<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
[ ] Confidential, For Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
1ST COMMUNITY BANCORP, INC.
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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[1ST COMMUNITY BANCORP, INC. LOGO]
109 EAST DIVISION
SPARTA, MICHIGAN 49345
April 29, 1997
To Our Shareholders:
The Annual Meeting of the Shareholders of 1st Community Bancorp, Inc.,
Sparta, Michigan, will be held at the following location and date:
Sparta Ridgeview Elementary School Gymnasium
557 South State Street
Sparta, Michigan 49345
Tuesday, April 29, 1997
6:30 p.m. Dinner - 7:30 p.m. Annual Meeting
The purpose of the meeting is set forth in the attached "Notice of Annual
Meeting of Shareholders."
Please plan to join us prior to the meeting for an informal sit-down dinner
to be served at 6:30 p.m. Shareholders holding stock in single ownership
form are cordially invited to bring a guest. To assist us in our planning,
please complete and return the enclosed reservation card by Friday, April
18, 1997.
The following Proxy Statement and enclosed form of proxy are being
furnished to holders of 1st Community Bancorp, Inc. Common Stock on and
after April 4, 1997. PLEASE BE SURE TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY PROMPTLY WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. A proxy may
be revoked at any time before it is exercised and shareholders who are
present at the meeting may withdraw their proxy and vote in person if they
wish to do so. Proxies must be signed by all owners as their names appear
on the proxy.
As we focus on the challenges and changes in today's banking environment,
we look forward to enhancing shareholder value at 1st Community Bancorp,
Inc. It is our desire to build long-term value for you as we continue to
build a strong foundation for continued profitable growth.
Please join us at the 1997 Annual Meeting on the evening of April 29. We
look forward to seeing you there.
Sincerely,
Jae M. Maxfield
President and Chief Executive Officer
<PAGE>
[1ST COMMUNITY BANCORP, INC. LOGO]
109 EAST DIVISION
SPARTA, MICHIGAN 49345
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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The annual meeting of shareholders of 1st Community Bancorp, Inc. will
be held in the Gymnasium at Sparta Ridgeview Elementary School, 557 South
State Street, Sparta, Michigan, on Tuesday, April 29, 1997, at 7:30 p.m.
local time, for the following purposes:
1. To elect directors.
2. To approve and adopt Restated Articles of Incorporation.
3. To approve the Executive Stock Incentive Plan of 1997.
4. To transact any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 19, 1997, are
entitled to notice of and to vote at the meeting and any adjournment of the
meeting.
By Order of the Board of Directors,
Linda R. Pitsch
Secretary
April 4, 1997
It is important that your shares be represented at the
meeting. Even if you expect to attend the meeting,
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OF
1ST COMMUNITY BANCORP, INC.
April 29, 1997
This Proxy Statement and the accompanying form of proxy are being
furnished to holders of common stock, $10 par value ("Common Stock"), of
1st Community Bancorp, Inc. (the "Corporation") on and after April 4, 1997,
in connection with the solicitation of proxies by the Corporation's Board
of Directors to be voted at the annual meeting of the Corporation's
shareholders (the "Annual Meeting") to be held on April 29, 1997, and any
adjournment of that meeting. The Annual Meeting will be held in the
Gymnasium at Sparta Ridgeview Elementary School, 557 South State Street,
Sparta, Michigan, at 7:30 p.m. local time.
The purpose of the Annual Meeting is to consider and vote upon the
following matters: (i) election of directors; (ii) approval and adoption
of Restated Articles of Incorporation; and (iii) approval of the Executive
Stock Incentive Plan of 1997. If a proxy in the form distributed by the
Corporation is properly executed and returned to the Corporation, the
shares represented by that proxy will be voted at the Annual Meeting and
any adjournment of that meeting. If a shareholder specifies a choice, the
proxy will be voted as specified. If no choice is specified, the shares
represented by the proxy will be voted for the election of all nominees of
the Board of Directors named in this Proxy Statement, for approval and
adoption of the proposed Restated Articles of Incorporation and for
approval of the Executive Stock Incentive Plan of 1997. The Corporation's
management does not know of any other matter to be presented at the Annual
Meeting. If other matters are presented, all shares represented by the
proxy will be voted in accordance with the judgment of the persons named as
proxies with respect to those other matters.
A proxy may be revoked at any time prior to its exercise by written
notice delivered to the Secretary of the Corporation. A proxy may also be
revoked by attending and voting at the Annual Meeting.
Solicitation of proxies will be made initially by mail. Directors,
officers and employees of the Corporation and ChoiceOne Bank (the "Bank")
also may solicit proxies in person, by telephone or by other means without
additional compensation. In addition, proxies may be solicited by nominees
and other fiduciaries who may mail material to or otherwise communicate
with the beneficial owners of shares held by them. All expenses of
solicitation of proxies will be paid by the Corporation.
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has nominated the following three persons for
reelection to the Corporation's Board of Directors for terms expiring at
the annual meeting of shareholders to be held in 2000:
William F. Cutler, Jr.
L. Edmond Eary, Jr., M.D.
Andrew W. Zamiara
Each nominee is presently a director of the Corporation whose term
will expire at the Annual Meeting. Seven other directors are serving terms
that will expire in 1998 and 1999. It is the intent of the persons named
in the accompanying proxy to vote for the election of the three nominees
listed above. The proposed nominees are willing to be elected and to
serve. In the event that any nominee is unable to serve or is otherwise
unavailable for election, which is not contemplated, the incumbent Board of
Directors may or may not select a substitute nominee. If a substitute
nominee is selected, all proxies will be voted for the person so selected.
If a substitute nominee is not selected, all proxies will be voted for the
election of the remaining nominees. Proxies will not be voted for a
greater number of persons than the number of nominees named above.
A plurality of the shares represented in person or by proxy and voting
on the election of directors is required to elect directors. For the
purpose of counting votes on the election of directors, abstentions, broker
non-votes and other shares not voted will not be counted as shares voted,
and the number of shares of which a plurality is required will be reduced
by the number of shares not voted.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS
APPROVAL AND ADOPTION OF RESTATED ARTICLES OF INCORPORATION
The Board of Directors has unanimously approved, and recommends that
the Corporation's shareholders approve and adopt, Restated Articles of
Incorporation (the "Restated Articles"). The Board of Directors approved
the Restated Articles to integrate the existing Articles of Incorporation
with several subsequent amendments, to change the name of the Corporation
to "ChoiceOne Financial Services, Inc.," to authorize a class of preferred
stock and to add certain provisions that the Board believes would be in the
best interests of the Corporation and its shareholders.
The following discussion summarizes the material changes to the
Corporation's existing Articles of Incorporation which would be effected by
approval and adoption of the proposed Restated Articles. This summary is
qualified in its entirety by reference to the text of the Restated
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Articles, a complete copy of which is included as Appendix A to this Proxy
Statement.
The Board of Directors proposes to amend Article I of the
Corporation's Articles of Incorporation to change the name of the
Corporation to "ChoiceOne Financial Services, Inc." In the second quarter
of 1996, as part of the Corporation's plan to expand the Corporation's
presence in markets outside the Sparta, Michigan market, the name of Sparta
State Bank was changed to ChoiceOne Bank and the name of Bradford Insurance
Centre, Ltd. was changed to ChoiceOne Insurance Agencies, Inc. While the
Corporation continues to depend to a great extent on its customer base in
Sparta and the surrounding communities, the Board of Directors believes
that it is in the best interests of the Corporation's shareholders to
expand the Corporation's market to enable it to compete more effectively
with other financial institutions. The current proposal to change the name
of the Corporation is another step in the Corporation's plan for entering
and serving additional markets. The name change will not affect or change
the business of the Corporation or the services offered to the
Corporation's customers in the markets presently served by the Corporation.
The Board of Directors also believes that changing the name of the
Corporation may help prevent potential confusion that customers and
shareholders could experience as a result of the divergent names of the
Corporation and its bank and insurance agency subsidiaries.
Article III of the Restated Articles includes a provision authorizing
the Board of Directors to issue up to 100,000 shares of preferred stock.
The provision would permit the Board to authorize the issuance of preferred
stock without additional shareholder approval, with such relative rights
and preferences as may be established by resolution of the Board of
Directors. The terms of the shares to be authorized, including dividend or
interest rates, conversion prices, voting rights, redemption prices,
maturity dates and similar matters would be determined by the Board of
Directors. No class of preferred stock is presently authorized by the
Corporation's current Articles of Incorporation.
Under the Restated Articles, the Board of Directors would be empowered
to determine the designations and relative voting, distribution, dividend,
liquidation and other rights, preferences and limitations of the preferred
stock, including, among other things: (i) the designation of each class or
series and the number of shares in the class or series; (ii) the dividend
rights, if any, of the class or series; (iii) the voting rights, if any (in
addition to any prescribed by law), of the holders of shares of the class
or series; (iv) the rights, if any, to convert or exchange the shares into
or for other securities; (v) the conditions or restrictions, if any, on
specified actions of the Corporation affecting the rights of the shares;
(vi) the redemption provisions, if any, of the shares; (vii) the
preference, if any, to which any class or series would be entitled in the
event of the liquidation or distribution of the Corporation's assets; and
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(viii) the provisions of a sinking fund, if any, provided for the
redemption of the preferred stock.
The Board of Directors believes that the availability of preferred
stock would provide the Corporation with flexibility of action for possible
future transactions, acquisitions, employee benefit plans and other
corporate purposes. Such purposes might include meeting requirements for
capital expenditures through the issuance of additional shares.
Authorization of preferred stock would permit the Board of Directors to
choose the exact terms of the class or series at the time of issuance to
promptly respond to investor preferences, developments in types of
preferred stock, market conditions and the nature of a specific
transaction.
It may be advantageous in some cases to pay investors dividends on
equity rather than interest on debt. Preferred stock would allow the
Corporation to offer equity that is potentially less dilutive of the
relative equity value of the holders of its Common Stock than would be the
case if additional shares of Common Stock were issued. Preferred stock
typically does not enjoy dividend growth corresponding to growth in a
company's earnings. In addition, preferred stock can be subject to
redemption, which could permit the Corporation to limit the dilutive effect
on the holders of its Common Stock.
If the Restated Articles are approved and adopted, no further
shareholder authorization for the issuance of preferred stock would be
required prior to issuance of the shares by the Board of Directors. The
Board presently does not have any plan or proposal to issue preferred
stock. Opportunities may arise, however, that require prompt action, such
as businesses becoming available for acquisition or favorable market
conditions existing for the sale of a particular type of preferred stock.
The delay and expense of seeking shareholder approval at the time of
issuance could deprive the Corporation and its shareholders of the ability
to effectively benefit from such an opportunity.
The Board of Directors could authorize shares of preferred stock which
have voting, dividend or other preferences over shares of its Common Stock
and the issuance of preferred stock could dilute the voting power, equity
position or share of earnings of common shareholders. Although the Board
of Directors has no present plan or proposal to do so, preferred stock
could be used to discourage or impede an attempt to obtain control of the
Corporation by merger, tender offer, proxy contest or other means and could
be used to inhibit the removal of incumbent management. At this time, the
Corporation's management is not aware of any attempts to obtain control of
the Corporation.
Article V of the Restated Articles enumerates the express powers of
the Board of Directors. Although Article V does not increase the powers of
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the Board relative to the Board's powers under the current Articles of
Incorporation, the article clarifies the specific actions that are within
the power of the Board of Directors.
Article VI of the Restated Articles would require the Corporation to
indemnify directors and executive officers of the Corporation to the
fullest extent permitted by the Michigan Business Corporation Act (the
"MBCA"). The MBCA provides, among other things, that a company shall
indemnify a director, officer, employee or agent against actual and
reasonable expenses, including attorneys' fees, incurred by the person who
is successful, on the merits or otherwise, in defense of any action, suit
or proceeding or in defense of a claim, issue or matter in such action,
suit or proceeding, to which the person was a party as a result of being or
having been a director, officer, employee or agent of the company.
The MBCA also permits a company to indemnify a person who is or was a
party or threatened to be made a party to a threatened, pending or
completed action, suit or proceeding by reason of the fact that the person
is or was a director, officer, employee or agent of the company or is or
was serving at the company's request as a director, officer, partner,
trustee, employee or agent of another company, against expenses, including
attorneys' fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with the
action, suit or proceeding, if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the company or its shareholders, and with respect to a
criminal action or proceeding, if the person had no reasonable cause to
believe that the conduct was unlawful. A company's board of directors
(acting through a quorum of disinterested directors or a special committee
of two or more disinterested directors) or independent legal counsel or the
shareholders may authorize indemnification in the specific case after a
determination is made that indemnification is permissible because such
standards have been satisfied. The MBCA also permits a company to pay for
or reimburse the reasonable expenses incurred by a director, officer,
employee or agent in advance of final disposition of the proceeding if the
person furnishes the company with a written affirmation of the person's
good faith belief that the person has met the applicable standard of
conduct and a written undertaking to repay the advance if it is ultimately
determined that the person did not meet such standard of conduct and if it
is determined that indemnification is not precluded under the MBCA.
Article VI of the Restated Articles provides that the Corporation
shall, to the fullest extent permitted by law, indemnify directors and
executive officers in connection with any actual or threatened civil,
criminal, administrative or investigative action, suit or proceeding
(whether brought by or in the name of the Corporation, a subsidiary or
otherwise) arising out of the director's or executive officer's service to
the Corporation, a subsidiary or to another organization at the request of
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the Corporation or a subsidiary. The Corporation may indemnify, but is
under no obligation to do so, individuals who are not directors or
executive officers of the Corporation to the extent permitted by the
Bylaws, a resolution of the Board or by a contractual agreement authorized
by the Board.
