SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995, or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _______ to ___________
Commission File Number 0-12216
OLD KENT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-1986608
(State of Incorporation) (I.R.S. Employer Identification Number)
One Vandenberg Center
Grand Rapids, Michigan 49503
(Address of principal executive (Zip Code)
Registrant's telephone number, including area code: (616) 771-5000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's Common stock, par value
$1, as of October 31, 1995 was 45,141,990 shares.
<PAGE>
INDEX
OLD KENT FINANCIAL CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994
Consolidated Statements of Income for the three
and nine months ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)_________________________________________________________
<CAPTION>
September 30, December 31,
(dollars in thousands) 1995 1994
<S> <C> <C>
ASSETS:
Cash and due from banks.......................................... $480,839 $486,281
Federal funds sold and resale agreements......................... 88,330 28,727
Total csh and cash equivalents.................................. 569,169 515,008
Interest-earning deposits........................................ 35,981 5,255
Trading account securities....................................... 6,187 10,651
Mortgages held-for-sale.......................................... 334,111 189,989
Securities available-for-sale:
Collateralized mortgage obligations and other mortgage-backed
securities................................................ 324,559 406,422
Other securities.............................................. 812,898 1,050,908
Total securities available-for-sale (amortized cost of
$1,138,622, and $1,518,208, respectively)................... 1,137,457 1,457,330
Securities held-to-maturity:
Collateralized mortgage obligations and other mortgage-backed
securities................................................ 1,285,784 1,092,797
Other securities.............................................. 881,825 990,695
Total securities held-to-maturity (market values of
$2,168,115 and $2,002,803, respectively).................... 2,167,609 2,083,492
Loans............................................................ 7,155,662 6,854,849
Allowance for credit losses...................................... (175,811) (167,253)
Net loans........................................................ 6,979,851 6,687,596
Premises and equipment........................................... 176,884 171,815
Other assets..................................................... 388,885 356,587
Total Assets..................................................... $11,796,134 $11,477,723
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing.......................................... $1,412,540 $1,449,460
Interest-bearing.............................................. 7,842,820 7,599,218
Foreign deposits -- interest-bearing.......................... 87,536 380,659
Total deposits.............................................. 9,342,896 9,429,337
Short-term borrowed funds........................................ 1,251,254 1,009,650
Other liabilities................................................ 201,692 141,621
Long-term debt................................................... 1,055 1,119
Total Liabilities................................................ 10,796,897 10,581,727
Shareholders' Equity:
Preferred stock: 25,000,000 shares authorized and unissued....... -- --
Common stock, $1 par value: 150,000,000 shares authorized;
45,279,508 and 43,178,291 shares issued and outstanding ....... 45,280 43,178
Capital surplus.................................................. 204,551 141,246
Retained earnings................................................ 750,164 751,163
Valuation adjustment of securities available-for-sale............ (758) (39,591)
Total Shareholders' Equity....................................... 999,237 895,996
Total Liabilities and Shareholders' Equity...................... $11,796,134 $11,477,723
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)___________________________________________________
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
(in thousands, except per share data) 1995 1994 1995 1994
<S> <C> <C> <C) <C>
Interest Income:
Interest and fees on loans............................. $170,586 $134,626 $496,379 $360,158
Interest on mortgages held-for-sale.................... 6,354 2,926 13,151 11,732
Interest on securities available-for-sale.............. 16,166 19,399 55,270 62,846
Interest on securities held-to-maturity:
Taxable.............................................. 30,391 33,557 90,049 102,467
Tax-exempt........................................... 3,042 3,286 9,564 9,871
Interest on deposits................................... 733 343 1,155 882
Interest on federal funds sold and resale agreements... 3,510 1,281 12,444 2,772
Interest on trading account securities................. 126 163 1,074 880
Total interest income.................................. 230,908 195,581 679,086 551,608
Interest Expense:
Interest on domestic deposits.......................... 89,745 66,762 256,837 180,328
Interest on foreign deposits........................... 2,637 1,474 12,687 7,060
Interest on short-term borrowed funds.................. 18,120 10,221 52,338 26,086
Interest on long-term debt............................. 26 31 81 88
Total interest expense................................. 110,528 78,488 321,943 213,562
Net Interest Income...................................... 120,380 117,093 357,143 338,046
Provision for credit losses.............................. 6,073 5,245 16,631 16,380
Net interest income after provision
for credit losses.................................... 114,307 111,848 340,512 321,666
Other Income:
Trust income........................................... 11,185 10,885 32,149 31,929
Service charges on deposit accounts.................... 10,331 9,115 29,623 26,377
Securities transactions................................ 28 155 (139) 782
Credit card transaction revenue........................ 7,087 6,517 20,430 16,288
Mortgage banking gains................................. 6,983 1,488 11,879 7,140
Mortgage servicing revenue............................. 4,974 3,234 12,792 9,239
Nonrecurring and OREO income........................... 0 348 2,202 1,949
Other.................................................. 9,876 8,257 28,136 23,653
Total other income..................................... 50,464 39,999 137,072 117,357
Other Expenses:
Salaries and employee benefits......................... 47,361 43,777 139,997 127,275
Occupancy expense...................................... 7,334 7,070 21,129 20,873
Equipment expense...................................... 6,106 5,901 18,145 16,974
FDIC Insurance......................................... (256) 4,944 10,043 14,164
Interbank credit card transaction fees................. 4,540 4,395 13,038 11,156
Nonrecurring and OREO expense.......................... 4,972 -- 6,247 --
Other expenses......................................... 36,934 29,831 102,867 88,433
Total other expenses................................... 106,991 95,918 311,466 278,875
Income Before Income Taxes............................... 57,780 55,929 166,118 160,148
Income taxes........................................... 19,464 18,974 55,706 53,448
Net Income............................................... $38,316 $36,955 $110,412 $106,700
Per Common Share:
Net income............................................. $0.84 $0.81 $2.42 $2.35
Dividends.............................................. $0.310 $0.276 $0.900 $0.829
Number of Common Shares Used to Calculate
Primary Income Per Share (in thousands)................ 45,671 45,742 45,595 45,430
