FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
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 0-18542
MID-WISCONSIN FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 06-1169935
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
132 West State Street, Medford, WI 54451
(Address of principal executive offices, including zip code)
(715) 748-8300
(Registrant's telephone number, including area code)
(Former name, former address & former fiscal year, if changed since last
report)
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
As of March 31, 2000 There were 1,809,450 shares of $.10 par value common stock
outstanding.
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999 3
Consolidated Statements of Income
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statement of Changes in
Stockholders' Equity
Three Months Ended March 31, 2000 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 8-15
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 15
PART II. OTHER INFORMATION
Item 5. Other Information 16-18
Item 6. Exhibits and Reports of Form 8-K 18-19
Signatures 20
Exhibit Index 21
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Mid-Wisconsin Financial Services, Inc.
and Subsidiary
Consolidated Balance Sheet
<CAPTION>
March 31, 2000 December 31, 1999
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks $11,791,083 $16,400,484
Interest-bearing deposits in other financial institutions 19,570 16,628
Federal funds sold 0 0
Investment securities available for sale -At fair value 65,867,025 63,364,665
Loans held for sale 179,000 50,000
Loans receivable, net of allowance for credit losses of
$2,357,525 in 2000 and $2,285,675 in 1999 219,013,112 215,260,185
Accrued interest receivable 2,008,657 2,048,587
Premises and equipment 6,628,896 6,740,834
Goodwill and purchased intangibles 2,071,570 2,156,512
Other assets 1,656,497 1,645,693
TOTAL ASSETS $309,235,410 $307,683,588
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing deposits $29,461,306 $30,615,700
Interest-bearing deposits 202,676,171 199,554,383
Total Deposits 232,137,477 230,170,083
Short-term borrowings 25,101,375 25,919,665
Long term borrowings 20,000,000 20,000,000
Accrued expenses and other liabilities 3,628,668 3,095,203
Total Liabilities 280,867,520 279,184,951
Stockholders' equity:
Common stock-Par value $.10 per share:
Authorized - 6,000,000 shares in 2000 & 1999
Issued & outstanding - 1,809,450 shares in 2000 180,945
- 1,824,718 shares in 1999 182,472
Additional paid-In capital 11,755,309 11,759,737
Retained earnings 17,334,420 17,356,953
Accumulated other comprehensive income, net of tax (902,784) (800,525)
Total Stockholders' Equity 28,367,890 28,498,637
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $309,235,410 $307,683,588
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
Item 1. Financial Statements Continued:
<TABLE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
and Subsidiary
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three months ended
March 31, 2000 March 31, 1999
<S> <C> <C>
Interest income
Interest and fees on loans $4,714,258 $4,076,058
Interest on investment securities:
Taxable 803,190 729,682
Tax-exempt 192,230 161,016
Other interest and dividend income 25,873 93,659
Total interest income 5,735,551 5,060,415
Interest expense
Deposits 2,262,356 2,057,142
Short-term borrowings 322,975 205,696
Long-term borrowings 292,211 80,820
Total interest expense 2,877,542 2,343,658
Net Interest income 2,858,009 2,716,757
Provision for credit losses 80,000 60,000
Net interest income after provision
for credit losses 2,778,009 2,656,757
Noninterest income:
Service fees 168,976 162,435
Trust Service fees 165,867 135,121
Investment product commissions 88,855 59,978
Other operating income 121,817 211,387
Total noninterest income 545,515 568,921
Noninterest expenses:
Salaries and employee benefits 1,226,759 1,138,575
Occupancy 336,046 363,626
Data Processing & Information Systems 112,190 90,922
Goodwill & Core Deposit Intang Amortization 84,942 80,798
Net realized loss on sale of securities available for sale 0 0
Other operating 532,565 488,317
Total noninterest expenses 2,292,502 2,162,238
Income before income taxes 1,031,022 1,063,440
Provision for income taxes 282,329 315,760
Net income $748,693 $747,680
Basic and diluted earnings per share $0.41 $0.40
Cash dividends declared per share $0.20 $0.17
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
Item 1. Financial Statements Continued:
<TABLE>
Mid-Wisconsin Financial Services, Inc.
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
<CAPTION>
Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive
Amount Capital Earnings Income (Loss) Totals
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 $182,472 $11,759,737 $17,356,953 ($800,525) $28,498,637
Comprehensive Income:
Net Income 748,693 748,693
Unrealized gain on securities
available for sale, net of tax (102,259) (102,259)
Total comprehensive income 646,434
Repurchase of common stock (1,527) (4,428) (406,282) (412,237)
Cash dividends declared $.20
per share (364,944) (364,944)
Balance September 30, 1999 $180,945 $11,755,309 $17,334,420 ($902,784) $28,367,890
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
Item 1. Financial Statements Continued:
<TABLE>
Mid-Wisconsin Financial Services, Inc.
and Subsidiary
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<CAPTION>
2000 1999
<S> <C> <C>
Increase (decrease) in cash and due from banks:
Cash flows from operating activities:
Net income $748,693 $747,680
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for depreciation and net amortization 300,324 319,162
Provision for credit losses 80,000 60,000
Proceeds from sales of loans held for sale 221,970 2,980,638
Gain on sale of loans held for sale (4,620) (41,238)
Originations of loans held for sale (346,350) (2,454,250)
(Gain) Loss on premises and equipment disposals (1,586) 11,836
Gain on sale of other real estate - (4,154)
Changes in operating assets and liabilities:
Other assets 85,506 (960)
Other liabilities 533,465 410,235
Net cash provided by operating activities 1,617,402 2,028,948
Cash flows from investing activities:
Available for sale securities:
Proceeds from maturities 1,843,976 7,439,471
Payment for purchases (4,509,536) (13,928,292)
Net (increase) decrease in loans (3,832,883) 3,176,321
Net (increase) decrease in interest-bearing deposits
in other institutions (2,942) 19,468
Net decrease in federal funds sold - 2,489,000
Capital expenditures (100,417) (784,735)
Proceeds from sale of premises and equipment 2,550 -
Proceeds from sale of other real estate 525 19,942
Net cash used in investing activities (6,598,727) (1,568,826)
Cash flows from financing activities:
Net decrease in noninterest-bearing deposits (1,154,394) (3,544,376)
Net increase (decrease) in interest-bearing deposits 3,121,788 (1,000,640)
Proceeds from exercise of stock options - 10,477
Payment for repurchase of common stock (412,236) (1,092,520)
Net increase (decrease) in short-term borrowing (818,290) 2,044,412
Proceeds from issuance of long-term borrowings - -
Dividends paid (364,944) (309,670)
Net cash provided by financing activities 371,924 (3,892,317)
Net (decrease) in cash and cash equivalents (4,609,401) (3,432,195)
Cash and cash equivalents at beginning 16,400,484 14,025,302
Cash and cash equivalents at end $11,791,083 $10,593,107
Supplemental cash flow information: 2000 1999
Cash paid during the year for:
Interest $2,779,102 $2,388,373
Income taxes $26,000 $63,616
Supplemental schedule of non-cash investing and financing activities:
Loans transferred to other real estate $- $223,027
Loans charged off $52,305 $50,182
Loans made in connection with the disposition of other real
Estate 0 0
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
MID-WISCONSIN FINANCIAL SERVICES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - GENERAL
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly Mid-Wisconsin
Financial Services, Inc.'s ("Company") financial position, results of its
operations and cash flows for the periods presented, and all such adjustments
are of a normal recurring nature. The consolidated financial statements
include the accounts of all subsidiaries. All material intercompany
transactions and balances are eliminated. The results of operations for the
interim periods are not necessarily indicative of the results to be expected
for the full year.
These interim consolidated financial statements have been prepared according to
the rules and regulations of the Securities and Exchange Commission and,
therefore, certain information and footnote disclosures normally presented in
accordance with generally accepted accounting principles have been omitted or
abbreviated. The information contained in the consolidated financial
statements and footnotes in the Company's 1999 annual report on Form 10-K,
should be referred to in connection with the reading of these unaudited interim
financial statements.
In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses for
the period. Actual results could differ significantly from those estimates.
Estimates that are susceptible to significant change include the determination
of the allowance for credit losses and the valuations of investments.
NOTE 2 - INVESTMENT SECURITIES
All investments are available for sale. The amortized cost and fair value of
investment securities for the periods indicated are summarized as follows:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
Amortized Cost Fair Value Amortized Cost Fair Value
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations
of other U.S. Govt agencies & corp $13,947,445 $13,517,360 $12,947,539 $12,487,600
Mortgage Backed Securities 33,633,081 32,939,822 32,989,062 32,389,232
Oblig. to states & political subdivisions 17,173,158 16,846,538 16,276,194 16,046,592
Corporate Securities 575,000 574,350 575,000 574,400
Equity Securities 1,988,955 1,988,955 1,866,841 1,866,841
Totals $67,317,639 $65,867,025 $64,654,636 $63,364,665
</TABLE>
<PAGE>
NOTE 3 - EARNINGS PER SHARE
Basic earnings per common share is calculated by dividing net income available
to common stockholders by the weighted average number of common shares
outstanding which includes the common stock equivalents applicable to shares
issuable under the stock options granted.
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
<S> <C> <C>
Net income available to common
stockholders $748,693 $747,680
Weighted average shares outstanding 1,814,022 1,859,729
Basic earnings per share $0.41 $0.40
</TABLE>
NOTE 4 - COMPREHENSIVE INCOME
The Financial Accounting Standards Board (FASB) has issued SFAS No. 130,
"Reporting Comprehensive Income", which is effective for fiscal years beginning
after December 15, 1997. This statement establishes standards for reporting
and display of comprehensive income and its components (revenues, expenses,
gains and losses) in a full set of general-purpose financial statements. This
statement requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The Company adopted SFAS No. 130 on January 1, 1998, and
all annual required disclosures have been included beginning with the Company's
1998 Form 10-K Annual Report.
The Company's comprehensive income for March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
<S> <C> <C>
Net Income $748,693 $747,680
Unrealized gain(loss) on securities
available for sale, net of tax (102,259) (98,898)
$646,434 $648,782
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis is presented to assist in the
understanding and evaluation of the Company's financial condition and results
of operations. It is intended to complement the unaudited financial
statements, footnotes, and supplemental financial data appearing elsewhere in
this Form 10-Q and should be read in conjunction therewith.
<PAGE>
Forward-looking statements have been made in this document that are subject to
risks and uncertainties. While the Company believes that these forward-looking
statements are based on reasonable assumptions, all such statements involve
risk and uncertainties that could cause actual results to differ materially
from these contemplated in this report. The assumptions, risks and
uncertainties relating to the forward-looking statements in this report include
those described under the caption "Cautionary Statements Regarding Forward
Looking Information" in Part I of the Company's Form 10-K for the year ended
December 31, 1999 and, from time to time, in the Company's other filings with
the Securities and Exchange Commission.
BALANCE SHEET
At March 31, 2000, total assets were $309,235,410, an increase of $31,589,890,
or 11.4%, over March 31, 1999, while assets grew $1,551,822 over December 31,
1999. Gross loans were $221,549,636 at March 31, 2000, growing $34,574,202
over first quarter 1999 and $3,953,776 over fourth quarter 1999. Loan growth
has come primarily from commercial and real estate loans.
Table 1: Period End Loan Composition
<TABLE>
<CAPTION>
March 31 % of Dec. 31 % of
2000 total 1999 total
<S> <C> <C> <C> <C>
Commercial and financial $45,197,622 20.40% $43,360,501 19.93%
Construction Loans 4,092,841 1.85% 4,136,740 1.90%
Agricultural 40,268,529 18.18% 40,279,168 18.51%
Real estate 121,032,628 54.63% 118,640,913 54.52%
Installment 10,712,999 4.83% 10,931,389 5.03%
Lease financing 245,017 0.11% 247,149 0.11%
Total loans (including loans held for sale) $221,549,636 100.00% $217,595,860 100.00%
</TABLE>
The loan portfolio is the Company's primary asset subject to credit risk. The
Company's process for monitoring credit risks includes weekly analysis of loan
quality, delinquencies, non-performing assets, and potential problem loans.
Loans are placed on a nonaccrual status when they become contractually past due
90 days or more as to interest or principal payments. All interest accrued but
not collected for loans (including applicable impaired loans) that are placed
on nonaccrual or charged off is reversed to interest income. The interest on
these loans is accounted for on the cash basis until qualifying for return to
accrual status. Loans are returned to accrual status when all the principal
and interest amounts contractually due have been collected and there is
reasonable assurance that repayment will continue within a reasonable time
frame.