Article VI further provides that the Corporation shall indemnify
directors and executive officers to the fullest extent permitted now or in
the future by applicable law. As such, the circumstances under which the
Corporation may be required or permitted to provide indemnification in the
future may be broader than that presently provided by the MBCA and the
Restated Articles.
The current Articles of Incorporation do not contain provisions for
the indemnification of directors or executive officers. The Corporation's
current Bylaws, however, generally follow the indemnification provisions of
the MBCA and permit, but do not require, the Corporation to indemnify a
director, officer, employee or agent of the Corporation or any individual
who serves at the Corporation's request as a director, officer, partner,
trustee, employee or agent of another domestic or foreign corporation in
certain circumstances if the applicable standard of conduct is met.
The proposed indemnification provision in the Restated Articles
applies to and may benefit the existing directors of the Corporation and,
as such, the directors may be deemed to have a personal interest in the
Restated Articles. If the shareholders approve the Restated Articles,
shareholders may be estopped from claiming that indemnification provided in
accordance with the Restated Articles and the MBCA is incorrectly provided,
although shareholders would not be barred from challenging any particular
indemnification as being provided in violation of the Restated Articles or
the MBCA.
The Corporation maintains directors' and officers' liability insurance
which may offset a portion of the costs involved in any indemnification
claim and the Corporation presently intends to continue such coverage in
the future, subject to availability at reasonable costs. To the extent
obligations under indemnification provisions exceed any proceeds of
insurance (or if such coverage is discontinued or not applicable), any such
indemnification payments made by the Corporation may have an adverse effect
upon the Corporation's assets and equity.
Since the indemnification provisions relate to actions occurring while
a person serves as a director or executive officer of the Corporation, the
Corporation may provide, or may be required to provide, indemnification if
the appropriate standards are satisfied even though at the time the
indemnification is sought such person no longer serves the Corporation in
such a capacity.
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The Board of Directors believes that the proposed Article VI is in the
best interests of the Corporation and its shareholders. In recent years,
there has been an increase in the number and amount of claims brought
against directors and officers of companies. Although no director or
executive officer of the Company has threatened to resign, and, to the best
of the Corporation's knowledge, no qualified person has refused to serve on
the Corporation's Board of Directors because of the threat of personal
liability, the Board believes that the proposed Article VI would enhance
the ability of the Corporation to attract and retain highly qualified
directors and executive officers in the future. In addition, threat of
personal liability may have an adverse effect on the decision-making
process of directors and executive officers of the Corporation. The
proposed indemnification clause also may encourage such persons to make
entrepreneurial decisions that they believe to be in the best interests of
the Corporation with less threat of personal liability for monetary damages
for breach of fiduciary duty.
Article VII of the Restated Articles includes a new provision
requiring all shareholder nominations for directors to be delivered to the
Corporation in writing at least 120 days prior to the notice of an annual
meeting of shareholders or, in the case of a special meeting of
shareholders at which a director would be elected, at least seven days
after the notice of the special meeting. A nomination that is not received
prior to these deadlines would not be placed on the ballot.
The Board believes that advance notice of nominations by shareholders
would afford a meaningful opportunity to consider the qualifications of the
proposed nominees and, to the extent deemed necessary or desirable by the
Board of Directors, would provide an opportunity to inform shareholders
about such qualifications. Although this nomination procedure would not
give the Board of Directors any power to approve or disapprove shareholder
nominations for the election of directors, the nomination procedure could
have the effect of precluding a nomination for the election of directors at
a particular meeting if the proper procedures were not followed.
Article VII also contains a provision for the removal of directors.
The provision, like the provision in the current Articles of Incorporation,
provides that a director may be removed before the end of a term only for
cause, provided that the Bylaws may provide for mandatory retirement from
the Board of Directors at 70 years of age or older. The current Articles
of Incorporation do not, however, define "cause." The Restated Articles
would provide that cause for removal would exist only if: (i) a director
has been convicted of a felony by a court of competent jurisdiction and the
conviction is no longer subject to direct appeal; (ii) a director has been
adjudicated by a court of competent jurisdiction to be liable for
negligence or misconduct in the performance of the director's duty to the
Corporation in a matter of substantial importance to the Corporation and
the adjudication is no longer subject to direct appeal; (iii) a director
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has become mentally incompetent, whether or not adjudicated, and the mental
incompetency directly affects the director's ability to act as a director
of the Corporation; or (iv) a director's actions or failure to act have
been in derogation of the director's duties. If a director is proposed to
be removed pursuant to (iii) and (iv) upon a vote of the shareholders, the
removal recommendation must be approved by a vote of at least 66 2/3% of
the total number of directors in office, exclusive of the director who is
the subject of the removal action.
The definition of "cause" found in Article VII of the Restated
Articles applies to and may benefit the existing directors of the
Corporation and, as such, the directors may be deemed to have a personal
interest in the Restated Articles.
Article X of the Restated Articles provides that the Board of
Directors would not initiate, approve, adopt or recommend any offer of any
person or entity (other than the Corporation) to make a tender or exchange
offer for any equity security of the Corporation, to merge or consolidate
the Corporation with any other entity or to purchase or acquire all or
substantially all of the Corporation's assets, unless and until the Board
has evaluated the offer and determined that it would be in compliance with
all applicable laws and that the offer is in the best interests of the
Corporation and its shareholders. In doing so, the Board could rely on an
opinion of legal counsel who is independent from the offeror and/or may
test such legal compliance in front of any court or agency that may have
appropriate jurisdiction over the matter.
In making its determination as to whether the transaction would be in
the best interests of the Corporation and its shareholders, the Board would
be required to consider all factors it deemed relevant, including but not
limited to: (i) the adequacy and fairness of the consideration to be
received by the Corporation and/or its shareholders, considering historical
trading prices of the Corporation's Common Stock, the price that could be
achieved in a negotiated sale of the Corporation as a whole, past offers to
other companies and the future prospects of the Corporation; (ii) the
possible social and economic impact of the proposed transaction on the
Corporation, its employees, customers and suppliers; (iii) the potential
social and economic impact of the proposed transaction on the communities
in which the Corporation and its subsidiaries operate or are located; (iv)
the business and financial condition and earnings prospects of the offering
party; (v) the competence, experience and integrity of the offering party
and its management; and (vi) the intentions of the offering party regarding
the use of the assets of the Corporation to finance the transaction.
The Board of Directors believes that the proposed Article X is in the
best interests of the Corporation and its shareholders because it would
permit the Board to consider various factors in addition to price which may
be important to the Corporation and its shareholders in evaluating various
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transactions to which the Corporation would be a party. Because Article X
could be used to insulate directors from liability if the directors
consider factors other than price, the directors may be deemed to have a
personal interest in this proposal. Article X could be considered an anti-
takeover measure because the Board could consider factors other than price
in evaluating an offer to merge, consolidate or purchase the Corporation
and determine that such other factors justify rejecting the offer. The
Board of Directors believes that the Corporation has historically had and
will continue to have a strong community presence and focus and that
consideration of the various factors listed in Article X would be
appropriate.
The Corporation's current Articles of Incorporation require a
supermajority (66 2/3%) vote of shareholders to amend certain provisions,
including any amendment to increase the amount of authorized capital of the
Corporation. The Restated Articles contain similar supermajority vote
requirements and also would require a supermajority vote to amend the new
Article X. Unlike the current Articles of Incorporation, however, the
Restated Articles would not require a supermajority vote of shareholders to
increase the amount of authorized capital of the Corporation.
The affirmative vote of the holders of two-thirds of the shares
entitled to vote at the Annual Meeting is required to approve and adopt the
proposed Restated Articles. For the purpose of counting votes on this
proposal, abstentions, broker non-votes and other shares not voted have the
same effect as a vote against the proposal.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVAL AND ADOPTION OF THE RESTATED ARTICLES OF INCORPORATION
APPROVAL OF EXECUTIVE STOCK INCENTIVE PLAN OF 1997
The Board of Directors believes that the Corporation's long-term
interests will be best advanced by aligning the interests of its key
employees with the interests of its shareholders. Therefore, to retain and
motivate officers and key management employees of exceptional abilities,
and in recognition of the significant and extraordinary contributions to
the long-term performance and growth of the Corporation and its
subsidiaries made by these individuals, the Board of Directors adopted,
subject to shareholder approval, the Executive Stock Incentive Plan of 1997
(the "Plan"). The Board currently contemplates that the Plan would
primarily be used to grant stock options to officers and key employees of
the Corporation and its subsidiaries. However, the Plan would also permit
the award of stock appreciation rights and stock awards to officers and key
employees of the Corporation and its subsidiaries (together with stock
options, "Incentive Awards").
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A maximum of 20,000 shares of Common Stock would be available for
Incentive Awards under the Plan (subject to certain antidilution
adjustments). Persons eligible to receive Incentive Awards under the Plan
include corporate executive officers (4 persons as of March 1997) and other
corporate and subsidiary officers and key employees (an indeterminate
number of persons) of the Corporation and its subsidiaries. Additional
individuals may become executive officers, corporate or subsidiary officers
or key employees in the future and could participate in the Plan. Officers
and key employees of the Corporation and its subsidiaries may be considered
to have an interest in the Plan because they may receive Incentive Awards
under the Plan. The benefits payable under the Plan are presently not
determinable and the benefits that would have been payable had the Plan
been in effect during the most recent fiscal year are similarly not
determinable. The Plan would not be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and would not be
subject to the Employee Retirement Income Security Act of 1974.
The following is a summary of the principal features of the Plan.
This summary is qualified in its entirety by reference to the terms of the
Plan set forth in Appendix B to this Proxy Statement.
The Plan would be administered by the Personnel and Benefits Committee
of the Board of Directors or such other committee as the Board may
designate for that purpose (the "Committee"). The Committee would make
determinations, subject to the terms of the Plan, as to the persons to
receive Incentive Awards, the amount of Incentive Awards to be granted to
each person, the time of each grant, the terms and duration of each grant
and all other determinations necessary or advisable for administration of
the Plan.
The principal stock option features of the Plan provide that the
Corporation may grant to participants options to purchase shares of Common
Stock at stated prices for specified periods of time. Options may qualify
as incentive stock options as defined in Section 422 of the Code
("Incentive Stock Options") or not ("Nonqualified Stock Options"), as
determined by the Committee. The Committee could award options for any
amount of consideration, or no consideration, as may be determined by the
Committee.
The Committee would set forth the terms of individual grants of stock
options in stock option agreements. The stock option agreements would
contain such terms, conditions and restrictions, consistent with the
provisions of the Plan, as the Committee determines to be appropriate.
These restrictions could include vesting requirements. Stock option
agreements may provide for automatic regrants of options with respect to
shares surrendered to the Corporation in connection with the exercise of an
outstanding stock option. The exercise price per share would be determined
by the Committee and would be a price equal to or higher than the par value
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of Common Stock on the date of grant. The exercise price of Incentive
Stock Options must be at least equal to the market value on the date of
grant. On March 19, 1997, the market value of Common Stock, based on the
average of the bid and asked prices quoted to the Corporation by the market
makers in the Corporation's Common Stock, was $42.25 per share. When
exercising all or a portion of a stock option, a participant could pay with
cash or, with the consent of the Committee, with shares of Common Stock or
other consideration. If shares of Common Stock are used to pay the
exercise price and the Committee consents, a participant could use the
value of shares received upon exercise for further exercises in a single
transaction, permitting a participant to fully exercise a large stock
option with a relatively small initial cash or stock payment. The
Committee could also authorize payment of all or a portion of the stock
option price in the form of a promissory note or installments on terms
approved by the Committee.
Although the term of each stock option would be determined by the
Committee, no stock option would be exercisable under the Plan after the
expiration of 10 years from the date it was granted. Stock options
generally would be exercisable for limited periods of time in the event a
stock option holder dies, becomes disabled or is terminated without cause.
If a stock option holder is terminated for cause, the stock option holder
would forfeit all rights to exercise any outstanding stock options. If a
stock option holder retires after age 55 and after completing 6 years of
service, or as otherwise determined by the Committee, the option holder
could exercise options for the shorter of 3 years or the remainder of the
terms of the options, but only to the extent the participant is entitled to
exercise the options on the date of retirement. If a stock option holder
terminates employment due to consensual severance (as defined in the Plan),
the Committee may, in its discretion, permit the participant to exercise
options for a period of time not exceeding 3 years after such termination.
Incentive Stock Options granted to participants under the Plan generally
could not be transferred except by will or by the laws of descent and
distribution. Nonqualified Stock Options would be transferable unless
transfer is restricted by the terms of the grant.
For federal income tax purposes, a participant would not recognize
income and the Corporation would not receive a deduction at the time an
Incentive Stock Option is granted. A participant exercising an Incentive
Stock Option would not recognize income at the time of the exercise. The
difference between the market value and the exercise price would, however,
be a tax preference item for purposes of calculating alternative minimum
tax. Upon sale of the stock, as long as the participant held the stock for
at least 1 year after the exercise of the stock option and at least 2 years
after the grant of the stock option, the participant's basis would equal
the exercise price, the participant would pay tax on the difference between
the sale proceeds and the exercise price as capital gain, and the
Corporation would receive no deduction for federal income tax purposes.
-11-
<PAGE>
If, before the expiration of either of the above holding periods, the
participant sold shares acquired under an Incentive Stock Option, the tax
deferral would be lost, the participant would recognize compensation income
equal to the difference between the exercise price and the fair market
value at the time of exercise (but not more than the maximum amount that
would not result in a loss on the disposition), and the Corporation would
receive a corresponding deduction for federal income tax purposes.
Additional gains, if any, recognized by the participant would result in the
recognition of short- or long-term capital gain.
