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 June 30, 1997, 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)
111 Lyon Street NW
Grand Rapids, Michigan 49503
(Address of principal executive (Zip Code)
Registrant's telephone number, including a(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 July 31, 1997 was 47,589,657 shares.
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INDEX
OLD KENT FINANCIAL CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996
Consolidated Statements of Income for the three
and six months ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows for the
six months ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)______________________________________________________________
<CAPTION>
June 30, December 31,
(dollars in thousands) 1997 1996
<S> <C> <C>
ASSETS:
Cash and due from banks................................................. $ 593,464 $ 530,444
Federal funds sold and resale agreements................................ 62,625 107,353
Total cash and cash equivalents......................................... 656,089 637,797
Interest-earning deposits............................................... 38,827 803
Trading account securities.............................................. 10,101 19,009
Mortgages held-for-sale................................................. 814,549 589,245
Securities available-for-sale:
Collateralized mortgage obligations and other mortgage-backed
securities....................................................... 1,143,312 673,722
Other securities..................................................... 899,470 1,221,476
Total securities available-for-sale (amortized cost of
$2,063,318, and $1,910,367, respectively).......................... 2,042,782 1,895,198
Securities held-to-maturity:
Collateralized mortgage obligations and other mortgage-backed
securities....................................................... 715,561 746,355
Other securities..................................................... 150,728 162,975
Total securities held-to-maturity (market values of
$867,652 and $911,592, respectively)............................... 866,289 909,330
Loans................................................................... 8,349,226 8,097,056
Allowance for credit losses............................................. (157,260) (165,928)
Net loans............................................................... 8,191,966 7,931,128
Premises and equipment.................................................. 181,784 173,916
Other assets............................................................ 558,451 490,402
Total Assets............................................................ $13,360,838 $12,646,828
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits:
Non-interest bearing................................................. $ 1,638,000 $ 1,580,960
Interest-bearing..................................................... 8,578,229 8,474,754
Foreign deposits -- interest-bearing................................. 45,962 24,433
Total deposits..................................................... 10,262,191 10,080,147
Other borrowed funds.................................................... 1,626,298 1,235,867
Other liabilities....................................................... 224,413 237,057
Subordinated debt....................................................... 100,000 100,000
Total Liabilities....................................................... 12,212,902 11,653,071
Guaranteed preferred beneficial interests in the Corporation's
junior subordinated debentures..................................... 100,000 --
Shareholders' Equity:
Preferred stock: 25,000,000 shares authorized and unissued.............. -- --
Common stock, $1 par value: 150,000,000 shares authorized;
47,584,813 and 44,944,321 shares issued and outstanding .............. 47,585 44,944
Capital surplus......................................................... 289,968 175,842
Retained earnings....................................................... 722,897 782,830
Valuation adjustment of securities available-for-sale................... (12,514) (9,859)
Total Shareholders' Equity.............................................. 1,047,936 993,757
Total Liabilities and Shareholders' Equity............................. $13,360,838 $12,646,828
</TABLE>
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<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)______________________________________________________________________
For the Three Months For the Six Months
Ended June 30, Ended June 30,
(in thousands, except per share data) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans............................................$191,633 $177,821 $379,205 $347,612
Interest on mortgages held-for-sale................................... 14,707 6,951 24,807 12,949
Interest on securities available-for-sale............................. 32,462 32,621 61,698 68,463
Interest on securities held-to-maturity:
Taxable............................................................. 12,778 14,305 25,899 28,281
Tax-exempt.......................................................... 2,100 2,331 4,289 4,891
Interest on deposits.................................................. 68 31 123 287
Interest on federal funds sold and resale agreements.................. 1,187 1,455 3,333 2,095
Interest on trading account securities................................ 264 130 952 218
Total interest income................................................. 255,199 235,645 500,306 464,796
Interest Expense:
Interest on domestic deposits......................................... 98,878 93,857 195,966 185,181
Interest on foreign deposits.......................................... 654 668 1,063 1,908
Interest on other borrowed funds...................................... 20,773 14,475 36,708 31,210
Interest on subordinated debt......................................... 3,403 1,668 6,188 3,354
Total interest expense................................................ 123,708 110,668 239,925 221,653
Net Interest Income..................................................... 131,491 124,977 260,381 243,143
Provision for credit losses............................................. 11,741 9,723 21,962 15,975
Net interest income after provision
for credit losses................................................... 119,750 115,254 238,419 227,168
Other Income:
Mortgage banking revenue (net)........................................ 24,817 12,005 43,627 22,825
Trust income.......................................................... 12,841 11,260 25,693 22,328
Service charges on deposit accounts................................... 11,708 11,277 23,139 22,001
Insurance sales commissions........................................... 3,281 3,393 6,775 6,557
ATM fees.............................................................. 1,600 649 2,565 1,330
Brokerage commissions................................................. 697 340 1,508 705
Credit card transaction revenue - net................................. 354 2,337 1,016 4,104
Securities gains/(losses)............................................. (774) 335 (1,411) 1,189
Nonrecurring and other real estate owned income....................... 17,698 1,332 20,285 3,829
Other................................................................. 10,263 8,091 19,276 15,196
Total other income.................................................... 82,485 51,019 142,473 100,064
Other Expenses:
Salaries and employee benefits........................................ 62,054 50,507 123,578 101,701
Occupancy expense..................................................... 8,425 7,540 17,042 15,000
Equipment expense..................................................... 7,016 6,202 13,633 11,949
Advertising and promotion............................................. 2,830 12,646 4,857 16,894
Amortization of goodwill and intangibles.............................. 3,340 2,426 6,710 4,885
FDIC Insurance........................................................ 358 306 599 487
Nonrecurring and other real estate owned expense...................... 2,079 296 2,306 587
Other expenses........................................................ 35,760 30,051 70,150 59,817
Total other expenses.................................................. 121,862 109,974 238,875 211,320
Income Before Income Taxes.............................................. 80,373 56,299 142,017 115,912
Income taxes.......................................................... 27,562 18,738 48,202 39,117
Net Income..............................................................$ 52,811 $ 37,561 $ 93,815 $ 76,795
Per Common Share:
Net income............................................................$ 1.10 $ 0.75 $ 1.95 $ 1.53
Dividends.............................................................$ 0.324 $ 0.290 $ 0.648 $ 0.581
Number of Common Shares Used to Calculate
Net Income Per Share (in thousands)................................... 48,001 49,941 48,209 50,124
</TABLE>
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<TABLE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Six months ended June 30, 1997 (dollars in thousands) 1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................... $ 93,815 $ 76,795
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for credit losses............................................. 21,962 15,975
Depreciation, amortization and accretion................................ 23,171 29,512
Net gains on sales of assets............................................ (48,530) (20,035)
Net change in trading account securities................................ 51,689 3,972
Originations and acquisitions of mortgages held-for-sale................ (2,065,799) (1,577,958)
Proceeds from sales and prepayments of mortgages held-for-sale.......... 1,869,220 1,528,492
Net change in other assets.............................................. (32,533) (12,474)
Net change in other liabilities......................................... (35,242) 8,562
Net cash (used for) provided by operating activities............................ (122,246) 52,841
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and prepayments of securities available-for-sale....... 113,550 261,036
Proceeds from sales of securities available-for-sale............................ 1,212,235 1,399,539
Purchases of securities available-for-sale...................................... (1,410,790) (1,526,434)
Proceeds from maturities and prepayments of securities held-to-maturity......... 144,591 63,118
Proceeds from sales of securities held-to-maturity.............................. 981 860
Purchases of securities held-to-maturity........................................ (103,260) (167,644)
Net change in interest-earning deposits......................................... (38,024) 174,238
Proceeds from sale of loans..................................................... 291,460 -
Net increase in loans........................................................... (333,271) (457,023)
Purchases of leasehold improvements, premises and equipment, net............. (12,251) (6,708)
Cash acquired in business acquisition........................................... 14,284 -
Sale of business units (net of cash sold)....................................... 1,234 7,123
Net cash used for investing activities.......................................... (119,261) (251,895)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in time deposits......................................................... (48,747) 687,895
Change in demand and savings deposits........................................... (71,015) (139,410)
Change in other borrowed funds.................................................. 390,431 (207,298)
Proceeds of guaranteed preferred beneficial interests in the
Corporation's junior subordinated debentures............................... 100,000 -
Repurchases of common stock..................................................... (85,775) (46,023)
Proceeds from common stock issuances............................................ 5,865 4,681
Dividends paid to shareholders.................................................. (30,959) (28,985)
Net cash provided by financing activities....................................... 259,800 270,860
Net change in cash and cash equivalents......................................... 18,293 71,806
Cash and cash equivalents at beginning of year.................................. 637,797 577,056
Cash and cash equivalents at June 30............................................ $ 656,090 $ 648,862
Supplemental disclosures of cash flow information:
Interest paid on deposits, other borrowed funds and
subordinate debt............................................................ $ 246,768 $ 225,283
Federal income taxes paid..................................................... 34,900 41,775
Significant non-cash transactions:
Stock dividend issued 122,474 84,013
Stock issued to acquire business.............................................. 71,767 8,431
</TABLE>
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 30, 1997
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 six month period
ended June 30, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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,
1996.
Certain reclassifications have been made to prior periods' financial statements
to place them on a basis comparable with the current periods' financial
statements.
NOTE B: FINANCIAL INSTRUMENT ACTING POLICIES
Old Kent uses certain off-balance sheet derivative financial instruments,
principally interest rate swaps, in connection with its asset/liability
management activities. Purchased interest rate options (including caps and
floors) and forwards are also used to manage interest rate risk and currency
risk. Provided these intruments meet specific criteria, they are considered
hedges and accounted for under the accrual or deferral methods, as more fully
discussed below.
Old Kent uses the accrual method for substantially all of its interest rate
swaps as well as for interest rate options. Amounts receivable or payable
under these agreements are recognized as an adjustment to the interest income
or expense of the hedged item. There is no recognition on the balance sheet
for changes in the fair value of the hedging instrument. Premiums paid for
interest rate options are deferred as a component of other assets and amortized
to interest income or expense over the contract term. Gains and losses
associated with forwards are deferred as an adjustment to the carrying value of
the related asset or liability and are recognized in the corresponding interest
income or expense accounts over the remaining life of the hedged item. Gains
and losses on terminated hedging instruments are also deferred and amortized to
interest income or expense over the remaining life of the hedged item.
Derivative financial instruments, such as caps and floors, that do not meet the
required criteria are carried on the balance sheet at fair value with realized
and unrealized changes in that value recognized in earnings. If the hedged item
is sold or its outstanding balance otherwise declines below that of the related
hedging instrument, the derivative product (or applicable excess portion
thereof) is marked-to-market and the resulting gain or loss is included in
earnings.
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1997
NOTE C: LOANS AND NONPERFORMING ASSETS
The following summarizes loans and nonperforming assets at the
dates indicated (dollars in thousands):
June 30, December 31,
Loans: 1997 1996
Commercial....................................$2,418,056 $2,205,837
Real estate - Commercial..................... 1,781,355 1,719,699
Real estate - Construction................... 478,221 428,001
Real estate - Residential mortgages.......... 914,631 859,318
Real estate - Consumer home equity .......... 840,190 728,530
Consumer...................................... 1,721,491 1,636,719
Credit card loans............................. 4,702 317,554
Lease financing............................... 190,580 201,398
Total Loans...................................$8,349,226 $8,097,056
June 30, December 31,
Nonperforming assets: 1997 1996
Nonaccrual loans .............................$ 43,030 $ 39,950
Restructured loans............................ 2,984 2,832
Impaired loans.............................. 46,014 42,782
Other real estate owned....................... 5,562 7,097
Total nonperforming assets....................$ 51,576 $ 49,879
Loans past due 90 days or more................$ 20,059 $ 36,817
At June 30, 1997, the Corporation's management has identified loans totalling
approximately $11.6 million as potential problem loans. These loans are not
included as nonperforming assets in the table above. While these loans were
in compliance with repayment terms at June 30, 1997, other circumstances caused
management to seriously doubt the ability of the borrowers to continue to
remain in compliance with existing loan repayment terms.
During June, 1997, Old Kent sold approximately $266 million of credit card
loans. This sale resulted from the Corporations's decision to discontinue
business activity as an underwriter of credit card loans. Old Kent will
continue to be an issuer, but will no longer carry credit card loans on its
balance sheet. After related costs (which included the use of estimates),
Old Kent recognized a pre-tax gain of $16.6 million on this sale, or
approximately $.22 per common share, after taxes. At June 30, 1997, Old Kent
had approximately $4.7 million of remaining credit card loans which were not
included in this transaction and are subject to possible disposal in the
foreseeable future.