A loan is considered impaired when, based on current information, it is
probable that the bank will not collect all amounts due in accordance with the
contractual terms of the loan agreement. Impairment is based on discounted
cash flows of expected future payments using the loan's initial effective
interest rate or the fair value of the collateral if the loan is collateral
dependent. The decision of management to place loans in this category does
not necessarily mean that the Company expects losses to occur but that
management recognizes that a higher degree of risk is associated with these
loans.
<PAGE>
The aggregate amount of non-performing loans decreased $626,083 to $950,233 at
March 31 ,2000 from $1,576,316 at March 31, 1999. The majority of the decrease
is due to a large commercial loan taken off nonaccrual status and several non-
performing real estate loans paid-off. Non-performing loans are those which
are either contractually past due 90 days or more as to interest or principal
payments, on a nonaccrual status, or the terms of which have been renegotiated
to provide a reduction or deferral of interest or principal.
Table 2: Allowance for Credit Losses and Nonperforming Assets
<TABLE>
<CAPTION>
Three Months Ended
March 31, 2000 March 31, 1999
<S> <C> <C>
Allowance for credit losses at
beginning of period $2,285,675 $2,159,145
Provision Charged to Operating Expense 80,000 60,000
Recoveries on Loans 44,155 6,330
Loans Charged off (52,305) (50,182)
Allowance for losses at end of period $2,357,525 $2,175,293
NONPERFORMING ASSETS
Nonaccrual loans $645,334 $1,094,662
Accruing loans past due
90 days or more 7,172 5,152
Restructured loans 297,727 476,502
Total non-performing
Loans 950,233 1,576,316
Other real estate owned 69,813 262,877
Total nonperforming assets $1,020,046 $1,839,193
</TABLE>
Management is not aware of any additional loans that represent material credits
or of any information that causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
LIQUIDITY
Liquidity refers to the ability of the Company to generate adequate amounts of
cash to meet the Company's need for cash. The Company manages its liquidity to
provide adequate funds to support borrowing needs and deposit flow of its
customers. Management views liquidity as the ability to raise cash at a
reasonable cost or with a minimum of loss and as a measure of balance sheet
flexibility to react to marketplace, regulatory and competitive changes.
Deposit growth is the primary source of liquidity. Deposits as a percentage of
total funding sources were 84% for the first three months of 2000 and 90% for
the first three months of 1999. Wholesale funding represents the balance of
the Company's total funding needs.
<PAGE>
The Company attempts, when possible, to match relative maturities of assets and
liabilities, while maintaining the desired net interest margin.
In response to slow deposit growth, in comparison to loan demand, the Company
has acquired more non-core funds. The primary funding sources utilized are
Federal Home Bank advances, federal funds purchased, repurchase agreements from
a base of individuals, businesses, and public entities, and brokered CDs.
CAPITAL RESOURCES
Stockholders' equity at March 31, 2000 decreased to $28,367,890 compared to
$28,827,153 at March 31, 1999. The change in equity between the two periods
was primarily a result of the payment of dividends, and the repurchase of
common stock. Stockholders' equity included unrealized gains (losses), net of
tax, on securities available for sale, net of their tax effect of ($902,784) at
March 31, 2000 compared to $360,534 for the comparable prior year period.
Cash dividends of $0.20 per share were paid in the first quarter of 2000,
representing a payout ratio of 48.74% for the quarter.
The adequacy of the Company's capital is regularly reviewed to ensure
sufficient capital is available for current and future needs and is in
compliance with regulatory guidelines. As of March 31, 2000 the Company's tier
1 risk-based capital ratio, total risk-based capital, and tier 1 leverage ratio
were well in excess of regulatory minimums.
Table 3: Capital Ratios
<TABLE>
<CAPTION>
Tier 1 Capital Total Capital
<S> <C> <C>
March 31, 2000 11.79% 12.82%
March 31, 1999 13.26% 14.37%
Regulatory minimum requirements
for well capitalized 4.00% 8.00%
</TABLE>
RESULTS OF OPERATIONS
Net income for the quarter ended March 31, 2000 totaled $748,693, or $.41 for
basic and diluted earnings per share. Comparatively, net income for the
quarter ended March 31, 1999 was $747,680, or $.40 for basic and diluted
earnings per share. Operating results for the first quarter 2000 generated an
annualized return on average assets of .98% and an annualized return on average
equity of 10.60%, compared to 1.07% and 10.38% for the comparable period in
1999. The net interest margin for first quarter 2000 was 4.17 % compared to
4.43% for the comparable quarter in 1999.
<PAGE>
Table 4: Summary Results of Operations
<TABLE>
<CAPTION>
(Dollars in thousands, 2000 1999
except per share amounts) First Fourth Third Second First
<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS:
Earnings and Dividends:
Net interest income $2,858 $2,943 $2,871 $2,864 $2,717
Provision for credit losses 80 60 0 60 60
Other noninterest income 546 512 479 547 569
Other noninterest expense 2,293 2,042 2,179 2,159 2,162
Net income 749 898 872 831 748
Per common share
Basic and diluted earnings 0.41 0.49 0.48 0.45 0.40
Dividends declared 0.20 0.20 0.20 0.60 0.17
Book Value 15.68 15.62 15.52 15.35 15.83
Average common shares (000's) 1,814 1,827 1,827 1,827 1,860
Dividend payout ratio 48.74% 40.65% 41.83% 131.64% 41.42%
Balance Sheet Summary:
At quarter end:
Loans net of unearned income 221,371 217,546 208,815 198,149 186,509
Assets 309,235 307,684 297,362 281,821 277,645
Deposits 232,137 230,170 223,894 217,400 217,777
Shareholders equity 28,368 28,499 28,300 27,989 28,827
Average balances:
Loans net of unearned income 218,564 214,263 204,237 194,757 188,401
Assets 307,118 302,851 290,405 280,373 279,234
Deposits 231,901 228,052 224,470 218,610 221,844
Shareholders equity 28,265 28,346 27,989 28,443 28,814
Performance Ratios:
Return on average assets 0.98% 1.19% 1.20% 1.19% 1.07%
Return on average common equity 10.60% 12.67% 12.46% 11.69% 10.38%
Tangible Equity to assets 8.57% 8.70% 8.92% 9.38% 9.53%
Total risk-based capital 12.82% 12.93% 13.16% 13.67% 14.37%
Net loan charge-offs as a percentage
of average loans 0.004% 0.02% 0.01% 0.01% 0.02%
Nonperforming assets as a percentage
of loans and other real estate 0.29% 0.63% 0.93% 0.94% 0.59%
Net interest margin 4.17% 4.47% 4.48% 4.57% 4.43%
Efficiency ratio(1) 64.97% 57.08% 62.79% 61.22% 63.54%
Fee revenue as a percentage of
average assets 0.17% 0.23% 0.16% 0.19% 0.20%
Stock Price Information:
High $27.50 $27.50 $27.38 $27.38 $27.38
Low 27.00 27.50 27.38 27.38 25.50
Market value at quarter end (2) 27.00 27.50 27.38 27.38 27.38
<FN>
(1) The yield on tax-exempt loans and securities is computed on a tax-
equivalent basis using a tax rate of 34% for all periods presented.
(2) Market value at quarter end represents the bid price. The quotations
reflect prices, without retail mark-up, markdown or
commissions, and may not necessarily represent actual transactions.
</TABLE>
<PAGE>
NET INTEREST INCOME
Net interest income is the most significant component of earnings. Net interest
income for the three months ended March 31, 2000 was $2,877,542.
Comparatively, net interest income for the first quarter 1999 was $2,716,757.
Fully taxable equivalent net interest income for the first quarter 2000
increased $149,183 to $2,983,094 over first quarter 1999. Average earning
assets grew $30 million from the first quarter 1999. The net interest margin
for March 31, 2000 was 4.17% or 26 basis points less than the 4.43% margin in
the first quarter 1999. The net interest margin continues to decline due to
the higher costs of deposits needed to fund the balance sheet. The Company is
trying to position more assets to reprice with the market to maintain or
increase the net interest margin.
Table 5: Net Interest Income Analysis
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 2000 March 31, 1999
Average Interest Average Average Interest Average
Balance Income/expense Yield/Rate Balance Income/expense Yield/Rate
<S> <C> <C> <C> <C> <C> <C>
Assets
Interest earning assets:
Loans (2) (3) $214,676,202 $4,663,605 8.69% $183,015,481 $4,009,590 8.76%
Tax Exempt Loans (1) 3,887,368 76,739 7.90% 5,385,508 100,699 7.48%
Taxable Investments 47,667,177 766,856 6.44% 44,496,107 698,437 6.28%
Municipal Investments-Txbl 375,000 6,609 7.05% 375,000 6,609 7.05%
Municipal Investments-TxEx (1) 16,337,852 291,228 7.13% 13,434,309 243,939 7.26%
Equity Securities 1,698,950 29,725 7.00% 1,823,033 24,636 5.41%
Other Interest Income 1,902,808 25,873 5.44% 7,998,660 93,659 4.68%
Total $286,545,357 $5,860,636 8.18% $256,528,098 $5,177,569 8.07%
Non-interest earning assets:
Cash & cash equivalents 11,964,782 12,343,639
Premises & Equip-Net 6,462,983 6,616,617
Other assets 4,474,141 5,937,630
Less:Allow.for ln loss (2,329,568) (2,192,157)
Total $307,117,695 $279,233,827
Liabilities & Stockholders' Equity:
Interest bearing liabilities:
Interest bearing demand $58,571,684 $482,065 3.29% $61,068,768 $440,095 2.88%
Savings deposits 20,252,411 98,964 1.95% 20,461,332 98,980 1.93%
Time deposits 122,697,552 1,681,327 5.48% 111,494,400 1,518,067 5.45%
Short-term borrowings 23,344,446 322,975 5.53% 19,321,702 205,696 4.26%
Long-term borrowings 20,000,000 292,211 5.84% 5,800,000 80,820 5.57%
Total $244,866,093 $2,877,542 4.70% $218,146,202 $2,343,658 4.30%
Non-interest bearing liabilities
Demand deposits 30,378,971 28,818,875
Other liabilities 3,607,729 2,454,582
Stockholders' equity 28,264,902 28,814,168
Total $307,117,695 $278,233,827
Interest rate spread (1) 3.48% 3.77%
Net interest income
and net interest margin (1) $2,983,094 4.17% $2,833,911 4.43%
<FN>
(1) The yield on tax-exempt loans and securities is computed on a tax-
equivalent basis using a tax rate of 34% for all periods presented.
(2) Nonaccrual loans have been included in the average balances.
(3) Interest income includes net loan fees.
</TABLE>
<PAGE>
PROVISION FOR CREDIT LOSSES
Management determines the adequacy of the provision for credit losses based on
past loan experience, current economic conditions, composition of the loan
portfolio, and the potential for future loss. Accordingly, the amount charged
to expense is based on management's evaluation of the loan portfolio. It is
the Company's policy that when available information confirms that specific
loans and leases, or portions thereof, including impaired loans, are
uncollectable, these amounts are promptly charged off against the allowance.
The provision for credit losses was $80,000 for the three months ended March
31, 2000, and $60,000 for the three months ended March 31, 1999. Net charge-
offs as a percentage of average loans outstanding were .0004% and .02% during
the three months ended March 31, 2000 and 1999, respectively.
Non-performing loans are reviewed to determine exposure for potential loss
within each loan category. The adequacy of the allowance for credit losses is
assessed based on credit quality and other pertinent loan portfolio
information. The adequacy of the reserve and the provision for credit losses
is consistent with the composition of the loan portfolio and recent credit
quality history.
NON-INTEREST INCOME
Non-interest income decreased 4.11% to $545,515 during the three months ended
March 31, 2000, from the comparable first quarter of 1999. There were no
gains or losses on securities during the three months ended March 31, 2000 and
1999. Influencing this result was lower loan fees, down $98,000 between
comparable three month periods. During the first quarter 1999, the Company
realized unusually large loan fees on two consumer loans.
Trust service fees continue to increase with the growth in trust business
volume and assets managed by the Company's Trust Department. Fiduciary fees
increased $30,746 or 22.75% compared to the same quarter last year. Investment
commissions increased $28,877 or 48.15% compared to first quarter 1999. The
increase was due to increase in the sale of services provided by the Investment
Department. The Investment Department receives commissions on life insurance,
annuities, mutual funds, and brokerage services.