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Nine months ended September 30 (in thousands) 1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................$ 110,412 $ 106,700
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for credit losses............................... 16,631 16,380
Depreciation, amortization and accretion.................. 32,075 29,492
Net gains on sales of assets.............................. 1,878 (3,959)
Net decrease in trading account securities................ 6,172 30,061
Originations and acquisitions of mortgages held-for-sale.. (1,489,953) (1,426,689)
Proceeds from sales of mortgages held-for-sale............ 1,341,311 1,785,198
Net change in other assets................................ (45,285) 1,999
Net change in other liabilities........................... 47,877 (54,335)
Net cash provided by operating activities......................... 21,118 484,847
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and prepayments of securities available-for-sale....... 298,559 106,401
Proceeds from sales of securities available-for-sale.............. 1,240,313 1,636,010
Purchases of securities available-for-sale........................ (1,159,293) (1,499,483)
Maturities and prepayments of securities held-to-maturity......... 243,860 506,470
Purchases of securities held-to-maturity.......................... (329,386) (400,442)
Net change in interest-earning deposits........................... (30,771) 33,368
Net increase in loans............................................. (308,887) (852,212)
Purchases of leasehold improvements, premises and equipment, net.. (21,398) (21,804)
Acquisition of businesses net of cash acquired.................... - 23,763
Net cash used for investing activities............................ (67,004) (467,929)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in time deposits......................................... 28,674 627,561
Decrease in demand and savings deposits........................... (115,114) (359,310)
Increase (decrease) in short-term borrowed funds.................. 234,961 (45,168)
Payments of long-term debt obligations............................ (64) (74)
Repurchases of common stock....................................... (12,500) (69,169)
Proceeds from common stock issuances.............................. 4,941 4,617
Dividends paid to shareholders.................................... (40,851) (36,789)
Net cash provided by financing activities......................... 100,047 121,668
Net change in cash and cash equivalents........................... 54,161 138,586
Cash and cash equivalents at beginning of year.................... 515,008 513,272
Cash and cash equivalents at end of year..........................$ 569,169 $ 651,858
Supplemental disclosures of cash flow information:
Interest paid on deposits, short-term borrowings and
long-term debt................................................$ 313,204 $ 207,994
Federal income taxes paid....................................... 52,016 58,917
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 30, 1995
NOTE A: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 1995
are not necessarily indicative of the results that may be expected for the
year ending December 31, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Corporation's annual report on Form 10-K for the year ended December 31,
1994.
Prior period's amounts included in these financial statements have been
reclassified to place them on a basis comparable with the current periods'
financial statements.
NOTE B: LOANS AND NONPERFORMING ASSETS
The following summarizes loans and nonperforming assets at the
dates indicated (dollars in thousands):
September 30, December 31,
Loans: 1995 1994
Commercial..................................... $1,891,822 $1,655,764
Real estate - Commercial...................... 1,623,679 1,326,042
Real estate - Construction.................... 238,730 215,213
Real estate - Residential mortgages........... 821,316 1,160,614
Real estate - Consumer home equity ........... 613,131 561,975
Consumer....................................... 1,531,904 1,722,134
Credit card loans.............................. 246,799 102,252
Lease financing................................ 188,281 110,855
Total Loans.................................... $7,155,662 $6,854,849
September 30, December 31,
Nonperforming assets (dollars in thousands): 1995 1994
Impaired loans (on nonaccrual status).......... $35,929 $54,576
Restructured loans............................. 3,160 5,838
Other real estate owned........................ 9,496 12,366
Total nonperforming assets..................... $48,585 $72,780
<PAGE>
NOTE C: ALLOWANCE FOR CREDIT LOSSES
The following summarizes the changes in the allowance for credit losses
(in thousands of dollars):
For the Nine Months
ended September 30,
Allowance for Credit Losses 1995 1994
Balance at January 1,............................ $167,253 $145,323
Changes in allowance due to purchased/sold loans.. (1,504) 9,237
Provision for credit losses....................... 16,631 16,380
Gross loans charged-off........................... (15,693) (13,294)
Gross recoveries of loans previously charged-off.. 9,124 9,327
Balance at end of period,......................... $175,811 $166,973
<TABLE>
NOTE D: SECURITIES AVAILABLE-FOR-SALE
The following summarizes amortized costs and estimated market values of securities
available-for-sale at the dates indicated (in thousands of dollars):
Carrying
Gross Gross Value
Amortized Unrealized Unrealized at Market
September 30, 1995: Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agencies...... $754,656 $3,931 $2,525 $756,062
Collateralized mortgage obligations and
other mortgage-backed securities...... 327,130 862 3,433 324,559
Equity securities....................... 56,836 0 0 56,836
Total securities available-for-sale..... $1,138,622 $4,793 $5,958 $1,137,457
December 31, 1994:
U.S. Treasury and federal agencies...... $1,054,962 $1,396 $30,178 $1,026,180
Collateralized mortgage obligations and
other mortgage-backed securities...... 439,904 78 33,560 406,422
Equity securities....................... 23,342 1,386 0 24,728
Total securities available-for-sale..... $1,518,208 $2,860 $63,738 $1,457,330
</TABLE>
<TABLE>
NOTE E: SECURITIES HELD-TO-MATURITY
The following summarizes amortized costs and estimated market values of securities
held-to-maturity at the dates indicated (in thousands of dollars):
Gross Gross
Amortized Unrealized Unrealized Market
September 30, 1995: Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agencies........ $672,719 $8,446 $3,704 $677,461
Collateralized mortgage obligations and
other mortgage-backed securities........ 1,285,784 9,648 20,032 1,275,400
State and political subdivision securities 209,106 6,962 814 215,254
Total securities held-to-maturity......... $2,167,609 $25,056 $24,550 $2,168,115
December 31, 1994:
U.S. Treasury and federal agencies........ $769,576 $2,409 $11,752 $760,233
Collateralized mortgage obligations and
other mortgage-backed securities........ 1,092,797 1,590 72,355 1,022,032
State and political subdivision securities 221,119 3,645 4,226 220,538
Total securities held-to-maturity......... $2,083,492 $7,644 $88,333 $2,002,803
</TABLE>
<PAGE>
NOTE F: BUSINESS COMBINATIONS
In September, Old Kent announced a definitive agreement to purchase Guyot,
Hicks, Anderson & Associates, Inc., (GHA) an independent insurance agency
headquartered in Traverse City, Michigan, with five offices throughout
western Michigan. GHA provides a full line of personal and commercial
insurance products. The acquisition is expected to be completed during the
fourth quarter of 1995, at which time the agency will become a subsidiary of
Old Kent Bank. At September 30, 1995 GHA had total assets of approximately
$5.7 million.