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1997
NOTE D: ALLOWANCE FOR CREDIT LOSSES AND NET CHARGE-OFFS
The following summarizes the changes in the allowance for credit losses, and
net charge-offs (in thousands of dollars):
<TABLE>
<CAPTION>
For the Six Months
ended June 30,
Allowance for Credit Losses 1997 1996
<S> <C> <C>
Balance at January 1,.................................... $165,928 $174,248
Changes in allowance due to acquisitions / divestitures... 3,184 (1,140)
Changes in allowance due to loans sold.................... (8,000) --
Provision for credit losses............................... 21,962 15,975
Gross loans charged-off................................... (33,226) (22,759)
Gross recoveries of loans previously charged-off.......... 7,412 6,163
Balance at end of period,................................. $157,260 $172,487
For the Six Months
ended June 30,
Net Loan Charge-Offs 1997 1996
Commercial Loans & Commercial Real Estate................. ($783) ($2,406)
Consumer.................................................. 12,052 5,006
Credit Card............................................... 12,913 7,971
Residential Mortgages..................................... 1 57
Leases.................................................... 1,631 5,968
Total Net Charge-Offs..................................... $ 25,814 $ 16,596
</TABLE>
NOTE E: 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):
<TABLE>
<CAPTION>
Carrying
Gross Gross Value
Amortized Unrealized Unrealized at Market
June 30, 1997: Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agency securities.... $ 831,859 $ 545 $12,466 $ 819,938
Collateralized mortgage obligations:
U.S. Government issued.................... 818,784 754 5,587 813,591
Privately issued.......................... 223,261 576 3,568 220,269
Mortgage-backed pass-through securities........ 121,804 103 893 121,014
Other securities............................... 67,610 - - 67,610
Total securities available-for-sale............ $2,063,318 $1,978 $22,514 $2,042,782
December 31, 1996:
U.S. Treasury and federal agency securities.... $1,167,775 $ 298 $ 7,891 $1,160,182
Collateralized mortgage obligations:
U.S. Government issued.................... 419,499 433 3,064 416,868
Privately issued.......................... 189,347 465 4,277 185,535
Mortgage-backed pass-through securities........ 72,452 46 1,179 71,319
Other securities............................... 61,294 - - 61,294
Total securities available-for-sale............ $1,910,367 $1,242 $16,411 $1,895,198
</TABLE>
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OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1997
<TABLE>
<CAPTION>
NOTE F: 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
June 30, 1997: Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agency securities.... $ 6,175 $ 5 $ 0 $ 6,180
Collateralized mortgage obligations:
U.S. Government issued.................... 455,152 726 3,335 452,543
Privately issued.......................... 150,598 80 1,337 149,341
Mortgage-backed pass-through securities........ 109,811 1,906 236 111,481
State and political subdivisions............... 144,553 4,642 1,088 148,107
Total securities held-to-maturity.............. $866,289 $7,359 $5,996 $867,652
December 31, 1996:
U.S. Treasury and federal agency securities.... $ 6,116 $ 9 $ 1 $ 6,124
Collateralized mortgage obligations:
U.S. Government issued.................... 462,778 1,878 3,444 461,212
Privately issued.......................... 160,699 - 1,885 158,814
Mortgage-backed pass-through securities........ 122,878 2,320 247 124,951
Other Securities............................... 156,859 4,730 1,098 160,491
Total securities held-to-maturity.............. $909,330 $8,937 $6,675 $911,592
</TABLE>
NOTE G: BUSINESS COMBINATIONS
On January 1, 1997, Old Kent acquired Seaway Financial Corporation ("Seaway"),
a bank holding company, and its subsidiaries, The Commercial and Savings Bank
of St. Clair County and The Algonac Savings Bank. The acquisition was effected
by a merger of Seaway with and into Old Kent. This transaction was accounted
for as a purchase for accounting purposes. At the effective date, Seaway had,
on a consolidated basis, assets totaling approximately $345 million and
deposits of approximately $302 million. Seaway stockholders received
approximately 1.9 million shares of common stock of Old Kent. The principal
market for the financial services offered by Seaway was St. Clair County,
Michigan, and the communities within St. Clair County.
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1997
NOTE H: CAPITAL INCOME SECURITIES
On January 31, 1997, Old Kent Capital Trust I, a Delaware business trust
controlled by the Corporation, issued $100 million of Floating Rate
Subordinated Capital Income Securities ("preferred securities".) The
Corporation unconditionally guarantees all of the obligations of Old Kent
Capital Trust I. The holders of the preferred securities are entitled to
receive cumulative cash distributions accruing from the date of original
issuance and payable quarterly in arrears on the 1st day of February, May,
August and November of each year commencing May 1, 1997, at a variable rate
equal to the three month LIBOR (London Interbank Offering Rate) plus .80%,
determined quarterly for the ensuing period two London business days prior to
the commencement of each period. In determining the amount of each quarterly
distribution, the previously described distribution rate is applied to the
liquidation amount of each preferred security computed on a basis of the actual
number of days elapsed in a year of twelve 30-day months. The stated maturity
of the preferred securities is February 1, 2027, but the securities may be
redeemed, in whole or in part, beginning on February 1, 2007 (or earlier due
to the occurrence of a Special Event as provided for in the instruments.)
The proceeds of the preferred security issuance were entirely invested by
Old Kent Capital Trust I in a similarly featured Junior Subordinated Debenture
issued by Old Kent Financial Corporation. The proceeds of the debenture
issuance by the Corporation will be used for general corporate purposes, which
may include the repurchase of its common shares.
The preferred securities qualify as Tier 1 capital, subject to certain
limitations, for regulatory capital purposes. The issuance of these securities
had the effect of increasing the Corporation's regulatory capital.
NOTE I: SHAREHOLDERS' EQUITY
In June, 1996, the Board of Directors authorized the repurchase of up to
4.5 million shares of Old Kent Common Stock which would be reserved for later
reissue in connection with business acquisitions, future stock dividends,
employee benefit plans and other corporate purposes. As of June 30, 1997,
approximately 4.3 million shares of Old Kent Common Stock had been purchased
under this authorization. In January, 1997, approximately 1.9 million of these
shares were issued to acquire Seaway Financial Corporation as described in
Note G.
In June, 1997, the Board of Directors of Old Kent Financial Corporation
declared a 5% stock dividend payable July 28, 1997, to shareholders of record
on June 27, 1997. All per share amounts included in this report have been
adjusted to reflect this dividend.
At that same meeting, Old Kent's directors authorized management, at its
discretion, to purchase up to 3.0 million shares of the Corporation's common
stock. It is anticipated that these shares will be purchased by the
Corporation in a systematic program of open market, or privately negotiated
purchases and they will be reserved for later reissue in connection with
potential future stock dividends, dividend reinvestment plan, employee benefit
plans, and other general corporate purposes. As of June 30, 1997, no shares
had been purchased under this authorization.
<PAGE>
OLD KENT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued (Unaudited)
June 30, 1997
NOTE J: MORTGAGE BANKING REVENUE (NET)
The following summarizes net mortgage banking revenues:
<TABLE>
<CAPTION>
For the Six Months
Net mortgage banking revenue: ended June 30,
1997 1996
<S> <C> <C>
Gross mortgage servicing revenue.................................... $19,444 $12,597
Less: amortization of mortgage servicing rights & direct costs.... (12,889) (9,804)
Net mortgage servicing revenue...................................... 6,555 2,793
Mortgage banking gains (net)........................................ 28,724 13,174
Mortgage originations and processing fees (net)..................... 8,348 6,858
Total net mortgage banking revenue................................ $43,627 $22,825
</TABLE>
NOTE K: EARNINGS PER SHARE
During February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). Old Kent is required to adopt the provisions of this statement
for the annual period ending December 31, 1997. SFAS 128 specifies
computational methods for determining basic and diluted earnings per share
which, for Old Kent, will cause different, but immaterial, results for earnings
per share than as currently calculated.
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods; earlier application is not
permitted. It requires the restatement of all prior period earnings per share
data presented. The table below compares net income per common share, as
currently reported, with proforma basic amounts as calculated under the
provisions of SFAS 128.
For the Six Months
ended June 30,
Net Income Per Common Share: 1997 1996
As Reported....................................... $1.95 1.53
Proforma, basic, as calculated under SFAS 128..... 1.96 1.54
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected Old Kent's financial
condition and results of operations during the periods included
in the consolidated financial statements included in this filing.
Old Kent's form 10-Q for the quarterly period ended March 31,
1997, is here incorporated by reference.
RESULTS OF OPERATIONS
Old Kent's net income was $52.8 million for the second quarter of
1997 compared to $37.6 million for the same period in 1996.
Second quarter earnings per share was $1.10 a 46.7% increase over
last year's $.75. For the six month period ended June 30, 1997,
net income was $93.8 million compared to $76.8 million a year ago
and earnings per share was $1.95, a 27.5% increase over last
year's $1.53.
Total assets were $13.4 billion at quarter-end compared to $12.6
billion at December 31, 1996. Return on average equity for the
second quarter of 1997 was 20.85% compared to 14.91% for the
second quarter of 1996. Return on average assets was 1.60% for the
second quarter of 1997 compared to 1.24% for the second quarter
of 1996.
Old Kent's net interest income for the second quarter of 1997 was
$131.5 million, a 5.2% increase over the $125.0 million recorded
in the same period of 1996. The increase in net interest income
was due to the January 1, acquisition of Seaway Financial
Corporation ("Seaway") and a shift in the earning asset mix from
lower yielding securities to higher yielding loans. For the
second quarter of 1997, the net interest margin was 4.37%
compared to 4.48% a year ago. The decrease in the net interest
margin was primarily due to increased funding costs and
repurchases of common stock.
The provision for credit losses was $11.7 million in the second
quarter of 1997 and $9.7 million in the second quarter of 1996.
The increase in the provision reflected a decline in consumer
credit quality. Net credit losses were $14.8 million or .71% of
average loans for the second quarter of 1997 compared to $10.7
million or .55% of average loans for the same period a year ago.
The allowance for credit losses as a percent of loans and leases
outstanding was 1.88% at June 30, 1997 and 2.05% at December 31,
1996. Impaired loans as a percent of total loans was .55% at
June 30, 1997 and .53% at December 31, 1996.
Total other operating income, excluding securities transactions
and other nonrecurring income, increased 33% or $16.2 million
during the second quarter of 1997 over the same period a year
ago. The aforementioned Seaway acquisition accounted for
approximately $2.0 million of this increase and another $12.8
million was attributable to our mortgage banking business,
primarily a result of growth and expansion of Old Kent Mortgage
Company. Trust income increased 14.0% or $1.6 million and
service charges on deposits increased 3.8% or $.4 million. All
other service charges and fees increased $1.4 million over the
same period a year ago.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Nonrecurring and other real-estate owned income totalled $17.7
million for the quarter ended June 30, 1997. This included a
gain of $16.7 million from the sale of credit card loans as
discussed in note C to the consolidated financial statements.
Old Kent sold approximately $1.3 billion of residential mortgage
loans during the quarter. Old Kent's residential third party
mortgage servicing portfolio increased 44% to $10.9 billion at
June 30, 1997, from $7.6 billion at June 30, 1996, primarily due
to acquisitions. The residential third party mortgage servicing
portfolio was $9.9 billion at December 31, 1996.
Total net securities gains (losses) for the second quarter of
1997 were ($774,000), compared to gains of $335,000 for the same
period of 1996.
Total operating expenses for the second quarter of 1997 increased
$11.9 million, or 10.8%, over the same period in 1996.
Approximately $5.9 million of this increase relates to the Seaway
acquisition. Excluding Seaway; salaries, wages and employee
benefits increased $9.2 million or 18.1% for the second quarter
of 1997 over the second quarter of 1996. The number of full-time
equivalent employees increased by 865 over a year ago, to 6,175
at June 30, 1997, which includes the acquisition of 232 Seaway
employees and 363 National Pacific Mortgage Co. employees. The
following table shows the change in employees:
June 30,
1997 1996 Change
Full-time equivalent staff:
Banking units 4,575 4,390 185
Mortgage banking 1,365 735 630
Insurance, leasing & brokerage 235 185 50
Total 6,175 5,310 865
During the second quarter of 1997 compared to the same period a
year ago, occupancy expenses excluding Seaway, increased 10.0%,
and equipment expenses increased 9.2%. Advertising and promotion
decreased 77.6% or $9.8 million from the prior year quarter,
largely attributable to the discontinuance of Old Kent's credit
card "CardMiles" promotional program, which was canceled in late
1996.
Old Kent maintains a reserve associated with its CardMiles
program which is included in other liabilities in the
consolidated balance sheets. Old Kent's process for recording
the allowance for redemption reserve is based on estimates.