Table 6: Noninterest Income
<TABLE>
<CAPTION>
1st Quarter 1st Quarter
2000 1999 Change Change
<S> <C> <C> <C> <C>
Service Fees $168,976 $162,435 $6,541 4.03%
Trust Service Fees 165,867 135,121 30,746 22.75%
Investment product commissions 88,855 59,978 28,877 48.15%
Other operating income 121,817 211,387 (89,570) -42.37%
Total noninterest income $545,515 $568,921 ($23,406 ) -4.11%
</TABLE>
<PAGE>
NON-INTEREST EXPENSE
Non-interest expenses increased 6.02% to $2,292,502 for the three months ended
March 31, 2000, from $2,162,238 for the three months ended March 31, 1999.
Salaries and employee benefits increased $88,184 or 7.75% compared to first
quarter 1999. The increase was attributable to base merit pay increases, and
commission or incentive pay.
Table 7: Noninterest Expense
<TABLE>
<CAPTION>
1st Quarter 1st Quarter
2000 1999 Change Change
<S> <C> <C> <C> <C>
Salaries and employee benefits $1,226,759 $1,138,575 $88,184 7.75%
Occupancy 336,046 363,626 (27,580) -7.58%
Data Processing & Information Systems 112,190 90,922 21,268 23.39%
Goodwill & Core Deposit Intang Amortization 84,942 80,798 4,144 5.13%
FDIC Assessment 11,733 6,423 5,310 82.67%
Other operating 520,832 481,894 38,938 8.08%
Total noninterest expense $2,292,502 $2,162,238 $130,264 6.02%
</TABLE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There was no material change in the information provided in response to Item 7A
of the Company's Form 10-K for the year ended December 31, 1999.
<PAGE>
ITEM 5. OTHER INFORMATION
The following information is provided for the purpose of updating the
description of the Company's common stock and supersedes the description set
forth in Item 11, pages 54-56 of Amendment No. 2 to Form 8, dated August 14,
1990:
Description of Common Stock
The following summary description of the material provisions of the Company's
articles of incorporation and by-laws is qualified in its entirety by reference
to the Company's articles of incorporation and by-laws, which have been
previously filed as exhibits (see Item 6, exhibits 4.1 and 4.2).
The Company's authorized capital stock consists of 6,000,000 shares of common
stock, $.10 par value per share. At May 9, 2000, there were 1,809,450 shares
of common stock outstanding which were held by approximately 816 stockholders
of record.
Common Stock
Holders of common stock are entitled to receive dividends as may be declared by
the Company's Board of Directors out of funds legally available to pay
dividends and, in the event of liquidation, to share pro rata with the holders
of common stock in any distribution of assets after payment or providing for
the payment of liabilities and the liquidation preference of any outstanding
preferred stock. The Company's ability to pay dividends may be limited by
federal or state banking laws. In particular, the Company's ability to pay
dividends may be limited by requirements to maintain capital at or above
regulatory minimums. Banking regulators have indicated that banking
organizations should generally pay dividends only if (1) the organization's net
income available to common shareholders over the past year has been sufficient
to fund the dividends and (2) the prospective rate of earnings retention
appears consistent with the organizations's capital needs, asset quality, and
overall financial condition.
Each holder of common stock is entitled to one vote for each share held of
record on the applicable record date for all matters presented to stockholders.
Holders of common stock have no cumulative voting rights or preemptive rights
to purchase or subscribe for any stock or other securities. There are no
conversion rights or redemption or sinking fund provisions with respect to
common stock. All outstanding shares of common stock are fully paid and
nonassessable except for a contingent liability under Wisconsin law for unpaid
wages. Wisconsin law provides that a stockholder may be held liable, up to the
amount the stockholder paid for his shares, for any claims made by employees
for unpaid wages, up to a maximum of six-months of wages.
<PAGE>
Anti-takeover Provisions in the Articles of Incorporation and By-laws and
Wisconsin Law
The Company's articles of incorporation and by-laws contain provisions that
could delay or make more difficult the acquisition of the Company by means of a
hostile tender offer, open market purchases, a proxy contest, or otherwise.
Wisconsin law also contains provisions which are intended to make a non-
negotiated transaction more difficult to achieve.
The articles of incorporation and the by-laws provide that the Board of
Directors shall be divided into three classes of directors, as nearly equal in
size as possible, serving staggered three-year terms. Upon expiration of the
term of a class of directors, the directors in that class are to be elected for
three-year terms at the annual meeting of stockholders in the year in which the
term for that class of directors expires. In addition, the classification of
the board of directors could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring,
control of the Company.
Section 180.1141 of the Wisconsin Business Corporation Law restricts some
business combinations between the Company and an "interested stockholder." An
"interested stockholder" includes any person (including the person's affiliates
or associates) who beneficially owns at least 10% of the voting power of the
outstanding voting power of the common stock and any of the Company's
affiliates or associates who, within the last three years, beneficially owned
at least 10% of the voting power of the then outstanding voting stock. A
business combination prohibited by Section 180.1141 includes:
1. a merger or share exchange with an interested stockholder (or a
corporation which would become an affiliate after a merger or share
exchange);
2. a sale, lease or other disposition to or with an interested
stockholder of assets which:
a. represents at least 5% of the aggregate market value of the
Company's assets;
b. has an aggregate market value equal to at least 5% of the value
of the outstanding stock; or
c. represents at least 10% of the earning power or income of the
Company;
3. the issuance of our stock which has an aggregate market value equal to
at least 5% of the aggregate market value of all of the Company's
outstanding stock to an interested stockholder;
4. a plan or proposal for liquidation or dissolution of the Company
pursuant to a proposal by or an agreement with an interested
stockholder; and
5. other reclassifications, recapitalizations and loans, guarantees,
financial assistance, or other transactions for the benefit of the
interested stockholder.
<PAGE>
For a period of three years after the date on which an interested stockholder
first became an interested stockholder, no business combinations between the
Company and the interested stockholder may occur unless the Board of Directors
had given prior approval to the business combination or the purchase by which
the interested stockholder became an interested stockholder. At any time more
than three years after the date on which an interested stockholder became an
interested stockholder, no business combination may be consummated unless the
purchase by which the interested stockholder became an interested stockholder
was approved by the Board of Directors prior to the date on which the
interested stockholder became an interested stockholder, the business
combination meets the "fair price" requirements set forth in the statute
regarding the price paid for the Company's stock, or the business combination
is approved by a majority of the shares entitled to vote which are not
beneficially owned by the interested stockholder.
Section 180.1150 of the Wisconsin Business Corporation Law provides that,
subject to some exceptions, in any matters to be voted upon by the Company's
stockholders, the voting power of shares held by any person in excess of 20% of
the shares outstanding and entitled to vote in the election of directors is
limited to 10% of the full voting power of those excess shares. For example, a
stockholder with 30% of the voting shares would exercise 23% of the voting
power of the shares eligible to vote.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits required by Item 601 of Regulation S-K
The following exhibits are filed as part of this quarterly report on Form 10-Q.
4.1 Articles of Incorporation, as amended (incorporated by reference to
Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995)
4.2 Bylaws, as amended September 20, 1995 (incorporated by reference to
Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995)
10.1* Mid-Wisconsin Financial Services, Inc. 1991 Employee Stock Option Plan
(incorporated by reference to Exhibit 10(b) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995)
10.2* Mid-Wisconsin Financial Services, Inc. Directors Deferred Compensation
Plan as last amended January 12, 2000 (incorporated by reference to Exhibit
10(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999)
10.3* Executive Officer Employment and Severance Agreement (incorporated by
reference to Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997)
<PAGE>
10.4* Mid-Wisconsin Bank Senior Officer Incentive Bonus Plan (incorporated by
reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997)
10.5* Director Retirement Benefit Policy (incorporated by reference to Exhibit
10(e) to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999)
10.6* 1999 TeamBank Bonus Plan (incorporated by reference to Exhibit 10(f) to
the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1999)
10.7 Mid-Wisconsin Financial Services, Inc. Employee Stock Purchase Plan
10.8* Mid-Wisconsin Financial Services, Inc. 1999 Stock Option Plan
22.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21)
to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995)
27.1 Financial Data Schedule
*Denotes Executive Compensation Plans and Arrangements
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter for which this Form
10-Q is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MID-WISCONSIN FINANCIAL SERVICES, INC.
Date May 15, 2000 GENE C. KNOLL
Gene C. Knoll, President
(Principal Executive Officer)
Date May 15,2000 RHONDA R. KELLEY
Rhonda R. Kelley, Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
to
FORM 10-Q
of
MID-WISCONSIN FINANCIAL SERVICES, INC.
For the period ended March 31, 2000
Pursuant to Section 102(d), Regulation S-T
(17 C.F.R. <section>232.102(d))
Exhibit 10 - Material Contracts
.7 Mid-Wisconsin Financial Services, Inc. Employee Stock Purchase Plan
.8* Mid-Wisconsin Financial Services, Inc. 1999 Stock Option Plan
*Denotes Executive Compensation Plans and Arrangements.
Exhibit 27 - Financial Data Schedule
<PAGE>
Exhibit 10.7
MID-WISCONSIN FINANCIAL SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Establishment of Plan.
Mid-Wisconsin Financial Services, Inc., a Wisconsin corporation (the
"Company"), proposes to grant options ("Options") for purchase of the Company's
common stock, $0.10 par value ("Common Stock"), to eligible employees of the
Company and its Designated Subsidiaries (as hereinafter defined in Section 5)
pursuant to the Employee Stock Purchase Plan (the "Plan"). The Company intends
the Plan to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"), and
the Plan shall be so construed. Any term not expressly defined in the Plan but
defined in Section 423 of the Code shall have the meaning provided in Section
423 of the Code.
2. Stock Subject to Plan.
A total of 50,000 shares of Common Stock will be available for issuance
under the Plan, subject to adjustments effected in accordance with Section 16.
Any shares of Common Stock that have been made subject to an Option that cease
to be subject to the Option (other than by means of exercise of the Option),
including, without limitation, in connection with the cancellation or
termination of an Option, shall again be available for issuance in connection
with future grants of Options under the Plan.
3. Purpose.
The purpose of the Plan is to encourage employees of the Company and its
Designated Subsidiaries to own Common Stock, by permitting them to acquire
Common Stock at a discount through payroll deductions, and thereby enhance
their sense of participation in the affairs of the Company and Subsidiaries and
to provide an incentive for continued employment.
<PAGE>
4. Administration.
(a) The Plan shall be administered by the Stock Option Committee or such
other committee of the Company's Board of Directors (the "Board") as the Board
may from time to time designate as the administrator of the Company's 1999
Employee Stock Option Plan. Subject to the provisions of the Plan and the
limitations of Section 423 of the Code or any successor provision in the Code,
the Committee shall have exclusive authority, in its discretion, to determine
all matters relating to Options granted under the Plan, including all terms,
conditions, restrictions, and limitations of Options, and to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan
as it shall from time to time deem advisable, to interpret the terms and
provisions of the Plan and any Option issued under the Plan, and to otherwise
supervise the administration of the Plan; provided, however, that all
participants granted Options under an offering pursuant to the Plan shall have
the same rights and privileges within the meaning of Section 423(b)(5) of the
Code except as required by applicable law. The Committee's exercise of
discretion and interpretation of the Plan, its rules and regulations, and all
actions taken and determinations made by the Committee pursuant to the Plan
shall be conclusive and binding on all parties involved or affected. The
Committee may delegate administrative duties to any person or persons selected
by it, as it deems advisable. All expenses incurred in connection with the
administration of the Plan shall be paid by the Company and the Designated
Subsidiaries; provided, however, that the Committee may require a participant
to pay any costs or fees in connection with the sale by the participant of
shares of Common Stock acquired under the Plan or in connection with the
participant's request for the issuance of a certificate for shares of Common
Stock held in the participant's account under the Plan.
(b) A majority of the members of the Committee shall constitute a quorum.
In the absence of specific rules to the contrary, action by the Committee shall
require the consent of a majority of the members of the Committee, expressed
either orally at a meeting of the Committee or in writing in the absence of a
meeting.
(c) No member of the Board, no executive officer or other employee of the
Company, and no other agent or representative of the Company shall be liable
for any act, omission, interpretation, construction, or determination made in
connection with the Plan in good faith, and all such persons shall be entitled
to indemnification and reimbursement by the Company in respect of any claim,
loss, damage, or expense (including attorneys fees) arising therefrom to the
full extent permitted by law, except as otherwise may be provided in the
Company's articles of incorporation and/or by-laws, and under any directors'
and officers' liability insurance that may be in effect from time to time.