Also during the third quarter of 1995, Old Kent signed a definitive agreement
to merge Republic Mortgage Corporation, a mortgage company headquartered in
Salt Lake City, Utah, with Old Kent Mortgage Company. As of September 30,
1995, Republic had total assets of approximately $50 million and a
residential servicing portfolio of $130 million. The merger is expected to
be completed during the fourth quarter of 1995.
On February 1, 1995, Old Kent acquired First National Bank Corp., a bank
holding company headquartered in Mount Clemens, Michigan. The merger was
effected through the exchange of 1.0813 shares of Old Kent Common Stock
(2,636,221 total shares) for each outstanding share of First National Bank
Corp. common stock. The merger was accounted for as a pooling-of-interests.
Accordingly, the accompanying consolidated financial statements have been
restated to include the financial position and results of operations of First
National Bank Corp. prior to the merger.
NOTE G: ADOPTION OF SFAS NO. 122
In May, 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 122, "Accounting for Mortgage
Servicing Rights, an amendment of FASB Statement No. 65." This Statement
requires companies to recognize as separate assets for the rights to service
mortgage loans for others, however those servicing rights are acquired. The
Statement also requires companies to assess the capitalized mortgage servicing
rights for impairment based on the fair value of those rights. The provisions
of this Statement shall be applied prospectively in fiscal years beginning
after December 15, 1995, and earlier application is encouraged. The
Corporation has adopted the provisions of SFAS No. 122. The adoption did not
have a material impact on the Corporation's financial position or results of
operations.
NOTE H: CAPITAL STOCK
The Registrant paid a 5% stock dividend on August 15, 1995, to shareholders
of record on July 19, 1995. Per share amounts included in this report have
been adjusted to reflect this dividend.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL DISCUSSION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Registrant's financial condition and results
of operations during the periods included in the consolidated financial
statements included in this filing. The Registrant's Form 10-Q for each of
the quarterly periods ended March 31 and June 30, 1995 are herein
incorporated by reference.
RESULTS OF OPERATIONS
The Registrant's net income was $38,316,000 for the third quarter of 1995
compared to $36,955,000 for the same period in 1994. Third quarter net income
per share for 1995 was $.84, a 3.7% increase over last year's $.81.
Year-to-date net income was $110,412,000 compared to $106,700,000 a year ago
and earnings per share was $2.42, a 3.0% increase over last year's $2.35.
Total assets were $11.8 billion at quarter-end compared to total assets of
$11.1 billion at September 30, 1994. Return on average equity for the third
quarter of 1995 was 15.53% compared to 16.52% for the third quarter of 1994.
Return on assets was 1.31% for the third quarter of 1995 compared to 1.36%
for the third quarter of 1994.
The Registrant's net interest income for the third quarter of 1995 was
$120.4 million, a 2.8% increase over the $117.1 million recorded in the same
period of 1994. This increase primarily resulted from a 7.9% increase in
average interest-earning assets. The net interest margin was 4.47% for the
third quarter of 1995 compared to 4.69% for the third quarter of 1994.
The decrease in the net interest margin is primarily due to increased
borrowing costs.
The provision for credit losses was $6.1 million for the third quarter of
1995 and $5.2 million for the third quarter of 1994. Net credit losses were
$3.9 million or .21% of average loans for the third quarter of 1995 compared
to $1.7 million or .10% of average loans for the same period a year ago.
The allowance for credit losses as a percent of loans and leases outstanding
was 2.46% at September 30, 1995 and 2.55% at September 30, 1994.
Nonperforming assets as a percent of total loans was .68% at September 30,
1995 and 1.03% at September 30, 1994.
Total other operating income, excluding security transactions and
nonrecurring items, increased 27.7% to $50.4 million during the third
quarter of 1995 over the same period a year ago. Mortgage servicing revenue
increased $1.7 million or 53.8% during the third quarter of 1995 over the
same period a year ago. This reflects an increase of $1.9 billion in the
Registrant's third party mortgage servicing portfolio from a year ago.
Mortgage banking gains of $7.0 million was $5.5 million more than the year
ago quarter and includes approximately $3.3 million of gains on sales of
mortgage loans which had been included as a component of total loans. It
also includes approximately $2.0 million of gains on sales of servicing rights.
Service charges on deposits increased 13.3% or $1.2 million and trust income
increased 2.8%.
Total net securities gains for the third quarter of 1995 were $28,000 compared
to gains of $155,000 for the same period of 1994.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Excluding nonrecurring items, total operating expenses for the third quarter
of 1995 increased 6.4% over the same period of 1994. Salaries, wages and
employee benefits increased 8.2% for the third quarter of 1995 over the third
quarter of 1994. The primary reason for this increase is the Registrants
increased use of incentive compensation and increased pension expense. The
number of full-time equivalent employees decreased by 117 (2.2%) over a
year-ago to 5,106 at September 30, 1995. During the third quarter of 1995
compared to the same period a year ago, equipment and net occupancy expenses
increased 3.6%, interbank credit card transaction expense increased 3.3%, and
other expenses increased 23.8%. The increase in other expenses includes a
$1.1 million loss on indirect auto loans sold and $1.4 million in
amortization of mortgage servicing rights.
During the third quarter, the FDIC decreased premium rates from $.23 per $100
in deposits to $.04, retroactively to June 1, 1995. This action resulted in
the Registrant recording a negative FDIC expense of $256,000 during the third
quarter of 1995. Excluding the portion of refund attributable to the second
quarter of 1995, FDIC insurance expense would have been approximately $1.3
million under the new rate for the third quarter of 1995.
A nonrecurring charge of $5.0 million was recognized during the third
quarter of 1995. This charge is related to a reengineering program aimed at
substantially reducing certain operating costs. The Registrant may recognize
additional charges in the range of $10 million to $15 million in the fourth
quarter of 1995, and expects there will be no further charges related to it's
current reengineering program after 1995. The Registrant anticipates that
reduced personnel costs and other efficiencies will result in pre-tax
benefits of up to $15 million in 1996, and that benefits should exceed $25
million annually beginning in 1997.
BALANCE SHEET CHANGES
Total loans increased 4.4% or $301 million from year-end 1994. For the nine
months ended September 30, 1995, commercial loans increased $453 million or
13.0% and consumer loans, excluding the effect of loan sales, increased $286
million or 12.2%. As a result of increased loan demand, securities
available-for-sale (excluding valuation adjustment) and securities
held-to-maturity, decreased $295 million since year-end 1994. Other
interest-earning assets increased $170 million since year-end 1994. Total
interest-earning assets (excluding securities available-for-sale valuation
adjustment) increased 2.2% or $236 million from December 31, 1994.