Factors affecting these estimates include, among others, current
and cumulative redemption experience, rates for air travel, and
economic conditions. The Corporation determines its allowance
for redemption reserve using a historical "lag" analysis based
upon monthly certificate redemptions, correlated with the months
in which the certificates were actually earned by eligible
cardholders. The allowance for redemption reserve is summarized
below:
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Six Months Ended
(Dollars in thousands) June 30,
CardMiles allowance for redemption reserve 1997
Allowance at beginning of period $10,823
Additions to redemption reserve 500
Redemptions during period (4,807)
Allowance at end of period $6,516
Amortization of goodwill and intangibles increased 38% or $.9
million. Nonrecurring expenses of $2.1 million was primarily
attributable to writedowns on certain obsolete software. Other
operating expenses increased by 19.0% or $5.7 million over the
prior year quarter, which includes the impact of recent
acquisitions of National Pacific Mortgage Corporation in August
1996, and Seaway Financial Corporation in January 1997.
Old Kent has completed an analysis to assure that its mainframe
and centrally controlled systems are able to deal with the advent
of the year 2000. Diagnosis and reprogramming in this area are
expected to result in expense estimated at $8-12 million, over
the three years ended December 31, 1999.
BALANCE SHEET CHANGES
Total interest-earning assets (at amortized cost), excluding the
Seaway acquisition increased 2.2% or $252 million from December
31, 1996. For the six months ended June 30, 1997, excluding the
Seaway acquisition, commercial loans grew at an annualized rate
of 10.7% or $238 million, and consumer loans grew at an
annualized rate of 13.6% or $161 million. The growth in
commercial loans is primarily a result of increased efforts in
the Registrant's eastern Michigan, and Illinois markets.
Excluding the Seaway acquisition, total securities (at amortized
cost) increased $13 million since year-end 1996. Mortgages
held-for-sale increased 38.2% or $225 million. Other interest
earning assets decreased 11.8% or $15 million, since year end
1996.
Total deposits, excluding the Seaway acquisition, decreased $130
million or 1.3% from year-end 1996: noninterest bearing deposits
increased 1.3% or $20 million and interest-bearing deposits
decreased 1.8% or $150 million. Short-term borrowed funds
increased $389 million or 31.4% from December 31, 1996.
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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
At June 30, 1997, shareholders' equity was $1,048 million
compared to $1,006 million at June 30, 1996. In June, 1997, the
Corporation was authorized to repurchase up to 3.0 million shares
of Old Kent Common Stock. As of June 30, 1997, no shares had
been repurchased under this authorization. In June, 1996, the
Corporation was authorized to repurchase up to 4.5 million shares
of Old Kent Common Stock. As described in the notes to the
consolidated financial statements, through June 30, 1997,
approximately 4.3 million shares had been repurchased and
approximately 1.9 million shares were issued to acquire Seaway.
The following table lists the number of shares repurchased and
reserved at June 30, 1997 with the intent of future reissuance
under the authorized programs.
Old Kent Common Stock repurchased and reserved for Number of
future reissuance at June 30, 1997: shares
(In thousands)
Reserved for possible future stock dividends
and other corporate purposes 1,991
Reserved for future reissuance for dividend
reinvestment and employee stock plans 460
Total 2,451
Shares reserved, as shown above, include approximately 112
thousand shares which were acquired by the Corporation during the
quarter ended June 30, 1997. The repurchase of these shares had
a beneficial effect on earnings per common share and return on
average equity for that period.
Total equity at June 30, 1997, was reduced by an after-tax
unrealized loss of $13 million on securities available-for-sale.
Shareholders' equity as a percentage of total assets as of June
30, 1997, was 7.84%.
The following table represents the Registrant's consolidated
regulatory capital position as of June 30, 1997:
Regulatory capital at June 30, 1997
(in millions) Tier 1 Total
Leverage Risk-Based Risk-Based
Ratio Capital Capital
Actual capital $1,036.0 $1,036.0 $1,259.0
Required regulatory minimum capital 391.2 392.3 784.6
Capital in excess of requirements $ 644.8 $ 643.7 $ 474.4
Actual ratio 7.94% 10.56% 12.84%
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)
As described in note H, in January, 1997, the Corporation issued
$100 million of capital income securities. These "Trust
Preferred Capital Securities" are eligible for Tier 1 capital
treatment.
The changes in total shareholders' equity and book value per
common share are summarized in the tables below.
Total Share-
holders' Equity Book Value Per
(in millions) Common Share
Balance, December 31, 1996 $ 993.8 $21.06
Net income for the six months ended
June 30, 1997 93.8 1.95
Cash dividends paid (31.0) (.65)
Net change in valuation adjustment of
securities available-for-sale (2.7) (.06)
Stock repurchases (net of stock issued,
excluding shares issued to acquire Seaway) (77.8) (1.79)
Acquisition of Seaway 71.8 1.51
Balance, June 30, 1997 $1,047.9 $22.02
<PAGE>
PART II OTHER INFORMATION
Item 2 Changes in Securities
On June 16, 1997, the Corporation issued 55,070 shares of common
stock to officers and key employees of the Corporation and its
subsidiaries pursuant to the Corporation's Restricted Stock Plan of
1987. On June 16, 1997, the Corporation issued 27,342 shares of
common stock to senior executive officers on expiration of the
deferral period associated with awards of deferred shares made by
the Corporation in 1992, pursuant to its Deferred Stock Compensation
Plan. Neither the Restricted Stock Plan of 1987 nor the Deferred
Stock Compensation Plan is registered under the Securities Act of
1933. Awards of shares or deferred shares under these plans were
made to officers and key employees of the Corporation and its
subsidiaries in consideration of their employment, do not involve
any investment decision or election by the recipient, and do not
constitute an "offer" or a "sale" under the Securities Act of 1933.
These transactions are reported in order to assure full disclosure.
Reporting these transaction under this item shall not constitute an
admission by the Corporation that such transactions constitute sales
of securities.
Item 6 Exhibits and reports on Form 8-K.
A. The following exhibits are filed as part of this report:
1. Exhibit 3 - Bylaws (as amended 04/21/97)
2. Exhibit 10 - Material Contracts
a. Executive Incentive Bonus Plan
Previously filed in registrant's definitive proxy
statement dated March 1, 1997. Here incorporated
by reference.
b. Executive Stock Incentive Plan of 1997
Previously filed in registrant's definitive proxy
statement dated March 1, 1997. Here incorporated
by reference.
c. Form of Indemnification Agreement.
d. Amendment of Executive Stock Incentive Plan of 1997
and Stock Option Incentive Plan of 1992.
3. Exhibit 11 - Statement Re: Computation of Earnings Per
Share
4. Exhibit 27 - Financial Data Schedules
B. The following reports on Form 8-K were filed during the
quarter:
Date of event Item Financial Statements
reported Reported Filed
April 30, 1997 5
<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: August 14, 1997 David J. Wagner
Chairman of the Board, President and
Chief Executive Officer
Date: August 14, 1997 B. P. Sherwood, III
Vice-Chairman and Treasurer
<PAGE>
EXHIBIT INDEX
3 Bylaws (as amended 4/21/97)
10 Material Contracts
11 Statement of Earnings per Share
27 Financial Data Schedule
Restated April 19, 1993
as amended through
April 21, 1997
BYLAWS
of
OLD KENT FINANCIAL CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office shall
be in the City of Grand Rapids, County of Kent, State of
Michigan.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of
Michigan as the board of directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Times and Places of Meetings. All meetings
of the shareholders shall be held at such times and places,
within or without the State of Michigan, as may be fixed from
time to time by the board of directors. If no designation of the
place of a meeting is made, such meeting shall be held at the
principal office of Old Kent Bank and Trust Company in Grand
Rapids, Michigan.
Section 2. Annual Meetings. Annual meetings of the
shareholders shall be held each year at such time on such
business day in the month of April as may be designated by the
board of directors, or if no such designation is made, at 10 a.m.
on the third Monday in April, or if that day is a legal holiday,
then on the next succeeding business day at such place and hour
as shall be fixed by the board of directors.
Section 3. Special Meetings. Special meetings of the
shareholders may be called by resolution of a majority of the
board of directors or by the Chairman of the Board or Chief
Executive Officer of the Corporation, and shall be held on a date
fixed by the board of directors or the Chairman of the Board or
Chief Executive Officer.
<PAGE>
Section 4. Notice of Meetings. Written notice of each
meeting of shareholders, stating the time, place and purposes
thereof, shall be given to each shareholder entitled to vote at
the meeting not less than ten (10) nor more than sixty (60) days
before the date fixed for the meeting. Notice of a meeting need
not be given to any shareholder who signs a waiver of notice
before or after the meeting. Attendance of a shareholder at a
meeting shall constitute both (a) a waiver of notice or defective
notice except when the shareholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to
holding the meeting or transacting any business because the
meeting has not been lawfully called or convened, and (b) a
waiver of objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes described
in the meeting notice, except when the shareholder objects to
considering the matter when it is presented.
Section 5. Shareholder List. The officer or agent who
has charge of the stock ledger of the Corporation shall prepare
and make a complete list of the shareholders entitled to vote at
each meeting, arranged by class or series of shares in
alphabetical order, showing the address of and the number of
shares registered in the name of each shareholder. The list
shall be produced and kept at the time and place of the meeting
and may be inspected during the whole time of the meeting by any
shareholder who is present at the meeting.
Section 6. Quorum. Unless a greater or lesser quorum is
provided in the Articles of Incorporation or by law, shares
entitled to cast a majority of the votes at a meeting constitute
a quorum at the meeting. Except when the holders of a class or
series of shares are entitled to vote separately on an item of
business, shares of all classes and series entitled to vote shall
be combined as a single class and series for the purpose of
determining a quorum. When the holders of a class or series of
shares are entitled to vote separately on an item of business,
shares of that class or series entitled to cast a majority of the
votes of that class or series at a meeting constitute a quorum of
that class or series at the meeting, unless a greater or lesser
quorum is provided in the Articles of Incorporation or by law.
If there is no quorum, the officer of the Corporation presiding
as chairman of the meeting shall have the power to adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present, when any business may
be transacted which might have been transacted at the meeting as
first convened had there been a quorum. However, if the
adjournment is for more than thirty (30) days, or if after the
adjournment the board fixes a new record date for the adjourned
meeting, notice of the time, place and purposes of such meeting
shall be given to each shareholder of record on the new record
date. Once a quorum is determined to be present, the
shareholders present in person or by proxy at such meeting may
continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
If a meeting is adjourned solely for the purpose of receiving the
results of voting by shareholders, such meeting need not be
reconvened. If not reconvened, such meeting shall stand
adjourned pending submission of the results of voting to the
Secretary of the Corporation, whereupon such meeting shall stand
adjourned until the next regular or special meeting of
shareholders.
<PAGE>
Section 7. Vote Required. When a quorum is present at a
meeting, any action to be taken by a vote of the shareholders,
other than the election of directors, shall be authorized by a
majority of the votes cast by the holders of shares entitled to
vote on the action, unless a greater vote is required by the
Articles of Incorporation or express provision of statute.
Except as otherwise provided by the Articles of Incorporation,
directors shall be elected by a plurality of the votes cast at an
election.
Section 8. Voting Rights. Except as otherwise provided
by the Articles of Incorporation or the resolution or resolutions
of the board of directors creating any class of stock, each
shareholder shall at every meeting of the shareholders be
entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such shareholder. Each
proxy to vote shall be in writing and signed by the shareholder
or his or her duly authorized representative, and no proxy shall
be voted after three years from its date, unless the proxy
provides for a longer period.
Section 9. Conduct of Meetings. Meetings of
shareholders generally shall follow accepted rules of
parliamentary procedure, subject to the following:
(a) The chairman of the meeting shall have
absolute authority over matters of procedure, and there
shall be no appeal from the ruling of the chairman.
If, in his or her absolute discretion, the chairman
deems it advisable to dispense with the rules of
parliamentary procedure as to any meeting of
shareholders or part thereof, he or she shall so state
and shall clearly state the rules under which the
meeting or appropriate part thereof shall be conducted.
(b) If disorder should arise which, in the
absolute discretion of the chairman, prevents the
continuation of the legitimate business of the meeting,
the chairman may quit the chair and announce the
adjournment of the meeting, and upon his or her so
doing, the meeting is immediately adjourned without the
necessity of any vote or further action of the
shareholders.
(c) The chairman may require any person who is
not a bona fide shareholder of record on the record
date, or a validly appointed proxy of such a
shareholder, to leave the meeting.
<PAGE>
(d) The chairman may introduce nominations,
resolutions or motions submitted by the board of
directors for consideration by the shareholders without
a motion or second. Except as the chairman shall
direct, a resolution or motion not submitted by the
board of directors shall be considered for a vote only
if proposed by a shareholder of record on the record
date or a validly appointed proxy of such a
shareholder, and seconded by such a shareholder or
proxy other than the individual who proposed the
resolution or motion.