5. Eligibility.
(a) Each employee of the Company or the Designated Subsidiaries is
eligible to participate in the Plan for any Offering Period (as hereinafter
defined) under the Plan except:
<PAGE>
(i) if so determined by the Committee or the Board, employees who are
customarily employed for less than 20 hours per week;
(ii) if so determined by the Committee or the Board, employees who
are customarily employed for not more than five months in a calendar year; and
(iii) employees who, together with any other person whose stock would
be attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold options to purchase stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Subsidiaries or who, as a result of being granted Options under the Plan,
would own stock or hold options to purchase stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
any of its Subsidiaries.
(b) For all purposes of the Plan, (i) the term "Subsidiary" shall mean any
"subsidiary corporation" as that term is defined in Section 424(f) of the Code
and (ii) the term "Designated Subsidiaries" shall mean Mid-Wisconsin Bank and
each subsidiary thereof and each other Subsidiary which may hereafter be
determined by the Committee or the Board to be a "Designated Subsidiaries." A
Designated Subsidiary will cease to be a Designated Subsidiary on the earlier
of (i) the date the Committee or the Board determines that such Subsidiary is
no longer a Designated Subsidiary or (ii) such Designated Subsidiary ceases for
any reason to be a Subsidiary.
6. Offering Periods.
The offering periods of the Plan (individually, an "Offering Period")
shall be of periods not to exceed the maximum period permitted by Section 423
of the Code. Until determined otherwise by the Committee or the Board,
Offering Periods shall commence on the first business day of each calendar year
and shall terminate on the last business day of such year; provided, however,
that the first Offering Period shall commence on the later of (i) July 1, 2000
or (ii) the effective date of the Company's Registration Statement on Form S-8
relating to the Plan and filed under the Securities Act of 1933, as amended,
and shall end on the last business day of 2000. The first day of each Offering
Period is referred to as the "Offering Date." The last day of each Offering
Period is referred to as the "Purchase Date." Subject to the requirements of
Section 423 of the Code, the Committee or the Board shall have the power to
change the duration of Offering Periods with respect to future offerings if
such change is announced at least 30 days prior to the Offering Date of the
first Offering Period to be affected by such change.
<PAGE>
7. Participation in the Plan.
An eligible employee may become a participant in the Plan on the first
Offering Date after he or she satisfies the eligibility requirements, by
delivering a properly completed enrollment form (on such form as the Committee
may prescribe) to the Committee not later than the 15th day of the month (or if
such day is not a business day for the Company or the applicable Subsidiary, on
the immediately preceding business day) before such Offering Date, unless a
later time for filing the enrollment form authorizing payroll deductions is set
by the Committee for all eligible employees with respect to a given Offering
Period. Once an employee becomes a participant in the Plan with respect to an
Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws from the Plan or terminates further
participation in the Offering Period as set forth in Sections 13 and 14. No
additional enrollment form shall be required for such continued participation
in the Plan.
8. Grant of Option on Enrollment.
Enrollment by an eligible employee in the Plan with respect to an
Offering Period will constitute the grant by the Company to such employee of an
Option to purchase on the relevant Purchase Date up to that number of shares of
Common Stock of the Company, and any fraction of a share, as is determined by
dividing (a) the amount accumulated in such employee's payroll deduction
account during the Offering Period ending on such Purchase Date, by (b) the
Purchase Price as that term is defined in Section 9; provided, however, that
the number of shares which may be purchased pursuant to an Option may in no
event exceed the number of shares determined in the manner set forth in Section
11(b).
9. Purchase Price.
(a) Subject to Section 9(b), the purchase price per share (the "Purchase
Price") pursuant to any Option shall be the lower of (i) 95% of the fair market
value of such share on the Offering Date for such Option or (ii) 95% of the
fair market value of such share on the Purchase Date for such Option; provided,
however, that in no event may the purchase price per share of Common Stock be
below the par value of a share of Common Stock.
(b) For purposes of the Plan, the term "fair market value" of the Common
Stock means, as of any given date, the price per share as determined in
accordance with the following:
<PAGE>
(i) EXCHANGE. If the principal market for the Common Stock is a
national securities exchange, "fair market value" means the average of
the highest and lowest reported sale prices of the Common Stock on the
New York Stock Exchange composite transaction tape if the Common Stock is
then listed for trading on such exchange, otherwise, the average of the
highest and lowest reported sales prices of the Common Stock in any
transaction reported on the principal exchange on which the Common Stock
is then listed for trading.
(ii) OVER-THE-COUNTER. If the principal market for the Common
Stock is an over-the-counter market, "fair market value" means the
average of the highest bid and lowest ask prices of the Common Stock
reported in The Nasdaq National Market or The Nasdaq Small Cap Market, or
if the Common Stock is not then listed for trading in either of such
markets, the average of the highest bid and lowest ask prices of the
Common Stock reported on the OTC Electronic Bulletin Board, or, if prices
for the Common Stock are not quoted on such OTC market, the average of
the highest bid and lowest ask prices reported on any other bona fide
over-the-counter stock market selected in good faith by the Committee.
(iii) DATE. If the date on which "fair market value" is to be
determined is not a business day, or, if there shall be no reported
transactions for such date, such determination shall be made on the next
preceding business day for which transactions were reported.
(iv) OTHER DETERMINATION. If subparagraphs (i) and (ii) are not
applicable, or if the Committee in its sole discretion does not believe
that the procedure set forth in subparagraphs (i) and (ii) is an accurate
measurement of the market value of the Common Stock because of the
limited trading market of the Common Stock, "fair market value" shall
mean such amount as may be determined by the Committee by whatever means
or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate.
The Committee may change the manner in which the Purchase Price is determined,
so long as (x) such determination does not have the effect of lowering the
Purchase Price to an amount less than that set forth in Section 9(a) and (y)
such changed manner of computation is announced to eligible employees at least
30 days prior to the Offering Date of the first
Offering Period to be affected by such change.
<PAGE>
10. Purchase of Shares; Changes in Payroll Deductions; Issuance of Shares.
(a) Funds contributed by each participant for the purchase of shares
under the Plan shall be accumulated by regular payroll deductions made during
each Offering Period. The deductions shall be made in such whole dollar
amounts per payroll period as the participant shall elect, provided, however,
that no such amount may exceed 5% of the participant's Compensation with
respect to such payroll period; and, provided further, that the Committee may,
from time to time, and at any time, specify a minimum dollar amount per payroll
period. As used herein, "Compensation" shall mean all base salary, wages,
bonuses, commissions, and overtime pay with respect to such payroll period;
provided, however, that for purposes of determining a participant's
Compensation, any election by such participant to reduce his or her regular
cash remuneration under Sections 125 or 401(k) of the Code shall be treated as
if the participant did not make such election. "Compensation" does not include
severance pay, hiring and relocation allowances, pay in lieu of vacation,
automobile allowances, imputed income arising under any Company group insurance
or other benefit program, income received in connection with stock options, or
any other special items of remuneration. Payroll deductions shall commence on
the first payday following the Offering Date and shall continue through the
last payday of the Offering Period unless sooner altered or terminated as
provided in the Plan.
(b) A participant may decrease (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Committee a new
authorization for payroll deductions, in which case the new rate shall become
effective for the next payroll period commencing more than 15 days after the
Committee's receipt of the authorization and shall continue for the remainder
of the Offering Period unless changed as described below. Such a decrease in
the rate of payroll deductions may be made at any time during an Offering
Period, but not more than one change may be made effective during any Offering
Period. Notwithstanding the foregoing, a participant may decrease the rate of
payroll deductions to zero for the remainder of the Offering Period. A
participant may increase or decrease the rate of payroll deductions for any
subsequent Offering Period by filing with the Committee a new authorization for
payroll deductions not later than the 15th day of the month (or if such date is
not a business day, the immediately preceding business day) before the
beginning of such Offering Period. A participant who has decreased the rate of
withholding to zero will be deemed to continue as a participant in the Plan
until the participant withdraws from the Plan in accordance with the provisions
of Section 13 or his or her participation is terminated in accordance with the
provisions of Section 14. A participant shall have the right to withdraw from
the Plan in the manner set forth in Section 13 regardless of whether the
participant has exercised his or her right to decrease the rate at which
payroll deductions are made during the applicable Offering Period.
<PAGE>
(c) All payroll deductions made for a participant will be credited to his
or her account under the Plan and deposited with the general funds of the
Company. No interest will accrue on payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
(d) On each Purchase Date, provided that the participant has not
terminated employment in accordance with Section 14 and has not submitted to
the Committee a signed and completed withdrawal form, in each case on or before
the 15th day (or if such date is not a business day, on the immediately
preceding business day) of the last month of the Offering Period in accordance
with Section 10(b) or Section 13, then, subject to the limitations set forth in
Section 11, the Company shall apply the funds then in the participant's account
to the purchase at the Purchase Price of whole and any fractional shares
(rounded to the nearest hundredth) of Common Stock issuable under the Option
granted to such participant with respect to the Offering Period.
(e) During a participant's lifetime, such participant's Option to
purchase shares hereunder is exercisable only by him or her or, in the event of
the participant's Disability, the participant's legal representatives. The
participant shall have no interest or voting right in shares covered by his or
her Option until such Option has been exercised. For purposes of the Plan,
"Disability" means (i) a physical or mental condition which qualifies as a
total and permanent disability under the terms of any plan or policy maintained
by the Company or a Subsidiary and for which the participant is eligible to
receive benefits under such plan or policy, or (ii) if the participant does not
participate in a disability plan, or is not covered by a disability policy, of
the Company or a Subsidiary, "Disability" means the permanent and total
inability of a participant by reason of mental or physical infirmity, or both,
to perform the work customarily assigned to him or her, if a medical doctor
selected or approved by the Committee, and knowledgeable in the field of such
infirmity, advises the Committee either that it is not possible to determine
when such Disability will terminate or that it appears probable that such
Disability will be permanent during the remainder of said participant's
lifetime.
11. Limitations on Rights to Purchase.
(a) No employee shall be granted an Option to purchase Common Stock under
the Plan at a rate which, when aggregated with his or her rights to purchase
stock under all other employee stock purchase plans of the Company or any
Subsidiary which is intended to meet the requirements of Code Section 423,
exceeds $25,000 in fair market value, determined as of the applicable date of
the grant of the Option, for each calendar year in which the employee
participates in the Plan (or any other employee stock purchase plan described
in this Section 11(a)).
<PAGE>
(b) The number of shares which may be purchased by any employee on the
first Purchase Date to occur in any calendar year may not exceed the number of
shares determined by dividing $25,000 by the fair market value (as defined in
Section 9) of a share of Common Stock on the Offering Date of the Offering
Period in which such Purchase Date occurs. The number of shares which may be
purchased by any employee on any subsequent Purchase Date which occurs in the
same calendar year as that referred to in the preceding sentence shall not
exceed the number of shares determined by performing the calculation described
below, with all computations to be made to the nearest one hundredth of a whole
share of Common Stock or one cent, as the case may be.
(i) STEP ONE: The number of shares purchased by the employee during any
previous Offering Period which occurred in the same
calendar year shall be multiplied by the fair market
value (as defined in Section 9) of a share of Common
Stock on the first day of such previous Offering Period
in which such shares were purchased.
(ii) STEP TWO: The amount determined in Step One shall be subtracted
from $25,000.
(iii) STEP THREE: The amount determined in Step Two shall be divided by
the fair market value (as defined in Section 9) of a
share of Common Stock on the Offering Date of the
Offering Period in which the subsequent Purchase Date
for which the maximum number of shares which may be
purchased is being determined by this calculation
occurs. The quotient so obtained shall be the maximum
number of shares which may be purchased by any employee
on such subsequent Purchase Date.
Subject to the limitations of Section 423 of the Code, and notwithstanding the
foregoing, the Committee may from time to time determine that a different
maximum number of shares may be purchased on any given Purchase Date in lieu of
the maximum amounts described above in this Section 11(b), in which case the
number of shares which may be purchased by any employee on such Purchase Date
may not exceed such different limitation; provided, that any change made by the
Committee pursuant to this sentence shall only be effective for Offering
Periods that begin at least 30 days after the change is announced to eligible
employees.