Under current federal income tax laws, a participant would not
recognize any income and the Corporation would not receive a deduction at
the time a Nonqualified Stock Option is granted. If a Nonqualified Stock
Option is exercised, the participant would recognize compensation income in
the year of exercise equal to the difference between the exercise price and
the fair market value on the date of exercise and the Corporation would
receive a corresponding deduction for federal income tax purposes. The
participant's tax basis in the shares acquired would be increased by the
amount of compensation income recognized. Sale of the stock after exercise
would result in recognition of short- or long-term capital gain or loss.
The Corporation could withhold from any cash otherwise payable to a
participant or require a participant to remit to the Corporation an amount
sufficient to satisfy federal, state and local withholding taxes and
employment-related tax requirements. Tax withholding obligations may be
satisfied by withholding Common Stock to be received upon exercise of an
option or by delivery to the Corporation of previously owned shares of
Common Stock.
In addition to stock options, the Committee could also grant stock
appreciation rights that would be subject to such terms and conditions as
the Committee determines. A stock appreciation right could relate to a
particular option and could be granted at the same time or after a related
option is granted. A stock appreciation right granted in tandem with an
option would permit a participant to receive, in exchange for the right to
exercise a related option, a payment from the Corporation in cash, stock or
other consideration equal to the difference between the market value of the
shares at the time of exercise of the stock appreciation right and the
exercise price of such option.
The Plan would also give the Committee authority to make stock awards.
A stock award of the Corporation's Common Stock would be subject to terms
and conditions determined by the Committee at the time of the award. Stock
award recipients would generally have all voting, dividend, liquidation and
other rights with respect to shares of Common Stock received upon becoming
the holder of record of the Common Stock. However, the Committee could
impose restrictions on the assignment or transfer of Common Stock awarded
under a stock award.
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<PAGE>
The Committee may include in an Incentive Award provisions for the
acceleration of any vesting or other similar requirements, for the
elimination of any restrictions upon an Incentive Award, or for
participants to receive cash in lieu of outstanding stock options upon a
"change in control" (as defined in the Plan or otherwise in an Incentive
Award) of the Corporation.
The Board of Directors may terminate the Plan at any time and may from
time to time amend the Plan. No amendment may impair any outstanding
Incentive Award without the consent of the participant except according to
the terms of the Plan or Incentive Award. No termination, amendment or
modification may become effective with respect to any Incentive Award
outstanding under the Plan without the prior written consent of the
participant holding the award unless the amendment or modification operates
to the benefit of the participant. Subject to shareholder approval, the
Plan would take effect on April 29, 1997, and, unless previously terminated
by the Board of Directors, no awards could be made under the Plan after
April 28, 2007.
The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or by proxy and voting on this proposal is
required to approve the Plan. For purposes of counting votes on this
proposal, abstentions, broker non-votes and other shares not voted will not
be counted as shares voted on the proposal, and the number of shares of
which a majority is required will be reduced by the number of shares not
voted.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE EXECUTIVE STOCK INCENTIVE PLAN OF 1997
VOTING SECURITIES
Holders of record of Common Stock at the close of business on March
19, 1997, will be entitled to vote at the Annual Meeting on April 29, 1997,
and any adjournment of that meeting. As of March 19, 1997, there were
482,710 shares of Common Stock issued and outstanding. Each share of
Common Stock is entitled to one vote on each matter submitted for
shareholder action.
As of March 19, 1997, no shareholder is known to the Corporation's
management to have been the beneficial owner of more than 5% of the
outstanding shares of Common Stock as of that date.
The following table sets forth information concerning the number of
shares of Common Stock held as of December 31, 1996, by each of the
Corporation's directors and nominees for director, each of the named
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<PAGE>
executive officers and all of the Corporation's directors and executive
officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP OF COMMON STOCK<F1>
----------------------------------------
SOLE VOTING SHARED
AND VOTING OR TOTAL PERCENT
NAME OF DISPOSITIVE DISPOSITIVE BENEFICIAL OF
BENEFICIAL OWNER POWER POWER<F2> OWNERSHIP CLASS
---------------- ----------- ----------- --------- -------
<S> <C> <C> <C> <C>
Frank G. Berris 4071 -- 4071 <F*>
Lawrence D. Bradford -- 5,870 5,870 1.2%
William F. Cutler, Jr. -- 3,000 3,000 <F*>
L. Edmond Eary, Jr., M.D. 2,413 108 2,521 <F*>
Lewis G. Emmons 4,638 -- 4,638 1.0
Stuart Goodfellow 6,182 -- 6,182 1.3
Jae M. Maxfield 100 -- 100 <F*>
Jon E. Pike 1,251 -- 1,251 <F*>
Linda R. Pitsch -- 356 356 <F*>
Andrew W. Zamiara 231 683 914 <F*>
All directors and
executive officers
as a group 18,886 10,326 29,212 6.1%
____________________________
<FN>
<F*> Less than 1%.
<F1> The numbers of shares stated are based on information furnished by
each person listed and include shares personally owned of record by
that person and shares that under applicable regulations are
considered to be otherwise beneficially owned by that person. Under
these regulations, a beneficial owner of a security includes any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting power
or dispositive power with respect to the security. Voting power
includes the power to vote or direct the voting of the security.
Dispositive power includes the power to dispose or direct the
disposition of the security. A person will also be considered the
beneficial owner of a security if the person has a right to acquire
beneficial ownership of the security within 60 days.
<F2> These numbers include shares as to which the listed person is legally
entitled to share voting or dispositive power by reason of joint
ownership, trust or other contract or property right, and shares held
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<PAGE>
by spouses and minor children over whom the listed person may have
substantial influence by reason of relationship.
</FN>
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
The Corporation's Board of Directors is divided into three classes,
which are as nearly equal in number as possible. Each class of directors
serves a successive three-year term of office. Directors who are not
employees of the Corporation may not serve for more than five consecutive
three-year terms, nor may they serve after attaining age 70.
Three members of the present Board of Directors are standing for
reelection. Seven other directors are serving terms that will expire in
1998 and 1999.
Biographical information concerning the Corporation's directors and
executive officers, including the three nominees who are nominated for
election to the Board of Directors at the Annual Meeting, is presented
below. Except as otherwise indicated, all directors, nominees for director
and executive officers have had the same principal employment for over five
years. All executive officers are appointed annually and serve at the
pleasure of the Board of Directors. All of the directors of the
Corporation also serve as directors of the Bank.
NOMINEES FOR ELECTION AS DIRECTORS TO TERMS EXPIRING IN 2000
WILLIAM F. CUTLER, JR. (age 49) is the former Vice President
of the H. H. Cutler Company, an apparel manufacturer. Mr. Cutler
joined the H. H. Cutler Company in 1970 and served in various
management and executive capacities until January 1994. The H.
H. Cutler Company was sold to VF (Vanity Fair) Corporation in
January 1994. Mr. Cutler has been a director of the Corporation
and the Bank since October 1993. Mr. Cutler served as a director
of the Sparta Health Center from 1981 until 1996 and is a trustee
of the Rockford Education Foundation.
L. EDMOND EARY, JR., M.D. (age 68) retired in 1991 after
establishing and operating a solo medical practice for 38 years.
Dr. Eary was an Associate Professor of Family Practice at the
College of Human Medicine at Michigan State University from July
1972 until June 1988. Dr. Eary has been a director of the
Corporation since 1986 and a director of the Bank since 1969.
Dr. Eary has been Chairman of the Board of Directors of the
Corporation and the Bank since May 1991 and was Vice Chairman of
the Board of Directors of the Corporation and the Bank from May
1990 until May 1991. Dr. Eary served as Interim President and
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<PAGE>
Chief Executive Officer of the Corporation from October 1, 1994
until January 10, 1995. Dr. Eary is also a director of Northwest
Ambulance Corp., a non-profit corporation, and Past President,
director and Treasurer of the Michigan Academy of Family
Physicians.
ANDREW W. ZAMIARA (age 56) is a registered pharmacist and
President/Manager of Momber Pharmacy and Gift Shop in Sparta,
Michigan. Mr. Zamiara has been a director of the Corporation and
the Bank since August 1990.
DIRECTORS WITH TERMS EXPIRING IN 1999
JAE M. MAXFIELD (age 51) has been a director and President
and Chief Executive Officer of the Corporation and the Bank since
January 1995 and a director of ChoiceOne Insurance Agencies, Inc.
since January 1996. From 1993 until January 1995, Mr. Maxfield
operated Maxfield Associates, an association of financial
advisors engaged in providing financial services to business and
professional occupations. Mr. Maxfield served as President and
Chief Executive Officer of Society Bank in Monroe, Michigan,
formerly a subsidiary of First of America Bank, from 1974 until
1993. Mr. Maxfield also is a director of West Shore Computer
Services, Inc., a data processing company, in which the Bank owns
a 20% interest and a director of Michigan Bankers Title of West
Michigan, L.L.C., a title insurance agency, in which the Bank
owns a 6% interest.
JON E. PIKE (age 55) is a certified public accountant and
Managing Partner of Beene, Garter LLP, certified public
accountants, of Grand Rapids, Michigan. Mr. Pike has been a
director of the Corporation and the Bank since September 1990.
Mr. Pike is also a director of Wm. A. Rogers & Co., a retail
hardware business in Sparta, Michigan, and President and a
director of B.G. Systems, Inc., a computer software business
affiliated with Beene, Garter LLP. Mr. Pike also is the Vice
President and Treasurer and a director of Sparta Foam, Inc., a
________________________.
LINDA R. PITSCH (age 49) has been a director of the
Corporation and the Bank since December 1994 and Secretary of the
Corporation and the Bank since February 1995. Ms. Pitsch also
has served as Senior Vice President and Cashier of the Bank since
January 1993. Ms. Pitsch has been an employee of the Bank since
September 1969, serving in various management and executive
capacities. Ms. Pitsch is also a director and Past President of
the Grand Rapids Chapter of the American Institute of Banking and
an instructor at Davenport College of Business, serving on its
Accounting Advisory Board.
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<PAGE>
DIRECTORS WITH TERMS EXPIRING IN 1998
FRANK G. BERRIS (age 49) is President of and owns American
Gas & Oil, Inc., a distributor of petroleum products and operator
of gas stations. Mr. Berris is also Past President of West
Michigan Oilman's Club and a member of the Michigan Petroleum
Association/Michigan Association of Convenience Stores. Mr.
Berris has been a director of the Corporation and the Bank since
August 1991.
LAWRENCE D. BRADFORD (age 57) is President of ChoiceOne
Insurance Agencies, Inc., an insurance agency that is a
subsidiary of the Bank. Mr. Bradford was a co-owner of the
insurance agency prior to the acquisition by the Bank in January
1996. Mr. Bradford has been a director of the Corporation since
1986 and a director of the Bank since 1974.
LEWIS G. EMMONS (age 52) is President and a director of
Emmons Development-Real Estate, Special Projects Coordinator for
Great Day Food Stores. Mr. Emmons has been a director of the
Corporation since 1986 and a director of the Bank since 1978.
STUART GOODFELLOW (age 53) owns Goodfellow Blueberry Farms
and Goodfellow Vending Services, a vending company. Mr.
Goodfellow is also past Vice President and a director of the
Michigan Blueberry Grower's Association. Mr. Goodfellow has been
a director of the Corporation and the Bank since August 1991
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
DENIS L. CROSBY (age 54) has been Vice President of the Registrant
since 1991. Mr. Crosby has been Senior Vice President of Loans at the Bank
since 1990 and Vice President of Loans at the Bank since 1986. From 1972
until joining the Registrant in 1986, Mr. Crosby was a commercial loan
officer at various affiliates of Michigan National Bank. Mr. Crosby is a
member of the Sparta Downtown Development Authority and a member of the
Economic Development Foundation of Western Michigan.
GERALD P. DAVID (age 58) has been Senior Vice President of the Bank
since 1984 and has served in various capacities at the Bank in the
Operations division since July 1976. Prior to his employment at the Bank,
Mr. David was associated with Old Kent Bank. Mr. David serves as President
of the Mid Michigan Bank Administration Institute Chapter.
THOMAS L. LAMPEN (age 41), a Certified Public Accountant, has been
Vice President and Chief Financial Officer of the Bank since January 1992
and Treasurer of the Registrant since April 1987. Prior to his employment
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<PAGE>
with the Registrant, Mr. Lampen worked for Alexander Grant and Company, a
national accounting firm.
BOARD COMMITTEES AND MEETINGS
The Corporation's Board of Directors has, among others, the following
standing committees:
AUDIT COMMITTEE. The members of the Audit Committee as of March 19,
1997, were Jon E. Pike (Chairman), L. Edmond Eary, M.D., Lewis G. Emmons
and Stuart Goodfellow. The Audit Committee is responsible for causing a
suitable examination of the financial records and operations of the
Corporation and the Bank to be made by the internal auditor of the
Corporation through a program of continuous internal audits. The Audit
Committee recommends to the Corporation's Board of Directors independent
certified public accountants for employment to examine the financial
statements of the Corporation and make such additional examinations as the
committee deems advisable. The Audit Committee also reviews reports of
examination of the Corporation and the Bank received from regulatory
authorities and reports to the Board of Directors at least once each
calendar year the results of examinations made and such conclusions and
recommendations as the committee deems appropriate, reviewing the scope of
the Corporation's and the Bank's procedures for internal auditing and the
results thereof. The Audit Committee met 4 times during 1996.
PERSONNEL AND BENEFITS COMMITTEE. The members of the Personnel and
Benefits Committee as of March 19, 1997, were Andrew W. Zamiara (Chairman),
William F. Cutler, Jr., Lewis G. Emmons, Stuart Goodfellow and Jae M.
