ===== ======
Information regarding impaired
loans is as follows for 1995:
Average investment in
impaired loans $ 319
Interest income recognized
on impaired loans on cash basis 44
Information regarding impaired loans at
December 31, 1995 is as follows:
Total impaired loans $ 389
Less loans for which no allowance
for loan losses is allocated (389)
------
Impaired loans for which an
allowance for loan losses
is allocated $ 0
------
Portion of allowance allocated
to these loans $ 0
------
</TABLE>
Nonperforming loans, including loans on nonaccrual and loans past due greater
than 90 days, totaled $1,014,000 at December 31, 1994.
- -----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 7 -PREMISES AND EQUIPMENT
Premises and equipment by classification are as follows at December 31, in
thousands:
<TABLE>
1995 1994
<S> <C> <C>
Land $ 640 $ 497
Buildings and improvements 4,507 4,712
Furniture and fixtures 3,974 3,915
------- -------
9,121 9,124
Accumulated depreciation (3,541) (3,077)
------- -------
$ 5,580 $ 6,047
======= =======
</TABLE>
NOTE 8 - DEPOSITS
The aggregate amount of time certificates of deposit in denominations of
$100,000 or more approximated $2,980,000 and $3,567,000 as of December 31,
1995 and 1994, respectively.
At December 31, 1995, the maturity of certificates of deposits for each year
is as follows:
<TABLE>
<S> <C>
1996 $ 39,023
1997 4,432
1998 3,992
1999 4,185
2000 3,783
Afterwards 176
--------
$ 55,591
========
</TABLE>
NOTE 9 - INCOME TAXES
The following are the components of the federal income tax expense (benefit)
for the years ended December 31, in thousands:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Current expense $ 57 $ 27 $ 232
Deferred expense (benefit) (112) (13) 28
Net operating loss benefit (66) (96)
----- ----- ------
$(121) $ (82) $ 260
===== ===== ======
</TABLE>
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ---------------------------------------------------------------------------
NOTE 9 - INCOME TAXES (Continued)
The net deferred tax asset (liability) at December 31, 1995 and 1994 is
comprised of the following:
<TABLE>
1995 1994
<S> <C> <C>
Deferred tax assets
Net unrealized depreciation on
securities available for sale $ 19 $ 585
Allowance for loan losses 154 140
Nonaccrual interest 3 14
Pension 100
AMT credit carry forward 108 107
Net operating loss 162 96
Other 32 36
------ ------
478 1,078
Deferred tax liabilities
Fixed assets (348) (223)
Purchase accounting adjustments (310) (477)
Pension (17)
Other (45) (61)
------ ------
(720) (761)
------ ------
Net deferred tax asset (liability) $ (242) $ 317
====== ======
No valuation allowance has been provided on deferred tax assets.
</TABLE>
The difference between the financial statement tax expense and amounts
computed by applying the federal statutory tax rate of 34% to pretax income
is reconciled as follows:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Statutory rate applied to income (loss)
before federal income taxes $ (51) $ 85 $ 575
Add (Deduct)
Effect of tax exempt interest (125) (210) (299)
Effect of disallowed interest
expense 19 27 31
Other 36 16 (47)
------ ------ ------
$ (121) $ (82) $ 260
</TABLE>
A tax operating loss carryforward in the amount of $96,000 expires in 2009.
The remaining $66,000 in carryforward expires in 2010.
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ----------------------------------------------------------------------------
NOTE 10 - LONG TERM BORROWINGS
Included in long-term borrowings on the consolidated balance sheets are
advances from the Federal Home Loan Bank (FHLB) which consist of the
following at December 31, in thousands:
<TABLE>
Rate at
December 31, Maturity 1995 1994
1995
<S> <C> <C> <C> <C>
Adjustable Rate Advances:
November 10, 1999 $ 5,000
5.908% July 15, 1998 $9,000 10,000
Fixed Rate Advances:
August 15, 2003 2,364
December 15, 2003 2,364
------ ------
$9,000 $19,728
====== ======
</TABLE>
The adjustable rate advances are priced at the three-month LIBOR rate less
three basis points. The advances are secured by approximately $11,495,000
in securities as of December 31, 1995. Interest is payable in monthly
installments through the date of maturity. Prepayments on the adjustable
rate advances up to 10% of the principal balance will be accepted by the
FHLB given the Corporation's notification to the FHLB of their intent to
prepay.
NOTE 11 - EMPLOYEE BENEFIT PLANS
The Corporation maintains an Employee Stock Ownership Plan (ESOP), which
invests primarily in stock of North Bank Corporation. The ESOP is a stock
bonus and defined contribution plan covering substantially all full-time
employees ages 21 or older, having completed one full year of service. In
accordance with the terms of the ESOP, employees may make voluntary
contributions to the Plan of up to 10 percent of eligible compensation,
subject to certain limitations. The Corporation will match employee
contributions equal to the greater of 50% of the first 6% of compensation
deferred by the participant or a discretionary amount determined by the
employer. The Corporation may also make a supplemental matching contribution
to the Plan in an amount determined by the employer. The Corporation's
contributions for 1995 and 1994 were $62,000 and $49,000, respectively. At
December 31, 1995, 48,114 shares were allocated to individual participants
under the plan.
The ESOP had a loan from a commercial bank which was paid off during 1995.
Accordingly, the Corporation had guaranteed the ESOP's debt. As loan payments
were made, unallocated shares were released and allocated to plan participants.
The ESOP's repayments of the debt were made from the contributions and
dividends on stock it received from the Corporation.
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ----------------------------------------------------------------------------
NOTE 11 - EMPLOYEE BENEFIT PLANS (Continued)
The Corporation has a stock option plan, adopted by shareholders in 1993,
which provides for the grant of a maximum of 20,000 shares of the
Corporation's common stock to certain officers and employees at a price which
is not less than the fair market value of the stock at the time the options
are granted. The options granted are exercisable immediately and expire
five years after the date of the grant. No options were granted in 1993.
Activity in the plan was as follows:
<TABLE>
Shares
Option Subject to
Price Option
<S> <C> <C>
Options granted in 1994 $ 16.25 3,039
Options expired 16.25 (218)
-----
Outstanding December 31, 1994 2,821
Options granted 16.45 3,412
Options expired 16.25 (262)
Options expired 16.45 (255)
Options exercised 16.25 (283)
Options exercised 16.45 (279)
-----
Outstanding December 31, 1995 5,154
=====
Exercisable at December 31, 1995 16.25 2,276
16.45 2,878
-----
5,154
=====
</TABLE>
Nonqualified stock options were granted to an officer of the Corporation
during 1993. The options cover 4,000 shares of common stock at the price of
$15.13 and expire in 1998. At December 31, 1995, the options had not been
exercised.
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ---------------------------------------------------------------------------
NOTE 11 - EMPLOYEE BENEFIT PLANS (Continued)
The Corporation sponsored a non-contributory, defined benefit pension plan
covering substantially all employees. On December 31, 1994, the Corporation
curtailed the defined benefit pension plan, which resulted in the freezing of
benefits as of that date. The net loss due to the plan curtailment was
$72,230 for 1994. During December 1995, the Corporation terminated the plan
and settled $1,103,000 of the accumulated benefit obligation by making
cash payments to plan participants and purchasing nonparticipating annuity
contracts. The remaining accumulated benefit obligation is expected to be
settled by April 1996. Defined benefits were not provided under any
successor plan. The net loss due to the plan settlement was $773,910 for
1995.
The following sets forth the plan's funded status and amounts recognized in
the consolidated balance sheets at December 31, in thousands:
<TABLE>
1995 1994
<S> <C> <C>
Actuarial present value of vested accumulated
benefit obligation $ (88) $ (1,098)
Plan assets at fair value 178 802
------ --------
Excess (deficiency) of plan assets
over (under) accumulated benefit
obligation 90 (296)
Unrecognized net loss 536
Unrecognized transition asset (33)
Adjustment required to recognize
minimum liability (503)
------ ---------
Net pension assets (liabilities) $ 90 $ (296)
====== =========
</TABLE>
Net pension cost included in operations, including the effects of curtailment
and settlement, consisted of the following components:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Service cost-benefits earned $ 88 $ 80
Interest cost on projected benefit
obligation $ 75 80 79
Expected return on plan assets (92) (76) (71)
Net amortization and deferral (1) 34 34
Net loss due to curtailment 72
Net loss due to settlement 774
------- ------ ------
Net periodic pension cost $ 756 $ 198 $ 122
======= ====== ======
</TABLE>
- -----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- -----------------------------------------------------------------------------
NOTE 11 - EMPLOYEE BENEFIT PLANS (Continued)
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, the Corporation recorded an additional minimum pension
liability adjustment in 1994 representing the excess of the accumulated
benefit obligation over the fair value of plan assets plus the amount
recognized as prepaid pension costs. The additional minimum pension liability
was included in "Other liabilities". This transaction, which had no impact
on earnings, resulted in a reduction of shareholders' equity in 1994 of
$332,640, net of tax.
A weighted average discount rate of 7% was used in determining the actuarial
present value of the accumulated benefit obligation in 1995 and 1994. The
expected long-term rate of return on plan assets was 9% in both years.
NOTE 12 - RELATED PARTY TRANSACTIONS
The Corporation enters into transactions with certain executive officers,
directors, and their related interests. Included in these transactions are
loans which amounted to approximately $130,000 and $309,000 at December 31,
1995 and 1994, respectively. Deposit accounts with the same individuals
amounted to $549,324 and $492,863 at December 31, 1995 and 1994, respectively.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
From time to time, the Corporation is involved in legal matters in the
ordinary course of business. Management believes that the ultimate
resolution of such matters will not have a material effect on the
consolidated financial statements.
The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet financing needs of its customers. These
financial instruments include commitments to make loans and unused lines of
credit. The Bank follows the same credit policy to make such commitments as
is followed for loans and investments recorded in the consolidated financial
statements.
As of December 31, 1995, the Bank has outstanding commitments to make loans of
which 67% are at fixed rates. These interest rates range from 8.25% to 9.75%.
The Bank also funds unused lines of credit of which 26% are at fixed rates.
The fixed interest rates on the line of credits range from 6.20% to 11.75%.
Outstanding commitments at December 31 were as follows:
<TABLE>
1995 1994
<S> <C> <C>
To make loans $ 341,000 $ 201,000
To fund lines of credit 7,152,000 3,091,000
To extend letters of credit 75,000 68,000
</TABLE>
- -----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 14 - NORTH BANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED
FINANCIAL INFORMATION (in thousands)
Presented below are condensed financial statements for the parent company:
<TABLE>
Condensed Balance Sheets
1995 1994
<S> <C> <C>
Assets
Cash $ 34 $ 37
Investment in subsidiary 10,545 9,415
Other assets 67 71
--------- -------
$ 10,646 $ 9,523
========= =======
Shareholders' equity $ 10,646 $ 9,523
========= =======
</TABLE>
<TABLE>
Condensed Statements of Income
1995 1994 1993
<S> <C> <C> <C>
Dividends from subsidiary $ 289 $ 317 $ 578
Operating expenses 20 73 64
------ ------ ------
Income before federal income
tax and equity in undistributed
or excess distributed 269 244 514
earnings or loss of subsidiary
Federal income tax benefit 4 25 20
----- ------ ------
Income before equity in undistributed
or excess distributed earnings
or loss of subsidiary 273 269 534
Equity in undistributed or excess
distributed earnings or loss of
subsidiary (302) 64 897
----- ------ ------
Net income $ (29) $ 333 $1,431
====== ====== ======
- ---------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
- ----------------------------------------------------------------------------
NOTE 14 - NORTH BANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED
FINANCIAL INFORMATION (in thousands) (Continued)
</TABLE>
<TABLE>
Condensed Statements of Cash Flows
1995 1994 1993
<S> <C> <C> <C>
Cash flow from operating activities
Net income(loss) $ (29) $ 333 $ 1,431
Adjustments to reconcile net
income to net cash from operating
activities
Equity in subsidiary's net
(income) loss 13 (381) (1,475)
Increase(decrease) in other
assets 4 (13) (8)
------- ------ ------
Net cash from operating
activities (12) (61) (52)
Cash flow from investing activities
Increase (decrease) in advances
to subsidiary (45)
Dividends from subsidiary 289 317 578
------- ------ ------
Net cash from investing activities 289 317 533
Cash flows from financing activities
Dividends paid to shareholders (289) (288) (265)
Issuance of common stock 9
Repurchases of common stock (147)
------- ------ ------
Net cash from financing
activities (280) (288) (412)
------- ------ ------
Net increase in cash and cash equivalents (3) (32) 69
Cash at beginning of period 37 69
------- ------ ------
Cash at end of year $ 34 $ 37 $ 69
======= ====== ======
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 15 - DISCLOSURES REGARDING FAIR VALUE OF FINANCIAL
INSTRUMENTS
(in thousands)
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and short-term investments
For these short-term instruments, the carrying amount is a reasonable estimate
of fair value.