<PAGE>
(c) If the number of shares to be purchased on a Purchase Date by all
employees participating in the Plan exceeds the number of shares then available
for issuance under the Plan, then the Committee shall make a pro rata
allocation of the remaining shares in as uniform a manner as shall be
reasonably practicable and as the Committee shall determine to be equitable.
In such event, the Company shall give written notice of such reduction of the
number of shares to be purchased under a participant's Option to each
participant affected thereby.
(d) Any payroll deductions accumulated in a participant's account which
are not used to purchase stock due to the limitations in this Section 11 shall
be returned to the participant as soon as practicable after the end of the
applicable Offering Period without interest.
12. Evidence of Stock Ownership.
As soon as practicable following each Purchase Date, the number of full
shares of Common Stock purchased by each participant shall be evidenced in such
manner as the Committee may deem appropriate, including book-entry registration
or issuance of one or more stock certificates which shall be deposited into an
account established in the participant's name at a stock brokerage or other
financial services firm designated or approved by the Committee. A participant
may request, no more than once during any 12-month period and/or within 30 days
following such participant's Termination of Employment for any reason, that a
stock certificate for full (but not fractional) shares be issued and delivered
to him or her. Such request shall be made by filing notice with the Company,
and the Company shall cause such shares to be delivered promptly following
receipt of such notice. Cash shall be paid in lieu of fractional shares based
on the Fair Market Value of the Common Stock on the date such notice is
received by the Company. In the event a participant or former participant
shall have an account balance of less than one full share with the Company as
of the Offering Date of any Offering Period for which such participant has
elected not to participate in the Plan, the Company shall cause such fractional
share to be sold as promptly as possible and the cash proceeds from such sale
to be paid to the account holder.
13. Withdrawal.
Each participant may withdraw from an Offering Period under the Plan by
signing and delivering to the Committee a written notice to that effect on a
form provided for such purpose. Such withdrawal may be elected at any time on
or prior to the 15th day of the last month (or if such date is not a business
day, the immediately preceding business day) of an Offering Period (each such
date, the "Withdrawal Deadline").
<PAGE>
14. Termination of Employment; Leave of Absence.
Termination of Employment for any reason, including, without limitation,
the failure of a participant to remain an eligible employee, immediately
terminates his or her participation in the Plan. For purposes of the Plan,
"Termination of Employment" means the termination of the participant's
employment with, or performance of services for, the Company and any of its
Subsidiaries. A participant employed by, or performing services for, a
Subsidiary shall also be deemed to incur a Termination of Employment if the
Subsidiary ceases to be such a Subsidiary and the participant does not
immediately thereafter become an employee of the Company or another Subsidiary.
Temporary absences from employment not exceeding the maximum amount then
permitted under the Company's policies or plans because of illness, vacation,
or leave of absence, and transfers among the Company and its Subsidiaries shall
not be considered Terminations of Employment. For purposes of the Plan, a
participant's employment shall be deemed to have terminated at the close of
business on the day preceding the first date on which he or she is no longer
for any reason whatsoever employed by the Company or any of its Subsidiaries.
15. Return of Payroll Deductions.
In the event a participant's participation in the Plan is terminated by
withdrawal, Termination of Employment, or otherwise, the Company shall promptly
deliver to the participant all accumulated payroll deductions of the
participant to the Plan which have not yet been applied to the purchase of
Common Stock as soon as practicable after the end of the applicable Offering
Period, unless such termination of participation occurs later than the
Withdrawal Deadline for the Offering Period, in which event such accumulated
payroll deductions will be utilized to purchase Common Stock for the
participant. No interest shall accrue on the payroll deductions of a
participant in the Plan.
16. Capital Changes.
(a) If the Company shall, after the effective date of the Plan, change
the Common Stock into a greater or lesser number of shares through a stock
dividend, stock split-up or combination of shares, then the number of shares
then subject to the Plan as provided for in Section 2 and the Purchase Price of
all Options then outstanding shall all be proportionately increased or
decreased as of the record date for such stock dividend, stock split-up or
combination of Shares in order to give effect thereto. Notwithstanding any
such proportionate increase or decrease, no fraction of a Share shall be issued
upon the exercise of an Option and the Shares subject to an Option shall be
rounded to the nearest whole Share.
<PAGE>
(b) If, after the effective date of the Plan, there shall be any change
in the Common Stock or other change in the capitalization of the Company other
than through a stock dividend, stock split-up or combination of shares,
including, but not limited to, a change which results from a merger,
consolidation, spin-off, or other distribution of stock or property of the
Company, any reorganization (whether or not such reorganization is within the
meaning of Section 368 of the Code), or any partial or complete liquidation of
the Company, then if, and only if, the Committee shall determine that such
change equitably requires an adjustment in (i) the number or kind of shares of
stock then reserved for issuance under Section 2, (ii) the number or kind of
shares of stock then subject to outstanding Options, or (iii) the Purchase
Price with respect to any Option, such adjustment as the Committee shall
determine is equitable and as shall be approved by the Board shall be made and
shall be effective and binding for all purposes of such Options and the Plan.
If any member of the Board shall, at the time of such approval, be an Optionee,
he shall not participate in action in connection with such adjustment.
17. Nonassignability.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive shares under the
Plan may be assigned, transferred, pledged, or otherwise disposed of in any way
(other than by will, the laws of descent and distribution, or as provided in
Section 24 hereof) by the participant. Any such attempt at assignment,
transfer, pledge, or other disposition shall be void and without effect.
18. Reports and Status of Accounts.
Individual accounts will be maintained by the Company for each
participant in the Plan. The participant shall have all ownership rights with
respect to shares of Common Stock held in his or her account(s) by the Company,
including the right to vote such shares and to receive any dividends or
distributions which may be declared thereon by the Board. The Committee shall
send to each participant promptly after the end of each Offering Period a
report of his or her account(s) setting forth with respect to such Offering
Period the total payroll deductions accumulated, the number of whole and any
fractional share purchased, and the per share price thereof, and also setting
forth the total number of shares (including any fractional share) then held in
his or her account(s). Neither the Company nor any Designated Subsidiary shall
have any liability for any error or discrepancy in any such report.
<PAGE>
19. No Rights to Continued Employment; No Implied Rights.
Neither the Plan nor the grant of any Option hereunder shall constitute a
contract of employment with any participant nor shall confer any right on any
employee to remain in the employ of the Company or any Subsidiary or restrict
the right of the Company or any Subsidiary to terminate such employee's
employment. The grant of any Option hereunder during any Offering Period shall
not give a participant any right to similar grants thereafter.
20. Equal Rights and Privileges.
All eligible employees shall have equal rights and privileges with
respect to the Plan except as required by applicable law so that the Plan
qualifies as an "employee stock purchase plan" within the meaning of Section
423 or any successor provision of the Code and the related regulations. Any
provision of the Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company,
the Board, or the Committee, be reformed to comply with the requirements of
Section 423. This Section 20 shall take precedence over all other provisions
in the Plan.
21. Notices.
All notices or other communications by a participant to the Committee or
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Committee or the Company, as the case may be, for
the receipt thereof.
22. Amendment of Plan.
The Board may amend the Plan in such respects as it shall deem advisable;
provided, however, that shareholder approval will be required for any amendment
that will increase the total number of shares as to which Options may be
granted under the Plan or, but for such shareholder approval, cause the Plan to
fail to continue to qualify as an "employee stock purchase plan" under Section
423 of the Code.
23. Termination of the Plan.
The Board may suspend or terminate the Plan at any time. Upon a
suspension or termination of the Plan while an Offering Period is in progress,
the Committee shall either shorten such Offering Period by setting a new
Purchase Date before the date of such suspension or termination of the Plan or
shall return the accumulated payroll deductions of all participants as if they
had all withdrawn before the Withdrawal Deadline for such Offering Period, as
set forth in Section 15. Unless the Plan shall have been previously terminated
by the Board, the Plan shall terminate on, and no Options shall be granted
after, December 31, 2009. No Options shall be granted during any period of
suspension of the Plan.
<PAGE>
24. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares of Common Stock and cash, if any, from the participant's
account under the Plan, in the event of such participant's death prior to
delivery to him or her (or to the Plan Financial Agent, if any, on his or her
behalf) of such shares and cash.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares or
cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to
the spouse or to any one or more dependents or relatives of the participant or,
if no spouse, dependent, or relative is known to the Company, to such other
person as the Company may in good faith determine to be the appropriate
designee.
25. Conditions upon Issuance of Shares; Limitation on Sale of Shares.
Shares of Common Stock shall not be issued with respect to an Option
unless the exercise of such Option and the issuance and delivery of such shares
pursuant thereto shall comply with all applicable provisions of law, domestic
or foreign, including, without limitation, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
or automated quotation system upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Company with
respect to such compliance.
26. Appointment of Plan Agent.
The Committee may appoint a stock brokerage or financial services firm to
act as Plan Agent and to perform such duties with respect to maintaining
participants' accounts, holding certificates of Common Stock on behalf of
participants, and such other record keeping, administrative, or ministerial
duties of either the Committee or the Company as the Committee shall, from time
to time, deem appropriate.
<PAGE>
27. Effective Date.
The Plan shall be effective as of July 1, 2000, subject to the approval
of the Company's stockholders; provided, however, that the Plan shall terminate
without action by the Board if it is not approved by the shareholders of the
Company within 12 months of the date it is adopted by the Board.
28. Governing Law.
Except to the extent that provisions of the Plan are governed by
applicable provisions of the Code or any other substantive provision of federal
law, the Plan and actions taken under the Plan shall be governed by and
construed in accordance with the laws of the State of Wisconsin without
reference to principles of conflict of laws.
<PAGE>
Exhibit 10.8
MID-WISCONSIN FINANCIAL SERVICES, INC.
1999 STOCK OPTION PLAN
Section 1. PURPOSE. The Plan has been adopted to (a) enable the Company
to attract and retain superior employees by providing incentive opportunities
with respect to future services that are competitive with those of other
similar companies, (b) further identify the interests of participating
employees with those of the Company's other shareholders through compensation
based on the performance of the Company's common stock, (c) attract and retain
qualified employees, and (d) promote the long-term financial interests of the
Company and its shareholders.
Section 2. CERTAIN DEFINITIONS. As used in this Plan, and in addition
to any terms elsewhere defined in this Plan, the following terms, when
capitalized, shall have the meanings set forth in this Section 2.
Section 2.1. "BOARD" means the Board of Directors of the Company.
Section 2.2. "CAUSE" means any one or more of the following on the part
of the participant: (a) the commission of an act which results in a payment of
a claim filed by the Company or a Subsidiary under a blanket banker fidelity
bond policy as from time to time and at any time maintained; (b) an intentional
failure to perform assigned duties; (c) willful misconduct in the course of
the participant's employment; (d) breach of a fiduciary duty involving personal
profit or acts or omissions of personal dishonesty, including, but not limited
to, commission of any crime of theft, embezzlement, misapplication of funds,
unauthorized issuance of obligations, or false entries; (e) any intentional,
reckless, or negligent act or omission to act which results in the violation by
the participant of any policy established by the Company or a Subsidiary which
is designed to insure compliance with applicable banking, securities,
employment discrimination or other laws or which causes or results in the
Company's or a Subsidiary's violation of such laws, except any act done by the
participant in good faith, as determined in the reasonable discretion of the
Board, or which results in a violation of such policies or law which is, in the
reasonable sole discretion of such Board, immaterial; or (f) any of the
foregoing which results in material loss to the Company or any of its
Subsidiaries. Except to the extent of the discretion granted to the Board in
clause (e), the Committee shall have the sole discretion to determine whether
"Cause" exists, and the Committee's determination shall be final.
Section 2.3. "CHANGE IN CONTROL" has the meaning set forth in Section
9.2.
<PAGE>
Section 2.4. "CODE" means the Internal Revenue Code of 1986, as amended.
The reference to any specific section of the Code shall include any successor
section or sections.
Section 2.5. "COMMITTEE" means, subject to the provisions of Section 4,
the Stock Option Committee of the Board.
Section 2.6. "COMMON STOCK" means the common stock, $.10 par value per
share, of the Company.
Section 2.7. "COMPANY" means Mid-Wisconsin Financial Services, Inc., a
Wisconsin corporation.