(e) Except as the chairman shall direct, no
matter may be presented to the meeting which has not
been submitted in writing to the Secretary for
inclusion in the agenda at least 10 days before the
date of the meeting.
(f) When all shareholders present at a meeting in
person or by proxy have been offered an opportunity to
vote on any matter properly before a meeting, the
chairman may at his or her discretion declare the polls
to be closed, and no further votes may be cast or
changed after such declaration. If no such declaration
is made by the chairman, the polls shall remain open
and shareholders may cast additional votes or change
votes until the inspectors of election have delivered
their final report to the chairman.
(g) When the chairman has declared the polls to
be closed on all matters then before a meeting, the
chairman may declare the meeting to be adjourned
pending determination of the results by the inspectors
of election. In such event, the meeting shall be
considered adjourned for all purposes, and the business
of the meeting shall be finally concluded upon delivery
of the final report of the inspectors of election to
the chairman at or after the meeting.
(h) When the chairman determines that no further
matters may properly come before a meeting, he or she
may declare the meeting to be adjourned, without
motion, second, or vote of the shareholders.
(i) When the chairman has declared a meeting to
be adjourned, unless the chairman has declared the
meeting to be adjourned until a later date, no further
business may properly be considered at the meeting even
though shareholders or holders of proxies representing
a quorum may remain at the site of the meeting.
<PAGE>
Section 10. Inspectors of Election. The board of
directors or, if they shall not have so acted, the chairman may
appoint, at or prior to any meeting of shareholders, one or more
persons (who may be directors and/or employees of the
Corporation) to serve as inspectors of election. The inspectors
so appointed shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies,
and shall receive votes or ballots, hear and determine challenges
and questions arising in connection with the right to vote, count
and tabulate votes or ballots, determine the result, and do such
acts as are proper to conduct the election or vote with fairness
to all shareholders.
Section 11. Voting. When any vote is taken by written
ballot at any meeting of shareholders, an unrevoked proxy
submitted in accordance with its terms shall be accepted in lieu
of, and shall be deemed to constitute, a written ballot marked as
specified in such proxy.
ARTICLE III
RECORD DATE
Section 1. Fixing of Record Date by Board. For the
purpose of determining the shareholders entitled to notice of or
to vote at any meeting of shareholders, or any adjournment
thereof, or to express consent to or dissent from any corporate
action in writing without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any
dividend or the distribution or allotment of any rights or
evidences of interests arising out of any change, conversion or
exchange of capital stock, or for the purpose of any other
action, the board of directors may fix, in advance, a date as the
record date for any such determination of shareholders. Such
date shall not be more than sixty (60) days nor less than ten
(10) days before the date of any such meeting, nor more than
sixty (60) days prior to the effectuation of any other action
proposed to be taken. Only shareholders of record on a record
date so fixed shall be entitled to notice of, and to vote at,
such meeting or to receive payment of any dividend or the
distribution or allotment of any rights or evidences of interests
arising out of any change, conversion or exchange of capital
stock.
Section 2. Provision for Record Date in the Absence of
Board Action. If a record date is not fixed by the board of
directors: (a) the record date for determination of shareholders
entitled to notice of or to vote at a meeting of shareholders
shall be the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day next
preceding the day on which the meeting is held; and (b) the
record date for determining shareholders entitled to express
consent to corporate action in writing, without a meeting, when
no prior action by the board of directors is necessary, shall be
the day on which the first written consent is expressed; and (c)
the record date for determining shareholders for any other
purpose shall be the close of business on the day on which the
resolution of the board relating thereto is adopted.
<PAGE>
Section 3. Adjournments. When a determination of
shareholders of record entitled to notice of or to vote at a
meeting of shareholders has been made as provided in this
Article, the determination applies to any adjournment of the
meeting, unless the board fixes a new record date for the
adjourned meeting.
ARTICLE IV
DIRECTORS
Section 1. Number and Qualification of Directors. Each
director shall be at least twenty-one (21) years of age. A
director need not be a shareholder, a citizen of the United
States, or a resident of the State of Michigan. The number of
directors shall be fixed by resolution of the board of directors
as provided in the Articles of Incorporation.
Section 2. Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized
number of directors shall be filled in the manner provided in the
Articles of Incorporation.
Section 3. Powers. The business and affairs of the
Corporation shall be managed by its board of directors which may
exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Articles
of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders.
Section 4. Fees and Expenses. The directors may be paid
their expenses, if any, of attendance at each meeting of the
board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee
meetings.
Section 5. Resignation and Removal. Any director may
resign at any time and such resignation shall take effect upon
receipt of written notice thereof by the Corporation, or at such
subsequent time as set forth in the notice of resignation.
Directors may be removed only as provided by statute or the
Articles of Incorporation.
ARTICLE V
MEETINGS OF DIRECTORS
Section 1. Place of Meetings. The board of directors of
the Corporation may hold meetings, both regular and special,
either within or without the State of Michigan.
<PAGE>
Section 2. First Meeting of Newly Elected Board. The
first meeting of each newly elected board of directors shall be
held immediately following the annual meeting of shareholders,
and no notice of such meeting shall be necessary to the newly
elected directors to legally constitute the meeting, provided a
quorum shall be present. In the event such meeting is not held
immediately following the annual meeting of shareholders, the
meeting may be held at such time and place as shall be specified
in a notice given as hereinafter provided for special meetings of
the board of directors, or as shall be specified in a written
waiver signed by all of the directors.
Section 3. Regular Meetings. Regular meetings of the
board of directors may be held with or without notice at such
time and at such place as shall from time to time be determined
by the board.
Section 4. Special Meetings. Special meetings of the
board may be called by the Chairman of the Board or the Chief
Executive Officer on two (2) days' notice to each director,
either personally, by mail, by telegram or by facsimile
transmission; special meetings shall be called by the Chairman of
the Board or Chief Executive Officer in like manner and on like
notice on the written request of two (2) directors.
Section 5. Purpose Need Not Be Stated. Neither the
business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in
the notice of such meeting.
Section 6. Quorum. At all meetings of the board of
directors a majority of the total number of directors shall
constitute a quorum for the transaction of business, and the acts
of a majority of the directors present at any meeting at which
there is a quorum shall be the acts of the board of directors,
except as may be otherwise specifically provided by statute or by
the Articles of Incorporation. If a quorum is not present at any
meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present.
Section 7. Action Without a Meeting. Unless otherwise
restricted by the Articles of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the
board of directors or of any committee thereof may be taken
without a meeting if, before or after the action, all members of
the board or of such committee, as the case may be, consent
thereto in writing and such written consent is filed with the
minutes or proceedings of the board or committee.
Section 8. Meeting by Telephone or Similar Equipment.
Members of the board of directors or any committee designated by
the board of directors may participate in a meeting of such
board, or committee, by means of conference telephone or similar
communications equipment by means through which all persons
participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section shall consti-
tute presence in person at the meeting.
<PAGE>
Section 9. Waiver of Notice. Attendance of a director
at or participation in a meeting of the board of directors or any
committee constitutes a waiver of notice of the meeting, except
where a director attends a meeting for the express purpose of
objecting, at the beginning of the meeting or upon his or her
arrival, to the meeting or the transaction of any business
because the meeting has not lawfully been called or convened, and
the person does not thereafter vote for or assent to any action
taken at the meeting. Notice of any meeting of the board or a
committee need not be given to any person entitled thereto who
waives such notice in writing, either before or after the
meeting.
ARTICLE VI
COMMITTEES OF DIRECTORS
Section 1. Committees. The board of directors may from
time to time appoint committees, whose membership shall consist
of such members of the board of directors as it may deem
advisable, to serve at the pleasure of the board. The board of
directors may also appoint directors to serve as alternates for
members of each committee in the absence or disability of regular
members. The board of directors may fill any vacancies in any
committee as they occur.
Section 2. Executive Committee. The Executive
Committee, if there is one, shall have and may exercise the full
powers and authority of the board of directors in the management
of the business affairs and property of the Corporation during
the intervals between meetings of the board of directors. The
Executive Committee shall also have the power and authority to
declare distributions and dividends and to authorize the issuance
of stock.
Section 3. Audit Committee.
(a) Function. The Audit Committee shall perform
the function of an audit committee for the Corporation
and each of its subsidiaries as that function may be
defined for the purpose of compliance with laws and
regulations applicable to the Corporation and each of
its subsidiaries. The Audit Committee shall have the
following duties and responsibilities:
(i) causing a suitable examination of the
financial records and operations of the
Corporation and each of its subsidiaries to be
made by the internal auditor of the Corporation;
(ii) recommending to the board of directors
the employment of independent public accountants
who fulfill the requirements established by
Section 36 of the Federal Deposit Insurance Act,
as amended, and any regulations issued pursuant to
such act by the Federal Deposit Insurance
Corporation or any successor of such corporation;
<PAGE>
(iii) reviewing with the independent
public accountants and management of the
Corporation and its subsidiaries the bases for
reports required by Section 36 of the Federal
Deposit Insurance Act, as amended, and any
regulations issued pursuant to such act by the
Federal Deposit Insurance Corporation or any
successor of such corporation;
(iv) reviewing examination reports of the
Corporation prepared by regulatory authorities and
such other information concerning examination
reports of the Corporation's subsidiaries as the
committee deems advisable; and
(v) reporting to the board of directors at
least once each calendar year concerning the
results of examinations made and such conclusions
and recommendations as the Audit Committee deems
advisable.
(b) Eligibility of Members. Directors who
fulfill all of the following conditions shall be
eligible to serve on the Audit Committee:
(i) members may not be current employees of
the Corporation or any of its subsidiaries; and
(ii) members must satisfy the requirements
established by Section 36 of the Federal Deposit
Insurance Act, as amended, and any regulations
issued pursuant to such act by the Federal Deposit
Insurance Corporation or any successor of such
corporation.
(c) Authorized Actions. The Audit Committee
shall have the power to take and effect such actions as
it deems necessary or advisable in the performance of
its duties. The committee may engage counsel and other
consultants to assist the committee in performing its
duties. Such counsel and other consultants may but
need not be otherwise engaged by the Corporation unless
otherwise prohibited by applicable laws or regulations.
<PAGE>
Section 4. Compensation Committee.
(a) Function. The Compensation Committee shall
perform the function of a compensation committee as
that function may be defined for the purpose of
compliance with laws and regulations applicable to the
Corporation. The Compensation Committee shall have the
following duties and responsibilities:
(i) administering option plans and benefit
plans of the Corporation which are approved by the
board of directors;
(ii) determining compensation policy of the
Corporation, reviewing Compensation policies and
programs of the Corporation, and submitting
recommendations to the board of directors;
(iii) determining compensation of the
Chief Executive Officer, reviewing individual
salaries of other executive officers, and
submitting recommendations to the board of
directors; and
(iv) preparing an annual report to the
Corporation's shareholders concerning the
compensation policy of the Corporation.
(b) Eligibility of Members. Directors who
satisfy all of the following conditions shall be
eligible to serve as members of the Compensation
Committee:
(i) A member may not be a current or former
employee of the Corporation or any of its
subsidiaries.
(ii) A member must be a "Non-Employee
Director" as such term is defined in Securities
and Exchange Commission Rule 16b-3.
(iii) A member must be an "outside
director" as such term is defined for the purpose
of Internal Revenue Service Regulation 1.162-27.
(iv) A member must not have an "Interlocking
Relationship" with the Corporation or any of its
officers. An "Interlocking Relationship" shall
include a relationship in which an executive
officer of the Corporation serves as a member of
the board of directors of another entity of which
a director of the Corporation is an executive
officer, or any other relationship which would be
required to be disclosed pursuant to Item
402(j)(3) of Securities and Exchange Commission
Regulation S-K.
<PAGE>
(c) Authorized Actions. The Compensation
Committee shall have authority to:
(i) authorize the issuance of stock of the
Corporation pursuant to the option plans and
benefit plans of the Corporation which are
approved by the board of directors;
(ii) interpret the option plans and benefit
plans of the Corporation which it administers to
the extent that such power does not conflict with
the terms of the applicable plan document; and
(iii) engage counsel and other
consultants as the committee may deem necessary or
advisable to assist the committee in performing
its duties, which counsel and other consultants
may but need not be otherwise engaged by the
Corporation.
(amended 4/21/97)
Section 5. Committee on Directors. The Committee on
Directors, if there is one, shall consider candidates for the
board of directors, propose to the board of directors candidates
for directors for submission to the shareholders at the annual
meeting, and review the retirement policy for directors and make
recommendations to the board of directors concerning this policy.
Section 6. Other Committees. The board of directors may
designate such other committees as it may deem appropriate, and
such committees shall exercise the authority delegated to them.