Securities
For securities, fair value is based upon market price quotes from brokers
utilizing pricing formulas.
Loans
The fair value of loans is estimated by discounting future cash flows using
the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Deposit liabilities
The fair value of demand deposits, savings accounts, and certain money market
deposits is the amount payable on demand at the reporting date. The fair
value of fixed-maturity certificates of deposit is estimated by discounting
future cash flows using the rates currently offered for deposits of similar
remaining maturities.
Long-term borrowings
The fair value of FHLB advances is estimated by discounting future cash flows
using rates currently offered for similar terms.
Accrued interest receivable/payable
For these items, the carrying amount is a reasonable estimate of fair value.
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 15 - DISCLOSURES REGARDING FAIR VALUE OF FINANCIAL
INSTRUMENTS
(in thousands) (Continued)
Commitments to extend credit and standby letters of credit
The fair value of commitments is estimated using the fees currently charged
to enter similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed-
rate loan commitments, fair value also considers the difference between
current levels of interest rates and the committed rates. The fair value of
letters of credit is based on fees currently charged for similar agreements or
on the estimated costs to terminate them or otherwise settle the obligations
with the counterparties at the reporting date. The fair values associated
with these financial instruments are immaterial at December 31, 1995 and 1994.
The estimated fair values of the Corporation's financial instruments are as
follows:
</TABLE>
<TABLE>
1 9 9 5 1 9 9 4
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Financial assets
Cash and short-term investments $ 6,621 $ 6,621 $ 8,121 $ 8,121
Securities 48,665 48,665 57,087 55,257
Loans 90,331 90,159 81,833 80,308
Less: allowance for
loan loss (988) (988) (949) (949)
Accrued interest receivable 1,102 1,102 1,010 1,010
Financial liabilities
Deposits 131,765 132,267 123,765 124,121
Borrowings 9,000 9,000 20,828 20,328
Accrued interest payable 516 516 496 496
</TABLE>
- ----------------------------------------------------------------------------
(Continued)
<PAGE>
NORTH BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE 16 - RESTRICTIONS ON SUBSIDIARY DIVIDENDS
Banking laws and regulations restrict the amount the Bank can transfer to the
Corporation in the form of cash dividends. At December 31, 1995, $3.6 million
of retained earnings of the Bank was available for distribution to the
Corporation as dividends without prior regulatory approval. It is not the
intent of management to pay dividends in amounts which would reduce the
capital of the Bank to a level below that which is considered prudent by
management and in accordance with the guidelines of regulatory authorities.
NOTE 17 - PENDING MERGER
In February 1996, the Corporation entered into a definitive agreement to be
acquired by Independent Bank Corporation of Ionia, Michigan (a publicly-traded
corporation). The purchase price is estimated to be $33 per share of North
Bank Corporation common stock. The acquisition is subject to both regulatory
and shareholder approval and is expected to be completed during the second
quarter of 1996.
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
Independent Bank Corporation
Pro forma combined consolidated balance sheet (In thousands)
As of March 31, 1996
North Bank
Corporation Pro forma
IBC Actual Adjustments combined
<S> <C> <C> <C> <C>
Assets
Cash and Cash Equivalents
Cash and due from banks $14,776 $6,579 $21,355
Federal funds sold 5,500 0 5,500
------------------------------------ -------
Total Cash and
Cash Equivalents 20,276 6,579 0 26,855
------------------------------------ -------
Securities available
for sale 90,108 47,890 1,015 (a)
(1,015)(b) 137,998
Securities held
to maturity 27,284 0 27,284
Federal Home Loan Bank
stock, at cost 7,710 993 8,703
Loans held for sale 15,172 1,856 17,028
Loans
Commercial and agricultural 110,278 20,411 130,689
Real estate mortgage 225,642 37,223 262,865
Installment 83,135 29,580 112,715
------------------------------------ -------
Total Loans 419,055 87,214 0 506,269
Allowance for loan losses (5,367) (970) (6,337)
------------------------------------ -------
Net loans 413,688 86,244 0 499,932
Property and equipment, net 10,174 5,447 (327)(b) 15,294
Intangibles 2,464 383 886 (b)
5,608 (c)
375 (d) 9,716
Accrued income and
other assets 8,840 2,578 (345)(a)
456 (b)
193 (d) 11,722
------------------------------------- -------
Total Assets $595,716 $151,970 $6,846 $754,532
====================================== =======
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing $45,615 $16,783 $62,398
Savings and NOW 223,367 57,568 280,935
Time 156,513 55,560 212,073
-------------------------------------- -------
Total Deposits 425,495 129,911 0 555,406
Federal funds purchased 6,450 1,500 7,950
Other borrowings 108,094 9,000 16,300 (c) 133,394
Accrued expenses and
other liabilities 7,206 1,537 568 (d) 9,311
-------------------------------------- -------
Total Liabilities 547,245 141,948 16,868 706,061
-------------------------------------- -------
Shareholders' Equity
Common stock, $1.00
par value 2,723 1,207 (1,207)(c) 2,723
Capital surplus 20,405 5,635 (5,635)(c) 20,405
Retained earnings 24,866 3,850 (3,850)(c) 24,866
Net unrealized gain
(loss) on securities
available for sale,
net of related tax effect 477 (670) 670 (a) 477
------------------------------------- -------
Total Shareholders' Equity 48,471 10,022 (10,022) 48,471
------------------------------------- -------
Total Liabilities and
Shareholders' Equity $595,716 $151,970 $6,846 $754,532
===================================== =======
</TABLE>
<PAGE>
Notes and adjustments
(a) To reverse North Bank Corporation's unrealized loss adjustment on
securities available for sale pursuant to FAS 115.
(b) Represents adjustments related to purchase accounting to record book
balances at market value.
(c) To record goodwill - Purchase price plus capitalizable professional
costs, less book value of assets. (Assets adjusted to market value
in adjustment (b) above)
(d) Represents adjustments related to purchase accounting to record accrued
severance and external loan and deposit conversion costs to be incurred.
<PAGE>
<TABLE>
<CAPTION
Independent Bank Corporation
Pro forma combined consolidated statements of income (In thousands)
For the three months ended March 31, 1996
North Bank
Corporation Pro forma
IBC Actual Adjustments combined
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $10,398 $2,024 $12,422
Securities 0
Taxable 1,325 697 $40 (a) 2,062
Tax-exempt 455 24 479
Other investments 210 39 249
----------------------------------- ------
Total Interest Income 12,388 2,784 40 15,212
----------------------------------- ------
Interest Expense
Deposits 3,346 1,151 4,497
Other borrowings 1,671 122 285 (b) 2,078
----------------------------------- ------
Total Interest Expense 5,017 1,273 285 6,575
----------------------------------- ------
Net Interest Income 7,371 1,511 (245) 8,637
Provision for loan losses 207 75 282
----------------------------------- ------
Net Interest Income After
Provision for Loan Losses 7,164 1,436 (245) 8,355
----------------------------------- ------
Non-interest Income
Service charges on
deposit accounts 475 96 571
Net gains (losses) on
asset sales
Real estate mortgage loans 441 96 537
Securities (51) 88 37
Other income 359 69 428
----------------------------------- ------
Total Non-interest income 1,224 349 0 1,573
----------------------------------- ------
Non-interest Expense
Salaries and employee
benefits 3,346 926 (184)(c) 4,088
Occupancy, net 434 123 557
Furniture and fixtures 360 173 (58)(d) 475
Other expenses 1,567 434 120 (d) 2,121
----------------------------------- ------
Total Non-interest Expense 5,707 1,656 (122) 7,241
----------------------------------- ------
Income before Federal
Income Tax 2,681 129 (123) 2,687
Federal income tax expense 791 48 (1) 838
----------------------------------- ------
Net Income $1,890 $81 ($122) $1,849
=================================== ======
Earnings per share $0.69 $0.17 $0.68
=================== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Independent Bank Corporation
Pro forma combined consolidated statements of income (In thousands)
For the twelve months ended December 31, 1995
North Bank
Corporation Pro forma
IBC Actual Adjustments combined
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $37,861 $7,765 $45,626
Securities 0
Taxable 5,919 3,002 $160 (a) 9,081
Tax-exempt 1,781 342 2,123
Other investments 421 124 545
----------------------------------- -------
Total Interest Income 45,982 11,233 160 57,375
----------------------------------- -------
Interest Expense
Deposits 12,470 4,401 16,871
Other borrowings 5,430 983 1,138 (b) 7,551
----------------------------------- -------
Total Interest Expense 17,900 5,384 1,138 24,422
----------------------------------- -------
Net Interest Income 28,082 5,849 (978) 32,953
Provision for loan losses 636 307 943
----------------------------------- -------
Net Interest Income After
Provision for Loan Losses 27,446 5,542 (978) 32,010
----------------------------------- -------
Non-interest Income
Service Charges on deposit
accounts 1,919 404 2,323
Net gains (losses) on asset
sales
Real estate mortgage loans 728 548 1,276
Securities (120) (111) (231)
Other income 1,239 361 1,600
----------------------------------- ------
Total Non-interest income 3,766 1,202 0 4,968
----------------------------------- ------
Non-interest Expense
Salaries and employee
benefits 12,163 3,512 15,675
Occupancy, net 1,548 468 2,016
Furniture and fixtures 1,345 740 (232)(d) 1,853
Other expenses 6,646 2,174 480 (d) 9,300
----------------------------------- -------
Total Non-interest Expense 21,702 6,894 248 28,844
----------------------------------- -------
Income before Federal
Income Tax 9,510 (150) (1,226) 8,134
Federal income tax expense 2,700 (121) (254) 2,325
------------------------------------ ------
Net Income $6,810 ($29) ($972) $5,809
==================================== ======
Earnings per share $2.50 ($0.06) $2.13
</TABLE>
<PAGE>
Explanation of adjustments
(a) Increase in interest income due to accretion of purchase accounting
adjustments.
(b) Interest expense on debt incurred to fund transaction.
(c) Elimination of payment to executive officer of North Bank Corporation
relating directly to the transaction.
(d) Amortization of goodwill (15 year straightline) and purchase accounting
adjustments.
(e) Decrease in federal income taxes reflecting the decrease in income before
federal income tax at 34%, adjusted for goodwill amortization.