Section 2.8. "DISABILITY" means (a) a physical or mental condition which
qualifies as a total and permanent disability under the terms of any plan or
policy maintained by the Company or a Subsidiary and for which the Optionee is
eligible to receive benefits under such plan or policy, or (b) if the Optionee
does not participate in a disability plan, or is not covered by a disability
policy, of the Company or a Subsidiary, "Disability" means the permanent and
total inability of a participant by reason of mental or physical infirmity, or
both, to perform the work customarily assigned to him or her, if a medical
doctor selected or approved by the Board, and knowledgeable in the field of
such infirmity, advises the Committee either that it is not possible to
determine when such Disability will terminate or that it appears probable that
such Disability will be permanent during the remainder of said participant's
lifetime.
Section 2.9. "EFFECTIVE DATE" means December 31, 1999.
Section 2.10. "EMPLOYED," and any variation thereof such as
"employment," means, as appropriate, employed by or employment with any of the
Company or any present or future Subsidiary.
Section 2.11. "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
Section 2.12. "FAIR MARKET VALUE" of a share of the Common Stock as of
any date means the price per Share on the immediately preceding date as
determined in accordance with the following:
(a) EXCHANGE. If the principal market for the Common Stock is a
national securities exchange, "Fair Market Value" means the average of
the highest and lowest reported sale prices of the Common Stock on the
New York Stock Exchange composite transaction tape if the Common Stock is
then listed for trading on such exchange, otherwise, the average of the
highest and lowest reported sales prices of the Common Stock in any
transaction reported on the principal exchange on which the Common Stock
is then listed for trading.
<PAGE>
(b) OVER-THE-COUNTER. If the principal market for the Common
Stock is an over-the-counter market, "Fair Market Value" means the
average of the highest bid and lowest ask prices of the Common Stock
reported in The Nasdaq National Market, or The Nasdaq Small Cap Market,
or if the Common Stock is not then listed for trading in either of such
markets, the average of the highest bid and lowest ask prices of the
Common Stock reported on the OTC Bulletin Board, or, if prices for the
Common Stock are not quoted on the OTC Bulletin Board, the average of the
highest bid and lowest ask prices reported on any other bona fide over-
the-counter stock market selected in good faith by the Committee.
(c) OTHER DETERMINATION. If subparagraphs (a) and (b) are not
applicable, "Fair Market Value" shall mean such amount as may be
determined by the Committee by whatever means or method as the Committee,
in the good faith exercise of its discretion, shall at such time deem
appropriate.
(d) DATE. If the date on which "Fair Market Value" is to be
determined is not a business day, or, if there shall be no reported
transactions for such date, such determination shall be made on the next
preceding business day for which transactions were reported.
Section 2.13. "INCENTIVE STOCK OPTION" means an Option granted pursuant
to the terms of the Plan which is intended by the Committee to meet the
requirements of an "incentive stock option" within the meaning of Section 422
of the Code, or any successor section or sections; provided, however, that to
the extent an Incentive Stock Option is exercised after the expiration of any
limitation on the time of exercise applicable under Section 422 of the Code, or
such Option does not meet the qualifications of an "incentive stock option"
within the meaning of such Section 422, such Option shall thereafter be a Non-
Qualified Option.
Section 2.14. "NON-QUALIFIED OPTION" means an Option granted pursuant to
the terms of the Plan which the Committee intends shall not meet the
requirements of an "incentive stock option" within the meaning of Section 422
of the Code, or any successor section or sections, and any Option intended to
be an Incentive Stock Option which does not satisfy the terms, or is not
exercised in accordance with the requirements of, Section 422 of the Code.
Section 2.15. "OPTION" means an option to purchase Shares awarded
pursuant to the provisions of Section 6.
<PAGE>
Section 2.16. "OPTION AGREEMENT" means the written document which
evidences an award of Options, whether or not such document requires the
signature of the Optionee.
Section 2.17. "OPTIONEE" means an eligible employee, as determined in
accordance with Section 5, who has been granted an Option.
Section 2.18. "OPTION PRICE" means, with respect to each Option, the
price per Share at which such Option may be exercised and the Shares subject to
such Option purchased.
Section 2.19. "PLAN" means the Mid-Wisconsin Financial Services, Inc.
1999 Stock Option Plan as set forth herein or as hereafter amended.
Section 2.20. "RETIREMENT DATE" means a participant's Termination of
Employment at or after the normal or early retirement date of such participant
under the terms of any retirement or pension plan sponsored by the Company
which is qualified under the provisions of the Code.
Section 2.21. "SHARE" means a share of Common Stock.
Section 2.22. "SUBSIDIARY" means any corporation, partnership, or other
entity in which the Company owns, directly or indirectly, at least a 50%
interest in the voting rights or profits.
Section 2.23. "TERMINATION OF EMPLOYMENT" means the termination of the
participant's employment with, or performance of services for, the Company and
any of its Subsidiaries. A participant employed by, or performing services
for, a Subsidiary shall also be deemed to incur a Termination of Employment if
the Subsidiary ceases to be such a Subsidiary and the participant does not
immediately thereafter become an employee of the Company or another Subsidiary.
Temporary absences from employment because of illness, vacation, or leave of
absence and transfers among the Company and its Subsidiaries shall not be
considered Terminations of Employment. For purposes of the Plan, a
participant's employment shall be deemed to have terminated at the close of
business on the day preceding the first date on which he or she is no longer
for any reason whatsoever employed by the Company or any of its Subsidiaries.
Section 3. NUMBER OF SHARES AVAILABLE FOR OPTIONS.
Section 3.1 SHARES SUBJECT. The aggregate number of Shares which may be
delivered under Options awarded pursuant to the Plan shall be equal to the sum
of (a) 200,000 and (b) any Shares available for future awards under all prior
stock option plans of the Company (the "Prior Plans") as of the Effective Date,
including any Shares with respect to which options awarded under any Prior
Plans are hereafter forfeited, expire, or are canceled without delivery of
Shares.
<PAGE>
Section 3.2 UNDELIVERED SHARES. To the extent any Shares subject to an
Option are not delivered to an Optionee (or the estate or other transferee of
such Optionee) because the Option is forfeited, expires, or otherwise becomes
unexercisable, or the Shares are not delivered because the Shares are used to
satisfy the applicable tax withholding obligation of the Optionee, such Shares
shall be deemed not to have been delivered for purposes of determining the
maximum number of Shares available for delivery under the Plan.
Section 3.3 EXERCISE USING SHARES. If the Option Price of any Option
awarded under the Plan or any Prior Plan is satisfied by tendering Shares to
the Company (by actual delivery or attestation), only the number of Shares
issued to the Optionee (or the estate or other transferee of such Optionee),
net of the Shares tendered, shall be deemed delivered for purposes of
determining the maximum number of Shares available for delivery under the Plan.
Section 3.4 STOCK DIVIDENDS, ETC. If the Company shall, after the
Effective Date, change the Common Stock into a greater or lesser number of
Shares through a stock dividend, stock split-up or combination of Shares, then
(a) the number of Shares then subject to the Plan as provided for in Section
3.1, but which are not then subject to any outstanding Option, (b) the number
of Shares subject to each then outstanding Option (to the extent not previously
exercised), and (c) the price per Share payable upon exercise of each then
outstanding Option, shall all be proportionately increased or decreased as of
the record date for such stock dividend, stock split-up or combination of
Shares in order to give effect thereto. Notwithstanding any such proportionate
increase or decrease, no fraction of a Share shall be issued upon the exercise
of an Option and the Shares subject to an Option shall be rounded to the
nearest whole Share.
Section 3.5 OTHER CHANGES. If, after the Effective Date, there shall be
any change in the Common Stock or other change in the capitalization of the
Company other than through a stock dividend, stock split-up or combination of
Shares, including, but not limited to, a change which results from a merger,
consolidation, spin-off, or other distribution of stock or property of the
Company, any reorganization (whether or not such reorganization is within the
meaning of Section 368 of the Code), or any partial or complete liquidation of
the Company, then if, and only if, the Committee shall determine that such
change equitably requires an adjustment in (a) the number or kind of shares of
stock then reserved for issuance under Section 3.1, (b) the number or kind of
shares of stock then subject to an Option, (c) the Option Price with respect to
an Option, or (d) any other limitation on the Option which may be granted to
any participant, to the extent such adjustment does not cause any Option to
fail to satisfy the requirements for exemption from the limitations on
deductibility imposed by Section 162(m) of the Code that is set forth in
Section 162(m)(4)(c) of the Code if such Option would have satisfied such
requirements immediately prior to such adjustment and if such Option, if then
exercised, would, when added to the Optionee's estimated compensation from the
Company and all Subsidiaries for such year, exceed the deductibility limits of
Section 162(m) of the Code, such adjustment as the Committee shall determine is
equitable and as shall be approved by the Board shall be made and shall be
effective and binding for all purposes of such Option and the Plan. If any
member of the Board shall, at the time of such approval, be an Optionee, he
shall not participate in action in connection with such adjustment.
<PAGE>
Section 4. ADMINISTRATION OF THE PLAN.
Section 4.1 COMMITTEE. The Plan shall be administered by the Committee.
The Committee shall, subject to the terms of the Plan, have the authority to,
in its sole discretion, (a) select eligible employees to receive an award of
one or more Options and to participate in the Plan, (b) determine the number of
Shares subject to each award and the Option Price associated therewith, (c)
establish terms and conditions concerning the time of, and conditions precedent
to, the exercisability of each Option (including, without limitation,
conditions with respect to the passage of time, performance of the Company, or
a Subsidiary, or the Optionee, restrictions on competitive employment or
satisfaction of Company policies, and any other conditions which the Committee
deems reasonably related to the satisfaction of the purposes of the Plan), (d)
determine the form of each Option Agreement and all terms and conditions
thereof with respect to each award, (e) interpret the Plan and the application
thereof and establish such rules and regulations as it deems necessary or
desirable for the administration of the Plan, (f) modify or cancel any award or
Option or take such action to cause the vesting or exercisability of any or all
outstanding Options to become exercisable in part or in full for any reason at
any time, subject to the limitation of Section 9.1, and (g) exercise such other
authority as is reasonably related to the administration of and/or the
fulfillment of the purpose of the Plan. All actions, interpretations, rules,
regulations and conditions taken or established by the Committee shall be
final, binding and conclusive upon the Company, each Subsidiary, and all
Optionees.
Section 4.2 MEMBERSHIP OF THE COMMITTEE.
(a) MEMBERSHIP QUALIFICATIONS. Except as provided in this Section
4.2, at all times the Committee shall consist of not less than three
members designated by the Board from among those of its members who are
not officers or employees of the Company or a Subsidiary and each of whom
is (a) a "non-employee director" within the meaning of Rule 16b-3 under
the Exchange Act (a "Non-Employee Director") and (b) an "outside
director" within the meaning of Section 162(m) of the Code (an "Outside
Director"); provided, however, that in addition to the Board's general
authority to amend the Plan as provided for in Section 10.1, the Board
shall have the specific authority to modify or eliminate the foregoing
qualifications or adopt such other qualifications as are reasonably
intended to result in (x) the award of Options, and transactions with
respect to the award or exercise of such Options, satisfying an exemption
from Section 16(b) of the Exchange Act, or any successor thereto, and (y)
compensation recognized by Optionees qualifying as a deductible expense
of the Company under the "performance-based compensation" exception to
compensation deduction limits which would otherwise be imposed on the
Company under Section 162(m) of the Code.
<PAGE>
(b) APPOINTMENT OF OTHER MEMBERS. In the event that one or more
members of the Committee shall fail to meet the qualifications set forth
in Section 4.2(a), the Board shall remove such member or members and
appoint a successor or successors who satisfy such qualifications. The
Board shall act in a reasonably prompt manner to fill any vacancy on the
Committee from among such of its members who are both Non-Employee
Directors and Outside Directors.
(c) VALIDITY OF GRANTS. Notwithstanding the qualifications for
members of the Committee established in Section 4.2(a), any award of
Options made by the Committee in good faith and without the knowledge
that one or more of its members did not satisfy such qualifications,
shall be valid and enforceable by the Optionee even though the members of
the Committee did not, at the time of such award, satisfy such
qualifications.
Section 4.3 ACTIONS BY THE COMMITTEE. A majority of the members of the
Committee shall constitute a quorum. In the absence of specific rules to the
contrary, action by the Committee shall require the consent of a majority of
the members of the Committee, expressed either orally at a meeting of the
Committee or in writing in the absence of a meeting.