Section 7. Meetings. Each committee provided for above
shall meet as often as its business may require and may fix a day
and time for regular meetings, notice of which shall not be
required. Whenever the day fixed for a meeting shall fall on a
holiday, the meeting shall be held on the following business day
or on such other day as the chairman of the committee may
determine. Special meetings of committees may be called by any
member, and notice thereof may be given to the members by
telephone, telegram, letter or facsimile transmission. A
majority of the members of a committee shall constitute a quorum
for the transaction of the business of the committee. A record
of the proceedings of each committee shall be kept and presented
to the board of directors.
Section 8. Substitutes. In the absence or
disqualification of a member of a committee, the members thereof
present at a meeting and not disqualified from voting, whether or
not they constitute a quorum, may unanimously appoint another
member of the board to act at the meeting in place of such absent
or disqualified member.
<PAGE>
ARTICLE VII
OFFICERS AND TITLED POSITIONS
Section 1. Appointment of Officers. The board of
directors at its first meeting after the annual meeting of
shareholders, or as soon as practicable after the election of
directors in each year, shall appoint from its number a Chairman
of the Board and a President. The board of directors shall also
appoint a Secretary, a Treasurer and a Chief Financial Officer,
all of whom shall be officers of the Corporation. The board of
directors may also appoint and expressly designate such other
individuals as it may deem proper to be officers of the
Corporation, with such titles as the board of directors may deem
appropriate. If the offices of Chairman of the Board and
President are held by a single person, that officer shall be the
Chief Executive Officer of the Corporation; if not, the board of
directors shall designate either the Chairman of the Board or the
President to be the Chief Executive Officer of the Corporation.
The dismissal of an officer, the appointment of an officer to
fill the office of one who has been dismissed or has ceased for
any reason to be an officer, the appointment of any additional
officers, and the change of an officer to a different or
additional office, may be made by the board of directors at any
later meeting. Any two or more offices may be filled by the same
person.
Section 2. Appointments to Titled Positions. The board
of directors or the Chief Executive Officer may from time to time
appoint individuals to fill titled positions. Holders of titled
positions who may from time to time be appointed pursuant to this
Section shall hold such titles as are assigned by the board of
directors or the Chief Executive Officer and shall perform such
duties and exercise such authority as may be assigned by the
board of directors or the Chief Executive Officer. Dismissal of
the holder of a titled position, appointment of a replacement for
a holder of a titled position, appointment of any additional
titled position holders, and change of a titled position holder
to a different or additional position, may be made by the board
of directors or the Chief Executive Officer. Any two or more
titled positions may be filled by the same person. (Amended
4/17/95.)
Section 3. Authority of Officers. The Chief Executive
Officer, the President (if not also the Chief Executive Officer),
the Secretary, the Treasurer, the Chief Financial Officer and
such other persons as the board of directors shall have appointed
and expressly designated as officers shall be the only officers
of the Corporation. Only the officers of the Corporation shall
have discretionary authority to determine the fundamental
policies of the Corporation. Holders of titled positions who
have not been expressly designated as officers of the Corporation
in this Section or by the board of directors shall not be
officers of the Corporation regardless of their titles.
<PAGE>
Section 4. Authority of Titled Positions. Holders of
titled positions who are not officers shall not have
discretionary authority to determine fundamental policies of the
Corporation and shall not, by reason of holding such titled
positions, be entitled to have access to any files, records or
other information relating or pertaining to the Corporation, its
business and finances, or to attend or receive the minutes of any
meetings of the board of directors or any committee of the
Corporation, except as and to the extent expressly authorized and
permitted by the board of directors or the Chief Executive
Officer.
Section 5. Term of Service. Each officer and holder of
a titled position shall serve at the pleasure of the board. The
board of directors may remove any officer or holder of a titled
position from that office or position for cause or without cause.
Any officer or holder of a titled position may resign his or her
office or position at any time, such resignation to take effect
upon receipt of written notice thereof by the Corporation unless
otherwise specified in the resignation.
Section 6. Chairman of the Board. The Chairman of the
Board shall preside at all meetings of the shareholders and all
meetings of the board of directors.
Section 7. President. The President shall, subject to
the direction of the board of directors, see that all orders and
resolutions of the board are carried into effect, and shall
perform all other duties necessary or appropriate to his or her
office, subject, however, to his or her right and the right of
the directors to delegate any specific powers to any other
officer or officers of the Corporation. In case of the absence
or inability to act of the Chairman of the Board, the President
shall exercise all of the duties and responsibilities of the
Chairman until the board shall otherwise direct.
Section 8. Chief Executive Officer. The Chief Executive
Officer, in addition to his or her duties as Chairman of the
Board or President, as the case may be, shall have final
authority, subject to the control of the board of directors, over
the general policy and business of the Corporation and shall have
the general control and management of the business and affairs of
the Corporation. The Chief Executive Officer shall have the
power, subject to the control of the board of directors, to
appoint, suspend or discharge and to prescribe the duties and to
fix the compensation of such agents and employees of the
Corporation, other than the officers appointed by the board, as
he or she may deem necessary.
<PAGE>
Section 9. Vice-Chairmen of the Board. Each Vice-Chairman
of the Board shall have such powers and perform such duties as may be
assigned to him or her from time to time by the board of directors or
the Chief Executive Officer. In case of the absence or inability to
act of the Chairman of the Board and the President, the duties of his
or her office shall, unless otherwise specified by these Bylaws, be
performed by the Vice-Chairmen of the Board in the order of their seniority
or such other priority as may be established by the board or by the Chief
Executive Officer, unless and until the board shall otherwise direct, and,
when so acting, the duly authorized Vice-Chairman of the Board shall have
all the powers of, and shall be subject to the restrictions upon, the
Chairman of the Board or the President.
Section 10. Vice Presidents. Each Executive Vice
President, Senior Vice President, Vice President, Assistant Vice
President and such other vice presidents as may be designated by
the board of directors shall have such powers and perform such
duties as may be assigned to him or her from time to time by the
board of directors or the Chief Executive Officer. In case of
the absence or inability to act of the President, and in the
absence or inability to act of the Vice-Chairmen of the Board,
the duties of the President shall, unless otherwise specified by
these Bylaws, be performed by the Executive Vice Presidents, the
Senior Vice Presidents, the Vice Presidents, the Assistant Vice
Presidents and then such other vice presidents as may be
designated by the board in the order of their seniority or such
other priority as may be established by the board or by the Chief
Executive Officer, unless and until the board shall otherwise
direct, and, when so acting, the duly authorized Executive Vice
President, Senior Vice President, Vice President or Assistant
Vice President shall have all the powers of, and shall be subject
to the restrictions upon, the President. Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents and Assistant
Vice Presidents have the authority to sign or execute contracts
and other documents which shall be binding on the Corporation and
to fulfill the terms thereof, but such Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents and Assistant Vice
Presidents shall not have the discretionary policy-making
authority conferred upon the officers by these Bylaws unless
expressly designated as an officer by the board of directors.
Section 11. Secretary. The Secretary shall attend all
sessions of the board of directors and all meetings of the
shareholders and shall record all votes and the minutes of all
proceedings in a book to be kept for that purpose. The Secretary
shall perform like duties for committees when required. He or
she shall give, or cause to be given, notice of all meetings of
the shareholders and meetings of the board of directors. He or
she shall keep in safe custody the seal of the Corporation and
shall see that it is affixed to all documents the execution of
which, on behalf of the Corporation under its seal, is necessary
or appropriate, and when so affixed may attest the same. He or
she shall perform such other duties as may be prescribed by the
board of directors or the Chief Executive Officer.
<PAGE>
Section 12. Treasurer. The Treasurer shall have custody
of the corporate funds and securities, except as otherwise
provided by the board, shall cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the
Corporation, and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such
depositories as may be designated by the board of directors. He
or she shall disburse the funds of the Corporation as may be
ordered by the board or directors, taking proper vouchers for
such disbursements, and shall render to the directors, at the
regular meetings of the board or whenever they may require it, an
account of all his or her transactions as Treasurer and of the
financial condition of the Corporation.
Section 13. Absence. In the case of the absence or
inability to act of any officer or holder of any titled position,
or for any other reason that the board may deem sufficient, the
board of directors or the Chief Executive Officer may delegate
for the time being the powers or duties of such officer or holder
of any titled position, to any other director or officer. To the
extent that the enumerated powers or duties do not involve
participation in major policy-making functions of the Corporation
or the exercise of discretionary authority to that end, said
powers or duties may be delegated for the time being to the
holder of a titled position, but shall be exercised under the
supervision of an officer.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification Other Than in Actions by or
in the Right of the Corporation. Any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that
he or she is or was a director or executive officer of the
Corporation or a subsidiary, or, while serving as such a director
or executive officer, is or was serving at the request of the
Corporation or a subsidiary as a director, officer, partner,
trustee, employee or agent of another foreign or domestic -
Corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, shall be indemnified by
the Corporation against expenses (including attorneys' fees),
judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Corporation or its
shareholders, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation or its
shareholders, or with respect to any criminal action or
proceeding, that he or she had reasonable cause to believe that
his or her conduct was unlawful. Persons who are not directors
or executive officers of the Corporation or a subsidiary may be
similarly indemnified in respect of such service to the extent
authorized at any time by the board of directors, except as
otherwise provided by statute or the Articles of Incorporation.
<PAGE>
Section 2. Indemnification in Actions by or in the Right
of the Corporation. Any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he or
she is or was a director or executive officer of the Corporation
or a subsidiary, or, while serving as such a director or
executive officer, is or was serving at the request of the
Corporation or a subsidiary as a director, officer, partner,
trustee, employee or agent of another foreign or domestic
Corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, shall be indemnified by
the Corporation against expenses (including attorneys' fees) and
amounts paid in settlement actually and reasonably incurred by
him or her in connection with the action or suit if he or she
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation
or its shareholders. Indemnification shall not be made for any
claim, issue or matter in which such person has been found liable
to the Corporation except to the extent authorized in Section 6
of this Article. Persons who are not directors or executive
officers of the Corporation or a subsidiary may be similarly
indemnified in respect of such service to the extent authorized
at any time by the board of directors, except as otherwise
provided by statute or the Articles of Incorporation.
Section 3. Expenses. To the extent that a director or
executive officer, or other person whose indemnification is
authorized by the board of directors, has been successful on the
merits or otherwise, including the dismissal of an action without
prejudice, in the defense of any action, suit or proceeding
referred to in Section 1 or 2 of this Article, or in the defense
of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith and
any action, suit or proceeding brought to enforce the mandatory
indemnification provided in this Section.
Section 4. Authorization of Indemnification. Any
indemnification under Section 1 or 2 of this Article (unless
ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the person
has met the applicable standard of conduct set forth in this
Article and upon an evaluation of the reasonableness of expenses
and amounts paid in settlement. Such determination shall be made
(a) by the board of directors by a majority vote of a quorum
consisting of directors who are not parties or threatened to be
made parties to such action, suit or proceeding, or if such a
quorum cannot be obtained, by a majority vote of a committee duly
designated by the board consisting solely of two or more
directors not at the time parties or threatened to be made
parties to such action, suit or proceeding; (b) by independent
legal counsel (who may be the regular counsel of the Corporation)
in a written opinion, which counsel shall be selected as provided
in (a) above, provided that if a committee cannot be designated
as provided in (a) above, then the board shall select such
independent counsel; (c) by all Independent Directors (as that
term is defined in the Michigan Business Corporation Act) who are
not parties or threatened to be made parties to such action, suit
or proceeding; or (d) by the shareholders, but shares held by
directors, officers, employees or agents who are parties or
threatened to be made parties to such action, suit or proceeding
may not be voted. In designating a committee under (a) above, or
in the selection of independent legal counsel in the event a
committee cannot be designated pursuant to (b) above, all
directors may participate. The Corporation may indemnify a
person for a portion of expenses (including reasonable attorneys'
fees), judgments, penalties, fines and amounts paid in settlement
for which the person is entitled to indemnification under Section
1 or 2 of this Article, even though the person is not entitled to
indemnification for the total amount of such expenses, judgments,
penalties, fines and amounts paid in settlement.
<PAGE>
Section 5. Advancing of Expenses. Expenses incurred by
any person who is or was serving as a director or executive
officer of the Corporation or a subsidiary in defending a civil
or criminal action, suit or proceeding described in Section 1 or
2 of this Article shall be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding if (a)
the person furnishes the Corporation a written affirmation of his
or her good faith belief that he or she has met the applicable
standard of conduct set forth in Section 1 or 2 of this Article;
(b) the person furnishes the Corporation a written undertaking,
executed personally or on his or her behalf, to repay the advance
if it is ultimately determined that he or she did not meet the
applicable standard of conduct; and (c) a determination is made
that the facts then known to those making the determination would
not preclude indemnification under the Michigan Business
Corporation Act. Persons who are or were not serving as a
director or executive officer of the Corporation or a subsidiary
may receive similar advances of expenses to the extent authorized
at any time by the board of directors, except as otherwise
provided by statute or the Articles of Incorporation.