<PAGE>
<TABLE>
<CAPTION>
North Bank Corporation
Consolidated Balance Sheets
March 31, December 31,
1996 1995
-------------------------------------
(unaudited)
<S> <C> <C>
Assets
Cash and Cash Equivalents
Cash and due from banks $6,579,000 $6,421,000
Federal funds sold 200,000
-------------------------------------
Total Cash and Cash Equivalents 6,579,000 6,621,000
Securities available for sale 48,883,000 48,665,000
Real estate loans held for sale 1,856,000 1,115,000
Loans
Commercial 20,411,000 20,923,000
Consumer 29,580,000 30,335,000
Real Estate 37,223,000 37,958,000
--------------------------------------
Total Loans 87,214,000 89,216,000
Allowance for loan losses (970,000) (988,000)
--------------------------------------
Net loans 86,244,000 88,228,000
Property and equipment, net 5,447,000 5,580,000
Accrued interest receivable 1,081,000 1,102,000
Other assets 1,880,000 1,405,000
--------------------------------------
Total Assets $151,970,000 $152,716,000
======================================
Liabilities and Shareholders' Equity
Deposits
Non-interest bearing $16,783,000 $17,872,000
Savings and NOW 57,568,000 58,302,000
Time 55,560,000 55,591,000
--------------------------------------
Total Deposits 129,911,000 131,765,000
Long-term borrowings 9,000,000 9,000,000
Federal funds purchased 1,500,000 0
Accrued expenses and other liabilities 1,537,000 1,305,000
--------------------------------------
Total Liabilities 141,948,000 142,070,000
--------------------------------------
Shareholders' Equity
Common stock, no par value 1,207,000 1,207,000
Capital surplus 5,635,000 5,635,000
Retained earnings 3,850,000 3,841,000
Net unrealized loss on securities
available for sale, net of related
tax effect (670,000) (37,000)
--------------------------------------
Total Shareholders' Equity 10,022,000 10,646,000
--------------------------------------
Total Liabilities and
Shareholders' Equity $151,970,000 $152,716,000
======================================
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
North Bank Corporation
Consolidated Statements of Income
Three months ended March 31,
1996 1995
(unaudited)
<S> <C> <C>
Interest Income
Loans, including fees $2,024,000 $1,834,000
Securities
Taxable 697,000 847,000
Tax-exempt 24,000 145,000
Federal funds sold 39,000 22,000
---------------------------
Total Interest Income 2,784,000 2,848,000
---------------------------
Interest Expense
Deposits 1,151,000 992,000
Borrowings 122,000 334,000
---------------------------
Total interest expense 1,273,000 1,326,000
---------------------------
Net Interest Income 1,511,000 1,522,000
Provision for loan losses 75,000 45,000
---------------------------
Net Interest Income After
Provision for Loan Losses 1,436,000 1,477,000
---------------------------
Non-interest Income
Service charges on deposit accounts 96,000 99,000
Net gains on sales of securities 96,000 79,000
Gain on sale of loans 88,000 63,000
Other income 69,000 99,000
---------------------------
Total Non-interest income 349,000 340,000
---------------------------
Non-interest Expense
Salaries and employee benefits 926,000 702,000
Occupancy, net 123,000 118,000
Furniture and equipment 173,000 174,000
Other expenses 434,000 481,000
---------------------------
Total Non-interest Expense 1,656,000 1,475,000
---------------------------
Income before Federal Income Tax 129,000 342,000
Federal income tax expense 48,000 139,000
---------------------------
Net Income $81,000 $203,000
===========================
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
North Bank Corporation
Consolidated Statements of Cash Flows
Three months ended March 31,
1996 1995
(unaudited)
<S> <C> <C>
Cash Flows from Operating Activities
Net income $81,000 $203,000
Adjustment to reconcile net income to net
cash provided by operating activities
Proceeds from sales of loans held for sale 5,764,000 2,857,000
Disbursements for loans held for sale (6,417,000) (3,238,000)
Depreciation 156,000 155,000
Provision for loan losses 75,000 45,000
Net amortization of investments 32,000 13,000
Net gains on the sales of securities (96,000) (79,000)
Net gains on sales of real estate
mortgage loans (88,000) (63,000)
Increase in accrued income and other assets (151,000) (1,417,000)
Increase in accrued expenses and other
liabilities 232,000 226,000
---------------------------
Net Cash from Operating Activities (412,000) (1,298,000)
---------------------------
Cash Flows from Investing Activities
Proceeds from sales of securities available
for sale 22,806,000 8,246,000
Proceeds from maturities, calls, and paydowns
of securities available for sale 2,002,000 2,000
Purchases of securities available for sale (25,921,000) (5,975,000)
Loan originations net of principal payments
received 1,909,000 (2,546,000)
---------------------------
Net Cash from Investing Activities 796,000 (273,000)
---------------------------
Cash Flows from Financing Activities
Net decrease in deposits (1,854,000) (1,650,000)
Cash dividends paid (72,000) (72,000)
Increase in other borrowings 1,500,000 3,100,000
---------------------------
Net Cash from Investing Activities (426,000) 1,378,000
---------------------------
Net decrease in Cash and Cash Equivalents (42,000) (193,000)
Cash and Cash Equivalents at Beginning
of Period 6,621,000 8,121,000
---------------------------
Cash and Cash Equivalents at End of Period $6,579,000 $7,928,000
===========================
Cash paid during the period for:
Interest $1,245,000 $1,275,000
===========================
Federal income taxes 12,000 35,000
===========================
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
North Bank Corporation
Consolidated Statements of Shareholders' Equity
Three months ended March 31,
1996 1995
(unaudited)
<S> <C> <C>
Balance at Beginning of Period $10,646,000 $9,523,000
Net income 81,000 203,000
Cash dividends declared (72,000) (72,000)
Net change in unrealized gain/(loss)
on securities available for sale,
net of related tax effect (633,000) 185,000
---------------------------
Balance at End of Period $10,022,000 $9,839,000
---------------------------
</TABLE>
See notes to consolidated financial statements
<PAGE>
North Bank Corporation
Notes to Interim Consolidated Financial Statements
1. In the opinion of management of North Bank Corporation, the accompanying
unaudited consolidated financial statements contain all the adjustments
(consisting only of normal recurring accruals) necessary to present
fairly the consolidated financial position of North Bank Corporation as
of March 31, 1996 and December 31, 1995, and the results of operations
for the three-month periods ended March 31, 1996 and 1995.
2. Management's assessment of the allowance for loan losses and the related
provision that is charged to operations is based upon periodic reviews of
the loan portfolio and an assessment of the effects of current
developments with respect to the borrowers, changes in economic
conditions and results of examinations by regulatory authorities. Loans
on non-accrual status, past due more than 90 days and still accruing
interest, or restructured amounted to $922,000 at March 31, 1996 and
$772,000 at December 31, 1995.
3. The provision for federal income taxes for the three-month periods ended
March 31, 1996 and 1995 is calculated using annualized rates on taxable
income for the respective periods.
4. The results of operations for three-month period ended March 31, 1996,
are not necessarily indicative of the results to be expected for the
year ended December 31, 1996.
5. The unaudited consolidated financial statements should be read in
conjunction with the notes to the audited consolidated financial
statements contained elsewhere in the Form 8-K.
<PAGE>
EXHIBIT 4.1
AMENDED AND RESTATED LOAN AGREEMENT
THIS AGREEMENT, dated as of June 6, 1996, is by and between
INDEPENDENT BANK CORPORATION, a corporation organized under the laws of
the State of Michigan (the "Borrower"), and THE NORTHERN TRUST COMPANY, an
Illinois banking corporation (the "Lender").
The parties hereto agree as follows:
SECTION 1
LOANS
SECTION 1.1 TERM LOAN. Subject to the terms and conditions of
this Agreement, the Lender agrees to lend to the Borrower, and the Borrower
agrees to borrow from the Lender, on or before July 15, 1996, the sum of TEN
MILLION AND NO/100 UNITED STATES DOLLARS ($10,000,000.00) (the "Term
Loan").
SECTION 1.2 TERM NOTE. The Term Loan shall be evidenced by a
promissory note (the "Term Note"), substantially in the form set forth in
Exhibit A, with appropriate insertions, dated the date of the Term Loan,
payable to the order of the Lender, and in the original principal amount of
the Term Loan. The Term Loan shall be payable in twenty (20) consecutive
quarterly principal installments, each installment due on the date and in
the principal amount set forth below:
Amount of
Principal
Date Installment
---- -----------
September 30, 1996 $500,000.00
December 31, 1996 $500,000.00
March 31, 1997 $500,000.00
June 30, 1997 $500,000.00
September 30, 1997 $500,000.00
December 31, 1997 $500,000.00
March 31, 1998 $500,000.00
June 30, 1998 $500,000.00
September 30, 1998 $500,000.00
December 31, 1998 $500,000.00
March 31, 1999 $500,000.00
June 30, 1999 $500,000.00
September 30, 1999 $500,000.00
December 31, 1999 $500,000.00
March 31, 2000 $500,000.00
June 30, 2000 $500,000.00
September 30, 2000 $500,000.00
<PAGE>
Amount of
Principal
Date Installment
---- -----------
December 31, 2000 $500,000.00
March 31, 2001 $500,000.00
June 30, 2001 All then remaining
outstanding and
unpaid principal
under the Term Note
SECTION 1.3 REVOLVING LOANS. Upon and subject to the terms and
conditions hereof, the Lender shall make loans to the Borrower, from time to
time from the date of this Agreement through June 6, 1997, at such times and
in such amounts, not to exceed in the aggregate SEVEN MILLION AND NO/100
UNITED STATES DOLLARS ($7,000,000.00) at any one time outstanding, as the
Borrower may request in its discretion and the Lender shall agree (the
"Revolving Loan(s)"; the Term Loan and the Revolving Loan(s), each a "Loan"
and, collectively, the "Loans"). During such period, the Borrower may
request to borrow, repay, and reborrow Revolving Loans hereunder.
SECTION 1.4 REVOLVING NOTE. The Revolving Loans shall be
evidenced by a promissory note (the "Revolving Note"; the Term Note and the
Revolving Note, collectively, the "Notes"), substantially in the form of
Exhibit B, with appropriate insertions, dated the date hereof, payable to
the order of the Lender, in the principal amount of $7,000,000 and with the
amounts borrowed and repaid and the balance indorsed on the grid by the
Lender. As long as Lender is the holder of the Revolving Note it may, at
its option, in lieu of indorsing the grid, record the amounts borrowed and
repaid under and the balance due on the Revolving Note in its books and
records, which books and records treat each borrowing as a separate Revolving
Loan; such indorsement or recording by the Lender shall be rebuttably
presumptive evidence of the principal balance due on the Revolving Note. The
principal of the Revolving Note shall be payable in full on June 5, 1997. Any
and all amounts outstanding under the Fourth Amended and Restated Line of
Credit Note dated as of October 11, 1995 by Borrower in favor of Lender
as of the date hereof of the Revolving Note shall be deemed to be amounts
outstanding under the Revolving Note.
SECTION 2
INTEREST
SECTION 2.1 INTEREST. The unpaid principal amount of the Term
Loan outstanding hereunder from time to time shall bear interest until paid
in full at one of the following rates: (a) the Federal Funds-based Rate;
(b) the LIBOR-based Rate; (c) the Bank <PAGE> Offered Rate; or (d) the
Overdue Rate. The unpaid principal amount of the Revolving Loans outstanding
hereunder from time to time shall bear interest until paid in full at one of
the following rates: (a) the Federal Funds-based Rate; (b) the LIBOR-based
Rate; or (c) the Overdue Rate. The Borrower may change the rate of interest
applicable to the outstanding principal amount of the Loans or any portion
thereof in accordance with the terms of this Section and Sections 2.2 and 2.3
hereinbelow.
(a) The "Federal Funds-based Rate" shall mean that floating
rate of interest per year equal to the sum of the Federal Funds Rate (as
herein defined) plus (i) for a Revolving Loan, three-quarters of one
percent (0.75%) or (ii) for a Term Loan, one percent (1.00%). The
"Federal Funds Rate" as used in this Agreement shall mean the weighted
average of the rates on overnight Federal funds transaction, with members
of the Federal Reserve System only, arranged by Federal funds brokers.
The Federal Funds Rate shall be determined by the Lender on the basis of
reports by Federal funds brokers to, and published daily by, the Federal
Reserve Bank of New York in the Composite Closing Quotations for U.S.
Government Securities. If such publication is unavailable or the Federal
Funds Rate is not set forth therein, the Federal Funds Rate shall be
determined on the basis of any other source reasonably selected by the
Lender. The Federal Funds Rate applicable each day shall be the Federal
Funds Rate reported as applicable to Federal funds transactions on that
date. In the case of Saturday, Sunday or legal holiday, the Federal
Funds Rate shall be the rate applicable to Federal funds transactions on
the immediately preceding day for which the Federal Funds Rate is
reported.
(b) The "Bank Offered Rate" shall mean that fixed rate of
interest per year offered by the Lender to the Borrower, for a selected
principal amount of a Term Loan and a selected interest period, and
accepted by the Borrower. Nothing herein shall be deemed to require the
Lender to make available a Bank Offered Rate.
(c) The "LIBOR-based Rate" shall mean the sum of the LIBOR
Rate (as herein defined) plus (i) for a Revolving Loan, three-quarters
of one percent (0.75%) or (ii) for a Term Loan, one percent (1.00%).
"LIBOR Rate" as used in this Agreement shall mean that fixed rate of
interest per year for deposits with maturity periods of 1, 2, 3 or 6
months (which maturity period Borrower shall select subject to the terms
stated herein) in United States dollars offered to Lender in or through
the London interbank market at or about 11:00 A.M., London time, three
days (during which banks are generally open in both Chicago and London)
before the rate is to take effect in an amount corresponding to the
amount of the requested Term Loan or Revolving Loan and for the London
deposit maturity <PAGE> requested, divided by one minus any applicable
reserve requirement (expressed as a decimal) on Eurodollar deposits of
the same amount and maturity as determined by the Lender in its sole
discretion.