The Registrant sold approximately $539.7 million of mortgages held-for-sale
and $315 million of mortgage loans during the quarter (see "Liquidity and
Capital Resources"). The Registrant's third-party mortgage servicing
portfolio grew $1.6 billion or 35% from year end 1994, to a balance of $6.3
billion at September 30, 1995. The increase is primarily a result of a $981
million mortgage servicing portfolio purchased in the second quarter of 1995.
Total deposits decreased $86 million from year-end 1994. Non-interest bearing
deposits decreased 2.5% or $37 million and interest-bearing deposits decreased
.6% or $49 million. Short-term borrowed funds increased 23.9% or $242 million
from December 31, 1994.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The maintenance of an adequate level of liquidity is necessary to ensure that
sufficient funds are available to meet customers' loan demand and deposit
withdrawals. The banking subsidiaries' liquidity sources consist of
securities available-for-sale, maturing loans and securities held-to-maturity,
and other short-term investments. Liquidity has also been obtained through
liabilities such as customer-related core deposits, funds borrowed,
certificates of deposit and public funds deposits.
During the third quarter of 1995, in addition to its normal recurring sales
of mortgages held-for-sale, the Registrant sold $315 million of residential
mortgage loans that had been classified as a component of total loans on the
accompanying balance sheets. As a result of these sales, the Registrant
realized a gain of approximately $3.3 million. This transaction was the
result of the Registrant's ongoing management of its liquidity. In addition,
the Registrant sold $250 million of consumer loans (collateralized by
automobiles.) This transaction was effected through a sale and
securitization, with the retention of servicing rights by Old Kent.
Management expects that this transaction will not have a material impact on
the Corporation's financial condition or results of operations. In November
1995, the Registrant expects to issue $100 million in long-term subordinated
debt for general corporate purposes.
At September 30, 1995, shareholders' equity was $999 million, compared to
$896 million at December 31, 1994, an increase of $103 million, or 11.5%.
Total equity at September 30, 1995 was reduced by an after-tax unrealized
loss of $0.8 million on securities available-for-sale. Shareholders' equity
as a percentage of total assets as of September 30, 1995 was 8.47%. The
following table represents the Registrant's consolidated regulatory capital
position as of September 30, 1995.
Regulatory capital at September 30, 1995
(in millions) Tier 1 Total
Leverage Risk-Based Risk-Based
Ratio Capital Capital
Actual capital $895.8 $898.3 $1,003.3
Required regulatory minimum capital 350.8 335.8 671.7
Capital in excess of requirements $545.0 $562.5 $ 331.6
Actual ratio 7.66% 10.79% 12.05%
Regulatory Minimum Ratio 3.00% 4.00% 8.00%
Ratio considered "well capitalized"
by regulatory agencies 5.00% 6.00% 10.00%
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The changes in book value per common share are shown in the table below.
Book value per common share, December 31, 1994 $20.75
Dilution effect of 5% stock dividend paid in August, 1995 (.99)
Book value per share, adjusted for 5% stock dividend 19.76
Net income per share for the nine months
ended September 30, 1995 2.42
Dividends per share (.90)
Net change in valuation adjustment of securities
available-for-sale .89
Other changes (.07)
Book value per share, September 30, 1995 $22.07
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
This item is inapplicable or is omitted pursuant to the
instructions to Part II.
Item 2. Changes in Securities.
This item is inapplicable or is omitted pursuant to the
instructions to Part II.
Item 3. Defaults on Senior Securities.
This item is inapplicable or is omitted pursuant to the
instructions to Part II.
Item 4. Submission of Matters to a Vote of Security Holders.
This item is inapplicable or is omitted pursuant to the
instructions to Part II.
Item 5. Other Information.
This item is inapplicable or is omitted pursuant to the
instructions to Part II.
Item 6. Exhibits and Reports on Form 8-K.
a.) The following exhibits are filed as part of this report:
Exhibit 10 - (a) Executive Stock Option Plan of 1986
(as amended)
Exhibit 11 - Statement Re: Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedules
b.) Reports on Form 8-K
No Form 8-K was filed during the second quarter of 1995.
<PAGE>
EXHIBIT INDEX
Exhibit
10 Executive Stock Option Plan of 1986, as amended
11 Statement of Earnings per Share
27 Financial Data Schedule
<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.
OLD KENT FINANCIAL CORPORATION
Date: November 13, 1995 David J. Wagner
Chairman of the Board, President and
Chief Executive Officer
Date: November 13, 1995 Richard W. Wroten
Executive Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
EXHIBIT 11
OLD KENT FINANCIAL CORPORATION
PRIMARY EARNINGS PER SHARE CALCULATION
All periods have been adjusted to reflect 5% stock dividend paid in August, 1995
Three Months Ended September Nine Months Ended September
P R I M A R Y 1 9 9 5 1 9 9 4 1 9 9 5 1 9 9 4
<S> <C> <C> <C> <C>
NET INCOME.........................$38,316,000 $36,955,000 $110,412,000 $106,700,000
Less: Preferred stock dividends.... - 0 - - 0 - - 0 - - 0 -
INCOME FOR PRIMARY
E.P.S. CALCULATION................$38,316,000 $36,955,000 $110,412,000 $106,700,000
Avg common shares outstanding...... 45,321,550 45,463,219 45,256,537 45,169,679
Common stock equivalents........... 349,195 279,047 337,978 259,823
SHARES FOR PRIMARY
E.P.S. CALCULATION................ 45,670,745 45,742,266 45,594,516 45,429,502
PRIMARY E.P.S...................... $0.84 $0.81 $2.42 $2.35
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> This schedule contains summary financial information extracted from
SEC form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<PERIOD-END> 09-30-95
<CASH> 480,839
<INT-BEARING-DEPOSITS> 35,981
<FED-FUNDS-SOLD> 88,330
<TRADING-ASSETS> 6,187
<INVESTMENTS-HELD-FOR-SALE> 1,137,457
<INVESTMENTS-CARRYING> 2,167,609
<INVESTMENTS-MARKET> 2,168,115
<LOANS> 7,155,662
<ALLOWANCE> 175,811
<TOTAL-ASSETS> 11,796,134
<DEPOSITS> 9,342,896
<SHORT-TERM> 1,251,254
<LIABILITIES-OTHER> 201,692
<LONG-TERM> 1,055
<COMMON> 45,280
0
0
<OTHER-SE> 953,957
<TOTAL-LIABILITIES-AND-EQUITY> 11,796,134
<INTEREST-LOAN> 509,530
<INTEREST-INVEST> 154,883
<INTEREST-OTHER> 14,673
<INTEREST-TOTAL> 679,086
<INTEREST-DEPOSIT> 269,524
<INTEREST-EXPENSE> 321,943
<INTEREST-INCOME-NET> 357,143
<LOAN-LOSSES> 16,631
<SECURITIES-GAINS> (139)