Maxfield. Mr. Maxfield is a non-voting member of this committee. The
Personnel and Benefits Committee performs the function of a compensation
committee and receives recommendations from senior management and makes
recommendations to the Board of Directors concerning the compensation and
benefits of the officers of the Corporation and the Bank. The Personnel
and Benefits Committee also monitors the provisions of the Personnel Manual
and sets the parameters for the Bank's incentive bonus plan. This
committee also administers the Bank's pension plan. The Personnel and
Benefits Committee met 3 times during 1996.
EXECUTIVE AND LOAN REVIEW COMMITTEE. The members of the Executive and
Loan Review Committee as of March 19, 1997, were L. Edmond Eary, M.D.
(Chairman), Frank G. Berris, Lawrence D. Bradford, William F. Cutler, Jr.,
Lewis G. Emmons, Stuart Goodfellow, Jae M. Maxfield, Jon E. Pike, Andrew W.
Zamiara and Denis L. Crosby. Mr. Crosby is an executive officer of the
Bank. This committee reviews all aspects of loan activity for the Bank for
the preceding month, including new loans of $25,000 or more, problem loans
and loans classified by examiners, loans 60 days or more past due and
non-accrual loans. This committee also approves loan charge-offs and
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<PAGE>
extensions of credit of up to 15% of the capital and surplus of the Bank.
The Executive and Loan Review Committee may also act in other capacities as
authorized by the Board of Directors. The Executive and Loan Review
Committee met 5 times in 1996.
BRANCHING AND ACQUISITIONS COMMITTEE. The members of the Branching
and Acquisitions Committee as of March 19, 1997, were Frank G. Berris,
Lawrence D. Bradford, William F. Cutler, Jr., L. Edmond Eary, M.D., Jae M.
Maxfield and Jon E. Pike. The purpose of this committee is to consider
potential acquisitions by the Bank and/or the Corporation. The Branching
and Acquisitions Committee met once in 1996.
COMPLIANCE/CRA COMMITTEE. The members of the Compliance/CRA Committee
as of March 19, 1997, were Linda R. Pitsch (Chairman), Jae M. Maxfield,
Lawrence D. Bradford and the following individuals who are officers of the
Bank: Mary J. Johnson, Anna M. Parker, Lebella J. Berghoef, Karen M.
Gilbert, Lee A. Braford and Denis L. Crosby. The Compliance/CRA Committee
is responsible for compliance with various federal banking regulations and
the Community Reinvestment Act of 1977. The Compliance/CRA Committee met 4
times in 1996.
The Corporation does not have a standing nominating committee of the
Board of Directors. During 1996, the Corporation's Board of Directors held
12 regular and special meetings. All directors attended at least 75% of the
aggregate number of meetings of the Board of Directors and meetings of
committees on which they served during the year.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors and officers of the Corporation and persons beneficially
owning more than 10% of the outstanding shares of Common Stock to file
reports of beneficial ownership and changes in beneficial ownership of
shares of Common Stock with the Securities and Exchange Commission.
Directors, officers and greater than 10% beneficial owners are required by
Securities and Exchange Commission regulations to furnish the Corporation
with copies of all Section 16(a) reports they file. Based solely on its
review of the copies of such reports received by it or written
representations from certain reporting persons that no Forms 5 were
required for those persons, the Corporation believes that all applicable
Section 16(a) reporting and filing requirements were satisfied from
January 1, 1996, through December 31, 1996.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
GENERAL. The following table shows certain information concerning
the compensation earned by the Chief Executive Officer of the Corporation
during 1996 for services rendered to the Corporation or the Bank during
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<PAGE>
each year in the three-year period ended December 31, 1996 in which such
individual served as an executive officer of the Corporation or Bank. No
other executive officer of the Corporation had cash compensation in excess
of $100,000 during 1996. Mr. Maxfield was compensated by the Bank in the
capacity indicated in the table.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
NAME AND
PRINCIPAL ANNUAL COMPENSATION ALL OTHER
POSITION YEAR SALARY<F1> BONUS<F2> COMPENSATION<F3>
-------- ---- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Jae M. Maxfield 1996 $107,800 $40,917 $25,091
Director, President and Chief 1995 $100,800 $30,900 $ 7,797
Executive Officer of the
Corporation and the Bank
<FN>
__________________________________________
<F1> Includes compensation deferred under the Bank's 401(k) Retirement
Savings Plan and director fees paid by the Corporation and the Bank.
<F2> Includes compensation deferred under the Bank's 401(k) Retirement
Savings Plan.
<F3> All other compensation for Mr. Maxfield in 1996 includes amounts paid
by the Bank for (i) life and disability insurance ($1,254); (ii)
contributions under the Bank's 401(k) Retirement Savings Plan
($1,545); (iii) moving expenses ($14,794); and (iv) real estate
brokerage fees ($7,498).
</FN>
</TABLE>
Mr. Maxfield has an employment agreement with the Bank. Under this
agreement, Mr. Maxfield shall be employed as President and Chief Executive
Officer of the Bank and the Corporation unless his employment is terminated
by him or he is dismissed at the pleasure of the Board of Directors of the
Bank. Under this agreement, Mr. Maxfield is entitled to a base salary to
be reviewed annually by the Board of Directors of the Bank, participation
in the Bank's Incentive Bonus Plan, payment of directors fees normally
payable to directors of the Corporation and the Bank for meetings attended
and other benefits generally available to all Bank employees. Mr. Maxfield
has agreed not to compete in any way with the business of the Bank and the
Corporation while in the employ of the Bank and for one year after
termination of his employment with the Bank.
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<PAGE>
401(K) PLAN. The Sparta State Bank 401(k) Retirement Savings Plan
(the "Savings Plan") is a 401(k) plan established as of July 1, 1992. The
Savings Plan is qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
The purpose of the Savings Plan is to permit Bank employees, including
Mr. Maxfield, to save for retirement on a pre-tax basis. In addition to
the pre-tax contributions by Bank employees, the Bank may make
discretionary matching and/or profit-sharing contributions to the Savings
Plan. If matching and/or profit-sharing contributions are made to the
Savings Plan, a participant is fully vested in those contributions after
six years of vested service.
Each participant in the Savings Plan has an account to record the
participant's interest in the plan. The amount of the contributions made
by or on behalf of the participants are credited to their accounts. A
participant's benefit from the Savings Plan is equal to the vested amount
in the participant's account under the plan when he or she terminates
employment with the Bank.
INCENTIVE BONUS PLAN. The Bank's Incentive Bonus Plan (the "Bonus
Plan") was established for all of the Bank's officers in 1985. The Bonus
Plan has applied to all employees (both officer and non-officer personnel)
since the 1986 fiscal year. The purposes of the Bonus Plan are to (i)
motivate all personnel of the Bank, (ii) encourage growth of profits and
maximization of return on equity and (iii) provide an opportunity for
participants to be rewarded for individual effort and performance that is
considered by the Personnel and Benefits Committee to be above average.
The Bonus Plan is based on return on equity. A funding range of 10%
through 11.5% was established. If return on equity is below 10%, or the
"threshold," no bonus based on Bank profits will be paid. Bonuses payable
under the Bonus Plan begin to accrue at 10% return on equity. One quarter
of the targeted bonus amount is payable for each one quarter of one
percentage point increase in return on equity above 10%, with 100% of the
targeted bonus amount payable at 11.5% return on equity. There was no
maximum bonus payable under the Bonus Plan such that any increase in return
on equity over 11.5% provided a bonus greater than 100% of the targeted
bonus.
Determinations of eligibility, funding, allocations and amounts of
awards are subject to the review and final approval of the Board of
Directors of the Bank. The Bank's executive officers, as a group, who are
also executive officers of the Corporation, received incentive bonuses
totaling $85,415 under the Bonus Plan for the 1996 fiscal year.
PENSION PLAN. The Sparta State Bank Pension Plan (the "Pension Plan")
is a defined benefit plan adopted as of April 1, 1968. The Pension Plan is
qualified under Section 401(a) of the Code. The cost of the Pension Plan
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<PAGE>
is borne entirely by the Bank. The purpose of the Pension Plan is to
provide retirement benefits to Bank employees. Each participant is fully
vested after six years of vested service.
Subject to certain minimums, the monthly normal retirement benefit is
equal to 1.1% of the participant's average monthly compensation multiplied
by the participant's years of [vested] service (without limit on amount),
plus 0.6% of the participant's average monthly compensation in excess of
covered compensation multiplied by his or her years of vested service (up
to a maximum of 35 years). "Average monthly compensation" means the
monthly average of the participant's compensation during the five
consecutive plan years in which the participant was most highly compensated
during the 10 plan years immediately preceding the participant's
termination of employment. "Covered compensation" means the greater of (i)
$1,000 or (ii) one twenty-fourth (1/24) of the covered compensation
(determined under regulations issued by the Internal Revenue Service) of an
individual who attains social security retirement age in the plan year in
which the benefit is calculated. Election of available joint and survivor
benefits, early retirement benefits and other payment options would reduce
monthly retirement benefits.
Since retirement benefits under the Pension Plan are based in
substantial part upon compensation during the 10 years before termination
of employment, it is not possible to predict accurately the annual
retirement benefits to be paid to any participant. The Pension Plan Table
set forth below shows estimated annual benefits payable under the Pension
Plan upon retirement to persons in the compensation and years-of-service
classifications listed in the table.
<TABLE>
PENSION PLAN TABLE
<CAPTION>
AVERAGE
REMUNERATION YEARS OF BENEFIT SERVICE
------------ -------------------------------------------------------------------------
35 OR
10 15 20 25 30 MORE
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 20,000 $ 2,573 $ 3,859 $ 5,145 $ 6,432 $ 7,718 $ 9,005
40,000 5,973 8,959 11,945 14,932 17,918 20,905
60,000 9,373 14,059 18,745 23,432 28,118 32,805
80,000 12,773 19,159 25,545 31,932 38,318 44,705
100,000 16,173 24,259 32,345 40,432 48,518 56,605
120,000 19,573 29,359 39,145 48,932 58,718 68,505
140,000 22,973 34,459 49,945 57,432 68,918 80,405
160,000 26,373 39,559 52,745 65,932 79,118 92,305
180,000 29,773 44,659 59,545 74,432 89,318 104,205
</TABLE>
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<PAGE>
As of March 19, 1997, Mr. Maxfield had two years of service under the
Pension Plan. Covered compensation for the individuals named in the
Summary Compensation Table above is substantially the same as the aggregate
amount reported as "Annual Compensation" in that table.
During 1996, the Corporation compensated its directors at the rate of
$50 per meeting attended and directors who were not employees of the
Corporation or the Bank received $60 per hour for each meeting of any
committee of the Board of Directors on which they served other than the
Executive and Loan Review Committee. During 1996, the Bank compensated its
directors at the rate of $350 per meeting attended. The Chairman of the
Board of the Bank received an additional $100 per meeting attended.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors, nominees for director and executive officers of the
Corporation and members of their immediate families were customers of and
had transactions with the Bank in the ordinary course of business between
January 1, 1996, and March 19, 1997. It is anticipated that such
transactions will take place in the future in the ordinary course of
business. All loans and commitments included in such transactions were
made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions
with other persons and did not involve more than the normal risk of
collectibility or present other unfavorable features.
On May 22, 1990, the Bank opened a branch on the corner of Division
Street and Ida Red Avenue in Sparta, Michigan. ChoiceOne Insurance
Agencies, Inc. (the "Agency") entered into a Lease and Option to Purchase
with the Bank providing for the lease and/or purchase of a portion of the
land and building which is occupied by the branch. Mr. Bradford, a
director of the Corporation and the Bank and President of the Agency (now a
wholly-owned subsidiary of the Bank), and two of Mr. Bradford's brothers
were the shareholders (each owning a 33 1/3% interest) of the Agency during
1995. The Lease and Option to Purchase was negotiated by the Bank and the
Agency on an arm's-length basis and contains terms and conditions
comparable to other lease/purchase arrangements in the area. The Lease and
Option to Purchase terminated on May 31, 1995, and the Agency rented the
space occupied by the Agency on a month to month basis thereafter. During
1995, the Agency made aggregate payments under this arrangement to the Bank
of $39,327. On January 1, 1996, the Agency became a wholly-owned
subsidiary of the Bank and no additional payments were made after that
date.
Effective January 1, 1996, the Bank, through a merger of a wholly-
owned subsidiary of the Bank, acquired all of the outstanding stock of the
Agency. Mr. Bradford and his two brothers each received 6,870 shares of
the Corporation's Common Stock, valued at approximately $259,350 for
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purposes of the transaction, in exchange for the outstanding shares of the
Agency. In connection with the transaction, Mr. Bradford, his son and his
nephew each entered into an employment agreement with the Agency. Under
the terms of these agreements, each individual will be employed for an
initial term of three years, will receive a base salary and will
participate in a bonus pool based on the income of the Agency as compared
to the Bank's investment in the Agency. In return, each individual agreed
to certain covenants, including covenants not to compete with the Agency
for specified periods of time.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Crowe, Chizek and Company LLP, certified public accountants, served as
the Corporation's principal accountant for 1996. The Board of Directors of
the Corporation has selected Crowe, Chizek and Company LLP to act as the
Corporation's principal accountant for 1997. Representatives of Crowe,
Chizek and Company LLP are not expected to be present at the Annual
Meeting. If a representative of Crowe, Chizek and Company LLP attends the
meeting, the representative will have an opportunity to make a statement
and will be expected to be available to respond to appropriate questions.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1998 annual
meeting of shareholders must be received by the Corporation for
consideration for inclusion in its proxy statement and form of proxy
relating to that meeting by December 5, 1997. Proposals of shareholders
should be made in accordance with Securities and Exchange Commission
Rule 14a-8.