Section 4.4 ACTIONS BY THE BOARD. Any authority granted to the
Committee may also be exercised by the full Board, except to the extent that
the grant or exercise of such authority would cause any Option or transaction
to become subject to (or lose an exemption under) the short-swing profit
recovery provisions of Section 16 of the Exchange Act or cause an Option not to
qualify for, or to cease to qualify for, the exemption as "performance-based
compensation" under Section 162 of the Code, and the regulations promulgated
thereunder. To the extent that any permitted action taken by the Board
conflicts with action taken by the Committee, the Board action shall control.
Section 4.5 LIMITATION ON LIABILITY AND INDEMNIFICATION OF BOARD. No
member of the Board, no executive officer or other employee of the Company, and
no other agent or representative of the Company shall be liable for any act,
omission, interpretation, construction, or determination made in connection
with the Plan in good faith, and all such persons shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage, or expense (including attorneys fees) arising therefrom to the full
extent permitted by law, except as otherwise may be provided in the Company's
articles of incorporation and/or by-laws, and under any directors' and
officers' liability insurance that may be in effect from time to time.
<PAGE>
Section 5. PERSONS ELIGIBLE TO BECOME OPTIONEES. Persons who are (a)
employees of the Company and any Subsidiary, (b) prospective employees who have
accepted offers of employment from the Company or a Subsidiary, or (c)
directors of the Company and its Subsidiaries shall be eligible to be selected,
in the sole discretion of the Committee, to participate in, and receive an
award of one or more Options pursuant to, the Plan.
Section 6. AWARDING OF OPTIONS.
Section 6.1 OPTIONEES. Subject to the limitations of Section 5, Options
shall be awarded to such eligible employees and directors of the Company and
its Subsidiaries as the Committee may, from time to time and at any time,
select. Membership of an employee or a director in a class shall not, without
specific Committee action, entitle such employee or director to receive an
Option award.
Section 6.2 OPTION AGREEMENT. Each Option shall be evidenced by an
Option Agreement, the terms of which may differ from other Option Agreements.
Each Option Agreement shall be signed on behalf of the Company and, if so
provided by the Committee, the Optionee, and shall set forth with respect to
the Option or Options awarded therein, the name of the Optionee, the date
awarded, the Option Price, whether the Option is an Incentive Stock Option or a
Non-Qualified Stock Option, the number of Shares subject to the Option, and
such other terms and conditions consistent with the Plan as determined by the
Committee. The Committee may at the time of award or at any time thereafter
impose such additional terms and conditions on the exercise of such Option as
it deems necessary or desirable for such Option, or the exercise thereof, to be
exempt under Section 16(b) of the Exchange Act, and the regulations promulgated
thereunder, and to qualify as "performance-based compensation" under Section
162 of the Code, and the regulations promulgated thereunder. Each Option
Agreement shall incorporate by reference all terms, conditions and limitations
set forth in the Plan.
Section 6.3 TERMS AND CONDITIONS OF THE OPTIONS. In addition to any
other terms, conditions, and limitations specified in the Plan, each Option
awarded hereunder shall, as to each Optionee, satisfy the following
requirements:
(a) DATE OF AWARD. Options must be awarded on or before December
14, 2009.
(b) EXPIRATION. No Incentive Stock Option shall be exercisable
after the expiration of ten years from the date such Option is awarded.
No Non-Qualified Stock Option shall be exercisable after the expiration
of twenty years from the date such Option is awarded.
<PAGE>
(c) PRICE. The Option Price as to any Share subject to an Option
may not be less than the Fair Market Value of the Share on the date the
Option is awarded.
(d) LIMITATIONS ON TRANSFERABILITY. No Incentive Stock Option
shall be transferable by the Optionee other than by will or the laws of
descent and distribution, nor can it be exercised by anyone other than
the Optionee during the Optionee's lifetime. Except as otherwise
provided in an Option Agreement or other action taken by the Committee,
each of which conform to the provisions of Section 6.4, no Non-Qualified
Option shall be transferable by the Optionee other than by will or the
laws of descent and distribution, nor can it be exercised by anyone other
than the Optionee during the Optionee's lifetime. Except as provided in
Section 6.4, no Option may be sold, transferred, assigned, pledged,
hypothecated, encumbered, or otherwise disposed of (whether by operation
of law or otherwise), or be subject to execution, attachment, or similar
process. Upon any attempt to so sell, transfer (other than in accordance
with Section 6.4), assign, pledge, hypothecate, encumber, or otherwise
dispose of any such award, such award and all rights thereunder shall
immediately become null and void.
(e) EXERCISE. Except as otherwise permitted by the Committee, or
as provided in Section 6.5, Options must be exercised in accordance with
the following time limitations:
(i) TERMINATION BY DEATH. If an Optionee incurs a
Termination of Employment by reason of death, any Option held by
such Optionee may thereafter be exercised, to the extent then
exercisable, for a period of one year from the date of such death
or until the expiration of the stated term of such Option,
whichever period is shorter.
(ii) TERMINATION BY REASON OF DISABILITY. If an Optionee
incurs a Termination of Employment by reason of Disability, any
Option held by such Optionee may thereafter be exercised by the
Optionee (or the estate of the Optionee in the event of death), to
the extent it was exercisable at the time of such Termination of
Employment, for a period of one year.
(iii) TERMINATION BY REASON OF RETIREMENT. If an Optionee
incurs a Termination of Employment by reason of Retirement, any
Option held by such Optionee may thereafter be exercised by the
Optionee (or the estate of the Optionee in the event of death), to
the extent it was exercisable at the time of such Termination of
Employment by reason of Retirement, for a period of two years.
<PAGE>
(iv) OTHER TERMINATION. If an Optionee incurs a Termination
of Employment for any reason other than death, Disability, or
Retirement, any Option held by such Optionee shall terminate.
(v) Notwithstanding any other provision of this Plan to the
contrary, in the event an Optionee incurs a Termination of
Employment other than for Cause during the 24-month period
following a Change in Control, any Option held by such Optionee may
thereafter be exercised by the Optionee, to the extent it was
exercisable at the time of termination, for (x) the longer of (i)
one year from such date of termination or (ii) such other period as
may be provided in the Plan for such Termination of Employment, or
(y) until expiration of the stated term of such Stock Option,
whichever period is shorter. If an Incentive Stock Option is
exercised after the expiration of the post-termination exercise
periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock
Option.
If an Incentive Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, such
Option will thereafter be treated as a Non-Qualified Stock Option.
(f) MINIMUM HOLDING PERIOD. No Option may be exercised before the
date which is six months after the later of (i) the date on which the
Plan is approved by the shareholders of the Company, or (ii) the date on
which such Option was awarded.
(g) ADDITIONAL RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS.
To the extent that the aggregate Fair Market Value (determined as of the
time the Option is awarded) of the Shares for which Incentive Stock
Options are exercisable for the first time by an individual during any
calendar year (under the Plan, any Prior Plans, or any other plan of the
Company or a Subsidiary) exceeds $100,000 (or such other individual limit
as may be in effect under the Code on the date of award), such Options
shall not be Incentive Stock Options. No Incentive Stock Option shall be
awarded to an employee who, at the time such Option is awarded, owns
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary within the meaning of
Section 422(b)(6) of the Code unless (i) at the time the Option is
awarded, the Option Price is at least 110% of the Fair Market Value of
the Shares subject to the Option, and (ii) such Option by its terms is
not exercisable after the expiration of five years from the date such
Option is awarded.
(h) LIMITATION ON OPTION AWARDS. No Optionee may be awarded
Options under the Plan in any calendar year with respect to more than
5,000 Shares.
<PAGE>
Section 6.4 TRANSFERABILITY OF NON-QUALIFIED OPTIONS. The Committee
may, in its discretion, under the terms of the Option Agreement with respect
to, or at any time on or after the date of the initial award of, a Non-
Qualified Option, permit transfer of such Non-Qualified Option by the Optionee
to (a) the spouse, children or grandchildren of the Optionee ("Immediate
Family"), (b) a trust for the exclusive benefit of the Optionee or the
Optionee's Immediate Family, (c) a partnership in which the Optionee or the
Optionee's Immediate Family are the only partners, or (d) to a former spouse of
the Optionee pursuant to a domestic relations order within the meaning of Rule
16a-12, as promulgated under Section 16 of the Exchange Act; provided, however,
that (x) there may be no consideration for any such transfer unless the payment
of such consideration to the Optionee is specifically authorized by the
Committee, (y) the Option Agreement, or any amendment thereof approved by the
Committee, must expressly provide for transferability of the Option evidenced
in such agreement in a manner consistent with this Section 6.4, and (z) once
transferred pursuant to the preceding provisions of this Section 6.4, no
subsequent transfer of such Options shall be permitted except a transfer by
will or the laws of descent and distribution. In authorizing all or any
portion of an Option to be transferred, the Committee may impose any conditions
on exercise, prescribe a holding period for the Shares acquired upon such
exercise, and/or impose any other conditions or limitations it deems desirable
or necessary in order to carry out the purposes and requirements of the Plan.
Following transfer, the terms and conditions of the Plan and the Option
Agreement relating to such Option shall continue to be applicable in all
respects to the Optionee who made such transfer and each transferred Option
shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer as if such Option had not been
transferred, including, but not limited to, the terms and conditions with
respect to the lapse and termination of such Option. For purposes of Section
7, the transferee of an Option, where applicable, shall be deemed an
"Optionee." None of the Company, the Committee, or any Optionee shall have any
obligation to inform any transferee of the termination or lapse of any Option
for any reason. Notwithstanding any other provision of the Plan, following the
termination of Employment of an Optionee, a transferred Non-Qualified Option
shall be exercisable by the transferee only to the extent, and for the periods
specified in Section 6.3(e) as if such Option had not been transferred.
Section 6.5 TERMINATION OR LAPSE OF OPTIONS. Each Option shall
terminate or lapse upon the first to occur of (a) the expiration date or any
date as of which the Option is deemed to be forfeited as set forth in the
applicable Option Agreement, (b) the applicable date set forth in Section
6.3(b), or (c) the date which is the day next following the last day such
Option could be exercised under Section 6.3(e).
Section 7. EXERCISE AND PAYMENT OF OPTION PRICE.
<PAGE>
Section 7.1 EXERCISE OF OPTIONS. Options shall be exercised as to all
or a portion of the Shares subject to the Option by written notice to the
Company setting forth the exact number of Shares as to which the Option is
being exercised and including with such notice payment of the Option Price
(plus the minimum required tax withholding). The date of exercise shall be the
date such written notice and payment have been delivered (in cash or in such
other manner as provided in Section 7.2) to the Secretary of the Company either
in person or by depositing said notice and payment in the United States mail,
postage pre-paid and addressed to such officer at the Company's home office.
Notwithstanding the fact that an Option has been transferred pursuant to
Section 6.4, the Optionee with respect to such transferred Option shall remain
liable for any required tax withholding.
Section 7.2 PAYMENT FOR SHARES. Payment of the Option Price (plus
required tax withholding) may be made (a) by tendering cash (in the form of a
check or otherwise) in such amount; (b) with the consent of the Committee, and
if authorized in the Option Agreement, by tendering, by either actual delivery
of Shares owned by the Optionee or by attestation, Shares with a Fair Market
Value on the date of exercise equal to such amount; (c) with the consent of the
Committee, by instructing the Committee to withhold a number of Shares having a
Fair Market Value on the date of exercise equal to the aggregate exercise price
of such Option; (d) by delivering a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the Company
the sale or loan proceeds equal to such amount; or (e) any combination of (a),
(b), (c) and (d); provided, however, that any Shares delivered in payment of
the Option Price pursuant to (b) shall have been purchased on the open market
and held by the Optionee for at least six months at the time of exercise of the
Option. Notwithstanding the fact that an Option has been transferred pursuant
to Section 6.4, the Optionee with respect to such transferred Option shall
remain liable for any required tax withholding.
Section 7.3 TAX WITHHOLDING. The delivery of Shares under the Plan is
subject to withholding of all applicable taxes, and the Committee may condition
the delivery of any Shares or other benefits on satisfaction of applicable
withholding obligations. The Committee, in its discretion, and subject to such
requirements as the Committee may impose prior to the occurrence of such
withholding, may permit withholding obligations to be satisfied through cash
payment by the Optionee or other person exercising an Option, through the
surrender of Shares which the Optionee or other person already owns, or through
the surrender of Shares to which the Optionee or other person is otherwise
entitled under the Plan.