(d) The "Overdue Rate" shall mean, with respect to the Loans
or any portion of the Loans not paid on its due date, that rate of
interest per year equal to two percent (2%) per year plus the greatest
of (i) the Federal Funds-based Rate, (ii) the Federal Funds-based Rate
on such due date, or (iii) the rate in effect hereunder with respect to
such Loans or portion of the Loans immediately prior to such due date.
The Overdue Rate shall apply to the Loans or any portion of the Loans in
the event any payment of principal is not made when due (whether by
acceleration or otherwise), from and including the date of such non-
payment and until such overdue payment (as well after as before judgment)
shall be paid in full.
SECTION 2.2 RATE SELECTION - REVOLVING LOANS.
Borrower may, at its option, select and change its selection of the interest
rate between the Federal Funds-based Rate and the LIBOR-based Rate (if
available as provided in Section 2.6) to apply to the outstanding principal
balance of the Revolving Loans or any portion thereof (in an amount which is
an integral multiple of $100,000.00), prior to any applicable principal
maturity date, subject to the notice requirements herein stated:
(a) At the time a Revolving Loan is made;
(b) At the expiration of the particular LIBOR-based Rate
interest period selected for the outstanding principal balance of a
Revolving Loan then bearing interest at the LIBOR-based Rate; and
(c) On any business day for the outstanding principal balance
of a Revolving Loan then bearing interest at the Federal Funds-based
Rate.
SECTION 2.3 RATE SELECTION - TERM LOANS. Borrower may, at its
option, select and change its selection of the interest rate between the
Federal Funds-based Rate, the LIBOR-based Rate (if available as provided
in Section 2.6) and the Bank Offered Rate (if available) to apply to the
outstanding principal balance of the Term Loans or any portion thereof (in an
amount which is an integral multiple of $100,000.00), prior to any applicable
principal maturity date, subject to the notice requirements herein stated:
(a) At the time the Term Loan is made;
<PAGE>
(b) At the expiration of the particular LIBOR-based Rate
interest period selected for the outstanding balance of a Term Loan
advance then bearing interest at the LIBOR-based Rate;
(c) At the expiration of the particular Bank Offered Rate
interest period selected for the outstanding balance of a Term Loan
advance then bearing interest at the Bank Offered Rate; and
(d) On any business day for the outstanding principal balance
of a Term Loan advance then bearing interest at the Federal Funds-based
Rate.
SECTION 2.4 RATE CHANGES AND NOTIFICATIONS
(a) Federal Funds-based Rate. If the Borrower wishes (i) to
borrow a Revolving Loan or any portion of a Revolving Loan at a Federal
Funds-based Rate, (ii) to borrow any advance constituting all or any
portion of the Term Loan initially at a Federal Funds-based Rate, or
(iii) to change the rate of interest on any advance or (iv) to cause the
Federal Funds-based Rate to apply to a Revolving Loan, any portion of a
Revolving Loan or a Term Loan advance for a subsequent interest period
following the expiration of the particular LIBOR-based Rate or Bank
Offered Rate interest period then in effect with respect thereto, the
Borrower shall, on or before the business day before such rate is to
take effect, give written or telephonic notice thereof. Such notice
shall specify the portion of a Revolving Loan or the amount of the Term
Loan advance to which the Federal Funds-based Rate shall apply.
(b) LIBOR-based Rate. If the Borrower wishes (i) to borrow a
Revolving Loan or any portion of a Revolving Loan at a LIBOR-based Rate,
(ii) to borrow any advance constituting all or any portion of the Term
Loan initially at a LIBOR-based Rate, (iii) to change the rate of
interest on any advance, within the limits described above, to a LIBOR-
based Rate or (iv) to cause the LIBOR-based Rate to apply to a Revolving
Loan, any portion of a Revolving Loan or a Term Loan advance for a
subsequent interest period following the expiration of the particular
LIBOR-based Rate or Bank Offered Rate interest period then in effect
with respect thereto, the Borrower shall, not less than two banking days
of the Lender prior to the banking day of the Lender on which such rate
is to take effect, give Lender written or telephonic notice thereof,
which shall be irrevocable. Such notice shall specify the amount of the
Revolving Loan (or the portion thereof) or the Term Loan advance to which
the LIBOR-based rate is to apply, the date on which such rate is to take
effect and the desired LIBOR maturity period of one, two, <PAGE> three
or six months (which maturity period shall not in any case extend after
the maturity date of such Loan).
(c) Bank Offered Rate. If the Borrower wishes to (i) to
borrow any advance constituting all or any portion of the Term Loan
initially at a Bank Offered Rate, (ii) to change the rate of interest
on any advance, within the limits described above, to a Bank Offered
Rate or (iii) to cause the Bank Offered Rate to apply to a Term Loan
advance for a subsequent interest period following the expiration of the
particular LIBOR-based Rate or Bank Offered Rate interest period then
in effect with respect thereto, the Borrower shall, on or before the
business day before such rate is desired to take effect, request the
Lender to offer an interest rate for a specified principal amount for a
specified interest period (not to exceed any applicable scheduled
principal maturity date) from the desired effective date. The Lender at
its sole discretion shall determine the availability of such rate and
may offer a rate for such term for all or a portion of the amount
specified by the Borrower. The Borrower shall accept or reject any such
rate before 1:30 P.M., Chicago time, on the same day the Lender makes
such offer. If the Lender does not make an offer or if the Borrower does
not accept the Lender's offer, the Borrower shall choose, or shall be
deeded to choose, the Federal Funds-based Rate hereunder, subject to the
limitations set forth herein.
(d) Failure to Notify.
(i) If the Borrower does not give timely notice under this
Section 2.4 to the Lender at or before the expiration of a selected
interest period with respect to any principal outstanding at the
LIBOR-based Rate, then the Borrower shall be deemed to have elected
to have such principal accrue interest after the expiration of such
interest period at the LIBOR-based Rate determined for the date on
which the existing LIBOR-based Rate interest period expires and for
a maturity period equal to the expiring LIBOR-based Rate loan or
advance; provided that, the Borrower shall be deemed to have elected
to have such principal accrue interest at the Federal Funds-based
Rate if the LIBOR-based Rate interest period for an expiring LIBOR-
based Rate loan or advance commencing at the expiration of such
existing LIBOR-based Rate interest period would extend past the
termination of the Term Loan or Revolving Loan commitment, as
appropriate.
(ii) If the Borrower does not give timely notice under
this Section 2.4 to the Lender at or before the expiration of a
selected interest period with respect to any principal outstanding
at the Bank Offered Rate, the Borrower shall be deemed to have
elected to have such principal accrue interest after the expiration
of such <PAGE> interest period at the Federal Funds-based Rate.
SECTION 2.5 INTEREST PAYMENT DATES.
(a) Basis of Computation. Interest shall be computed for the
actual number of days elapsed on the basis of a year consisting of 360
days, including the date a Loan is made and excluding the date a Loan or
any portion thereof is paid or prepaid.
(b) Interest Payment Dates. Accrued interest shall be paid
in respect of each portion of principal to which the Federal Funds-based
Rate applies on the last day of March, June, September, and December of
each year, beginning with September 30, 1996, at final maturity, and upon
payment in full and in respect of each portion of principal to which the
Bank Offered Rate or the LIBOR-based Rate applies, at the end of each
respective interest period for such portion. Interest shall be payable
upon demand in respect of each portion of principal to which the Overdue
Rate applies.
SECTION 2.6 ADDITIONAL PROVISIONS WITH RESPECT TO THE BANK
OFFERED RATE OR THE LIBOR-BASED RATE. The selection by the Borrower of the
Bank Offered Rate option or the LIBOR-based Rate option within the limits
described hereinabove and the maintenance of the Loans or any portion of the
Loans at such rates shall be subject to the following additional terms and
conditions:
(I) Availability of Deposits at a Determinable Rate. If,
after Borrower has elected to (I) to borrow a Revolving Loan or any
portion of a Revolving Loan at a LIBOR-based Rate, (ii) to borrow
any advance constituting all or any portion of the Term Loan
initially at a LIBOR-based Rate, (iii) to change the rate of
interest on any Term Loan advance, within the limits described
above, to a LIBOR-based Rate or (iv) to cause the LIBOR-based Rate
to apply to a Revolving Loan, any portion of a Revolving Loan or a
Term Loan advance for a subsequent interest period following the
expiration of the particular LIBOR-based Rate or Bank Offered Rate
interest period then in effect with respect thereto, Lender notifies
Borrower that:
(A) United States dollar deposits in the amount and for
the maturity requested are not available to Lender (in the
case of the LIBOR-based Rate option, in the London interbank
market), or
(B) reasonable means do not exist for Lender to determine
the LIBOR Rate for the amount and maturity requested,
<PAGE>
all as determined by the Lender in its sole discretion, then the
portion of the Loans outstanding subject to the LIBOR-based Rate
shall accrue interest at the Federal Funds-based Rate.
(ii) Prohibition of Making, Maintaining, or Repayment
of Principal at the Bank Offered Rate or the LIBOR-based Rate. If
any treaty, statute, regulation, interpretation thereof, or any
directive, guideline or otherwise by a central bank or fiscal
authority (whether or not having the force of law) shall either
prohibit the making of loans or advances at the Bank Offered Rate
or the LIBOR-based Rate or extend the time at which any principal
subject to the Bank Offered Rate or the LIBOR-based Rate may be
purchased, maintained, or repaid, then on and as of the date the
prohibition or extension becomes effective, the principal subject
to that prohibition or extension shall continue at the Federal
Funds-based Rate.
(iii) Payment of Principal and Interest to be Net of
Any Taxes or Costs. All payments of principal and interest shall
be made net of any taxes (other than income taxes imposed by the
United States or any state or local government authority thereof
on the income of the Lender) and costs incurred by the Lender
resulting from having principal outstanding hereunder at the Bank
Offered Rate or the LIBOR-based Rate. Without limiting the
generality of the preceding obligation, illustrations of such taxes
and costs are:
(A) (Not applicable to Bank Offered Rate) Taxes (or the
withholding of amounts for taxes) of any nature whatsoever
including income, excise, interest equalization taxes (other
than income taxes imposed by the United States or any state
thereof on the income of the Lender) as well as all levies,
imposts, duties, or fees whether now in existence or as the
result of a change in, or promulgation of, any treaty, statute,
regulation, interpretation thereof, or any directive,
guideline, or otherwise, by a central bank or fiscal authority
(whether or not having the force of law) or a change in the
basis of, or time of payment of, such taxes and other amounts
resulting therefrom;
(B) (Not applicable to Bank Offered Rate) Any reserve
or special deposit requirements against assets or liabilities
of, or deposits with or for the account of, the Lender with
respect to principal outstanding at the LIBOR-based Rate <PAGE>
(including those imposed under Regulation D of the Federal
Reserve Board) or resulting from a change in, or the
promulgation of, such requirements by treaty, statute,
regulation, interpretation thereof, or any directive,
guideline, or otherwise by a central bank or fiscal authority
(whether or not having the force of law), to the extent that
such requirements are not provided for in Section 2.1(c);
(C) (Not applicable to the Bank Offered Rate) Any other
costs resulting from compliance with treaties, statutes,
regulations, interpretations, or any directives or guidelines
(other than any such costs in effect at the time the LIBOR-
based Rate is offered by the Lender), or otherwise by a
central bank or fiscal authority (whether or not having the
force of law);
(D) Any loss (including loss of anticipated profits) or
expense incurred by reason of the liquidation or re-employment
of deposits acquired by the Lender to make a Revolving Loan or
to fund a Term Loan advance or maintain principal outstanding
under the Bank Offered Rate or the LIBOR-based Rate:
(1) As the result of a voluntary prepayment at a
date other than the last day of the interest period
selected for principal outstanding at the Bank Offered
Rate or the LIBOR-based Rate; or
(2) As the result of a mandatory repayment at a date
other than the last day of the interest period selected
for principal outstanding at the Bank Offered Rate or the
LIBOR-based Rate or as the result of the occurrence of an
Event of Default and the acceleration of any portion of
the indebtedness hereunder; or
(3) As the result of a prohibition on making,
maintaining, or repaying principal outstanding at the Bank
Offered Rate or the LIBOR-based Rate.