Determinations under this Section shall be made in the manner
specified in Section 4 of this Article. Notwithstanding the
foregoing, in no event shall any advance be made in instances
where the board or independent legal counsel reasonably
determines that such person deliberately breached his or her duty
to the Corporation or its shareholders.
Section 6. Right to Indemnification Upon Application;
Procedure Upon Application. A director, executive officer or
other person who is a party or threatened to be made a party to
an action, suit or proceeding may apply for indemnification to
the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court
may order indemnification if it determines that the person is
fairly and reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not he or she met the
applicable standard of conduct set forth in Section 1 or 2 of
this Article or was adjudged liable as described in Section 2 of
this Article, provided, however, that if he or she was adjudged
liable, his or her indemnification shall be limited to reasonable
expenses incurred.
Section 7. Indemnification Under Bylaws Not Exclusive.
The indemnification or advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under the Articles of Incorporation, any bylaw,
agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the
heirs, executors and administrators of such a person. The total
amount of expenses advanced or indemnified from all sources shall
not exceed the amount of actual expenses incurred by the person
seeking indemnification or advancement of expenses. All rights
to indemnification under this Article shall be deemed to be
provided by a contract between the Corporation and the director,
officer, employee or agent who serves in such capacity at any
time while these Bylaws and other relevant provisions of the
general corporation law and other applicable law, if any, are in
effect. Any repeal or modification thereof shall not affect any
rights or obligations then existing.
<PAGE>
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another
Corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability
under the provisions of this Article.
Section 9. Mergers. For the purposes of this Article,
references to the "Corporation" include all constituent
Corporations absorbed in a consolidation or merger, as well as
the resulting or surviving Corporation, so that any person who is
or was a director, officer, employee or agent of such constituent
Corporation, or is or was serving at the request of such
constituent Corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic Corporation,
partnership, joint venture, trust or other enterprise, whether
for profit or not, shall stand in the same position under the
provisions of this Article with respect to the resulting or
surviving Corporation if he or she had served the resulting or
surviving Corporation in the same capacity.
Section 10. Savings Clause. If this Article or any
portion thereof shall be invalidated on any ground by any court
of competent jurisdiction, then the Corporation shall
nevertheless indemnify each director, executive officer or other
person whose indemnification is authorized by the board of
directors as to expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement with respect to any action,
suit or proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding and an action by
the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated or
by any other applicable law.
ARTICLE IX
SUBSIDIARIES
Section 1. Subsidiaries. The board of directors, the
Chief Executive Officer, or any executive officer designated by
the board of directors may vote the shares of stock owned by the
Corporation in any subsidiary, whether wholly or partly owned by
the Corporation, in such manner as they may deem in the best
interests of the Corporation, including, without limitation, for
the election of directors of any subsidiary corporation, or for
any amendments to the charter or bylaws of any such subsidiary
corporation, or for the liquidation, merger or sale of assets of
any such subsidiary corporation. The board of directors, the
Chief Executive Officer, or any executive officer designated by
the board of directors may cause to be elected to the board of
directors of any such subsidiary corporation such persons as they
shall designate, any of whom may, but need not be, directors,
executive officers, or other employees or agents of the
Corporation. The board of directors, the Chief Executive
Officer, or any executive officer designated by the board of
directors may instruct the directors of any such subsidiary
corporation as to the manner in which they are to vote upon any
issue properly coming before them as the directors of such
subsidiary corporation, and such directors shall have no
liability to the Corporation as the result of any action taken in
accordance with such instructions.
<PAGE>
Section 2. Subsidiary Officers Not Executive Officers.
The officers of any subsidiary corporation shall not, by virtue
of holding such title and position, be deemed to be executive
officers of the Corporation, nor shall any such officer of a
subsidiary corporation, unless he or she is also a director or
executive officer of the Corporation, be entitled to have access
to any files, records or other information relating or pertaining
to the Corporation, its business and finances, or to attend or
receive the minutes of any meetings of the board of directors or
any committee of the Corporation, except as and to the extent
expressly authorized and permitted by the board of directors or
the Chief Executive Officer.
ARTICLE X
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by,
or in the name of the Corporation by, the Chairman of the Board,
a Vice Chairman of the Board, the President, an Executive Vice
President, a Senior Vice President, or a Vice President and the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares
owned by him or her in the Corporation. The certificate may, but
need not be, sealed with the seal of the Corporation, or a
facsimile thereof.
Section 2. Facsimile Signatures. Where a certificate
is signed (a) by a transfer agent or an assistant transfer
agent, or (b) by a transfer clerk acting on behalf of the Corpo-
ration and a registrar, the signatures of the Chairman of the
Board, Vice Chairman of the Board, President, Executive Vice
President, Senior Vice President, Vice President, Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary may be
facsimiles. In case any officer(s) or any holder(s) of a titled
position who has signed, or whose facsimile signature(s) has been
used on, any certificate shall cease to be such officer(s) or
holder(s) before such certificate has been delivered by the
Corporation, such certificate may nevertheless be issued and
delivered as though the person(s) who signed such certificate or
whose facsimile signature(s) appears thereon continued to be such
officer(s) or holder(s) of such titled position.
Section 3. Lost Certificates. The officers may direct a
new certificate to be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact
by the person claiming the certificate of stock to be lost,
stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the officers may, in their
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate,
or his or her legal representative, to advertise the same in such
manner as it shall require and/or to give the Corporation a bond
in such sum as they may direct as indemnity against any claim
that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
<PAGE>
Section 4. Registered Owner. The Corporation shall be
entitled to recognize the exclusive rights of a person registered
on its books as the owner of shares to receive dividends and to
vote as such owner, and to hold liable for calls and assessments
a person registered on its books as the owner of shares; the
Corporation shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Michigan.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Checks. Any signature on any check, demand
or note may be signed by the facsimile signature of any person
authorized by the board of directors to sign under this Section 1
of Article XI. If any officer who has signed or whose facsimile
signature has been used shall cease to be such officer, such
document may nevertheless be signed by means of such facsimile
signature and delivered as though the person who signed such
document or whose facsimile signature has been used thereon had
not ceased to be such officer.
Section 2. Fiscal Year. The fiscal year of the
Corporation shall be fixed by resolution of the board of -
directors.
Section 3. Seal. The corporate seal shall have
inscribed thereon the name of the Corporation and the words
"Corporate Seal, Michigan." The seal may be used by causing it or
a facsimile thereof to be impressed, affixed, reproduced or
otherwise.
Section 4. Voting Securities. The Chief Executive
Officer or any executive officer designated by the board of
directors shall have full power and authority on behalf of the
Corporation to attend and to act and to vote, or to execute in
the name or on behalf of the Corporation a proxy authorizing an
agent or attorney-in-fact for the Corporation to attend and to
act and to vote, at any meetings of security holders of
corporations in which the Corporation may hold securities, and at
such meetings he or she and his or her duly authorized agent or
attorney-in-fact shall possess and may exercise any and all
rights and powers incident to the ownership of such securities
and which, as the owner thereof, the Corporation might have
possessed and exercised if present.
<PAGE>
Section 5. Dividends. Dividends upon the capital stock
of the Corporation, subject to the provisions of the Articles of
Incorporation, if any, may be declared by the board of directors
at any regular or special meeting pursuant to law. Dividends may
be paid in cash, in property, or in shares of capital stock,
subject to the provisions of the Articles of Incorporation.
Section 6. Reserves. Before payment of any dividends,
there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the directors from
time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the directors shall
think conducive to the interests of the Corporation, and the
directors may modify or abolish any such reserve in the manner in
which it was created.
ARTICLE XII
AMENDMENTS
These Bylaws may be amended, altered, changed, added to or
repealed by the shareholders at any regular or special meeting of
the shareholders if notice of such action be contained in the
notice of such meeting, or by the board of directors at any
regular or special meeting of the board of directors.
<PAGE>
OLD KENT FINANCIAL CORPORATION
SECRETARY'S CERTIFICATE
I, MARY E. TUUK, the duly elected, qualified and
acting Vice President and Secretary of Old Kent Financial
Corporation (the "Corporation"), do hereby certify that attached
hereto is a true and correct copy of the Bylaws of the
Corporation which were in full force and effect as of the date
written below.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
the seal of the Corporation on _______________________________,
19_____.
______________________________
Mary E. Tuuk
Vice President and
Secretary
[Corporate Seal]
RESOLUTIONS OF THE BOARD OF DIRECTORS
OF
OLD KENT FINANCIAL CORPORATION
June 16, 1997
AMENDMENT OF EXECUTIVE STOCK INCENTIVE
PLAN OF 1997 AND STOCK OPTION
INCENTIVE PLAN OF 1992
WHEREAS, the Board of Directors wants to permit greater
flexibility in personnel administration to facilitate
implementation of policies designed to promote various
corporate purposes; and
WHEREAS, the Board of Directors believes that certain
amendments to the Corporation's Executive Stock Incentive
Plan of 1997 (the "1997 Plan") and Stock Option Incentive
Plan of 1992 (the "1992 Plan") are tailored to specific and
limited circumstances and will permit the desired
flexibility in personnel administration; and
WHEREAS, the Board of Directors has reviewed and
considered the proposed amendments to the 1997 Plan and the
1992 Plan and has determined that the proposed amendments
will not materially increase the benefits accruing to
participants under either plan;
IT IS THEREFORE RESOLVED, that paragraph (b) of Section
5.8 of the 1997 Plan is hereby amended in its entirety to
read as follows:
(b) Consensual Severance. If a Participant
ceases to be employed by the Company or one of its
Subsidiaries due to Consensual Severance, the
Committee may, in its sole discretion, permit the
Participant to exercise his or her Stock Options
in accordance with their terms and to the extent
that the Participant was entitled to exercise the
Stock Options 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 5 years after the date of
termination or the dates on which such Stock
Options expire by their terms.
FURTHER RESOLVED, that paragraph (c) of Section 5.8 of
the 1997 Plan is hereby amended in its entirety to read as
follows:
<PAGE>
(c) Retirement. If a Participant ceases to
be employed by the Company or one of its
Subsidiaries due to Retirement, the Participant
may exercise his or her Stock Options in
accordance with their terms for a period of 5
years after such termination of employment unless
such Stock Options earlier expire by their terms,
but only to the extent that the Participant was
entitled to exercise the Stock Options on the date
of termination.
FURTHER RESOLVED, that paragraph (b) of Section 12 of
the 1992 Plan is hereby amended in its entirety to read as
follows:
(b) If a Participant ceases to be employed
by Old Kent or one of its Subsidiaries due to
Consensual Severance, the Committee may, in its
sole discretion, permit the Participant to
exercise his or her Options or Rights in
accordance with their terms and to the extent that
the Participant was entitled to exercise the
Options or 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 five years after the date of
termination or the dates on which such Options or
Rights expire by their terms.
FURTHER RESOLVED, that paragraph (c) of Section 12 of
the 1992 Plan is hereby amended in its entirety to read as
follows:
(c) If a Participant ceases to be employed
by Old Kent or one of its Subsidiaries due to
Retirement, the Participant may exercise his or
her Options or Rights in accordance with their
terms for a period of five years after such
termination of employment unless such Options or
Rights earlier expire by their terms, but only to
the extent that the Participant was entitled to
exercise the Options or Rights on the date of
termination.
FURTHER RESOLVED, that, in connection with the
amendments described in these resolutions, the officers of
the Corporation are authorized to execute and cause to be
filed on its behalf all such applications and other
instruments and to take such other actions as in their
discretion they may consider necessary or appropriate to
comply with all relevant laws in force in the United States
of America, the State of Michigan, and other appropriate
jurisdictions; and
FURTHER RESOLVED, that the officers of the Corporation
be, and they hereby are, authorized on behalf of the
Corporation to execute any and all documents and to take any
and all further actions which may in their judgment be
necessary or appropriate to carry out the foregoing
resolutions.
<PAGE>
OLD KENT FINANCIAL CORPORATION
INDEMNIFICATION AGREEMENT
This Agreement is made as of April 21, 1997, by and
between Old Kent Financial Corporation (the "Corporation") a
Michigan corporation, and _____________________ ("Indemnitee").
Indemnitee is, or is nominated to be elected, a director
of the Corporation. It is essential to the Corporation to attract
and retain as directors the most capable persons available. The
Corporation's Articles of Incorporation, as approved by its
shareholders, provide that the Corporation's directors shall be
indemnified as of right to the fullest extent permitted by law.