FORM 10-K REPORT AVAILABLE
THE CORPORATION'S FORM 10-KSB ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES, WILL BE PROVIDED WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN
REQUEST. REQUESTS SHOULD BE DIRECTED TO MR. THOMAS L. LAMPEN, TREASURER,
1ST COMMUNITY BANCORP, INC., 109 EAST DIVISION, SPARTA, MICHIGAN 49345.
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APPENDIX A
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
Name
JEFFREY A. OTT
Address WARNER NORCROSS & JUDD LLP
900 OLD KENT BUILDING, 111 LYON STREET, N.W.
City State Zip Code
GRAND RAPIDS MICHIGAN 49503
EFFECTIVE DATE:
Document will be returned to the name and address you enter above.
RESTATED ARTICLES OF INCORPORATION
OF
CHOICEONE FINANCIAL SERVICES, INC.
1. These Restated Articles of Incorporation are executed pursuant to
the provisions of Sections 641-643, Act 284, Public Acts of 1972, as
amended.
2. The corporation identification number (CID) assigned by the
Bureau is 323-667.
3. The present name of the corporation is:
CHOICEONE FINANCIAL SERVICES, INC.
4. The corporation's former name was 1ST COMMUNITY BANCORP, INC.
5. The date of filing the original Articles of Incorporation was
February 24, 1986.
6. The following Restated Articles of Incorporation supersede the
original Articles of Incorporation as amended and shall be the Articles of
Incorporation of the corporation:
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ARTICLE I
NAME
The name of the corporation is:
CHOICEONE FINANCIAL SERVICES, INC.
ARTICLE II
PURPOSES
The purposes of the corporation are to engage in any activity
within the purposes for which corporations may be organized under the
Michigan Business Corporation Act.
ARTICLE III
AUTHORIZED CAPITAL
The total authorized capital stock of the corporation is One
Million One Hundred Thousand (1,100,000) shares of stock divided into two
classes, as follows:
A. One Million (1,000,000) shares of common stock, par value Ten
Dollars ($10.00), which shall be called "Common Stock."
B. One Hundred Thousand (100,000) shares of preferred stock, no par
value, which shall be called "Preferred Stock."
The following provisions shall apply to the authorized stock of
the corporation:
1. PROVISIONS APPLICABLE TO COMMON STOCK.
a. NO PREFERENCE. None of the shares of Common Stock
shall be entitled to any preferences, and each share of Common
Stock shall be equal to every other share of said Common Stock in
every respect.
b. DIVIDENDS. After payment or declaration of full
dividends on all shares having a priority over the Common Stock
as to dividends, and after making all required sinking or
retirement fund payments, if any, on all classes of Preferred
Stock and on any other stock of the corporation ranking as to
dividends or assets prior to the Common Stock, dividends on the
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shares of Common Stock may be declared and paid, but only when
and as determined by the Board of Directors.
c. RIGHTS ON LIQUIDATION. On any liquidation, dissolution
or winding up of the affairs of the corporation, after there
shall have been paid to or set aside for the holders of all
shares having priority over the Common Stock the full
preferential amounts to which they are respectively entitled, the
holders of the Common Stock shall be entitled to receive pro rata
all the remaining assets of the corporation available for
distribution to shareholders. The Board of Directors may
distribute in kind to the holders of Common Stock such remaining
assets of the corporation or may sell, transfer or otherwise
dispose of all or any part of such remaining assets to any person
and may sell all or any part of the consideration so received and
distribute any balance thereof in kind to holders of Common
Stock. The merger or consolidation of the corporation into or
with any other corporation, or the merger or consolidation of any
other corporation into it, or any purchase or redemption of
shares of stock of the corporation of any class, shall not be
deemed to be a dissolution, liquidation or winding up of the
corporation for the purposes of this paragraph.
d. VOTING. At all meetings of shareholders of the
corporation, the holders of the Common Stock shall be entitled to
one vote for each share of Common Stock held by them
respectively.
2. PROVISIONS APPLICABLE TO PREFERRED STOCK:
a. PROVISIONS TO BE FIXED BY THE BOARD OF DIRECTORS:
The Board of Directors is expressly authorized at any time,
and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series, each with such voting
powers, full or limited, or without voting powers, and with such
designations, preferences and relative, participating,
conversion, optional or other rights, and such qualifications,
limitations or restrictions thereof, as shall be stated in the
resolution or resolutions providing for the issue thereof adopted
by the Board of Directors, and as are not stated in these
Restated Articles of Incorporation, or any amendments thereto,
including (without limiting the generality of the foregoing) the
following:
(1) The distinctive designation and number of shares
comprising such series, which number may (except where
otherwise provided by the Board of Directors in creating
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such series) be increased or decreased (but not below the
number of shares then outstanding) from time to time by
action of the Board of Directors.
(2) The stated value of the shares of such
series.
(3) The dividend rate or rates on the shares of such
series and the relation which such dividends shall bear to
the dividends payable on any other class of capital stock or
on any other series of Preferred Stock, the terms and
conditions upon which and the periods in respect of which
dividends shall be payable, whether and upon what conditions
such dividends shall be cumulative and, if cumulative, the
date or dates from which dividends shall accumulate.
(4) Whether the shares of such series shall be
redeemable and, if redeemable, whether redeemable for cash,
property or rights, including securities of any other
corporation, and whether redeemable at the option of the
holder or the corporation or upon the happening of a
specified event, the limitations and restrictions with
respect to such redemption, the time or times when, the
price or prices or rate or rates at which, the adjustments
with which and the manner in which such shares shall be
redeemable, including the manner of selecting shares of such
series for redemption if less than all shares are to be
redeemed.
(5) The rights to which the holders of shares of such
series shall be entitled, and the preferences, if any, over
any other series (or of any other series over such series),
upon the voluntary or involuntary liquidation, dissolution,
distribution or winding up of the corporation, which rights
may vary depending on whether such liquidation, dissolution,
distribution or winding up is voluntary or involuntary, and,
if voluntary, may vary at different dates.
(6) Whether the shares of such series shall be subject
to the operation of a purchase, retirement or sinking fund
and, if so, whether and upon what conditions such fund shall
be cumulative or noncumulative, the extent to which and the
manner in which such fund shall be applied to the purchase
or redemption of the shares of such series for retirement or
to other corporation purposes and the terms and provisions
relative to the operation thereof.
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(7) Whether the shares of such series shall be
convertible into or exchangeable for shares of any other
class or of any other series of any class of capital stock
of the corporation or any other corporation, and, if so
convertible or exchangeable, the price or prices or the rate
or rates of conversion or exchange and the method, if any,
of adjusting the same, and any other terms and conditions of
such conversion or exchange.
(8) The voting powers, if any, of the shares of such
series, and whether and under what conditions the shares of
such series (alone or together with the shares of one or
more of other series having similar provisions) shall be
entitled to vote separately as a single class, for the
election of one or more additional directors of the
corporation in case of dividend arrearages or other
specified events, or upon other matters.
(9) Whether the issuance of any additional shares of
such series, or of any shares of any other series, shall be
subject to restrictions as to issuance, or as to the powers,
preferences or rights of any such other series.
(10) Any other preferences, privileges and powers and
relative participating, optional or other special rights,
and qualifications limitations or restrictions of such
series, as the Board of Directors may deem advisable and as
shall not be inconsistent with the provisions of these
Restated Articles of Incorporation.
b. PROVISIONS APPLICABLE TO ALL PREFERRED STOCK
(1) All Preferred Stock shall rank equally and be
identical in all respects except as to the matters permitted
to be fixed by the Board of Directors, and all shares of any
one series thereof shall be identical in every particular
except as to the date, if any, from which dividends on such
shares shall accumulate.
(2) Shares of Preferred Stock redeemed, converted,
exchanged, purchased, retired or surrendered to the
corporation, or which have been issued and reacquired in any
manner, may, upon compliance with any applicable provisions
of the Michigan Business Corporation Act, be given the
status of authorized and unissued shares of Preferred Stock
and may be reissued by the Board of Directors as part of the
series of which they were originally a part or may be
reclassified into and reissued as part of a new series or as
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a part of any other series, all subject to the protective
conditions or restrictions of any outstanding series of
Preferred Stock.
ARTICLE IV
REGISTERED OFFICE AND RESIDENT AGENT
The street address (which is the mailing address) of the current
registered office is 109 East Division, Sparta, Michigan 49345.
The name of the current resident agent is Jae M. Maxfield.
ARTICLE V
POWERS OF BOARD OF DIRECTORS
In furtherance and not in limitation of the powers conferred by
the Michigan Business Corporation Act, the Board of Directors is expressly
authorized:
A. To make, alter or repeal the Bylaws of the corporation.
B. To authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
C. To set apart out of any of the funds of the corporation available
for dividends a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created.
D. By a majority of the whole Board, to designate one or more
committees, each committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. The Bylaws may
provide that in the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
place of any such absent or disqualified member. Any such committee, to
the extent provided in the resolution of the Board of Directors, or in the
Bylaws of the corporation, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation
to be affixed to all papers which may require it; but no such committee
shall have the power to authorize amending these Restated Articles of
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Incorporation, adopting an agreement of merger or consolidation,
recommending to the shareholders the sale, lease, exchange or other
disposition of all or substantially all of the corporation's property and
assets other than in the usual and regular course of its business,
recommending to the shareholders a dissolution of the corporation or a
revocation of a dissolution or amending the Bylaws of the corporation; and,
unless the resolution or Bylaws expressly so provide, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock.
E. When and as authorized by the shareholders in accordance with the
Michigan Business Corporation Act, to sell, lease or exchange all or
substantially all of the property and assets of the corporation, including
its goodwill and its corporate franchises, upon such terms and conditions
and for such consideration, which may consist in whole or in part of money
or property including shares of stock in, and/or other securities of, any
other corporation or corporations, as the Board of Directors shall deem
expedient and in the best interests of the corporation.
F. To elect and determine the duties of the officers of the
corporation and to establish the rights, powers, duties, rules and
procedures that (1) govern the Board of Directors, including without
limitation the vote required for any action by the Board of Directors; and
(2) affect the directors' power to manage the affairs of the corporation.
G. To create and issue, by way of distributions to shareholders, as
dividends or otherwise, rights or options entitling the holders thereof to
purchase from the corporation shares of any class or series of the
corporation's capital stock. Such rights or options shall be evidenced in
such manner as the Board shall approve and shall set forth the terms upon
which the time within which, and the price at which such shares may be
purchased from the corporation upon the exercise of any such right or
option. The terms and conditions of such rights or options may include,
without limitation, provisions which adjust the option price or number of
shares issuable under such rights or options in the event of an acquisition
of shares or a reorganization, merger, consolidation, sale of assets or
other occurrence involving the corporation, and restrictions or conditions
that preclude or limit the entitlement, exercise or transfer of such rights
or options by any person or persons who, after the date of creation or
issuance of such rights or options, acquires, obtains the right to acquire,
or offers to acquire directly or indirectly, beneficial ownership of a
specified number or percentage of the corporation's outstanding voting
shares or other shares of the corporation, or that invalidate or void such
rights or options held by any such person or persons.
H. No Bylaw shall be adopted by shareholders which shall impair or
impede the implementation of the foregoing.
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ARTICLE VI
INDEMNIFICATION
The corporation shall indemnify directors and executive officers
of the corporation as of right to the fullest extent now or hereafter
permitted by law in connection with any actual or threatened civil,
criminal, administrative or investigative action, suit or proceeding
(whether brought by or in the name of the corporation, a subsidiary or
otherwise) arising out of their service to the corporation, a subsidiary or
to another organization at the request of the corporation or a subsidiary.
The corporation may indemnify persons who are not directors or executive
officers of the corporation to the extent authorized by Bylaw, resolution
of the Board of Directors or contractual agreement authorized by the Board
of Directors. The corporation may purchase and maintain insurance to
protect itself and any such director, officer or other person against any
liability asserted against the person and incurred by him or her in respect
of such service whether or not the corporation would have the power to
indemnify him or her against such liability by law or under the provisions
of this paragraph. The provisions of this paragraph shall apply to
actions, suits or proceedings, whether arising from acts or omissions
occurring before or after the adoption of this Article VI, and to
directors, officers and other persons who have ceased to render such
service, and shall inure to the benefit of the heirs, executors and
administrators of the directors, officers and other persons referred to in
this paragraph.
ARTICLE VII
DIRECTORS
A. NUMBER AND TERM OF DIRECTORS. The corporation shall be managed
by a Board of Directors who will initially be elected in accordance with
this Section. The number of directors shall not be less than nine (9) nor
more than fifteen (15). Initially there shall be eleven (11) directors.
The exact number of directors may be increased or decreased from time to
time by the Board of Directors, pursuant to a resolution adopted by a
majority of the entire Board of Directors. Effective on January 1, 1987,
the members of the Board must be shareholders of the corporation. The
Board of Directors shall be divided into three (3) classes, with the term
of office of one class expiring each year. At the annual meeting of
shareholders in 1986, four (4) directors of Class I shall be elected to
hold office for a term expiring at the 1987 annual meeting, four (4)
directors of Class II shall be elected to hold office for a term expiring
at the 1988 annual meeting and three (3) directors of Class III shall be
elected to hold office for a term expiring at the 1989 annual meeting.
Beginning with the annual meeting of shareholders in 1987, each class of
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directors whose term shall then expire shall be elected to hold office for
a three (3) year term and until the election and qualification of their
respective successors.