<EXPENSE-OTHER> 311,466
<INCOME-PRETAX> 166,118
<INCOME-PRE-EXTRAORDINARY> 166,118
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,412
<EPS-PRIMARY> 2.42
<EPS-DILUTED> 2.42
<YIELD-ACTUAL> 4.47
<LOANS-NON> 35,929
<LOANS-PAST> 21,606
<LOANS-TROUBLED> 3,160
<LOANS-PROBLEM> 60,695
<ALLOWANCE-OPEN> 167,253
<CHARGE-OFFS> 15,693
<RECOVERIES> 9,124
<ALLOWANCE-CLOSE> 175,811
<ALLOWANCE-DOMESTIC> 175,811
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
OLD KENT FINANCIAL CORPORATION
EXECUTIVE STOCK OPTION PLAN OF 1986
(As Amended, August 21, 1995)
1. Purposes. The purposes of this Plan are to encourage stock
ownership by, key management employees of Old Kent Financial Corporation
(the Corporation") and its Subsidiaries, to thereby provide an additional
incentive for such employees to expand and improve the profits and
prosperity of the Corporation and its Subsidiaries, and to assist the
Corporation and its Subsidiaries in attracting and retaining key personnel
through the grant of (1) Options to purchase shares of the Corporation's
Common Stock and (2) Stock Appreciation Rights related to those Options. It
is not intended that Options granted under this Plan will qualify as
incentive stock options as defined in Section 422A of the Internal Revenue
Code of 1954 as amended and as enacted by the Economic Recovery Tax Act of
1981.
2. Definitions. The following terms are defined for use herein as
follows unless otherwise required by the context:
(a) "Board" means the Board of Directors of the
Corporation.
(b) "Committee" means the Personnel Committee of the
Board, or the 1986 Executive Stock Option Plan Committee if one
is appointed by the Board to administer the Plan.
(c) "Common Stock" means the Common Stock of the
Corporation, par value $1.00.
(d) "Consensual Severance" means the voluntary
termination of all employment by the Participant with the
Corporation or any of its Subsidiaries which the Committee
determines to be in the best interests of the Corporation.
(e) "Corporation" means Old Kent Financial Corporation,
a Michigan corporation.
(f) "Market Value" means the last sale price of the
Common Stock as reported on the NASDAQ National Market System on
the day preceding the date on which the particular Option or
Stock Appreciation Right is granted, or, if the last sale price
of shares of Common Stock is not so reported on that date, then
a fair market value determined by the Committee by any
reasonable method selected by it in good faith.
(g) "Option" means a right to purchase Common Stock
granted pursuant to the Plan.
(h) "Option Agreement" means an agreement evidencing
Options as provided in Section 7 of the Plan.
(i) "Option Price" means the purchase price for Common
Stock under an Option, as determined pursuant to Section 6
below.
(j) "Participant" means an employee of the Corporation,
or of any Subsidiary of the Corporation, to whom an Option is
granted under the Plan.
(k) "Plan" means this 1986 Executive Stock Option Plan
of the Corporation as in effect from time to time.
(l) "Retirement" means the voluntary termination of all
employment by the Participant after the Participant has attained
55 years of age and completed 10 years of service with the
Corporation or any of its Subsidiaries.
(m) "Stock Appreciation Right" shall mean a right to
receive cash or Common Stock granted pursuant to Section 8 and
Section 9 of the Plan.
(n) "Subsidiary" shall mean a subsidiary corporation of
the Corporation, as defined in Section 425 of the Internal
Revenue Code of 1954, as amended.
3. Shares.
(a) The total number of shares of Common Stock which may
be sold under the Plan shall not exceed 500,000 shares, except
that the total number of shares which may be sold under the Plan
may be increased to the extent of adjustments authorized by
Section 13. Such shares shall be authorized shares and may be
either unissued shares or treasury shares.
(b) If an option granted under the Plan shall expire or
terminate for any reason (other than pursuant to the exercise of
a stock appreciation right) without having been exercised in
full, the shares not delivered under such option shall be
available for options subsequently granted.
4. Administration.
(a) The Plan shall be administered by the Personnel
Committee of the Board or, alternatively at the option of the
Board, the Board may appoint a 1986 Executive Stock Option Plan
Committee consisting of not less than three nor more than five
members to administer the Plan. No Committee member shall be or
shall have been eligible to participate in either the Plan or
any similar plan of the Corporation or any of its affiliates
entitling the participants therein to acquire stock, stock
options or stock appreciation rights of the Corporation or of
any of its affiliates, either at the time of his appointment to
the Committee or within the year prior to his appointment to the
Committee.
(b) The Committee shall determine the employees to be
granted Options or Stock Appreciation Rights, the amount of
stock to be optioned to each employee, the quantity of Stock
Appreciation Rights to be granted to each employee, and the
terms of the Options and Stock Appreciation Rights to be
granted. The Committee shall have full power and authority to
interpret the provisions of the Plan, to supervise the
administration of the Plan and to adopt forms and procedures for
the administration of the Plan. All determinations made by the
Committee shall be final and conclusive.
(c) The granting of any Option or Stock Appreciation
Right pursuant to this Plan shall be entirely within the
discretion of the Committee. Nothing herein contained shall be
construed to give any officer or employee any right to
participate under this Plan or to receive any Option or Stock
Appreciation Right under the Plan.
(d) The expenses of administering this Plan shall be
borne by the Corporation.
5. Eligibility. The Committee may grant Options and/or Stock
Appreciation Rights to any key management employee (including an employee
who is a director or an officer) of the Corporation or its Subsidiaries with
the Committee determining whether a given individual is eligible to
participate in the Plan. An employee who has been granted an Option or
Stock Appreciation Right under the Plan or any other stock option or stock
appreciation right plan of the Corporation may be granted additional Options
and/or Stock Appreciation Rights. Options and Stock Appreciation Rights may
be awarded by the Committee at any time and from time to time to new
Participants, or to then Participants, or to a greater or lesser number of
Participants, and may include or exclude previous Participants, as the
Committee shall determine.