Section 7.4 ISSUANCE OF SHARES. No Shares shall be issued until full
payment therefor has been made. An Optionee shall have all of the rights of a
shareholder of the Company holding the Common Stock that is subject to such
Option (including, if applicable, the right to vote the Shares and the right to
receive dividends), when the Optionee has given written notice of exercise, has
paid in full for such Shares and, if requested, has given the representation
described in Section 12.
<PAGE>
Section 8. DIRECTOR STOCK OPTIONS. In addition to any Options which may
be granted to a director pursuant to the provisions of Section 6.1 the
Committee may also grant Options to directors of the Company and/or its
Subsidiaries which satisfy the following requirements:
(a) AUTOMATIC GRANTS. Each such director who is not otherwise an
employee of the Company or any of its Subsidiaries, shall, on the first
day after his or her first election as a director, and thereafter on the
day after each annual meeting of shareholders of the Company during such
director's term, automatically be granted Non-Qualified Options in an
amount specified by the Committee to purchase Common Stock having an
exercise price of 100% of the Fair Market Value of the Common Stock on
the date of grant of such Non-Qualified Stock Option.
(b) LIMITATIONS ON AUTOMATIC GRANTS. An automatic director Option
shall be granted hereunder only if as of each date of grant the director
(i) is not otherwise an employee of the Company or any of its
Subsidiaries, (ii) has not been an employee of the Company or any of its
Subsidiaries for any part of the preceding fiscal year, and (iii) has
served on the Board continuously since the commencement of his term.
(c) RIGHTS OF OPTIONEE. Each holder of a Stock Option granted
pursuant to this Section 8 shall also have the rights specified in
Section 9.
(d) INSUFFICIENT SHARES. In the event that the number of shares
of Common Stock available for future grant under the Plan is insufficient
to make all automatic grants required to be made on such date, then all
non-employee directors entitled to a grant on such date shall share
ratably in the number of Options on shares available for grant under the
Plan.
(e) TERMS AND CONDITIONS OF DIRECTOR OF OPTIONS. Except as
expressly provided in this 8, any Non-Qualified Option granted hereunder
shall be subject to the terms and conditions of the Plan as if the grant
were made pursuant to Section 6 hereof.
Section 9. CHANGE IN CONTROL.
Section 9.1 ADJUSTMENT OF OPTIONS.
(a) VESTING AND CASH PAYMENT. In the event of a Change of
Control,
(i) all Options outstanding on the date on which such Change
in Control has occurred (the "Change in Control Date") shall, to
the extent not then exercisable or vested, immediately become
exercisable in full, and
<PAGE>
(ii) each Optionee may elect (the Optionee's "Election
Right") with respect to each Option held by such Optionee on the
Change in Control Date to surrender such Option for an immediate
lump sum cash payment in an amount equal to the product of (A) the
number of Shares then subject to the Option as to which the
election is being exercised multiplied by (B) the excess, if any,
of (1) the greater of (a) the Change in Control Price or (b) the
highest Fair Market Value of a Share on any day in the 60-day
period ending on the Change in Control Date, over (2) the Option
Price of such Option. For purposes of this Section 9.1(a), the
"Change in Control Price" shall mean, if the Change in Control is
the result of a tender or exchange offer or a Corporate Transaction
(as defined in Section 9.2(c)), the highest price per Share paid in
such tender or exchange offer or Corporate Transaction, and, to the
extent that the consideration paid in any such transaction consists
all or in part of securities or other noncash consideration, the
value of such securities or other noncash consideration shall be
determined in the sole discretion of the Committee.
(b) ELECTION. The exercise of an Election Right must be in
writing, specify the Option or Options and the number of Shares as to
which the election is being exercised, and be delivered to the Secretary
of the Company either in person or by depositing said notice and payment
in the United States mail, postage pre-paid and addressed to such officer
at the Company's home office on or before the 60th day following the
Change in Control Date.
(c) PAYMENT DATE. All payments due an Optionee pursuant to the
provisions of this Section 9.1 shall be made by the Company on or before
the 5th business day following the date on which the Optionee's election
has been delivered to the Company pursuant to Section 9.1(b).
(d) POOLING CONSIDERATIONS. Notwithstanding any other provision of
this Section 9.1, if the grant or the exercise of an Optionee's Election
Right or payment of cash provided for in this Section 9.1 would make a
Change in Control transaction ineligible for pooling-of-interests
accounting treatment under APB No. 16, that, but for the nature of such
grant or exercise of Election Rights or payment of cash, would otherwise
be eligible for such pooling-of-interests accounting treatment, the
Committee shall have the right and authority to substitute for the cash
payments to be made to the Optionee pursuant to Section 9.1(a), Common
Stock with a Fair Market Value, determined as of the date of delivery of
such Shares, equal to the cash that would otherwise be payable to such
Optionee in connection with the exercise of an Optionee's Election Right
hereunder or, to the extent necessary to preserve such pooling-of-
interests accounting treatment, to otherwise modify, eliminate, or
terminate such Election Right.
<PAGE>
Section 9.2 DEFINITION OF "CHANGE OF CONTROL." For purposes of the
Plan, a "Change of Control" means the happening of any of the following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 25% or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this paragraph (a), the following
acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company other than an acquisition by virtue
of the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
entity controlled by the Company, and (D) any acquisition pursuant to a
transaction which complies with clauses (i), (ii), and (iii) of paragraph
(c) of this Section 9.2; or
(b) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board; provided,
however, for purposes of the Plan, that any individual who becomes a
member of the Board subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be deemed to be and shall be
considered as though such individual were a member of the Incumbent
Board, but provided, further, that any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board shall not be so deemed or considered as a member of the
Incumbent Board; or
<PAGE>
(c) Consummation of a reorganization, merger or consolidation, or
sale or other disposition of all or substantially all of the assets of
the Company or the acquisition of the assets or securities of any other
entity (a "Corporate Transaction"); excluding, however, such a Corporate
Transaction pursuant to which (i) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of, respectively,
the outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through
one or more subsidiaries) (the "Resulting Company") in substantially the
same proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (ii) no Person (other than
the Company, any employee benefit plan (or related trust) of the Company)
will beneficially own, directly or indirectly, 25% or more of,
respectively, the outstanding shares of common stock of the Resulting
Company or the combined voting power of the then outstanding voting
securities of such Resulting Company entitled to vote generally in the
election of directors except to the extent that such ownership existed
with respect to the Company prior to the Corporate Transaction, and (iii)
individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the
Resulting Company; or
(d) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Section 10. AMENDMENT AND TERMINATION OF PLAN.
Section 10.1 AMENDMENT OF PLAN. The Board may amend the Plan from time
to time and at any time; provided, however, that (a) except as specifically
provide herein, no amendment shall, in the absence of written consent to the
change by an affected Optionee, adversely affect such Optionee's rights under
any Option which has been awarded prior to the amendment except to the extent
such amendment is, in the sole opinion of the Committee, required to comply
with any stock exchange rules, accounting rules, or laws applicable to the
Company or the Plan, (b) no amendment with respect to the maximum number of
Shares which may be issued pursuant to Options under the Plan or to any
individual in any calendar year made be made unless approved by a majority of
the Shares entitled to vote at a meeting of the shareholders if such amendment
would, in the absence of such approval and in the sole opinion of the
Committee, have an adverse effect on the Company under applicable tax or
securities laws or accounting rules, and (c) no amendment shall be made without
the approval of the Company's shareholders to the extent such approval is
required by applicable law or stock exchange rules.
<PAGE>
Section 10.2 TERMINATION OF PLAN. The Plan shall terminate on the first
to occur of (a) December 31, 2009 or (b) the date specified by the Board as the
effective date of Plan termination; provided, however, that the termination of
the Plan shall not limit or otherwise affect any Options outstanding on the
date of termination.
Section 11. EFFECTIVE DATE. Notwithstanding any provision of this Plan
to the contrary, the Plan shall not be effective, and any Options awarded under
the Plan shall be null and void, unless the adoption of the Plan is approved at
the annual meeting of the Company's shareholders next following the Effective
Date by the majority of the shares entitled to vote at such meeting.
Section 12. INVESTMENT INTENT. The Committee may require each person
purchasing or receiving Shares pursuant to an Option to represent to and agree
with the Company in writing that such person is acquiring the Shares without a
view to the distribution thereof. The certificates for such Shares may include
any legend which the Committee deems appropriate to reflect any restrictions on
transfer.
Section 13. AVAILABILITY OF INFORMATION. If the Shares subject to an
Optionee's Option are not registered or to be registered under the Securities
Act of 1933 as amended, the Company shall furnish each Optionee with (a) a copy
of the Plan and the Company's most recent annual report to its shareholders at
the time the Option Agreement is delivered to the Optionee and (b) a copy of
each subsequent annual report and proxy statement, on or about the same date as
such report shall be made available to shareholders of the Company. The
Company will furnish, upon written request addressed to the Secretary of the
Company, but at no charge to the Optionee or any duly authorized representative
of the Optionee, copies of all reports filed by the Company with the Securities
and Exchange Commission, including, but not limited to, the Company's annual
reports on Form 10-K, its quarterly reports on Form 10-Q, and its proxy
statements. Notwithstanding the foregoing provisions of this Section 13, the
Company shall not be required to furnish any such report or statement if a copy
of such report is otherwise provided to the Optionee in connection with another
plan maintained by the Company or such Optionee's status as a shareholder of
the Company.
Section 14. LIMITATION OF RIGHTS.
(a) CONDITIONS OF EMPLOYMENT. The Plan shall not constitute a
contract of employment, and participation in or eligibility for
participation in the Plan shall not confer upon any employee the right to
be continued as an employee of the Company or any present or future
Subsidiary and the Company and each Subsidiary, hereby expressly reserves
the right to terminate the employment of any employee, with or without
cause, as if the Plan and any Options awarded pursuant to it were not in
effect.
<PAGE>
(b) COMPANY ASSETS. Neither an Optionee nor any other person
shall, by reason of receiving an award of an Option under the Plan
acquire any right, title, or interest in any assets of the Company or any
Subsidiary by reason of such Option or the Plan. To the extent an
Optionee or any other person shall acquire a right to receive payments
from the Company pursuant to an Option Agreement or the Plan, such right
shall be no greater than the right of any unsecured general creditor of
the Company.
(c) ISSUANCE OF SHARES. Notwithstanding any other provision of the
Plan or agreements made pursuant thereto, the Company shall not be
required to issue or deliver any certificate or certificates for Shares
under the Plan prior to fulfillment of all of the following conditions:
(i) Listing or approval for listing upon notice of issuance,
of such Shares on the exchange or over-the-counter market as may at
the time be the principal market for the Common Stock;
(ii) Any registration or other qualification of the Shares
under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the
Committee shall, in its absolute discretion upon the advice of
counsel, deem necessary or advisable; and
(iii) Obtaining any other consent, approval, or permit from
any state or federal governmental agency which the Committee shall,
in its absolute discretion after receiving the advice of counsel,
determine to be necessary or advisable.
Section 15. COMPLIANCE WITH APPLICABLE LAWS. If at any time the Company
shall be advised by its counsel that the exercise of any Option or the delivery
of Shares upon the exercise of an Option is required to be approved, listed,
registered or qualified under any securities law, that certain actions must be
taken under the rules of any stock exchange or over-the-counter market, that
such exercise or delivery must be accompanied or preceded by a prospectus or
similar circular meeting the requirements of any applicable law, or that some
other action is required to be taken by the Company in compliance with
applicable law, the Company will use reasonable efforts to take all actions
required within a reasonable time, but exercise of the Options or delivery by
the Company of certificates for Shares may be deferred until the Company shall
be in compliance with all such requirements.
Section 16. GOVERNING LAW. The Plan, each Option awarded hereunder and
the related Option Agreement, and all determinations made and actions taken
pursuant thereto, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the internal laws of the State of
Wisconsin and construed in accordance therewith without giving effect to the
principles of conflicts of laws applied by any state.
<PAGE>
IN WITNESS WHEREOF, the Company has caused the Plan to be executed by its
duly authorized officers as of December 31, 1999.
MID-WISCONSIN FINANCIAL SERVICES, INC.
By:
Gene C. Knoll
President
ATTEST:
By:
William A. Weiland
Secretary
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 11,791
<INT-BEARING-DEPOSITS> 202,676
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 65,867
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<DEPOSITS> 232,137
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0
0
<COMMON> 181
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<INTEREST-TOTAL> 5,736
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<ALLOWANCE-CLOSE> 2,358
<ALLOWANCE-DOMESTIC> 2,358
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