B. NOMINATIONS OF DIRECTOR CANDIDATES.
1. Nominations of candidates for election as directors of the
corporation at any meeting of shareholders called for election of
directors (an "Election Meeting") may be made by the Board of
Directors or by any shareholder entitled to vote at such Election
Meeting.
2. Nominations made by the Board of Directors shall be made at
a meeting of the Board of Directors, or by written consent of
directors in lieu of a meeting, not less than thirty (30) days prior
to the date of the Election Meeting, and such nominations shall be
reflected in the minute books of the corporation as of the date made.
At the request of the Secretary of the corporation, each proposed
nominee shall provide the corporation with such information concerning
himself as is required under the rules of the Securities and Exchange
Commission to be included in the corporation's proxy statement
soliciting proxies for such person's election as a director.
3. Any shareholder who intends to make a nomination at an
Election Meeting shall deliver, not less than one hundred twenty (120)
days prior to the date of notice of the Election Meeting in the case
of an annual meeting, and not more than seven (7) days following the
date of notice of the meeting in the case of a special meeting, a
notice to the Secretary of the corporation setting forth: (a) the
name, age, business address and residence address of each nominee
proposed in such notice; (b) the principal occupation or employment of
each such nominee; (c) the number of shares of capital stock of the
corporation which are beneficially owned by each such nominee; (d) a
statement that each such nominee is willing to be nominated and serve;
and (e) such other information concerning each such nominee as would
be required under the rules of the Securities and Exchange Commission
in a proxy statement soliciting proxies for the election of such
nominees.
4. If the chairman of the Election Meeting determines that a
nomination was not made in accordance with the foregoing procedures,
such nomination shall be void.
C. VACANCIES. All vacancies in the membership of the Board shall be
filled by appointment made by a majority vote of the remaining directors.
Any vacancy resulting from the removal of a director for cause shall be
filled solely by appointment made by a majority of the Continuing Directors
as defined in Article IX. Each person so appointed to fill a vacancy shall
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remain a director until the next election of the class for which that
director shall have been chosen and until that director's successor shall
be elected by the shareholders.
D. REMOVAL OF DIRECTORS. A director may be removed before the end
of a term only for cause, except that the Bylaws may provide for mandatory
retirement from the Board of Directors at seventy (70) years of age or
older. At any annual meeting of the shareholders, or at a meeting of
shareholders called expressly for the purpose, the notice of which shall
state that the removal of a director or directors is among the purposes of
the meeting, the holders of a majority of the shares then entitled to vote
at an election of directors, present in person or by proxy, may remove such
director or directors for cause. If the holders of the shares of any class
are entitled to elect one or more directors by the provisions of these
Restated Articles of Incorporation the provisions of this Section shall
apply only to the vote of the holders of that class of outstanding shares.
Except as may be provided otherwise by law, cause for removal
shall be construed to exist only if: (1) the director whose removal is
proposed has been convicted of a felony by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal; (2)
such director has been adjudicated by a court of competent jurisdiction to
be liable for negligence or misconduct in the performance of such person's
duty to the corporation in a matter of substantial importance to the
corporation and such adjudication is no longer subject to a direct appeal;
(3) such director has become mentally incompetent, whether or not so
adjudicated, which mental incompetency directly affects such person's
ability as a director of the corporation; or (4) the director's actions or
failure to act have been in derogation of the director's duties, as
provided in the Bylaws of the corporation or otherwise provided by law.
Any proposal for removal pursuant to (3) or (4) of this paragraph which is
initiated by the Board of Directors for submission to the shareholders
shall require the affirmative vote of at least sixty-six and 2/3 percent
(66-2/3%) of the total number of directors then in office, exclusive of the
director who is the subject of the removal action and who shall not be
entitled to vote thereon.
ARTICLE VIII
OPT-OUT PROVISION
Pursuant to M.C.L.A. <Section>450.1784(l)(b), the corporation
elects not to be governed by Chapter 7A of the Michigan Business
Corporation Act, M.C.L.A. <Sections>450.1775 ET SEQ., or any amended
versions of that Chapter.
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ARTICLE IX
CERTAIN BUSINESS COMBINATIONS
A. HIGHER VOTE REQUIREMENTS FOR CERTAIN BUSINESS COMBINATIONS. In
addition to any vote otherwise required by law or by these Restated
Articles of Incorporation, a Business Combination shall require approval by
an affirmative vote of not less than sixty-six and 2/3 percent (66-2/3%) of
the Voting Stock, other than Voting Stock held by either (1) an Interested
Shareholder who is, or whose Affiliate or Associate is, a party to a
Business Combination, or (2) an Affiliate or Associate of the Interested
Shareholder.
B. CONDITIONS EXEMPTING HIGHER VOTE REQUIREMENTS. The vote
requirements of Section A of this Article IX shall not be applicable to a
particular Business Combination if the conditions specified in either one
of the following paragraphs are met:
1. APPROVAL BY CONTINUING DIRECTORS. The Business Combination
has been approved by a vote of a majority of the Continuing Directors;
or
2. FAIR PRICE PROVISION. Payment to shareholders in the
Business Combination is exclusively in the form of cash, or cash and
notes at the individual shareholder's option, provided that the option
is available to all shareholders, and all of the following conditions
are met:
a. COMMON STOCK. The amount of cash to be paid per share
to holders of Common Stock of the corporation must be at least
equal to the HIGHEST of the following amounts:
(1) The highest per share price, including any
brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Shareholder for any
shares of Common Stock of the same class or series acquired
by the Interested Shareholder at any time prior to the
Announcement Date of the proposal of the Business
Combination, or in the transaction in which it became an
Interested Shareholder, whichever is higher.
(2) The fair market value per share of Common Stock of
the same class or series as determined in good faith by the
Continuing Directors, which determination may be based upon
an appraisal by any investment banking or similar firm, on
the Announcement Date or on the Determination Date,
whichever is higher.
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b. NON-COMMON STOCK. The amount of the cash to be paid
per share in the Business Combination to holders of shares of any
class or series of outstanding stock other than Common Stock
shall be at least equal to the HIGHEST of the following amounts,
whether or not the Interested Shareholder has previously acquired
any shares of the particular class or series of stock:
(1) The highest per share price, including any
brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Shareholder for any
shares of the class of stock acquired at any time prior to
the Announcement Date of the proposal of the Business
Combination, or in the transaction in which it became an
Interested Shareholder, whichever is higher.
(2) The highest preferential amount per share to which
the holders of shares of the class of stock are entitled in
the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation.
(3) The fair market value per share of the class of
stock as determined in good faith by the Continuing
Directors, which determination may be based upon an
appraisal by any investment banking or similar firm, on the
Announcement Date or on the Determination Date, whichever is
higher.
c. OTHER CONDITIONS. Prior to the consummation of a
Business Combination by an Interested Shareholder, all of the
following conditions shall be met:
(1) Any full periodic dividends, whether or not
cumulative, on any outstanding Preferred Stock of the
corporation shall have been declared and paid at the regular
date therefor.
(2) The annual rate of dividends paid on any class or
series of stock of the corporation that is not Preferred
Stock, except as necessary to reflect any subdivision of the
stock, shall not have been reduced, and the annual rate of
dividends shall have increased as necessary to reflect any
reclassification, including any reverse stock split,
recapitalization, reorganization or any similar transaction
that has the effect of reducing the number of outstanding
shares of the stock.
(3) The Interested Shareholder may not have received
the benefit, directly or indirectly, except proportionately
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as a shareholder, of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or
other tax advantages provided by the corporation or any of
its subsidiaries, whether in anticipation of or in
connection with the Business Combination or otherwise.
(4) The Interested Shareholder did not become the
Beneficial Owner of any additional shares of the corporation
except as part of the transaction that created the
Interested Shareholder status or as a result of
proportionate stock splits or stock dividends.
d. PROXY STATEMENT. A proxy statement describing the
proposed Business Combination that complies with the disclosure
requirements of the Securities Exchange Act of 1934, as amended,
and which complies with the disclosure requirements of the
Michigan Blue Sky Laws, as amended, and the rules and regulations
promulgated thereunder (collectively the "Acts"), must be sent by
first class mail to all shareholders of the corporation at least
thirty (30) days prior to the consummation of the Business
Combination. The proxy statement must be sent regardless of
whether it is required by the Acts. The proxy statement shall
prominently display a recommendation of the Continuing Directors
on the advisability or inadvisability of the Business Combination
and a recommendation of any investment banking or similar firm
selected by a majority of the Continuing Directors, as to the
fairness of the Business Combination to the shareholders of the
corporation.
C. DEFINITIONS.
1. "Affiliate" or "Affiliated Person" means a Person who
directly, or indirectly through one or more intermediaries, controls,
is controlled by or is under common control with a specified Person.
2. "Announcement Date" means the first general public
announcement or the first communication generally to shareholders of
the corporation, whichever is earlier, of the proposal or intention to
make a proposal concerning a Business Combination.
3. "Associate," when used to indicate a relationship with any
person, means any one of the following:
a. Any corporation, partnership or other organization,
(except for the corporation or a subsidiary of the corporation),
in which the Person is (i) an officer, director or partner, or
(ii) is, directly or indirectly, the Beneficial Owner of ten
percent (10%) or more of any class of Equity Securities.
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b. Any trust or other estate (i) in which the Person has a
beneficial interest of ten percent (10%) or more, or (ii) as to
which the Person serves as trustee or in a similar fiduciary
capacity.
c. Any relative of the Person or the Person's spouse who
has the same residence as the Person or who is a director or
officer of the corporation or any of its Affiliates.
4. "Beneficial Owner," when used with respect to any Voting
Stock, means a Person who:
a. Individually or with any of its Affiliates or
Associates, beneficially owns Voting Stock, directly or
indirectly.
b. Individually or with any of its Affiliates or
Associates has:
(1) The right to acquire Voting Stock whether the
right is exercisable immediately or only after the passage
of time, pursuant to any agreement, or upon the exercise of
conversion rights, exchange rights, warrants, options or
otherwise.
(2) The right to vote Voting Stock pursuant to any
agreement.
(3) Any agreement for the purpose of acquiring,
holding, voting or disposing of Voting Stock with any other
person who beneficially owns, or whose Affiliates or
Associates beneficially own, directly or indirectly, the
Voting Stock.
5. "Book Value" means the net amount of an asset or group of
assets shown in the accounting records which record the cost of the
asset less reductions from the cost of the asset, such as depreciation
and amortization, determined in accordance with generally accepted
accounting principles.
6. "Business Combination" means any one of the following:
a. Any merger or consolidation of the corporation, or any
subsidiary of the corporation, that alters the contract rights of
the Voting Stock as expressly set forth in these Restated
Articles of Incorporation or changes or converts, in whole or in
part, the outstanding shares of the corporation with either:
(1) Any Interested Shareholder.
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(2) Any other corporation, whether or not itself an
Interested Shareholder, which is, or after the merger or
consolidation would be, an Affiliate of an Interested
Shareholder that was an Interested Shareholder prior to the
transaction.
b. Any sale, lease, transfer or other disposition, except
in the ordinary course of business, in one transaction or a
series of transactions in any twelve-month period, to any
Interested Shareholder or any Affiliate of any Interested
Shareholder (other than the corporation or any of its
subsidiaries) of any assets of the corporation or any of its
subsidiaries having an aggregate Book Value as of the end of the
corporation's most recently ended fiscal quarter of ten percent
(10%) or more of its Consolidated Net Worth measured at the time
the transaction or transactions are approved by the board of
directors of the corporation.
c. The issuance or transfer by the corporation, or any of
its subsidiaries in one transaction or a series of transactions,
of any Equity Securities of the corporation or any of its
subsidiaries that have an aggregate market value of ten percent
(10%) or more of the total fair market value of the outstanding
shares of the corporation to any Interested Shareholder or any
Affiliate of any Interested Shareholder (other than the
corporation or any of its subsidiaries) except pursuant to the
exercise of warrants or rights to purchase Equity Securities
offered pro rata to all holders of the corporation's Voting Stock
or any other method affording substantially proportionate
treatment to the holders of Voting Stock.
d. The adoption of any plan or proposal for the
liquidation or dissolution of the corporation in which anything
other than cash will be received by an Interested Shareholder or
any Affiliate of any Interested Shareholder.
e. Any reclassification of securities, including any
reverse stock split, or recapitalization of the corporation, or
any merger or consolidation of the corporation with any of its
subsidiaries that has the effect, directly or indirectly, in one
transaction or a series of transactions, of increasing by ten
percent (10%) or more of the total number of outstanding shares,
the proportionate amount of the outstanding shares of any class
of Equity Securities of the corporation or any of its
subsidiaries which is directly or indirectly owned by any
Interested Shareholder or any Affiliate of any Interested
Shareholder.
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7. "Common Stock" means any stock other than preferred or
preference stock.
8. "Consolidated Net Worth" means the total assets of the
corporation less its total liabilities determined in accordance with
generally accepted accounting principles.
9. "Continuing Director" means any member of the Board of
Directors of the corporation who is not an Affiliate or an Associate
of an Interested Shareholder and either (a) was a member of the Board
of Directors prior to the time that the Interested Shareholder became
an Interested Shareholder, or (b) is a successor to a Continuing
Director who is not an Affiliate or Associate of an Interested
Shareholder and is recommended to succeed a Continuing Director by a
majority of the Continuing Directors who are then members of the Board
of Directors.
10. "Control," "controlling," "controlled by," or "under common
control with" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting shares, by
contract, or otherwise. The Beneficial Ownership of 10% or more of
the voting shares of a corporation shall create a presumption of
control.
11. "Determination Date" means the date on which an Interested
Shareholder first became an Interested Shareholder.