If the Lender incurs any such taxes or costs, the Borrower, upon
demand in writing specifying such taxes and costs, shall promptly
pay them; save for manifest error the Lender's specification shall
be presumptively deemed correct. If a Revolving Loan, any portion
thereof <PAGE> or a Term Loan advance is at any time made at the
Bank Offered Rate or the LIBOR-based Rate, such Loan or such portion
thereof shall be conclusively deemed to have been funded by or on
behalf of the Lender by the purchase of deposits corresponding in
amount and maturity to the amounts and interest periods selected by
the Borrower under this Agreement.
SECTION 3
PAYMENTS AND PREPAYMENTS
SECTION 3.1 FUNDS. Payments and prepayments of principal and
interest shall be made in immediately available funds to the Lender at its
main banking office at 50 South LaSalle Street, Chicago, Illinois.
SECTION 3.2 PREPAYMENT. The Borrower may at its option from
time to time prepay principal of the Term Loan bearing interest at the Federal
Funds-based Rate, the LIBOR-based Rate or the Bank Offered Rate in whole or in
part, provided that any partial prepayment shall be in an aggregate principal
amount of at least $100,000.00. The Borrower may at its option from time to
time prepay principal of the Revolving Loans bearing interest at the Federal
Funds-based Rate the LIBOR-based Rate or the Bank Offered Rate in whole or in
part. Any prepayments of principal of the Loans bearing interest at the
Federal Funds-based Rate shall be without premium or penalty. Any prepayment
of an amount bearing interest at the LIBOR-based Rate or the Bank Offered
Rate at a date other than the maturity date applicable to the Loan or the
portion of the Loan being prepaid shall be subject to the provisions of
Section 2.6. All prepayments of principal shall include interest accrued
to the date of prepayment on the principal amount being prepaid and all
prepayments of principal of the Term Loan or portion thereof shall be applied
to the next due installments of the Term Loan in the inverse order of
maturity.
SECTION 4
REPRESENTATIONS AND WARRANTIES
To induce the Lender to make the Loans, the Borrower represents and
warrants to the Lender that:
SECTION 4.1 ORGANIZATION. The Borrower is a corporation existing
and in good standing under the laws of the State of Michigan; each subsidiary
(specifically including but not limited to each subsidiary which is a bank
(each, a "Subsidiary Bank")) is a corporation duly existing and in good
standing under the laws of the jurisdiction of its incorporation; the Borrower
and any subsidiary (specifically including but not limited to each Subsidiary
Bank) are duly qualified, in good standing and <PAGE> authorized to do
business in each jurisdiction where, because of the nature of their activities
or properties, such qualification is required; and the Borrower and any
subsidiary (specifically including but not limited to each Subsidiary Bank)
have the corporate power and authority to own their properties and to carry
on their businesses as now being conducted.
SECTION 4.2 AUTHORIZATION; NO CONFLICT. The borrowings
hereunder, the execution and delivery of this Agreement and the Notes, and
the performance by the Borrower of its obligations under this Agreement and
the Notes are within the Borrower's corporate powers, have been authorized
by all necessary corporate action, have received all necessary governmental
approval (if any shall be required) and do not and will not contravene or
conflict with any provision of law or of the articles of incorporation or
by-laws of the Borrower or any subsidiary or of any agreement binding upon
the Borrower or any subsidiary.
SECTION 4.3 FINANCIAL STATEMENTS. The Borrower has supplied
copies of the following financial or other statements to the Lender:
(a) The Borrower's unaudited consolidated financial statements
as at March 31, 1996;
(b) The Borrower's audited consolidated and consolidating
financial statements as at December 31, 1995; and
(c) A copy of the Call Report furnished to the Federal
Deposit Insurance Corporation with respect to each Subsidiary Bank, as
of March 31, 1996.
Such statements under subsections (a) and (b) have been prepared in conformity
with generally accepted accounting principals applied on a basis consistent
with that of the preceding fiscal year (when applicable), and accurately
present the condition of the Borrower and its subsidiaries as at such dates
and the results of their operations for the respective periods then ended.
Since the date of those statements, no material, adverse change in the
business, properties, assets, operations, conditions, or prospects of the
Borrower or any subsidiary has occurred of which the Lender has not been
advised in writing before this Agreement was signed. There is no known
contingent liability of the Borrower or any subsidiary which is known to be
in an amount in excess of $150,000.00 (excluding loan commitments, letters of
credit, and other contingent liabilities incurred in the ordinary course of
the banking business) that is not disclosed or reflected in such financial
statements or of which the Lender has not been advised in writing before this
Agreement was signed.
<PAGE>
SECTION 4.4 TAXES. The Borrower and each subsidiary have filed
or caused to be filed all federal, state, and local tax returns, if any,
which, to the knowledge of the Borrower or subsidiary, are required to be
filed, and have paid or have to be paid all taxes, including those shown on
such returns or on any assessment received by them, to the extent that such
taxes have become due (except for current taxes not delinquent and taxes being
contested in good faith and by appropriate proceedings for which adequate
reserves have been provided on the books of the Borrower or the appropriate
subsidiary, and as to which no foreclosure, distraint, sale, or similar
proceedings have been commenced).
SECTION 4.5 LIENS. None of the assets of the Borrower or any
subsidiary are subject to any mortgage, pledge, title retention lien, or other
lien, encumbrance, or security interest, except for: (a) current taxes not
delinquent or taxes being contested in good faith and by appropriate
proceedings; (b) liens arising in the ordinary course of business for sums
not due or sums being contested in good faith and by appropriate proceedings,
but not involving any deposits or advances or borrowed money or the deferred
purchase price of property or services; (c) liens and security interests
securing deposits of public funds, repurchase agreements, federal funds
purchased, trust assets, and other similar liens granted in the ordinary
course of the banking business; (d) to the extent reflected in the financial
statements referred to above; and (e) liens shown on Schedule 4.5 attached
hereto.
SECTION 4.6 ADVERSE CONTRACTS. Neither the Borrower nor any
subsidiary is a party to any agreement or instrument or subject to any charter
or other corporate restriction, nor is it subject to any judgment, decree or
order of any court or governmental body, that may have a material and adverse
effect on the business, assets, liabilities, financial condition, operations,
or business prospects of the Borrower and its subsidiaries taken as a whole or
on the ability of the Borrower to perform its obligations under this Agreement
or the Notes. Neither the Borrower nor any subsidiary has knowledge of or
notice that it is in default in the performance, observance or fulfilment of
any of the obligations, covenants, or conditions contained in any such
agreement, instrument, restriction, judgment, decree, or order except as the
Borrower has notified Lender in writing before the date of this Agreement.
SECTION 4.7 REGULATION U. The Borrower is not engaged
principally in, nor is one of the Borrower's important activities, the
business of extending credit for the purpose of purchasing or carrying
"margin stock" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve system as now and from time to time hereinafter in
effect.
<PAGE>
SECTION 4.8 LITIGATION AND CONTINGENT LIABILITIES. No litigation
(including derivative actions) arbitration proceedings, or governmental
proceedings are pending or, to the knowledge of the Borrower or its officers,
overtly threatened, against the Borrower or any subsidiary that would (singly
or in aggregate), if adversely determined, have a material and adverse effect
on the financial condition, continued operations, or prospects of the Borrower
and its subsidiaries taken as a whole, except as set forth (including
estimates of the dollar amounts involved) in a schedule furnished by the
Borrower to Lender before this Agreement was signed.
SECTION 4.9 SUBSIDIARIES. Each Subsidiary Bank and other
subsidiaries and affiliates are listed in Exhibit C to this Agreement.
SECTION 4.10 BANK HOLDING COMPANY. To the best of its knowledge,
the Borrower has complied with all federal, state and local laws pertaining
to bank holding companies, including without limitation the Bank Holding
Company Act of 1956, as amended, and to the best of its knowledge there are
no unsatisfied conditions precedent or subsequent to its engaging in the
business of being a registered bank holding company.
SECTION 5
COVENANTS
Until all obligations of the Borrower hereunder and the Notes are
paid and fulfilled in full, the Borrower agrees that it shall, and shall
cause any subsidiary to, comply with the following covenants, unless the
Lender otherwise gives its prior written consent:
SECTION 5.1 CORPORATE EXISTENCE, MERGERS, ETC. The Borrower and
each subsidiary shall preserve and maintain its corporate existence, rights,
franchises, licenses, and privileges, and will not liquidate, dissolve, or
merge or consolidate with or into any other corporation, or sell, lease,
transfer, or otherwise dispose of all or a substantial part of its assets,
except that:
(a) Any subsidiary may merge or consolidate with or into any
one or more wholly-owned subsidiaries or the Borrower; and
(b) Any subsidiary may sell, lease, transfer, or otherwise
dispose of any of its assets to the Borrower or one or more wholly-owned
subsidiaries.
SECTION 5.2 REPORTS, CERTIFICATES, AND OTHER INFORMATION. The
Borrower shall furnish to the Lender:
<PAGE>
(a) Interim Reports. Within forty-five (45) days after the
end of each quarter (except the last quarter) of each fiscal year of the
Borrower, a copy of an unaudited consolidated financial statement of the
Borrower and its subsidiaries prepared on a basis consistent with the
audited consolidated financial statements referred to in Section 4.3
of this Agreement (except that such reports do not need footnotes or
statements of changes as required for such audited statement), signed by
an authorized officer of the Borrower and consisting of at least (i)
a balance sheet as at the close of such quarter and (ii) a statement of
earnings for such quarter and for the period from the beginning of such
fiscal year to the close of such quarter.
(b) Annual Report. Within one hundred (100) days after the
end of each fiscal year of the Borrower, a copy of the annual report
of the Borrower and its subsidiaries prepared on a consolidated and
consolidating basis and in conformity with generally accepted accounting
principles applied on a basis consistent with prior consolidated and
consolidating financial statements of the Borrower and its subsidiaries,
which annual report shall be duly certified by independent certified
public accountants of recognized standing satisfactory to the Lender,
accompanied by an opinion without significant qualification.
(c) FDIC Call Reports. Within forty-five (45) days after
each quarter of each fiscal year of each Subsidiary Bank, a copy of the
Call Report furnished to the Federal Deposit Insurance Corporation with
respect to such quarter by such Subsidiary Bank.
(d) Certificates. Contemporaneously with the furnishing of a
copy of each annual report and of each quarterly statement provided for
in this Section, a certificate signed by either the President and Chief
Executive Officer or the Executive Vice President and Chief Financial
Officer of the Borrower, to the effect that no Event of Default or
Unmatured Event of Default has occurred and is continuing, or, if there
is any such event, describing it and the steps, if any, being taken to
cure it, and containing a computation of and showing compliance with all
financial ratios or restrictions contained in this Agreement.
(e) Reports to Shareholders. Copies of each communication
from the Borrower or any subsidiary to shareholders generally, promptly
upon the filing or making thereof.
(f) Reports to and Filings with the Securities and Exchange
Commission. Promptly upon the filing or making thereof, copies of each
filing and report made by the Borrower <PAGE> or any subsidiary
(including any Subsidiary Bank) with or to the Securities and Exchange
Commission.
(g) Schedule of Non-Performing Assets. If such information
shall not be stated at least quarterly on the reports and filings
described in subsection (c) of this Section 5.2, promptly after the end
of each quarter of each fiscal year of the Borrower, a report signed by
either the President and Chief Executive Officer of the Borrower or the
Executive Vice President and Chief Financial Officer, dated as of the
last day of such quarter, showing for the Borrower and each Subsidiary
Bank the amount of all loans in non-accrual status, the amount of all
other loans that are ninety (90) days or more past due (either principal
or interest), the amount of all other loans listed as "other
restructured" in any reports to regulatory authorities, and the amount
of all other assets listed as "other real estate owned" in any reports
to regulatory authorities, and if requested by the Lender, a schedule of
all such assets with respect to which the principal balance exceeds
$200,000 (in the aggregate for all loans to any one borrower), showing
separately for each such asset the total principal amount of such asset
and, if so requested by the Lender, the amount of unpaid accrued
interest.
(h) Notice of Default, Litigation, and ERISA Matters.