This Agreement implements that provision. In consideration of
Indemnitee's agreement to serve as a director of the Corporation,
the parties are entering into this Agreement.
THEREFORE, the Corporation and Indemnitee agree:
Section 1. Definitions. As used in this Agreement:
(a) "Expenses" shall mean all reasonable costs,
expenses, and obligations actually paid or incurred in
connection with investigating, litigating, being a
witness in, defending, or participating in, or preparing
to litigate, defend, be a witness in, or participate in
any matter that is the subject of a Proceeding (as
defined below), including, without limitation, any
attorney, accountant and expert fees and court costs.
(b) "Proceeding" shall mean any threatened,
pending, or completed action, suit, or proceeding, or any
inquiry or investigation, whether brought by or in the
right of the Corporation or otherwise, and whether of a
civil, criminal, administrative, or investigative nature,
including without limitation any administrative or civil
action instituted by any federal or state bank regulatory
agency, in which Indemnitee is, may be, or may have been
involved as a party or otherwise by reason of the fact
that Indemnitee is or was a director, officer, employee,
or agent of the Corporation or Old Kent Bank, or by
reason of any action taken by Indemnitee, or any inaction
on Indemnitee's part, while acting as a director,
officer, employee, or agent of the Corporation or Old
Kent Bank, or by reason of the fact that Indemnitee is or
was elected, appointed or serving at the request of the
Corporation or Old Kent Bank as a director, officer,
partner, trustee, employee, agent or fiduciary of any
other foreign or domestic corporation, bank, partnership,
joint venture, trust or other enterprise, whether for
profit or not.
<PAGE>
(c) "Resolution Costs" shall include any amount
paid in connection with a Proceeding and in satisfaction
of a judgment, fine or penalty, or any amount paid in
settlement of a Proceeding.
(d) "Change in Control" shall mean an occurrence of
a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A
issued under the Securities Exchange Act of 1934, as
amended (the "Act"). Without limiting the inclusiveness
of the definition in the preceding sentence, a Change in
Control of the Corporation shall be deemed to have
occurred as of the first day that any one or more of the
following conditions is satisfied: (a) any Person is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of
the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding
securities; (b) the failure at any time of the Continuing
Directors to constitute at least a majority of the board
of directors of the Corporation; or (c) any of the
following occur: (i) any merger or consolidation of the
Corporation, other than a merger or consolidation in
which the voting securities of the Corporation
immediately prior to the merger or consolidation continue
to represent (either by remaining outstanding or being
converted into securities of the surviving entity) 60% or
more of the combined voting power of the Corporation or
surviving entity immediately after the merger or
consolidation with another entity; (ii) any sale,
exchange, lease, mortgage, pledge, transfer or other
disposition (in a single transaction or a series of
related transactions) of assets or earning power
aggregating more than 50% of the assets or earning power
of the Corporation on a consolidated basis; (iii) any
complete liquidation or dissolution of the Corporation;
(iv) any reorganization, reverse stock split or
recapitalization of the Corporation which would result in
a Change in Control as otherwise defined herein; or (v)
any transaction or series of related transactions having,
directly or indirectly, the same effect as any of the
foregoing.
(e) "Continuing Directors" means the individuals
who were either (a) serving as directors of the
Corporation on February 17, 1997, or (b) subsequently
appointed or elected as a director, if appointed or
nominated by at least a majority of the Continuing
Directors in office at the time of the nomination or
appointment, but specifically excluding any individual
whose initial assumption of office occurs as a result of
either an actual or threatened "election contest" (as the
term is used in Rule 14a-11 of Regulation 14A promulgated
under the Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other
than the Corporation's board of directors.
(f) "Person" has the same meaning as set forth in
Sections 13(d) and 14(d)(2) of the Act.
<PAGE>
(g) A "Potential Change in Control" shall be deemed
to have occurred if (i) the Corporation enters into an
agreement, the consummation of that would result in the
occurrence of a Change in Control; (ii) any person
(including the Corporation) publicly announces an
intention to take or to consider taking actions that once
consummated would constitute a Change in Control; or
(iii) the Board of Directors adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
Section 2. Agreement To Serve. Indemnitee agrees to serve as
a director and/or officer of the Corporation for so long as
Indemnitee is duly elected or appointed or until the tender of
Indemnitee's written resignation.
Section 3. Indemnification.
(a) The Corporation shall indemnify Indemnitee
against all Expenses incurred by Indemnitee in connection
with any Proceeding, except as otherwise provided in this
Agreement. The Corporation shall indemnify Indemnitee
against all Resolution Costs incurred by Indemnitee in
connection with any Proceeding other than a Proceeding by
or in the right of the Corporation, except as otherwise
provided in this Agreement. However, no indemnification
shall be made under this Section if and to the extent
that such Expenses or Resolution Costs are:
(i) with respect to remuneration paid
Indemnitee if it shall be determined by a
final judgment or other final adjudication
that such remuneration was in violation of
law;
(ii) on account of any suit in which
judgment is rendered against Indemnitee for an
accounting of profits made from the purchase
and sale by Indemnitee of securities of the
Corporation pursuant to the provisions of
Section 16 of the Securities Exchange Act of
1934 and amendments thereto;
(iii) on account of Indemnitee's
conduct which is determined by a final
judgment or other final adjudication to
have been knowingly fraudulent,
deliberately dishonest, or willful
misconduct;
(iv) on account of Indemnitee's conduct
which is finally, affirmatively and
unconditionally determined to have not been in
good faith, to have not been believed by
Indemnitee to have been in or not opposed to
the best interests of the Corporation, or to
have produced an unlawful personal benefit;
<PAGE>
(v) with respect to a criminal
proceeding if the Indemnitee knew or
reasonably should have known that Indemnitee's
conduct was unlawful; or
(vi) if a final decision by a court
having jurisdiction in the matter shall
determine that such indemnification is not
lawful.
(b) In addition to any indemnification provided
under Subsection 3(a) above, the Corporation shall
indemnify Indemnitee against any Expenses or Resolution
Costs incurred by Indemnitee, regardless of the nature of
the Proceeding that Expenses and/or Resolution Costs were
incurred, if the Expenses or Resolution Costs would have
been covered, insured or reimbursed under any insurance
policy in effect on the effective date of this Agreement
or that become effective on any later date.
(c) It is the intent of this Agreement that, in
addition to any indemnification provided under
Subsections 3(a) and 3(b), the Corporation shall
indemnify Indemnitee, to the fullest extent allowed by
law as presently or hereafter enacted or interpreted,
against any Expenses and Resolution Costs incurred by
Indemnitee in connection with any Proceeding. To the
extent a change in, or in the implementation or
interpretation of, the Michigan Business Corporation Act
or the Federal Deposit Insurance Act (whether by statute,
regulation, judicial decision or otherwise) permits
greater indemnification, either by agreement or
otherwise, than presently provided by law or this Agree-
ment, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
(d) Without limiting Indemnitee's right to
indemnification under any other provision of this
Agreement, the Corporation shall indemnify Indemnitee in
accordance with the provisions of this Subsection if
Indemnitee is a party to or threatened to be made a party
to or otherwise involved in any Proceeding by or in the
right of the Corporation to procure a judgment in its
favor by reason of the fact that Indemnitee was or is a
director, officer, employee, or agent of the Corporation
or Old Kent Bank or is or was serving at the request of
the Corporation or Old Kent Bank as a director, officer,
partner, trustee, employee, agent, or fiduciary of
another foreign or domestic corporation, partnership,
joint venture, trust, or other enterprise, whether for
profit or not, against all Expenses and Resolution Costs
incurred by Indemnitee, if it is determined that
Indemnitee acted in good faith in a manner which
Indemnitee reasonably believed to be in or not opposed to
the best interests of the Corporation or its
shareholders, except that no indemnification shall be
made under this Subsection in respect of any claim,
issue, or matter as to which Indemnitee shall have been
adjudged to be liable to the Corporation in the
performance of his duty to the Corporation unless, and
only to the extent that, any court in which such
Proceeding was brought shall determine upon application
that, despite the adjudication of liability but in view
of all the relevant circumstances, Indemnitee is fairly
and reasonably entitled to indemnity, in which event
indemnification shall be limited to reasonable expenses
incurred.
<PAGE>
(e) Notwithstanding anything in this Agreement to
the contrary, prior to a Change in Control, Indemnitee
shall not be entitled to indemnification pursuant to this
Agreement in connection with any Proceeding initiated by
Indemnitee against the Corporation or any director,
officer, employee, agent, or fiduciary of the Corporation
(in such capacity) unless the Corporation has joined in
or consented to the initiation of such Proceeding.
(f) Notwithstanding anything in this Agreement,
no indemnification shall be paid in violation of Michigan
or federal laws and regulations. By way of illustration,
but not limitation, it is acknowledged that as of the
date of this Agreement such laws or regulations may
prohibit payment or reimbursement of Indemnitee for: (i)
any civil money penalty or judgment resulting from any
administrative or civil action instituted by any federal
banking agency; or (ii) any other liability or expense
with regard to any administrative proceeding or civil
action instituted by any federal banking agency which
results in a final order or settlement pursuant to which
Indemnitee is assessed a civil money penalty, removed
from office, or prohibited from participating in the
conduct of the affairs of the Corporation or Old Kent
Bank, or required to cease and desist from or take any
affirmative action described in section 8(b) of the
Federal Deposit Insurance Act with respect to the
Corporation.
(g) With respect to an administrative proceeding or
civil action initiated by any federal banking agency,
indemnification shall not be paid if and to the extent
that the payment of indemnification under this Agreement
would materially and adversely affect the Corporation's
safety and soundness.
Section 4. Payment Of Indemnification.
(a) The Corporation shall pay or reimburse
Indemnitee all Expenses and Resolution Costs for which
Indemnitee is entitled to indemnification under Section
3, upon written demand for such payment or reimbursement
from the Indemnitee, promptly if, when and to the extent
that a determination has been made, or deemed to have
been made, in the manner provided in this Section 4 that
Indemnitee is entitled to indemnification under Section
3.
(b) A determination as to whether or not Indemnitee
is entitled to indemnification shall be made, no later
than 30 days after receipt by the Corporation of a
written demand of Indemnitee for such payment or
reimbursement, by: (i) a majority vote of a quorum of
directors who are not parties or threatened to be made
parties to such Proceeding; (ii) if a quorum cannot be
obtained under subsection (i), a majority vote of a
committee of two or more directors, duly designated by
the board, who are not parties or threatened to be made
parties to such Proceeding; or (iii) if there are no
directors who are not parties to the Proceeding,
independent legal counsel selected by the board. If such
determination is not referred to independent legal
counsel, the board of directors, or committee provided in
this subsection, shall be deemed to have made a
determination that the Indemnitee is entitled to
Indemnification under Section 3 and that the Expenses and
Resolution Costs are reasonable, unless such board or
committee determines, in writing and in unconditional
terms, that indemnification is not allowed under Section
3 of this Agreement or that a specified portion of such
Expenses and Resolution Costs are not reasonable.
<PAGE>
(c) If a Change in Control (as defined in Section
1(d)) has occurred, the determination made under Section
4 shall be made by independent legal counsel and not the
board of directors or a committee of the board of
directors. If there has been a Change in Control,
independent legal counsel shall be selected by
Indemnitee. The Corporation shall pay the reasonable
fees of the independent legal counsel and fully indemnify
such counsel against any and all expense (including
attorney fees), claims, liabilities, and damages arising
out of or relating to this Agreement or its engagement
pursuant thereto.
(d) If the indemnification demand is referred to
independent legal counsel under this Section 4, a
determination as to whether or not Indemnitee is entitled
to indemnification shall be made no later than 45 days
after Indemnitee's initial demand to the Corporation.
Independent legal counsel shall be deemed to have made a
determination that indemnification is allowed under
Section 3 of this Agreement and that the Expenses and
Resolution Costs are reasonable, unless within that time
independent legal counsel presents to the Corporation's
board of directors a written opinion stating in
unconditional terms that Indemnitee is not entitled to
indemnification under Section 3 of this Agreement or that
a specified portion of such Expenses and Resolution Costs
are not reasonable.
(e) If the Corporation has not made a determination
as to whether or not indemnification is allowed under
Section 3 within the 30 day period (or 45 day period if
referred to independent legal counsel) prescribed in
Section 4, the Corporation, shall be deemed to have made
a determination that Indemnitee is entitled to
indemnification under Section 3 and that the Expenses and
Resolution Costs are reasonable.
(f) The right to indemnification payments as
provided by this Agreement shall be enforceable by
Indemnitee in any court of competent jurisdiction. The
burden of proving that indemnification is not required or
permitted by this Agreement shall be on the Corporation
or on the person challenging the indemnification.