12. "Equity Security" or "Equity Securities" mean any one of the
following:
a. Any stock or similar security, certificate of interest
or participation in any profit sharing agreement, voting trust
certificate or voting share.
b. Any security convertible, with or without
consideration, into an equity security, or any warrant or other
security carrying any right to subscribe to or purchase an equity
security.
c. Any put, call, straddle or other option or privilege of
buying an equity security from, or selling an equity security to,
another without being bound to do so.
13. "Interested Shareholder" means any Person (other than the
corporation or any of its subsidiaries) who is either:
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a. The Beneficial Owner, directly or indirectly, of ten
percent (10%) or more of the outstanding Voting Stock of the
corporation.
b. An Affiliate of the corporation and at any time within
the two-year period immediately prior to the date in question was
the Beneficial Owner, directly or indirectly, of ten percent
(10%) or more of the then outstanding Voting Stock of the
corporation.
c. For the purpose of determining whether a Person is an
Interested Shareholder pursuant to subdivision (a) or (b), the
number of shares of Voting Stock considered to be outstanding
shall include all Voting Stock owned by the Person.
14. "Person" means any entity including, without limitation, an
individual, a corporation, a partnership, a trust, a bank, a joint
stock company, an unincorporated association or similar organization.
15. "Valuation Date" means:
a. In a Business Combination voted upon by shareholders,
the day prior to the date of the shareholders vote or the day
which is twenty (20) calendar days prior to the consummation of
the Business Combination, whichever is later.
b. In a Business Combination not voted upon by
shareholders, the date of the consummation of the Business
Combination.
16. "Voting Stock" means all outstanding shares of Common Stock
and Preferred Stock of the corporation entitled to vote in an election
of directors.
ARTICLE X
EVALUATION OF OFFERS
The Board of Directors shall not initiate, approve, adopt or
recommend any offer of any party other than the corporation to make a
tender or exchange offer for any equity security of the corporation, or to
engage in any Business Combination as defined in Article IX, unless and
until it shall have first evaluated the proposed offer and determined in
its judgment that the proposed offer would be in compliance with all
applicable laws. In evaluating a proposed offer to determine whether it
would be in compliance with law, the Board of Directors shall consider all
aspects of the proposed offer, including the manner in which the offer is
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proposed to be made, the documents proposed for the communication of the
offer and the effects and consequences of the offer if consummated, in the
light of the laws of the United States of America and affected states and
foreign countries. In connection with this evaluation, the Board may seek
and rely upon the opinion of independent legal counsel and it may test the
legality of the proposed offer in any state, federal or foreign court or
before any state, federal or foreign administrative agency which may have
jurisdiction. If the Board of Directors determines in its judgment that a
proposed offer would be in compliance with all applicable laws, the Board
of Directors shall then evaluate the proposed offer and determine whether
the proposed offer is in the best interests of the corporation and its
shareholders. The Board of Directors shall not initiate, approve, adopt or
recommend any such offer which in its judgment would not be in the best
interests of the corporation and its shareholders. In evaluating a
proposed offer to determine whether it would be in the best interests of
the corporation and its shareholders, the Board of Directors shall consider
all factors which it deems relevant including, without limitation:
A. The fairness of the consideration to be received by the
corporation and its shareholders under the proposed offer, taking into
account the trading price of the corporation's stock immediately prior to
the announcement of the proposed offer, the historical trading prices of
the corporation's stock, the price that might be achieved in a negotiated
sale of the corporation as a whole, premiums over the trading price of
their securities which have been proposed or offered to other companies in
the past in connection with similar offers and the future prospects of the
corporation;
B. The possible social and economic impact of the proposed offer and
its consummation on the corporation and its employees, customers and
suppliers;
C. The possible social and economic impact of the proposed offer and
its consummation on the communities in which the corporation and its
subsidiaries operate or are located;
D. The business and financial conditions and earnings prospects of
the offering party, including, without limitation, debt service and other
existing or likely financial obligations of the offering party;
E. The competence, experience and integrity of the offering party
and its management; and
F. The intentions of the offering party regarding the use of the
assets of the corporation to finance the transaction.
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ARTICLE XI
LIABILITY OF DIRECTORS
A director of the corporation shall not be personally liable to
the corporation or its shareholders for monetary damages for a breach of
the director's fiduciary duty, except for liability:
A. For any breach of the director's duty of loyalty to the
corporation or its shareholders;
B. For any acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
C. For any violation of Section 551(1) of the Michigan Business
Corporation Act;
D. For any transaction from which the director derived an improper
personal benefit; or
E. For any acts or omissions occurring before March 1, 1987.
If the Michigan Business Corporation Act is amended after this
Article has been adopted by the shareholders to authorize corporate action
to further eliminate or limit the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited
to the fullest extent permitted by the Michigan Business Corporation Act as
amended.
Any repeal, modification or adoption of any provision in these
Restated Articles of Incorporation inconsistent with this Article XI shall
not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal, modification or adoption.
ARTICLE XII
DURATION
The term of this corporation is perpetual.
ARTICLE XIII
AMENDMENTS
These Articles may be amended by the affirmative vote of a
majority of the shares entitled to vote at any regular or special meeting
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of shareholders of the corporation if notice of the proposed amendment is
contained in the notice of the meeting, except that the affirmative vote of
not less than sixty-six and 2/3 percent (66-2/3%) of the shares entitled to
vote at any regular or special meeting of shareholders of the corporation
shall be necessary for any amendment to Articles VII, VIII, IX, X and this
Article XIII.
I, the President and Chief Executive Officer of ChoiceOne
Financial Services, Inc., sign my name this ___ day of __________, 1997.
CHOICEONE FINANCIAL SERVICES, INC.
_____________________________________________
Jae M. Maxfield
President and Chief Executive Officer
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APPENDIX B
1ST COMMUNITY BANCORP, INC.
EXECUTIVE STOCK INCENTIVE PLAN OF 1997
SECTION 1
ESTABLISHMENT OF PLAN; PURPOSE OF PLAN
1.1 ESTABLISHMENT OF PLAN. The Company hereby establishes the
EXECUTIVE STOCK INCENTIVE PLAN OF 1997 (the "Plan") for its corporate and
Subsidiary officers and other key employees. The Plan permits the grant
and award of Stock Options, Stock Appreciation Rights and Stock Awards.
1.2 PURPOSE OF PLAN. The purpose of the Plan is to provide officers
and key management employees of the Company and its Subsidiaries with an
increased incentive to make significant and extraordinary contributions to
the long-term performance and growth of the Company and its Subsidiaries,
to join the interests of officers and key employees with the interests of
the Company's shareholders through the opportunity for increased stock
ownership and to attract and retain officers and key employees of
exceptional abilities. The Plan is further intended to provide flexibility
to the Company in structuring long-term incentive compensation to best
promote the foregoing objectives.
SECTION 2
DEFINITIONS
The following words have the following meanings unless a
different meaning is plainly required by the context:
2.1 "Act" means the Securities Exchange Act of 1934, as amended.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Change in Control," unless otherwise defined in an Incentive
Award agreement, means an occurrence of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A issued under the Act. Without limiting the
inclusiveness of the definition in the preceding sentence, a
Change in Control of the Company shall be deemed to have occurred
as of the first day that any one or more of the following
conditions is satisfied: (a) any Person is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Company's then
outstanding securities; (b) the failure at any time of the
Continuing Directors to constitute at least a majority of the
<PAGE>
Board; or (c) any of the following occur: (i) any merger or
consolidation of the Company, other than a merger or
consolidation in which the voting securities of the Company
immediately prior to the merger or consolidation continue to
represent (either by remaining outstanding or being converted
into securities of the surviving entity) 60% or more of the
combined voting power of the Company or surviving entity
immediately after the merger or consolidation with another
entity; (ii) any sale, exchange, lease, mortgage, pledge,
transfer or other disposition (in a single transaction or a
series of related transactions) of assets or earning power
aggregating more than 50% of the assets or earning power of the
Company on a consolidated basis; (iii) any complete liquidation
or dissolution of the Company; (iv) any reorganization, reverse
stock split or recapitalization of the Company which would result
in a Change in Control as otherwise defined in this Plan; or (v)
any transaction or series of related transactions having,
directly or indirectly, the same effect as any of the foregoing.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means the Personnel and Benefits Committee of the
Board or such other committee as the Board shall designate to
administer the Plan. The Committee shall consist of at least two
members of the Board and all of its members shall be "non-
employee directors" as defined in Rule 16b-3 issued under the
Act.
2.6 "Common Stock" means the Common Stock of the Company, par value
$10 per share.
2.7 "Company" means 1st Community Bancorp, Inc., a Michigan
corporation, and its successors and assigns.
2.8 "Consensual Severance" means the voluntary termination of all
employment by the Participant with the Company or any of its
Subsidiaries which the Committee determines to be in the best
interests of the Company.
2.9 "Continuing Directors" means the individuals constituting the
Board as of the date this Plan was adopted and any subsequent
directors, if appointed or nominated by at least a majority of
the Continuing Directors in office at the time of the nomination
or appointment, but specifically excluding any individual whose
initial assumption of office occurs as a result of either an
actual or threatened "election contest" (as the term is used in
Rule 14a-11 of Regulation 14A issued under the Act) or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board.
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2.10 "Employee Benefit Plan" means any plan or program established by
the Company or a Subsidiary for the compensation or benefit of
employees of the Company or any of its Subsidiaries.
2.11 "Incentive Award" means the award or grant of a Stock Option,
Stock Appreciation Right or Stock Award to a Participant pursuant
to the Plan.
2.12 "Market Value" shall equal the mean of the highest and lowest
sales prices of shares of Common Stock reported on The NASDAQ
Stock Market (or any successor exchange or system that is the
primary stock exchange or system for trading of Common Stock) on
the date of grant, or if The Nasdaq Stock Market (or any such
successor) is closed on that date, the last preceding date on
which The Nasdaq Stock Market (or any such successor) was open
for trading and on which shares of Common Stock were traded.
2.13 "Participant" means a corporate officer or any key employee of
the Company or its Subsidiaries who is granted an Incentive Award
under the Plan.
2.14 "Person" has the same meaning as set forth in Sections 13(d) and
14(d)(2) of the Act.
2.15 "Retirement" means the voluntary termination of all employment by
the Participant after the Participant has attained 55 years of
age and completed 6 years of service with the Company or any of
its Subsidiaries or as otherwise may be set forth in the
Incentive Award agreement or other grant document with respect to
a Participant and a particular Incentive Award.
2.16 "Stock Appreciation Right" means any right granted to a
Participant pursuant to Section 6 of the Plan.
2.17 "Stock Award" means an award of Common Stock awarded to a
Participant pursuant to Section 7 of the Plan.
2.18 "Stock Option" means the right to purchase Common Stock at a
stated price for a specified period of time. For purposes of the
Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a
nonqualified stock option.
2.19 "Subsidiary" means any corporation or other entity of which 50%
or more of the outstanding voting stock or voting ownership
interest is directly or indirectly owned or controlled by the
Company or by one or more Subsidiaries of the Company.
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SECTION 3
ADMINISTRATION
3.1 POWER AND AUTHORITY. The Committee shall administer the Plan.
The Committee may delegate record keeping, calculation, payment and other
ministerial administrative functions to individuals designated by the
Committee, who may be employees of the Company and its Subsidiaries.
Except as limited in this Plan, the Committee shall have all of the express
and implied powers and duties set forth in this Plan, shall have full power
and authority to interpret the provisions of the Plan and Incentive Awards
granted under the Plan and shall have full power and authority to supervise
the administration of the Plan and Incentive Awards granted under the Plan
and to make all other determinations considered necessary or advisable for
the administration of the Plan. All determinations, interpretations and
selections made by the Committee regarding the Plan shall be final and
conclusive. The Committee shall hold its meetings at such times and places
as it deems advisable. Action may be taken by a written instrument signed
by a majority of the members of the Committee and any action so taken shall
be fully as effective as if it had been taken at a meeting duly called and
held. The Committee shall make such rules and regulations for the conduct
of its business as it deems advisable.
3.2 GRANTS OR AWARDS TO PARTICIPANTS. In accordance with and subject
to the provisions of the Plan, the Committee shall have the authority to
determine all provisions of Incentive Awards as the Committee may deem
necessary or desirable and as are consistent with the terms of the Plan,
including, without limitation, the following: (a) the persons who shall be
selected as Participants; (b) the nature and extent of the Incentive Awards
to be made to each Participant (including the number of shares of Common
Stock to be subject to each Incentive Award, any exercise price, the manner
in which an Incentive Award will vest or become exercisable and the form of
payment for the Incentive Award); (c) the time or times when Incentive
Awards will be granted; (d) the duration of each Incentive Award; and (e)
the restrictions and other conditions to which payment or vesting of
Incentive Awards may be subject.
3.3 AMENDMENTS OR MODIFICATIONS OF AWARDS. The Committee shall have
the authority to amend or modify the terms of any outstanding Incentive
Award in any manner, provided that the amended or modified terms are not
prohibited by the Plan as then in effect, including, without limitation,
the authority to: (a) modify the number of shares or other terms and
conditions of an Incentive Award; (b) extend the term of an Incentive
Award; (c) accelerate the exercisability or vesting or otherwise terminate
any restrictions relating to an Incentive Award; (d) accept the surrender
of any outstanding Incentive Award; and (e) to the extent not previously
exercised or vested, authorize the grant of new Incentive Awards in
substitution for surrendered Incentive Awards.