Promptly upon learning of the occurrence of any of the following, written
notice describing the same and the steps being taken by the Borrower or
any subsidiary affected in respect thereof: (i) the occurrence of an
Event of Default or Unmatured Event of Default; or (ii) the issuance of
any cease and desist order, memorandum of understanding, cancellation of
insurance, or proposed disciplinary action from the Federal Deposit
Insurance Corporation or other regulatory entity or the institution of,
or any adverse determination in, any litigation, arbitration or
governmental proceeding which is material to the Borrower or any
subsidiary on a consolidated basis; or (iii) the occurrence of a
reportable event under, or the institution of steps by the Borrower or
any subsidiary to withdraw from, or the institution of any steps to
terminate, any employee benefit plans as to which the Borrower or any of
its subsidiaries may have any liability.
(i) Subsidiaries. Promptly from time to time a written
report of any changes in the list of its subsidiaries.
(j) Other Information. From time to time such other
information, financial or otherwise, concerning the Borrower, any
subsidiary, or delinquent or non-performing loans as the Lender may
reasonably request.
<PAGE>
SECTION 5.3 INSPECTION. The Borrower and any subsidiary shall
permit the Lender and its agents at any reasonable time during normal business
hours to inspect their properties and, to the full extent permitted by
applicable law subject to applicable confidentiality laws, to inspect and
make copies of their books and records.
SECTION 5.4 FINANCIAL REQUIREMENTS.
(a) Tangible Net Worth. The Borrower shall maintain a
minimum consolidated tangible net worth equal to at least $40,000,000.00.
(b) Total Debt to Net Worth. The Borrower's total
indebtedness for borrowed money (specifically excluding the indebtedness
for borrowed money of the Borrower's subsidiaries) shall not at any time
exceed 45% of its tangible net worth (provided that nothing in this
paragraph shall permit the Borrower to borrow except as specifically
permitted elsewhere in this Agreement).
(c) Return on Assets Ratio. The Borrower shall maintain on a
consolidated basis for each quarter a ratio of net income to assets of
not less than 0.75%.
(d) Nonperforming Assets.
(i) Assets of each Subsidiary Bank classified as "non-
performing assets" (which shall include all loans in non-accrual
status, all loans more than ninety (90) days past due in principal
or interest, all loans restructured or renegotiated, and all assets
listed as "other restructured" or "other real estate owned" on the
Federal Deposit Insurance Corporation or other regulatory agency
call report) shall not at any time exceed 20% of the tangible net
worth of such Subsidiary Bank.
(ii) Assets of the Borrower and its subsidiaries on a
consolidated basis classified as "non-performing assets" (which
shall include all loans in non-accrual status, all loans more than
ninety (90) days past due in principal or interest, all loans
restructured or renegotiated, and all assets listed as "other
restructured" or "other real estate owned" on the Federal Deposit
Insurance Corporation or other regulatory agency call report) shall
not at any time exceed 3.00% of the loans of the Borrower and its
subsidiaries on a consolidated basis.
(e) Loan Loss Reserves Ratio. The Borrower shall maintain at
all times on a consolidated basis a ratio of loan loss reserves to assets
classified as "non-performing loans" <PAGE> (which shall include all loans
in non-accrual status, all loans more than ninety (90) days past due in
principal or interest) of not less than 100%.
(f) Leverage Ratio. The Borrower shall maintain a ratio of
Tier 1 capital to average quarterly assets less goodwill of at least five
percent (5%), calculated on a consolidated basis as of the last day of
each fiscal quarter of the Borrower. Each Subsidiary Bank shall maintain
a ratio of Tier 1 capital to average quarterly assets less goodwill of
at least five percent (5%), calculated as of the last day of each fiscal
quarter of such Subsidiary Bank.
(g) Risk-Based Capital Ratio. Prior to June 30, 1997, the
Borrower and each Subsidiary Bank shall maintain a ratio of total capital
to risk-weighted assets of not less than nine percent (9%). From and
after June 30, 1997, the Borrower and each Subsidiary Bank shall maintain
a ratio of total capital to risk-weighted assets of not less than ten
percent (10%).
(h) Tier 1 Capital Ratio. The Borrower and each Subsidiary
Bank shall maintain a ratio of Tier 1 capital to risk-weighted assets of
not less than six percent (6%).
(i) Definitions. For the purposes of this Section 5.4, the
following terms shall have the following definitions:
(i) "Risk-weighted assets" shall mean at any date the sum
of total risk-weighted balance sheet assets and the total of risk-
weighted off-balance sheet credit equivalent amounts as determined
under the capital formula currently used by the Federal Reserve
Board.
(ii) "Tangible net worth" shall mean at any date the total
shareholders' equity (including all classes of capital stock,
capital surplus, additional paid-in capital, retained earnings,
contingencies and capital reserves), minus the cost of common stock
reacquired by the Borrower and other capital accounts of the
Borrower at such date, minus goodwill, patents, trademarks, service
marks, trade names, copyrights, and all intangible assets (including
without limitation "core-deposit intangibles" and unidentifiable
intangibles resulting from acquisitions) and all items that are
treated as intangible assets under generally accepted accounting
principles or that otherwise fit within the definition of
"intangible assets" in the instructions for the call report of the
Federal Deposit Insurance Corporation.
<PAGE>
(iii) "Tier 1 capital" means the same as that determined
under the capital formula currently used by the Federal Reserve
Board.
(iv) "Total capital" shall mean tangible primary capital
plus intangible assets plus secondary capital qualifying obligations
(as defined by the Board of Governors of the Federal Reserve
System).
SECTION 5.5 INDEBTEDNESS, LIENS AND TAXES. The Borrower and each
subsidiary shall:
(a) Indebtedness. Not incur, permit to remain outstanding,
assume or in any way become committed for indebtedness in respect of
borrowed money or the deferred purchase price of property or services
(specifically including but not limited to indebtedness in respect of
money borrowed from financial institutions but excluding deposits),
except for: (i) indebtedness incurred hereunder; (ii) indebtedness
existing on the date of this Agreement shown on the financial
statements furnished to the Lender before this Agreement was signed;
and (iii) indebtedness of the Subsidiary Banks arising in the ordinary
course of the banking business of the Subsidiary Banks.
(b) Liens. Not create, suffer or permit to exist any lien,
encumbrance, or pledge of any kind or nature upon or of any of their
assets now or hereafter owned or acquired (specifically including but
not limited to the capital stock of any of the Subsidiary Banks), or
acquire or agree to acquire any property or assets of any character under
any conditional sale agreement or other title retention agreement,
but this Section shall not be deemed to apply to: (i) liens existing
on the date of this Agreement which are reflected in the financial
statements referred to in Section 4.3 hereinabove; (ii) liens of
landlords, contractors, laborers or supply men, tax liens, or liens
securing performance or appeal bonds or other similar liens or charges
arising out of the Borrower's business, but not involving any deposits
or advances or the deferred purchase price of property or services,
provided that tax liens are removed before related taxes become
delinquent and other liens are promptly removed, in either case unless
contested in good faith and by appropriate proceedings, and as to which
adequate reserves shall have been established; (iii) liens securing
borrowings or advances from the Borrower by wholly-owned subsidiaries;
and (iv) liens on the assets of any Subsidiary Bank arising in the
ordinary course of the banking business of such Subsidiary Bank.
(c) Taxes. Pay and discharge all taxes, assessments and
governmental charges or levies imposed upon <PAGE> them, upon their
income or profits or upon any properties belonging to them, prior to
the date on which penalties attach thereto, and all lawful claims for
labor, materials and supplies when due, except that no such tax,
assessment, charge, levy or claim need to be paid which is being
contested in good faith by appropriate proceedings as to which adequate
reserves shall have been established, and as to which no foreclosure,
distraint, sale, or similar proceedings have commenced.
(d) Keep Well Agreements. Not assume, guarantee, endorse or
otherwise become or be responsible in any manner (whether by agreement
to purchase any obligations, stock, assets, goods or services, or to
supply or advance any funds, assets, goods or services, or otherwise)
with respect to the obligation of any other person or entity other than
a wholly-owned subsidiary, except (i) by the indorsement of negotiable
instruments for deposit or collection in the ordinary course of business,
issuance of letters of credit or similar instruments or documents in the
ordinary course of business, and (ii) as permitted by this Agreement.
SECTION 5.6 INVESTMENTS AND LOANS. Neither the Borrower nor any
subsidiary shall make any loan, advance, extension of credit, or capital
contribution to, or purchase or otherwise acquire for a consideration,
evidences of indebtedness, capital stock or other securities of any person,
except that (a) the Borrower may invest, by way of purchase of securities or
capital contributions, in the Subsidiary Banks or any other bank or banks,
and upon the Borrower's purchase or other acquisition of fifty percent (50%)
of the stock of any bank, such bank shall thereupon become a "Subsidiary Bank"
for all purposes under this Agreement; (b) the Borrower may invest, by way of
loan, advance, extension of credit (whether in the form of lease, conditional
sales agreement, or otherwise), purchase of securities, capital contributions,
or otherwise, in subsidiaries other than banks or Subsidiary Banks; (c) the
Borrower and any subsidiary may purchase or otherwise acquire or own short-
term money market items (specifically including but not limited to preferred
stock mutual funds); and (d) the Subsidiary Banks may make any investment
permitted by applicable governmental laws and regulations. Nothing in this
Section 5.6 shall prohibit the Borrower or any Subsidiary Bank from making
loans, advances, or other extensions of credit in the ordinary course of
banking upon substantially the same terms as heretofore extended by them in
such business or upon such terms as may at the time be customary in the
banking business.
SECTION 5.7 CAPITAL STRUCTURE AND DIVIDENDS. Neither the
Borrower nor any subsidiary shall purchase or redeem, or obligate itself to
purchase or redeem, any shares of the Borrower's capital stock, of any class,
issued and outstanding from time to time; or declare or pay any dividend
(other than dividends payable <PAGE> in its own common stock or to the
Borrower) make any other distribution in respect of such shares other than
to the Borrower, except that the Borrower may declare or pay cash dividends
to holders of the stock of the Borrower in any fiscal year in an amount not
to exceed 60% of the Borrower's consolidated net income for the immediately
preceding fiscal year; provided that no Event of Default or Unmatured Event
of Default exists as of the date of such declaration or payment or would
result therefrom. The Borrower shall at all times own, directly or
indirectly, the same (or greater) percentage of the stock of each subsidiary
that it held on the date of this Agreement. No subsidiary shall issue
additional voting shares of capital stock other than to the Borrower.
SECTION 5.8 MAINTENANCE OF PROPERTIES. The Borrower and any
subsidiary shall maintain, or cause to be maintained, in good repair, working
order and condition all their properties (whether owned or held under lease)
and from time to time make or cause to be made all needed and appropriate
repairs, renewals, replacements, additions, betterments and improvements
thereto, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.
SECTION 5.9 INSURANCE. The Borrower and any subsidiary shall
maintain with insurers of recognized responsibility insurance in such amounts
and against such risks as is required by law and such other insurance, in
such amount and against such hazards and liabilities, as is customarily
maintained by bank holding companies and banks similarly situated. Each
Subsidiary Bank shall have deposits insured by Federal Deposit Insurance
Corporation.
SECTION 5.10 USE OF PROCEEDS.
(a) General. The proceeds of the Term Loan will be used by
the Borrower solely for the purpose of acquiring North Bank Corporation.
The proceeds of the Revolving Loans will be used by the Borrower for the
acquisition of North Bank Corporation and for general corporate purposes.
(b) Regulation U. The Borrower and any subsidiary shall not
use or permit any proceeds of the Loans to be used, either directly or
indirectly, for the purpose, whether immediate, incidental or ultimate,
of "purchasing or carrying any margin stock" within the meaning of
Regulations U or X of the Board of Governors of the Federal Reserve
System, as amended from time to time. If requested by the Lender, the
Borrower and any subsidiary will furnish to the Lender a statement in
conformity with the requirements of Federal Reserve Form U-1 to the
foregoing effect. No part of the proceeds of the Loans will be used for
any purpose which <PAGE> violates or is inconsistent with the provisions
of Regulation U or X of the Board of Governors.
(c) Tender Offers and Going Private. Without the Lender's
prior written consent, neither the Borrower nor any subsidiary shall use
(or permit to be used) any proceeds of the Loans to acquire any security
in any transaction which is subject to Section 13 or 14 of the Securities
Exchange Act of 1934, as amended, or any regulations or rulings
thereunder.