Neither the failure of the Corporation, including its
board of directors, committees, or legal counsel to have
made a determination prior to the commencement of any
Proceeding that indemnification is proper, nor an actual
determination by the Corporation, including its board of
directors, committee, or independent legal counsel, that
indemnification is not proper, shall bar an action by
Indemnitee to enforce this Agreement or create a
presumption that Indemnitee is not entitled to
indemnification under this agreement. If the board of
directors, committee, or independent legal counsel
determines in accordance with Section 4 above that
Indemnitee would not be permitted to be indemnified in
whole or in part, Indemnitee shall have the right to
commence litigation in any court in the State of Michigan
having subject matter jurisdiction thereof and in which
venue is proper seeking an independent determination by
the court or challenging any such determination by the
board of directors, committee, or independent legal
counsel, and the Corporation hereby consents to service
of process and to appear in any such proceeding.
Expenses incurred by Indemnitee in connection with
successfully establishing Indemnitee's right to
indemnification, in whole or in part, shall also be paid
or reimbursed by the Corporation.
<PAGE>
(g) Indemnitee shall not participate in any way in
the board of directors' or committees' discussion and
approval of indemnification under this Section 4.
However, Indemnitee may present Indemnitee's request to
the board of directors and respond to any inquiries
concerning Indemnitee's involvement in the circumstances
giving rise to the administrative proceeding or civil
action.
Section 5. Payment or Reimbursement of Indemnitee in
Advance of Final Disposition.
(a) The Corporation shall pay or reimburse Indemnitee
all Expenses incurred by Indemnitee in advance of final
disposition of a Proceeding, within 30 days after receipt
by the Corporation of a written request for such advance
payment or reimbursement, if:
(i) Indemnitee has furnished the Corporation
with a written affirmation of his or her good
faith belief that he or she has met the
applicable standard of conduct required of
Indemnitee and for which the indemnification
claim is based; and
(ii) as of the date of such payment or
reimbursement, a determination has not been
made, in the manner provided in Section 4 of
this Agreement, that the facts then known to
those making the determination would preclude
indemnification under this Agreement.
(b) Indemnitee hereby undertakes that Indemnitee shall
repay to the Corporation any amount advanced under this
Agreement if an to the extent that it is ultimately
determined that Indemnitee is not entitled to such
indemnification.
Section 6. Establishment of Trust. In the event of a Poten-
tial Change in Control of the Corporation, the Corporation shall,
upon written request by Indemnitee, create a trust for the benefit
of the Indemnitee and from time to time upon written request of
Indemnitee shall fund the trust in an amount sufficient to satisfy
any and all Expenses or Resolution Costs that may properly be
subject to indemnification under Section 3 above anticipated at the
time of each request. The amount or amounts to be deposited in the
trust pursuant to this funding obligation shall be determined by a
majority vote of a quorum consisting of directors who are
Continuing Directors and not parties to the Proceeding or by the
Chief Executive Officer of the Corporation. If all of those
individuals are parties to the Proceeding, the amount or amounts to
be deposited in the trust shall be determined by independent legal
counsel. The terms of the trust shall provide that upon a Change
in Control (i) the trust shall not be revoked or the principal of
the trust fund invaded, without the written consent of the
Indemnitee; (ii) the trustee shall advance, within two (2) business
days of a request by the Indemnitee, any amount properly payable to
Indemnitee under Sections 4 or 5 of this Agreement; (iii) the trust
shall continue to be funded by the Corporation in accordance with
the funding obligation set forth above; (iv) the trustee shall
promptly pay to the Indemnitee all amounts that the Indemnitee
shall be entitled to indemnification pursuant to this Agreement or
otherwise; and (v) all unexpended funds in the trust shall revert
to the Corporation upon a final determination by a court of
competent jurisdiction that the Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee shall
be chosen by the party determining the initial funding of the trust
and shall be a national or state bank having a combined capital and
surplus of not less than $20,000,000. At the time of each draw
from the trust fund, the Indemnitee shall provide the trustee with
a written request providing that Indemnitee undertakes to repay the
amount to the extent that it is ultimately determined that
Indemnitee is not entitled to indemnification. Any funds,
including interest or investment earnings, remaining in the trust
fund shall revert and be paid to the Corporation if (i) a Change in
Control has not occurred; and (ii) if the Board of Directors by
vote of a majority of a quorum consisting of Continuing Directors
determines that the circumstances giving rise to that particular
funding of the trust no longer exists. Nothing in this section
shall relieve the Corporation of any of its obligations under this
Agreement.
<PAGE>
Section 7. Partial Indemnification; Successful Defense. If
Indemnitee is entitled under any provision of this Agreement to
indemnification, or advance payment or reimbursement by the
Corporation for some portion of the Expenses or Resolution Costs
incurred by Indemnitee, but not for the total amount, the
Corporation shall nevertheless indemnify Indemnitee or advanced
payment or reimbursement for the portion of such Expenses or
Resolution Costs to which Indemnitee is entitled. Notwithstanding
any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in
defense of any or all claims relating in whole or in part to a
Proceeding or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified
against all Expenses and Resolutions Costs incurred in connection
with such Proceeding.
Section 9. Consent to Settlement. Unless and until a Change
in Control has occurred, the Corporation shall not be liable to
indemnify Indemnitee under this Agreement for any amounts paid in
settlement of any Proceeding made without the Corporation's written
consent. The Corporation shall not settle any Proceeding in any
manner that would impose any penalty or limitation on Indemnitee or
involve an admission of illegal conduct without Indemnitee's
written consent. Neither the Corporation nor the Indemnitee will
unreasonably withhold their consent to any proposed settlement.
Section 10. Severability. If this Agreement or any portion
hereof (including any provision within a single section,
subsection, or sentence) shall be held to be invalid, void, or
otherwise unenforceable on any ground by any court of competent
jurisdiction, the Corporation shall nevertheless indemnify
Indemnitee as to any Expenses or Resolution Costs with respect to
any Proceeding to the full extent permitted by law or any
applicable portion of this Agreement that shall not have been
invalidated, declared void, or otherwise held to be unenforceable.
Section 11. Indemnification Hereunder Not Exclusive. The
indemnification provided by this Agreement shall be in addition to
any other rights to which Indemnitee may be entitled under the
Articles of Incorporation or Bylaws of the Corporation, any
agreement, any vote of shareholders or disinterested directors, the
Michigan Business Corporation Act, the Federal Deposit Insurance
Act, or otherwise, both as to actions in Indemnitee's official
capacity and as to actions in another capacity while holding such
office.
Section 12. No Presumption. For purposes of this Agreement,
the termination of any claim, action, suit, or proceeding, by
judgment, order, settlement (whether with or without court
approval), conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not
meet any particular standard of conduct or have any particular
belief or that a court has determined that indemnification is not
permitted by applicable law.
<PAGE>
Section 13. Liability Insurance. If the Corporation
maintains an insurance policy or policies providing directors' and
officers' liability insurance, Indemnitee shall be covered by the
policy or policies to the maximum extent of the coverage available
for any director or officer of the Corporation. Indemnitee may be
covered by the policy or policies whether or not the Corporation
would have the power to indemnify him or her against liability
under Sections 561 to 565 of the Michigan Business Corporation Act.
Section 14. Subrogation. In the event of payment under this
Agreement, the Corporation shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee, who
shall execute all documents reasonably required and shall take all
reasonable actions necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation to
effectively bring suit to enforce such rights.
Section 15. No Duplication of Payments. The Corporation
shall not be liable under this Agreement to make any payment to the
extent Indemnitee has otherwise actually received payment (under
any insurance policy, Bylaw, or otherwise) of the amounts otherwise
indemnifiable hereunder.
Section 16. Notice. Any notice or other communication
required under this Agreement shall be in writing and delivered or
sent by postage prepaid first class mail, as follows:
If to the Corporation:
Old Kent Financial Corporation
One Vandenberg Center
111 Lyon Street, N.W.
Grand Rapids, Michigan 49503
Attention: Corporate Secretary (or to any other
individual or address that the Corporation
designates in writing to Indemnitee)
If to Indemnitee:
Addressed to the address provided in this Agreement or
such other address as Indemnitee may designate by written
notice to the Corporation.
Notice shall be deemed received three days after the date
postmarked if properly addressed. The Corporation may designate any
other address in writing to Indemnitee.
<PAGE>
Section 17. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall constitute an
original, and all of which taken together shall constitute a single
document.
Section 18. Continuation of Indemnification. The
indemnification rights provided to Indemnitee under this Agreement
shall continue after Indemnitee has ceased to be a director,
officer, employee, agent, or fiduciary of the Corporation or any
other foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise, whether for profit or not, in which
Indemnitee served in any such capacity at the request of the
Corporation.
Section 19. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and
their respective successors and assigns, including any direct or
indirect successor by purchase, merger, consolidation, or otherwise
to all or substantially all of the business or assets of the
Corporation, and spouses, heirs, administrators and personal and
legal representatives of Indemnitee.
Section 20. Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Michigan applicable to contracts made and to be performed in such
state without giving effect to the principles of conflicts of laws,
and the federal laws of the United States of America.
Section 21. Period of Limitations. No legal action shall be
brought and no cause of action shall be asserted by or on behalf of
the Corporation or any affiliate of the Corporation against
Indemnitee, Indemnitee's spouse, heirs, administrators or personal
or legal representatives after the expiration of one (1) year from
the date of accrual of the cause of action, and any claim or cause
of action of the Corporation or its affiliate shall be extinguished
and deemed released unless asserted by the timely filing of a legal
action within the one (1) year period; provided, however, that if
any shorter period of limitations is otherwise applicable to any
cause of action the shorter period shall govern.
<PAGE>
Section 22. Amendments; Waiver. No supplement, modification,
or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto or, in the case of waiver, by
the party against whom the waiver is asserted. No waiver of any of
the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
The parties have executed this Agreement as of the date stated
in the first paragraph of the Agreement.
Old Kent Financial Corporation
By
Its__________________________________
Indemnitee
Address:
____________________________________
____________________________________
<TABLE>
<CAPTION>
EXHIBIT 11
OLD KENT FINANCIAL CORPORATION
PRIMARY EARNINGS PER SHARE CALCULATION
Three Months Ended June 30 Six Months Ended June 30
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
<S> <C> <C> <C> <C>
P R I M A R Y, after 5% stk div
Net income.............................. $52,811,000 $37,561,000 $93,815,000 $76,795,000
Less: Preferred stock dividends......... - 0 - - 0 - - 0 - - 0 -
Income for primary EPS calculation...... $52,811,000 $37,561,000 $93,815,000 $76,795,000
Avg common shares outstanding........... 47,596,433 49,576,332 47,844,670 49,749,975
Common stock equivalents................ 405,049 364,418 364,295 374,292
Share for primary EPS calculation....... 48,001,482 49,940,750 48,208,965 50,124,267
PRIMARY E.P.S........................... $1.10 $0.75 $1.95 $1.53
</TABLE>
<PAGE>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
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> 6-MOS
<PERIOD-END> JUN-30-97
<FISCAL-YEAR-END> DEC-31-97
<CASH> 593,464
<INT-BEARING-DEPOSITS> 38,827
<FED-FUNDS-SOLD> 62,625
<TRADING-ASSETS> 10,101
<INVESTMENTS-HELD-FOR-SALE> 2,042,782
<INVESTMENTS-CARRYING> 866,288
<INVESTMENTS-MARKET> 867,651
<LOANS> 9,163,775
<ALLOWANCE> 157,260
<TOTAL-ASSETS> 13,360,838
<DEPOSITS> 10,262,191
<SHORT-TERM> 1,625,509
<LIABILITIES-OTHER> 224,413
<LONG-TERM> 200,789
<COMMON> 47,585
0
0
<OTHER-SE> 1,000,351
<TOTAL-LIABILITIES-AND-EQUITY> 13,360,838
<INTEREST-LOAN> 404,012
<INTEREST-INVEST> 91,886
<INTEREST-OTHER> 4,408
<INTEREST-TOTAL> 500,306
<INTEREST-DEPOSIT> 197,029
<INTEREST-EXPENSE> 239,925
<INTEREST-INCOME-NET> 260,381
<LOAN-LOSSES> 21,962
<SECURITIES-GAINS> (1,411)
<EXPENSE-OTHER> 238,875
<INCOME-PRETAX> 142,017
<INCOME-PRE-EXTRAORDINARY> 142,017
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,815
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.95
<YIELD-ACTUAL> 4.40
<LOANS-NON> 43,030
<LOANS-PAST> 20,059
<LOANS-TROUBLED> 2,984
<LOANS-PROBLEM> 66,073
<ALLOWANCE-OPEN> 165,928
<CHARGE-OFFS> 33,226
<RECOVERIES> 7,412
<ALLOWANCE-CLOSE> 157,260
<ALLOWANCE-DOMESTIC> 157,260
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