6. Option Price. The purchase price for Common Stock under each
Option shall be 100% of Market Value of the Common Stock at the time the
Option is granted, or such other purchase price as may be determined by the
Committee.
7. Terms and Conditions of Options. Each Option shall be evidenced
by a written Option Agreement containing such terms and conditions,
consistent with the provisions of this Plan, as are set by the Committee,
including without limitation the following:
(a) Number of Shares. Each Option Agreement shall state
the number of shares to which it pertains. The number of shares
to which a participant is entitled under an Option Agreement
shall be reduced by the number of Stock Appreciation Rights
(described in Section 8 and Section 9 below) related to the
Option that have been previously exercised by the Participant.
(b) Option Price. Each Option Agreement shall state the
Option Price.
(c) Time of Payment. The exercise price for each share
purchased pursuant to an option granted under the Plan shall be
payable in full upon exercise, with the medium provided for in
Section 7(d) or, where applicable, Section 7(e).
(d) Payment With Cash. The exercise price shall be paid
in cash as further described in Section 7(g) below, unless
otherwise provided for in Section 7(e).
(e) Payment With Stock or Other Consideration. The
Committee shall have discretion to grant Options which permit
payment of the exercise price in whole or in part with shares of
Common Stock of the Corporation or in other consideration
equivalent to cash. Shares of Common Stock delivered in payment
of the exercise price shall be valued at the last sale price of
the Common Stock as reported on the NASDAQ National Market
System on the day preceding the date of exercise, or, if the
last sale price of shares of Common Stock is not so reported on
that date, then at a fair market value determined by the
Committee by any reasonable method selected by it in good faith.
(f) Duration and Limits on Exercise of Options. Each
option shall be exercisable in whole or in part in such amounts
and at or after such dates as may be specified in the Option
Agreement. In no event, however, shall any option be
exercisable after the expiration of ten (10) years from the date
of grant. The Committee may in its discretion require a
participant to continue his service with the Corporation or its
Subsidiaries for a certain length of time prior to the Option
becoming exercisable. Unless otherwise provided in the Option
Agreement an option shall be deemed outstanding until it either
expires or is exercised in full. No Option may be exercised for
a fractional share of Common Stock.
(g) Manner of Exercise of Options. Options shall be
exercised by the delivery of written notice to the Corporation
setting forth the number of shares of Common Stock with respect
to which the Option is to be exercised, together with cash,
certified check, bank draft or postal or express money order
payable to the order of the Corporation for an amount equal to
the Option Price of such shares of Common Stock, or if the terms
of the Option Agreement permit, by exchanging shares of Common
Stock owned by the Participant, so long as the exchanged shares
of Common Stock plus cash (or certified check) paid, if any,
have a total Market Value equal to the Exercise Prices for the
shares of Common Stock to be acquired upon exercise of the
Option. The written notice will also specify the address to
which the certificates for the shares are to be mailed.
Whenever an Option is exercised by exchanging shares of Common
Stock owned by the Participant, the Participant shall deliver to
the Corporation certificates registered in the name of such
Participant representing a number of shares of Common Stock
legally and beneficially owned by such Participant, free of all
liens, claims, and encumbrances of every kind, accompanied by
stock powers duly endorsed in blank by the record holder of the
shares represented by such certificates. Such notice may be
delivered in person to the Secretary of the Corporation, or may
be sent by registered mail, return receipt requested, to the
Secretary of the Corporation, in which case delivery shall be
deemed made on the date such notice is deposited in the mail.
As promptly as practicable after receipt of such written
notification and payment, the Corporation shall deliver to the
Participant certificates for the number of shares of Common
Stock with respect to which such Option has been so exercised,
issued in the Participant's name; provided, that such delivery
shall be deemed effected for all purposes when a stock transfer
agent of the Corporation shall have deposited such certificates
in the United States mail, addressed to the Participant, at the
address specified pursuant to this Section 6(g).
(h) Committee Discretion. Option Agreements need not
contain provisions identical to or similar to other Option
Agreements. The Committee may, in its discretion, vary among
Participants and among Options granted to the same Participant
any and all of the terms and conditions of Options granted under
the Plan, including the term during which and the amounts in
which and dates at or after which such Options may be exercised.
8. Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights to individuals granted related Options under the Plan.
A Stock Appreciation Right may be granted simultaneously with or subsequent
to the Option to which the right is related, but each Stock Appreciation
Right must relate to a particular Option. In exchange for the surrender in
whole or in part of the right to exercise the related Option to purchase
shares of Common Stock, the exercise of a Stock Appreciation Right shall
entitle a Participant to an amount equal to the appreciation in value of the
shares to which the related option right is being surrendered pursuant to
such exercise. Such appreciation in value shall be equal to the excess of
the Market Value of such shares at the time of the exercise of the Stock
Appreciation Right over the Option Price of such shares. Upon the exercise
of a Stock Appreciation Right, payment by the Corporation may be made in
cash, in shares of Common Stock or partly in cash and partly in shares of
Common Stock. If payment is made in shares of Common Stock, such shares
shall be valued at their Market Value as of the date of surrender of the
right to exercise the Option. The Committee shall have discretion to
determine the form of payment made by the Corporation upon the exercise of a
Stock Appreciation Right.
9. Terms and Conditions of Stock Appreciation Rights. The grant of
Stock Appreciation Rights shall be evidenced by written agreements (which
may also be Option Agreements) containing such terms and conditions,
consistent with the provisions of this Plan, as the Committee shall from
time to time determine. Stock Appreciation Rights shall be exercisable in
whole or in part in such amounts and at or after such dates as may be
specified in the agreement; provided, however, that Stock Appreciation
Rights may be exercised only when the related Option could be exercised and
only when the Market Value of the Common Stock subject to the Option exceeds
the Option Price. In no event, however, shall any Stock Appreciation Right
be exercisable after the expiration of ten years from the date of grant.
The Committee may in its discretion require a Participant to continue his
service with the Corporation and its Subsidiaries for a certain length of
time prior to the Stock Appreciation Rights becoming exercisable. Unless
otherwise provided in the written agreement, a Stock Appreciation Right
shall be deemed outstanding until it either expires or is exercised in full.