SECTION 6
CONDITIONS OF LENDING
The obligation of the Lender to make each of the Loans is subject to
the following conditions precedent:
SECTION 6.1 GENERAL DOCUMENTATION; INITIAL LOAN. In addition
to the conditions precedent set forth in Section 6.2, the obligation of the
Lender to make the initial Loan under this Agreement is subject to the
conditions precedent that the Lender shall have received all of the following,
each duly executed and dated the date of the first Loan, in form and substance
satisfactory to the Lender and its counsel, at the expense of the Borrower,
and in such number of signed counterparts as the Lender may request (except
for the Notes, of which only the original of each Note shall be signed):
(a) Notes. The Term Note in the form of Exhibit A, with
appropriate insertions, and the Revolving Note in the form of Exhibit B,
with appropriate insertions;
(b) Resolution. A copy of a resolution of the Board of
Directors of the Borrower authorizing or ratifying the execution,
delivery, and performance, respectively, of this Agreement, the Notes,
and the other documents provided for in this Agreement, certified by
the Secretary of the Borrower;
(c) Articles of Incorporation and By-Laws. A copy of the
articles of incorporation and by-laws of the Borrower, certified by the
Secretary of the Borrower and a copy of the articles of incorporation
and by-laws of each subsidiary as of the date hereof, certified by the
Secretary of such subsidiary;
(d) Certificate of Incumbency. A certificate of the Secretary
of the Borrower certifying the names of the officer or officers of the
Borrower authorized to sign this Agreement, the Notes, and the other
documents provided for in this Agreement, together with a sample of the
true signature of each such officer (the Lender may conclusively rely
on such <PAGE> certificate until formally advised by a like certificate
of any changes therein);
(e) Certificates of Good Standing. A certificate of good
standing for the Borrower, and a certificate of good standing for each
subsidiary as of the date hereof;
(f) Certificate of No Default. A certificate signed by the
President and Chief Executive Officer of the Borrower to the effect that
(I) no Event of Default or Unmatured Event of Default has occurred and
is continuing or will result from the making of the Loans; and (ii) the
representations and warranties of the Borrower contained herein are true
and correct as at the date of the initial Loan as though made on that
date;
(g) Opinion of Counsel for the Borrower. An opinion of
counsel to the Borrower to such effect as the Lender may reasonably
require; and
(h) Miscellaneous. Such other documents and certificates as
the Lender may reasonably request.
SECTION 6.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT.
(a) Representations and Warranties. At the date of each Loan,
the Borrower's representations and warranties set forth herein (as such
representations and warranties may be amended from time to time by the
parties hereto) shall be true and correct as at such date with the same
effect as though those representations and warranties had been made on
and as at such date.
(b) No Default. At the time of each Loan and immediately
after giving effect to each Loan, the Borrower shall be in compliance
with all the terms and provisions set forth herein on its part to be
observed or performed, and no Event of Default or Unmatured Event of
Default shall have occurred and be continuing at the time of any Loan or
would result from the making of any Loan.
SECTION 6.3 SUCCEEDING LOANS. The application by the Borrower
for any Loan other than the first shall be deemed a representation and
warranty by the Borrower that the statements in Section 6.2 are true and
correct on and as of the date of each such Loan. The Borrower hereby
expressly acknowledges and agrees that (A) each request for a Loan under
this Agreement shall be deemed to be a representation and warranty by the
Borrower to the Lender that no Event of Default (as hereinafter defined),
or event which with the passage of time would become such, has occurred
and is continuing as of the date of such request for a Loan and (B) upon
<PAGE> receipt of each request for an Advance under this Agreement, the
Lender, in its sole discretion, shall have the right to request that the
Borrower provide to the Lender, prior to the Lender's funding of the Loan so
requested, a certificate executed by the Borrower's President and Chief
Executive Officer or the Borrower's Executive Vice President and Chief
Financial Officer to the effect that no Event of Default, or event which with
the passage of time would become such, has occurred and is continuing as of
the date of such request for a Loan.
SECTION 7
DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. Each of the following
occurrences is hereby defined as an "Event of Default":
(a) Nonpayment. The Borrower shall fail to make any payment
of principal, interest, or other amounts payable hereunder within three
(3) days of when due; or
(b) Cross-Default. There shall occur any material default or
event of default, or any event that might become such with notice or the
passage of time or both, or any similar event, or any event that requires
(or enables another party to require) the prepayment of borrowed money or
the acceleration of the maturity thereof, under the terms of any evidence
of indebtedness or other agreement issued or assumed or entered into by
the Borrower or any subsidiary or under the terms of any indenture,
agreement, or instrument under which any such evidence of indebtedness or
other agreement is issued, assumed, secured, or guaranteed, and such
event shall continue beyond any applicable period of grace; or
(c) Dissolutions, etc. The Borrower shall fail to comply
with any provision (including but not limited to Section 5.1 hereof)
concerning its existence or that of any subsidiary or any prohibition
against dissolution, liquidation, merger, consolidation, or sale of all
or a substantial part of its assets or those of any subsidiary, or the
Borrower or any subsidiary shall take any corporate action to approve
any of the foregoing; or
(d) Warranties. Any representation, warranty, schedule,
certificate, financial statement, report, notice, or other writing
furnished by or on behalf of the Borrower to the Lender is false or
misleading in any material respect on the date as of which the facts
therein set forth are stated or certified; or
(e) Change in Control. A majority of the outstanding voting
stock of the Borrower shall be acquired, <PAGE> directly or indirectly,
by a person or entity, or group of persons or entities acting in concert,
who own on the date hereof less than 5% of such voting stock; or
(f) ERISA. Any reportable event in which the amount involved
or claimed exceeds $100,000.00 shall occur under the Employee Retirement
Income Security Act of 1974, as amended, in respect of any employee
benefit plan maintained for employees of the Borrower or any subsidiary;
or
(g) Litigation. There shall be rendered against the Borrower
or any subsidiary a final judgment, decree, or court order for the
payment of money (or the Borrower or any subsidiary shall settle any
suit, action, or proceeding for an amount) of more than $500,000.00
(including any deductible amounts) in excess of applicable insurance
coverage or, if not a judgment for payment of money, otherwise having
a material adverse effect on the financial condition or continued
operations of the Borrower or any subsidiary on a consolidated basis,
and the continuance of such judgment, decree, or court order for any
period of sixty (60) consecutive days without a stay of execution, or,
if it is earlier, the date that the Borrower shall not have any right to
appeal or shall otherwise become unconditionally obligated to pay such
amount (whether by agreement or passage of time); or
(h) Cease and Desist Order. The Federal Deposit Insurance
Corporation or other regulatory entity shall issue a cease and desist
order against the Borrower or any subsidiary; or
(I) Noncompliance with this Agreement. Borrower shall fail
to comply with any provision hereof in any material respect, which
failure does not otherwise constitute an Event of Default, and such
failure shall continue for thirty (30) consecutive days after notice
thereof to the Borrower by the Lender or any other holder of the Notes;
or
(j) Other Agreements. If any default or Event of Default
shall exist under any other instrument, document, agreement or guaranty
delivered to the Lender in connection with the Loans, or any such
instrument, document, agreement, or guarantee shall not be or shall cease
to be enforceable in accordance with its terms; or
(k) Bankruptcy- Filing of Petition. The Borrower or any
subsidiary shall file a petition or answer or consent seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign bankruptcy
law or other similar law, or the Borrower or any subsidiary shall consent
to the institution of proceedings thereunder or the filing of any <PAGE>
such petition or to the appointment or taking possession of a receiver,
liquidator, assignee, trustee, custodian, sequestrator or similar
official of the Borrower or any subsidiary or of any substantial part of
their respective properties, or the Borrower or any subsidiary shall take
any corporate action to approve any of the foregoing; or
(l) Bankruptcy - Entry of Order for Relief. There shall be
entered a decree or order by a court or administrative or regulatory
authority constituting an order for relief in respect of the Borrower
or any subsidiary under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, state
or foreign bankruptcy law or other similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or similar
official of the Borrower or any subsidiary or of any substantial part of
their respective properties, or ordering the winding-up of or liquidation
of the affairs of, or the disposition of any substantial part of the
assets of, the Borrower or any subsidiary, or ordering the merger or
consolidation of the Borrower or any subsidiary with or into any other
entity, and any such decree or order shall continue unstayed and in
effect for a period of thirty (30) consecutive days; or
(m) Insolvency. The Borrower or any subsidiary shall become
insolvent or shall fail or be unable to pay its debts as they mature, or
shall admit in writing its inability to pay its debts as they mature, or
shall make a general assignment for the benefit of its creditors, or
shall enter into any composition or similar agreement, or shall suspend
the transaction of all or a substantial portion of its usual business,
or any Subsidiary Bank shall have its charter to operate as a bank
revoked, shall be closed by any regulatory authority, or shall cease to
have deposits insured by the Federal Deposit Insurance Corporation.
SECTION 7.2 REMEDIES. Upon the occurrence of any Event of
Default set forth in subsections (a)-(j) of Section 7.1 and during the
continuance thereof, the Lender or any other holder of the Notes may declare
the Notes and any other amounts owed the Lender to be immediately due and
payable, whereupon the Notes and any other amounts payable hereunder shall
forthwith become due and payable. Upon the occurrence of any Event of Default
set forth in subsections (k)-(m) of Section 7.1, the Notes and any other
amounts owed to the Lender shall be immediately and automatically due and
payable without action of any kind on the part of the Lender or any other
holder of the Notes. Upon the occurrence of an Event of Default or an
Unmatured Event of Default, the Revolving shall immediately and automatically
terminate without action of any kind on the part of the Lender or any other
holder of the Revolving Note. The Borrower expressly waives presentment,
demand, notice, <PAGE> or protest of any kind in connection herewith. No
delay or omission on the part of Lender or any holder of the Notes in
exercising any power or right hereunder or under the Notes shall impair such
right or power or be construed to be a waiver of any Event of Default or
Unmatured Event of Default or any acquiescence therein, nor shall any single
or partial exercise of any power or right hereunder preclude other or further
exercise thereof, or the exercise of any other power or right.
SECTION 8
DEFINITIONS
SECTION 8.1 GENERAL. As used herein:
(a) The term "affiliate" means any corporation of which the
Borrower owns directly or indirectly 20% or more, but less than 50%, of
the outstanding voting stock, or any partnership, joint venture, trust
or other legal entity of which the Borrower has effective control, by
contract or otherwise.
(b) The term "business day" shall mean a day on which the
Lender is open at its main office for the purpose of conducting a
commercial banking business and is not authorized to close.
(c) With respect to any given Subsidiary Bank, the term
"capital" shall be defined to be the same as that determined under the
capital formula currently used by the Federal Reserve Bank of the
District in which such Subsidiary Bank is located.
(d) The term "subsidiary" means Independent Bank, Independent
Bank West Michigan, Independent Bank South Michigan, Independent Bank
East Michigan, North Bank Corporation, North Bank or any other
corporation, partnership, joint venture, trust, or other legal entity
of which the Borrower owns directly or indirectly 50% or more of the
outstanding voting stock or interest, or of which the Borrower has
effective control, by contract or otherwise, and shall include but shall
not be limited to all Subsidiary Banks.
(e) The term "Subsidiary Bank" means Independent Bank,
Independent Bank West Michigan, Independent Bank South Michigan,
Independent Bank East Michigan, North Bank or any other subsidiary
which is a bank.
(f) The term "Unmatured Event of Default" means an event or
condition which would become an Event of Default, with notice or the
passage of time or both.
<PAGE>
(g) Except as and unless otherwise specifically provided
herein, all accounting terms in this Agreement shall have the meanings
given to them by generally accepted accounting principles and shall be
applied and all reports required by this Agreement shall be prepared,
in a manner consistent with the most recent financial statements provided
to the Lender before this Agreement was signed.
SECTION 8.2 APPLICABILITY OF SUBSIDIARY AND AFFILIATE
REFERENCES.
Terms hereof pertaining to any subsidiary or affiliate shall apply only during
such times as the Borrower has any subsidiary or affiliate.