As described above in Section 7(h) with respect to Options, the Committee
may also vary, among the Participants and among Stock Appreciation Rights
granted to the same Participant, any and all of the terms and conditions of
Stock Appreciation Rights granted under the Plan.
10. No Rights as Shareholder. A Participant shall have none of the
rights of a shareholder until shares of Common Stock are issued to him, and
no adjustment will be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
11. Transferability of Options and Stock Appreciation Rights.
Options granted to Participants under this Plan may not be transferred
except by will or the laws of descent and distribution. During the lifetime
of the Participant to whom granted, Options may be exercised only by the
Participant, his guardian or legal representative. Stock Appreciation
Rights shall not be assignable or transferable under any circumstances and
shall be exercised only by the Participant to whom granted. To assure
compliance with applicable federal and state securities laws, the
Corporation may legend any certificate representing shares issued pursuant
to the exercise of an Option or Stock Appreciation Right with an appropriate
restrictive legend, and may also issue appropriate stop transfer
instructions to its transfer agent with respect to such shares.
12. Termination of Employment. If a Participant terminates
employment with the Corporation or its Subsidiary, for any reason other than
the Participant's Consensual Severance, Retirement, death, disability or
termination for cause, he may exercise his Options or Stock Appreciation
Rights in accordance with their terms for a period of three months after
such termination of employment unless such Option or Stock Appreciation
Right earlier expires by its terms, but only to the extent the Participant
was entitled to exercise the Options or Stock Appreciation Rights on the
date of termination. For purposes of the Plan: (a) a transfer of an
employee from the Corporation to any Subsidiary; (b) a leave of absence,
duly authorized in writing by the Corporation, for military service or for
any other purpose approved by the Corporation if the period of such leave
does not exceed 90 days; and (c) a leave of absence in excess of 90 days,
duly authorized in writing by the Corporation, provided the employee's right
to reemployment is guaranteed either by statute or contract, shall not be
deemed a termination of employment. For purposes of the Plan, termination
of employment shall be considered to occur on the date on which the employee
is no longer obligated to perform services for the Corporation or any of its
Subsidiaries and the employee's right to reemployment is not guaranteed
either by statute or contract, regardless of whether the employee continues
to receive compensation from the Corporation or any of its Subsidiaries
after such date.
If a Participant ceases to be employed by the Corporation or one of
its Subsidiaries due to Consensual Severance, the Committee may, in its sole
discretion, permit the Participant to exercise his Options or Stock
Appreciation Rights in accordance with their terms and to the extent that
the Participant was entitled to exercise the Options or Stock Appreciation
Rights on the date of termination for a period of time after such
termination of employment as may be determined by the Committee, provided,
that such period may not extend beyond the earlier of three years after the
date of termination or the dates on which such Options or Stock Appreciation
Rights expire by their terms.
If a Participant ceases to be employed by the Corporation or one of
its Subsidiaries due to Retirement, he may exercise his Options or Stock
Appreciation Rights in accordance with their terms for a period of three
years after such termination of employment unless such Options or Stock
Appreciation Rights earlier expire by their terms, but only to the extent
that the Participant was entitled to exercise the Options or Stock
Appreciation Rights on the date of termination.
If a Participant ceases to be employed by the Corporation or one
of its Subsidiaries due to the Participant's disability, he may exercise his
Option or Stock Appreciation Right in accordance with its terms, for one
year after such event unless such Option or Stock Appreciation Right earlier
expires by its terms, but only to the extent that the Participant was
entitled to exercise the Option or Stock Appreciation Right on the date of
such event.
If a Participant dies either while an employee of the
Corporation or within three months after the termination of his employment
other than for cause or within one year of termination by reason of
disability, the Options and Stock Appreciation Rights issued to such
Participant shall be exercisable in accordance with their terms by the
personal representative of such Participant or other successor to the
interest of the Participant for a period of one year after such
Participant's death to the extent that the Participant was entitled to
exercise the Option or Stock Appreciation Right on the date of death or
termination of employment, whichever first occurred.
If a Participant's employment is terminated for cause, the
Participant shall have no further right to exercise any Option or Stock
Appreciation Right previously granted him.
Nothing in the Plan or in any Option or Stock Appreciation Right
shall interfere with or limit in any way the right of the Corporation or its
Subsidiaries to terminate a Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Corporation
or any Subsidiaries.
13. Changes in the Corporation's Capital Structure. The existence
of outstanding Options shall not affect in any way the right or power of the
Corporation or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation's
capital structure or its business, or any merger or consolidation of the
Corporation, or any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Corporation, or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
If the Corporation shall effect a subdivision or consolidation
of shares or other capital readjustment, the payment of a stock dividend,
the distribution of a stock split, or other increase or reduction of the
number of shares of the Common Stock outstanding, without receiving
compensation therefor in money, services or property, then (a) the number,
class, and per share price of shares of stock subject to outstanding Options
hereunder shall be appropriately adjusted in such a manner as to entitle a
Participant to receive upon exercise of an Option, for the same aggregate
cash consideration, the same total number and class of shares as he would
have received had he exercised his Option in full immediately prior to the
event requiring the adjustment; and (b) the number and class of shares then
reserved for issuance under the Plan shall be adjusted by substituting for
the total number and class of shares of Common Stock then reserved that
number and class of shares of stock that would have been received by the
owner of an equal number of outstanding shares of each class of Common Stock
as the result of the event requiring the adjustment.
After a merger of one or more corporations into the Corporation,
or after a consolidation of the Corporation and one or more corporations in
which the Corporation shall be the surviving corporation, each holder of an
outstanding Option shall, at no additional cost, be entitled upon exercise
of such Option to receive in lieu of the number and class of shares as to
which such Option would have been so exercisable in the absence of such
event, the number and class of shares of stock or other securities to which
such holder would have been entitled pursuant to the terms of the agreement
of merger or consolidation if, immediately prior to such merger or
consolidation, such holder had been the holder of record of the number and
class of shares of Common Stock equal to the number of shares as to which
such Option was exercisable.
If the Corporation is merged into or consolidated with another
corporation under circumstances where the Corporation is not the surviving
corporation, or if the Corporation is liquidated, or sells or otherwise
disposes of substantially all its assets to another corporation while
unexercised Stock Appreciation Rights remain outstanding under the Plan,
each holder of an unexpired Stock Appreciation Right shall be provided with
appropriate written notice of such merger, consolidation, liquidation or
sale which shall state that each holder of an unexpired Stock Appreciation
Right shall have the right to exercise such Stock Appreciation Right in full
(without regard to limitations imposed pursuant to Section 8 or 9 hereof)
during a 30-day period preceding the effective date of such merger,
consolidation, liquidation or sale.
If the Corporation is merged into or consolidated with another
corporation under circumstances where the Corporation is not the surviving
corporation, or if the Corporation is liquidated, or sells or otherwise
disposes of substantially all its assets to another corporation while
unexercised Options remain outstanding under the Plan, all outstanding
Options may be canceled by the Board as of the effective date of any such
merger, consolidation, liquidation or sale provided that written notice of
such cancellation shall be given to each holder of an Option which states
that each holder of an unexpired Option shall have the right to exercise
such Option in full (without regard to limitations imposed pursuant to
Section 7 hereof) during a 30-day period preceding the effective date of
such merger, consolidation, liquidation or sale.
In the event all outstanding Options are not canceled, the Board
may nonetheless waive any limitations so that, from and after a date prior
to the effective date of such merger, consolidation, liquidation or sale (as
the case may be) specified by the Board, all Options shall be exercisable in
full. In the event all outstanding Options are not canceled by the Board
and the Corporation is merged into or consolidated with another corporation
under circumstances where the Corporation is not the surviving corporation,
or if the Corporation is liquidated, or sells or otherwise disposes of
substantially all its assets to another corporation while unexercised
Options remain outstanding under the Plan, after the effective date of such
merger, consolidation, liquidation or sale, as the case may be, the Options
shall survive and each holder of an outstanding Option shall be entitled,
upon exercise of such Option, to receive, in lieu of shares of Common Stock,
shares of such stock, other securities and/or such other consideration as
the holders of shares of Common Stock received pursuant to the terms of the
merger, consolidation, liquidation or sale.
Except as hereinbefore expressly provided, the issue by the
Corporation of shares of stock of any class, or securities convertible into
shares of stock of any class, for cash or property, or for labor or services
either upon direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the
Corporation convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to,
the number, class or price of shares of Common Stock then subject to
outstanding Options.
14. Tax Withholding. The Corporation or a Subsidiary shall make
such provisions as it shall deem appropriate for the withholding of any
taxes determined to be required to be withheld in connection with the grant
or exercise of Options or Stock Appreciation Rights under the Plan. As a
condition to the issuance of shares of Common Stock pursuant to the Plan,
Participants must authorize the Corporation to withhold in accordance with
applicable law from any regular cash compensation payable to him any taxes
required to be withheld by the Corporation under federal, state or local law
as a result of his exercise of an Option or Stock Appreciation Right.
Alternatively, the delivery of certificates upon the exercise of Options or
Stock Appreciation Rights may, in the discretion of the Committee, be
conditioned upon payment to the Corporation by the person exercising such
Option or Stock Appreciation Right of the amount, determined by the
Corporation, of any tax liability of the Corporation resulting from such
exercise. Such provision may include, with the Committee's consent,
withholding of or delivery of shares of Common Stock valued at the same time
and in the same manner as the shares giving rise to the withholding
obligation.
15. Indemnification. Each person who is or shall have been a member
of the Committee shall be indemnified and held harmless by the Corporation
from and against any cost, liability or expense imposed or incurred in
connection with such person's or the Committee's taking or failing to take
any action under the Plan to the full extent permitted by the Corporation's
Articles of Incorporation and Bylaws. Each such person shall be justified
in relying on information furnished in connection with the Plan's
administration by any appropriate person or persons. This right of
indemnification shall inure to the benefit of the heirs, executors, or
administrators of each such member of the Committee and shall be in addition
to all other rights to which such member of the Committee may be entitled as
a matter of law, contract, or otherwise.
16. Limitation on Actions. Every right of action by or on behalf of
the Corporation or by any shareholder against any past, present or future
member of the Board or Committee or against any officer or employee of the
Corporation arising out of or in connection with this Plan shall,
irrespective of the place where action may be brought and irrespective of
the place of residence of any such director, member, officer or employee,
cease and be barred by the expiration of three years from whichever is the
later of (a) the date of the act or omission in respect of which such right
of action arises or (b) the first date upon which there has been made
generally available to shareholders an annual report of the Corporation and
a proxy statement for the annual meeting of shareholders following the
issuance of such annual report, which annual report and proxy statement
alone or together set forth, for the related period, the aggregate number of
shares for which Options were granted and the aggregate number of Stock
Appreciation Rights granted; and any and all right of action by an executive
(past, present or future) against the Corporation arising out of or in
connection with this Plan shall, irrespective of the place where action may
be brought, cease and be barred by the expiration of three years from the
date of the act or omission in respect of which such right of action arises.
17. Applicability of Plan to Non-Plan Options and Stock Appreciation
Rights. This Plan shall not affect the terms and conditions of any stock
options or stock appreciation rights heretofore or hereafter granted to any
employee of the Corporation or any Subsidiary under any other option plan or
stock appreciation rights plan.
18. Listing and Registration of Shares. Each Option and Stock
Appreciation Right shall be subject to the requirement that the Committee
may determine, in its discretion, that the listing, registration or
qualification of the shares covered thereby upon any securities exchange or
under any federal or state law or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or
in connection with, the granting of such Option or Stock Appreciation Right
or the issue or purchase of shares thereunder, such Option or Stock
Appreciation Right may not be exercised in whole or in part unless and until
such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
19. Effective Date of Plan. This Plan shall take effect on March 1,
1986, subject to approval by the shareholders of the Corporation at the 1986
Annual Meeting of Shareholders or any adjournment thereof or at a Special
Meeting of Shareholders. options and Stock Appreciation Rights granted
hereunder shall not be exercisable prior to such shareholder approval and
shall expire should the shareholders fail to approve the Plan by August 1,
1986. Unless earlier terminated by the Board of Directors, the Plan shall
terminate on March 1, 1996. No option shall be granted under this Plan
after such date.
20. Law Applicable. This Plan and all determinations made and
actions taken pursuant to this Plan shall be governed by the laws of
Michigan and construed accordingly.
21. Termination and Amendment. The Committee may terminate or
suspend the Plan at any time, or may from time to time amend the Plan as it
deems proper and in the best interests of the Corporation, provided that no
such amendment may materially increase either the benefits to Participants
under the Plan or the number of shares that may be issued under the Plan,
materially modify the eligibility requirements, reduce the Option Price
(except pursuant to adjustments under Section 13) or impair any outstanding
Option or Stock Appreciation Right.