SECTION 9
MISCELLANEOUS
SECTION 9.1 WAIVER OF DEFAULT. The Lender may, by written notice
to the Borrower, at any time and from time to time, waive any default in the
performance or observance of any condition, covenant or other term hereof,
which shall be for such period and subject to such conditions as shall be
specified in any such notice. In the case of any such waiver, the Lender and
the Borrower shall be restored to their former position and rights hereunder
and under the Notes, respectively, and any Event of Default or Unmatured Event
of Default so waived all be deemed to be cured and not continuing; but no
such waiver shall extend to or impair any right consequent thereon or to any
subsequent or other Event of Default or Unmatured Event of Default.
SECTION 9.2 NOTICES. All notices and requests to or upon the
respective parties hereto shall be deemed to have been given or made when
deposited in the mail, postage prepaid and all demands shall be deemed to
have been made when deposited in the mail, certified or registered with
return receipt requested, addressed, in each instance, as follows:
(a) if to the Lender, to 50 South LaSalle Street, Chicago,
Illinois 60675 (Attention: Division Head, Correspondent Banking and
Trade Finance Division);
(b) if to the Borrower, to 230 W. Main Street, Ionia,
Michigan 48864 (Attention: President and Chief Executive Officer);
or to such other address as may be hereafter designated in writing by the
respective parties hereto.
SECTION 9.3 NONWAIVER; CUMULATIVE REMEDIES. No failure to
exercise, and no delay in exercising, on the part of the Lender of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise any other <PAGE> right, power or privilege. The
rights and remedies of the Lender herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 9.4 SURVIVAL OF AGREEMENTS. All agreements,
representations and warranties made herein shall survive the delivery of the
Notes and the making of the Loans hereunder.
SECTION 9.5 SUCCESSORS. This Agreement shall, upon execution
and delivery by the Borrower, and acceptance by the Lender in Chicago,
Illinois, become effective and shall be binding upon and inure to the benefit
of the Borrower, the Lender and their respective successors and assigns,
except that the Borrower may not transfer or assign any of its rights or
interest hereunder without the prior written consent of the Lender.
SECTION 9.6 CAPTIONS. Captions in this Agreement are for
convenience of reference only and shall not define or limit any of the terms
or provisions hereof. References herein to Sections or provisions without
reference to the document in which they are contained are references to this
Agreement.
SECTION 9.7 SINGULAR AND PLURAL. Unless the context requires
otherwise, wherever used herein the singular shall include the plural and
vice versa, and the use of one gender shall also denote the others where
appropriate.
SECTION 9.8 COUNTERPARTS. This Agreement may be executed by the
parties on any number of separate counterparts, and by each party on separate
counterparts; each counterpart shall be deemed an original instrument; and all
of the parts taken together shall be deemed to constitute one and the same
instrument.
SECTION 9.9 FEES. The Borrower agrees, upon written request of
the Lender, to pay or reimburse the Lender for all reasonable costs and
expenses of preparing and enforcing this Agreement or the Notes, or preserving
its rights hereunder or under any document or instrument executed in
connection herewith (including legal fees and reasonable time charges of
attorneys who may be employees of the Lender, whether in or out of court, in
original or appellate proceedings or in bankruptcy).
SECTION 9.10 CONSTRUCTION. This Agreement, the Notes and any
document or instrument executed in connection herewith shall be governed by,
and construed and interpreted in accordance with, the internal laws of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois.
SECTION 9.11 SUBMISSION TO JURISDICTION; VENUE. To induce the
Lender to make the Loans, as evidenced by the Notes and this Agreement, the
Borrower irrevocably agrees that, subject to the Lender's sole and absolute
election, all suits, actions or <PAGE> other proceedings in any way, manner
or respect, arising out of or from or related to this Agreement, the Notes or
any document executed in connection herewith, shall be subject to litigation
in courts having situs within Chicago, Illinois. The Borrower hereby
consents and submits to the jurisdiction of any local, state or federal court
located within Chicago, Illinois. The Borrower hereby waives any right it
may have to request or demand trial by jury, to transfer or change the venue
of any suit, action or other proceeding brought against the Borrower by the
Lender in accordance with this Section, or to claim that any such proceeding
has been brought in an inconvenient forum.
INDEPENDENT BANK CORPORATION
By: /s/Charles C. Van Loan
Charles C. Van Loan
Its: President & Chief
Executive Officer
THE NORTHERN TRUST COMPANY
By: /s/Thomas E. Bernhardt
Thomas E. Bernhardt
Its: Vice President
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
TERM NOTE
$10,000,000.00 Chicago, Illinois
_________, ____
FOR VALUE RECEIVED, INDEPENDENT BANK CORPORATION, a corporation
organized under the laws of Michigan, promises to pay to the order of THE
NORTHERN TRUST COMPANY (the "Lender") at its office at 50 South LaSalle
Street, Chicago, Illinois 60675, the principal sum of TEN MILLION AND NO/100
UNITED STATES DOLLARS ($10,000,000.00), payable in twenty (20) consecutive
quarterly principal installments consisting of nineteen (19) equal consecutive
quarterly principal installments of $500,000.00 each and a twentieth (20th)
and final consecutive quarterly principal installment of all then unpaid
principal, each due of the last day of each March, June, September and
December of each year, beginning September 30, 1996.
The unpaid principal amount from time to time outstanding shall bear
interest from and including the date of this Note at the rate or rates per
year set forth in the Loan Agreement (as hereafter defined) and such interest
shall be payable at the times set forth in the Loan Agreement. Interest shall
be computed for the actual number of days on the basis of a year consisting
of 360 days.
Payments of both principal and interest are to be made in
immediately available funds in lawful money of the United States of America.
This Note evidences indebtedness incurred under, and is expressly
subject to the terms and provision of, the Amended and Restated Loan Agreement
dated as of June 6, 1996 executed by and between the undersigned and the
Lender (and any amendments, restatements, and replacements thereto or
therefor) (the "Loan Agreement"), to which Loan Agreement reference is hereby
made for a statement of its terms, definitions and provisions, including
those under which this Note may be paid prior to its due date or have its due
date accelerated.
The undersigned agrees to pay all expenses, including reasonable
attorneys' fees and legal expenses, incurred by the holder of this Note in
attempting to collect any amounts payable hereunder. The undersigned
irrevocably waives presentment, protest, demand and notice of any kind in
connection herewith.
<PAGE>
This Note is made under and governed by the internal laws of the
State of Illinois, and shall be deemed to have been executed in the State of
Illinois.
INDEPENDENT BANK CORPORATION
By:
Its: President and Chief Executive
Officer
<PAGE>
EXHIBIT B
REVOLVING NOTE
$7,000,000.00 Chicago, Illinois
__________, _____
FOR VALUE RECEIVED, on or before __________, ____, INDEPENDENT BANK
CORPORATION, a corporation organized under the laws of Michigan, promises to
pay to the order of THE NORTHERN TRUST COMPANY (the "Lender") at its office at
50 South LaSalle Street, Chicago, Illinois 60675, the lesser of the principal
sum of SEVEN MILLION AND NO/100 UNITED STATES DOLLARS ($7,000,000.00),
or the
amount outstanding as indorsed on the grid attached to this Note (or recorded
in the Lender's books and records, if the Lender is the holder hereof). Such
indorsement or recording by the Lender shall be rebuttably presumptive
evidence of the principal balance due on this Note.
The unpaid principal amount from time to time outstanding shall bear
interest from and including the date of this Note at the rate or rates per
year set forth in the Loan Agreement (as hereafter defined) and such interest
shall be payable at the times set forth in the Loan Agreement. Interest shall
be computed for the actual number of days elapsed on the basis of a year
consisting of 360 days.
Payments of both principal and interest are to be made in immediately
available funds in lawful money of the United States of America.
This Note evidences indebtedness incurred under, and is expressly subject
to the terms and provisions of, that certain Amended and Restated Loan
Agreement dated as of June 6, 1996 executed by and between the undersigned and
the Lender (and, if amended, restated, or replaced, all further amendments,
restatements, and replacements thereto or therefor) (collectively, the "Loan
Agreement"), to which Loan Agreement reference is hereby made for a statement
of its terms, definitions and provisions, including those under which this
Note may be paid prior to its due date or have its due date accelerated.
The undersigned agrees to pay all expenses, including reasonable
attorneys' fees and legal expenses, incurred by the holder of this Note in
attempting to collect any amounts payable hereunder. The undersigned
irrevocably waives presentment, protest, demand and notice of any kind in
connection herewith.
This Note is made under and governed by the internal laws of the State of
Illinois, and shall be deemed to have been executed in the State of Illinois.
<PAGE>
This Note amends, restates and replaces in its entirety that certain
Fourth Amended and Restated Line of Credit Note dated as of October 11, 1995
executed by the undersigned in favor of the Lender (the "Prior Note"). Any
and all amounts outstanding under the Prior Note as of the date of this Note
shall be deemed to be amounts outstanding under this Note.
INDEPENDENT BANK CORPORATION
By:
Its: President and Chief Executive
Officer
<PAGE>
First Amendment
to Amended and Restated Loan Agreement
and Revolving Note
Reference is hereby made to that certain Amended and Restated Loan
Agreement dated as of June 6, 1996 (the "Loan Agreement") by and between
Independent Bank Corporation, a corporation organized under the laws of the
State of Michigan (the "Borrower"), and The Northern Trust Company, an
Illinois banking corporation (the "Lender"), and to the Revolving Note dated
as of June 6, 1996 executed pursuant thereto by the Borrower in favor of the
Lender. Capitalized terms used herein without definition shall have the
meaning assigned to such terms in the Loan Agreement.
Upon the execution of this First Amendment to Amended and Restated
Loan Agreement (the "First Amendment") by each of the undersigned, the Loan
Agreement and the Revolving Note are hereby amended as follows:
(a) The title of Section 2 of the Loan Agreement is hereby changed
from "INTEREST" to "INTEREST AND FEES", and a new Section 2.7 is inserted
as the end of Section 2 of the Loan Agreement as follows:
" SECTION 2.7 COMMITMENT FEE. The Borrower agrees to pay the
Lender a commitment fee (the "Commitment Fee") of one-eighth of one
percent (1/8th of 1%) per year on the average daily unused amount of the
Revolving Loan Commitment. The Commitment Fee shall commence to accrue
on the date of this Agreement and shall be paid on the last day of each
March, June, September and December in each year, beginning with the
first of such dates to occur after the date of this Agreement, at
maturity and upon payment in full. The Borrower's payment of the Line
of Credit Fee shall compensate (and shall be deemed to compensate) the
Lender for the cost and risks incurred by the Lender for making the
Revolving Loans available to Borrower."
(b) The first full sentence of Exhibit B of the Loan Agreement
(the form of the Revolving Note) and the Revolving Note is hereby amended
and replaced in its entirety as follows:
" FOR VALUE RECEIVED, INDEPENDENT BANK CORPORATION, a corporation
organized under the laws of Michigan, promises to pay to the order of
THE NORTHERN TRUST COMPANY (the "Lender") at its office at 50 South
LaSalle Street, Chicago, Illinois 60675, the lesser of the principal sum
of SEVEN MILLION AND NO/100 UNITED STATES DOLLARS ($7,000,000.00), or
the
amount outstanding as indorsed on the grid attached to this Note (or
recorded in the Lender's books and records, if the Lender is the holder
hereof)."
<PAGE>
(c) The date on the fourth line of Section 1.3 of the Loan
Agreement is hereby changed from June 6, 1997 to June 5, 1997.
Except as specifically amended hereby, the Loan Agreement and the
Revolving Note shall remain in full force and effect and are hereby ratified
and confirmed. The execution, delivery and performance of this First
Amendment shall not operate as a waiver of any right, power or remedy of the
Lender under the Loan Agreement or the Revolving Note, nor constitute a waiver
of any provision of the Loan Agreement or the Revolving Note.
This First Amendment may be executed in counterparts with each
such counterpart being considered an original and all such counterparts
constituting one and the same document. This First Amendment shall be
governed by the internal laws of the State of Illinois.
This First Amendment has been executed and delivered by each of the
undersigned as of the sixth day of June, 1996.
INDEPENDENT BANK CORPORATION
By: /s/Charles C. Van Loan
Charles C. Van Loan
Its: President & Chief
Executive Officer
THE NORTHERN TRUST COMPANY
By: /s/Thomas E. Bernhardt
Thomas E. Bernhardt
Its: Vice President
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this Current Report of Independent Bank Corporation
on Form 8-K of our report dated March 8, 1996, included herein, on the
financial statements of North Bank Corporation as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995.
/s/Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
August 7, 1996