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3.4 INDEMNIFICATION OF COMMITTEE MEMBERS. Neither any member or
former member of the Committee nor any individual to whom authority is or
has been delegated shall be personally responsible or liable for any act or
omission in connection with the performance of powers or duties or the
exercise of discretion or judgment in the administration and implementation
of the Plan. Each person who is or shall have been a member of the
Committee shall be indemnified and held harmless by the Company from and
against any cost, liability or expense imposed or incurred in connection
with such person's or the Committee's taking or failing to take any action
under the Plan. Each such person shall be justified in relying on
information furnished in connection with the Plan's administration by any
appropriate person or persons.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section
4.2 of the Plan, a maximum of 20,000 shares of Common Stock shall be
available for Incentive Awards under the Plan. Such shares shall be
authorized and may be either unissued or treasury shares.
4.2 ADJUSTMENTS. If the number of shares of Common Stock outstanding
changes by reason of a stock dividend, stock split, recapitalization,
merger, consolidation, combination, exchange of shares or any other change
in the corporate structure or shares of the Company, the number and kind of
securities subject to and reserved under the Plan, together with applicable
exercise prices, shall be appropriately adjusted. No fractional shares
shall be issued pursuant to the Plan and any fractional shares resulting
from adjustments shall be eliminated from the respective Incentive Awards,
with an appropriate cash adjustment for the value of any Incentive Awards
eliminated. If an Incentive Award is canceled, surrendered, modified,
exchanged for a substitute Incentive Award or expires or terminates during
the term of the Plan but prior to the exercise or vesting of the Incentive
Award in full, the shares subject to but not delivered under such Incentive
Award shall be available for other Incentive Awards. If shares subject to
and otherwise deliverable upon the exercise of an Incentive Award are
surrendered to the Company in connection with the exercise of an Incentive
Award, the surrendered shares subject to the Incentive Award shall be
available for other Incentive Awards.
SECTION 5
STOCK OPTIONS
5.1 GRANT. A Participant may be granted one or more Stock Options
under the Plan. The Committee, in its discretion, may provide in the
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initial grant of a Stock Option for the subsequent automatic grant of
additional Stock Options for the number of shares that are subject to the
initial Stock Option and surrendered to the Company in connection with the
exercise of the initial or any subsequently granted Stock Option. Stock
Options shall be subject to such terms and conditions, consistent with the
other provisions of the Plan, as may be determined by the Committee in its
sole discretion. In addition, the Committee may vary, among Participants
and among Stock Options granted to the same Participant, any and all of the
terms and conditions of the Stock Options granted under the Plan. The
Committee shall have complete discretion in determining the number of Stock
Options granted to each Participant. The Committee may designate whether
or not a Stock Option is to be considered an incentive stock option as
defined in Section 422(b) of the Code.
5.2 STOCK OPTION AGREEMENTS. Stock Options shall be evidenced by
stock option agreements containing such terms and conditions, consistent
with the provisions of the Plan, as the Committee shall from time to time
determine. To the extent not covered by the stock option agreement, the
terms and conditions of this Section 5 shall govern.
5.3 STOCK OPTION PRICE. The per share Stock Option price shall be
determined by the Committee, but shall be a price that is equal to or
higher than the par value of the Company's Common Stock; PROVIDED, that the
per share Stock Option price for any shares designated as incentive stock
options shall be equal to or greater than 100% of the Market Value on the
date of grant.
5.4 MEDIUM AND TIME OF PAYMENT. The exercise price for each share
purchased pursuant to a Stock Option granted under the Plan shall be
payable in cash or, if the Committee consents, in shares of Common Stock
(including Common Stock to be received upon a simultaneous exercise) or
other consideration substantially equivalent to cash. The time and terms
of payment may be amended with the consent of a Participant before or after
exercise of a Stock Option. The Committee may from time to time authorize
payment of all or a portion of the Stock Option price in the form of a
promissory note or other deferred payment installments according to such
terms as the Committee may approve. The Board may restrict or suspend the
power of the Committee to permit such loans and may require that adequate
security be provided.
5.5 STOCK OPTIONS GRANTED TO TEN PERCENT SHAREHOLDERS. No Stock
Option granted to any Participant who at the time of such grant owns,
together with stock attributed to such Participant under Section 424(d) of
the Code, more than 10% of the total combined voting power of all classes
of stock of the Company or any of its Subsidiaries may be designated as an
incentive stock option, unless such Stock Option provides an exercise price
equal to at least 110% of the Market Value of the Common Stock and the
exercise of the Stock Option after the expiration of five years from the
date of grant of the Stock Option is prohibited by its terms.
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5.6 LIMITS ON EXERCISABILITY. Stock Options shall be exercisable for
such periods, not to exceed 10 years from the date of grant, as may be
fixed by the Committee. At the time of the exercise of a Stock Option, the
holder of the Stock Option, if requested by the Committee, must represent
to the Company that the shares are being acquired for investment and not
with a view to the distribution thereof. The Committee may in its
discretion require a Participant to continue the Participant's service with
the Company and its Subsidiaries for a certain length of time prior to a
Stock Option becoming exercisable and may eliminate such delayed vesting
provisions.
5.7 RESTRICTIONS ON TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents
(before or after the option grant) or unless the stock option
agreement or grant provides otherwise; (i) no incentive stock
options granted under the Plan may be sold, exchanged,
transferred, pledged, assigned or otherwise alienated or
hypothecated except by will or the laws of descent and
distribution; and (ii) all Stock Options that are not incentive
stock options may be transferred, PROVIDED, that as a condition
to any such transfer the transferee must execute a written
agreement permitting the Company to withhold from the shares
subject to the Stock Option a number of shares having a market
value at least equal to the amount of any federal, state or local
withholding or other taxes associated with or resulting from the
exercise of the Stock Option. All provisions of a Stock Option
which are determined with reference to the Participant, including
without limitation those which refer to the Participant's
employment with the Company or its Subsidiaries, shall continue
to be determined with reference to the Participant after any
transfer of a Stock Option.
(b) OTHER RESTRICTIONS. The Committee may impose other
restrictions on any shares of Common Stock acquired pursuant to
the exercise of a Stock Option under the Plan as the Committee
deems advisable, including, without limitation, restrictions
under applicable federal or state securities laws.
5.8 TERMINATION OF EMPLOYMENT.
(a) GENERAL. If a Participant is no longer employed by the
Company or its Subsidiary for any reason other than the
Participant's Consensual Severance, Retirement, death, disability
or termination for cause, the Participant may exercise his or her
Stock Options in accordance with their terms for a period of 3
months after such termination of employment unless the terms of
the applicable stock option agreement or grant provide otherwise,
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but only to the extent the Participant was entitled to exercise
the Stock Options on the date of termination. For purposes of
the Plan: (i) a transfer of an employee from the Company to any
Subsidiary; (ii) a leave of absence, duly authorized in writing
by the Company, for military service or for any other purpose
approved by the Company if the period of such leave does not
exceed 90 days; and (iii) a leave of absence in excess of 90
days, duly authorized in writing by the Company, provided the
employee's right to reemployment is guaranteed either by statute
or contract, shall not be deemed a termination of employment.
For purposes of the Plan, termination of employment shall be
considered to occur on the date on which the employee is no
longer obligated to perform services for the Company or any of
its Subsidiaries and the employee's right to reemployment is not
guaranteed either by statute or contract, regardless of whether
the employee continues to receive compensation from the Company
or any of its Subsidiaries after such date.
(b) CONSENSUAL SEVERANCE. If a Participant ceases to be
employed by the Company or one of its Subsidiaries due to
Consensual Severance, the Committee may, in its sole discretion,
permit the Participant to exercise his or her Stock Options in
accordance with their terms and to the extent that the
Participant was entitled to exercise the Stock Options on the
date of termination for a period of time after such termination
of employment as may be determined by the Committee, provided,
that such period may not extend beyond the earlier of 3 years
after the date of termination or the dates on which such Stock
Options expire by their terms.
(c) RETIREMENT. If a Participant ceases to be employed by
the Company or one of its Subsidiaries due to Retirement, the
Participant may exercise his or her Stock Options in accordance
with their terms for a period of 3 years after such termination
of employment unless such Stock Options earlier expire by their
terms, but only to the extent that the Participant was entitled
to exercise the Stock Options on the date of termination.
(d) DISABILITY. If a Participant ceases to be employed by
the Company or one of its Subsidiaries due to the Participant's
disability, he or she may exercise his or her Stock Options in
accordance with their terms for 1 year after he or she ceases to
be employed unless such Stock Options earlier expire by their
terms, but only to the extent that the Participant was entitled
to exercise the Stock Options on the date of such termination.
(e) DEATH. If a Participant dies either while an employee
or otherwise during a time when the Participant could have
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exercised a Stock Option, the Stock Options issued to such
Participant shall be exercisable in accordance with their terms
by the personal representative of such Participant or other
successor to the interest of the Participant for a period of 1
year after such Participant's death to the extent that the
Participant was entitled to exercise the Stock Options on the
date of death but not beyond the original term of the Stock
Options.
(f) TERMINATION FOR CAUSE. If a Participant's employment
is terminated for cause, the Participant shall have no further
right to exercise any Stock Options previously granted him or
her.
SECTION 6
STOCK APPRECIATION RIGHTS
6.1 GRANT. A Participant may be granted one or more Stock
Appreciation Rights under the Plan and such Stock Appreciation Rights shall
be subject to such terms and conditions, consistent with the other
provisions of the Plan, as shall be determined by the Committee in its sole
discretion. A Stock Appreciation Right may relate to a particular Stock
Option and may be granted simultaneously with or subsequent to the Stock
Option to which it relates. Stock Appreciation Rights shall be subject to
the same restrictions and conditions as Stock Options under subsections
5.6, 5.7 and 5.8 of the Plan. To the extent granted in tandem with a Stock
Option, the exercise of a Stock Appreciation Right shall, in exchange for
the right to exercise a related Stock Option, entitle a Participant to an
amount equal to the appreciation in value of the shares covered by the
related Stock Option surrendered. Such appreciation in value shall be
equal to the excess of the Market Value of such shares at the time of the
exercise of the Stock Appreciation Right over the option price of such
shares.
6.2 EXERCISE; PAYMENT. To the extent granted in tandem with a Stock
Option, Stock Appreciation Rights may be exercised only when a related
Stock Option could be exercised and only when the Market Value of the stock
subject to the Stock Option exceeds the exercise price of the Stock Option.
The Committee shall have discretion to determine the form of payment made
upon the exercise of a Stock Appreciation Right, which may take the form of
shares of Common Stock.
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SECTION 7
STOCK AWARDS
7.1 GRANT. A Participant may be granted one or more Stock Awards
under the Plan in lieu of, or as payment for, the rights of a Participant
under any other compensation plan, policy or program of the Company or its
Subsidiaries. Stock Awards shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by
the Committee in its sole discretion.
7.2 RIGHTS AS A SHAREHOLDER. A Participant shall have all voting,
dividend, liquidation and other rights with respect to shares of Common
Stock issued to the Participant as a Stock Award under this Section 7 upon
the Participant becoming the holder of record of the Common Stock granted
pursuant to such Stock Awards; PROVIDED, that the Committee may impose such
restrictions on the assignment or transfer of Common Stock awarded pursuant
to a Stock Award as it deems appropriate.
SECTION 8
CHANGE IN CONTROL
Without in any way limiting the Committee's discretion, the
Committee may include in any Incentive Award provisions for acceleration of
any vesting or other similar requirements or for the elimination of any
restrictions upon Incentive Awards upon a Change in Control of the Company.
The Committee may also include provisions for Participants to receive cash
in lieu of outstanding Stock Options upon a Change in Control of the
Company.
SECTION 9
GENERAL PROVISIONS
9.1 NO RIGHTS TO AWARDS. No Participant or other person shall have
any claim to be granted any Incentive Award under the Plan and there is no
obligation of uniformity of treatment of employees, Participants or holders
or beneficiaries of Incentive Awards under the Plan. The terms and
conditions of Incentive Awards of the same type and the determination of
the Committee to grant a waiver or modification of any Incentive Award and
the terms and conditions thereof need not be the same with respect to each
Participant.
9.2 WITHHOLDING. The Company or a Subsidiary shall be entitled to
(a) withhold and deduct from future wages of a Participant (or from other
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amounts that may be due and owing to a Participant from the Company or a
Subsidiary), or make other arrangements for the collection of, all amounts
necessary to satisfy any and all federal, state and local withholding and
employment-related tax requirements attributable to an Incentive Award or
any action related to an Incentive Award, including, without limitation,
the grant, exercise or vesting of, or payment of dividends with respect to,
an Incentive Award or a disqualifying disposition of Common Stock received
upon exercise of an incentive stock option; or (b) require a Participant
promptly to remit the amount of such withholding to the Company before
taking any action with respect to an Incentive Award. Unless the Committee
determines otherwise, withholding may be satisfied by withholding Common
Stock to be received upon exercise or by delivery to the Company of
previously owned Common Stock. The Company may establish such rules and
procedures concerning timing of any withholding election as it deems
appropriate.
9.3 COMPLIANCE WITH LAWS; LISTING AND REGISTRATION OF SHARES. All
Incentive Awards granted under the Plan (and all issuances of Common Stock
or other securities under the Plan) shall be subject to all applicable
laws, rules and regulations and to the requirement that if at any time the
Committee shall determine, in its discretion, that the listing,
registration or qualification of the shares covered thereby upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the grant of such Incentive Award or
the issue or purchase of shares thereunder, such Incentive Award may not be
exercised in whole or in part, or the restrictions on such Incentive Award
shall not lapse, unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
9.4 NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained
in the Plan shall prevent the Company or any Subsidiary from adopting or
continuing in effect other or additional compensation arrangements,
including the grant of stock options and other stock-based awards and such
arrangements may be either generally applicable or applicable only in
specific cases.
9.5 NO RIGHT TO EMPLOYMENT. The grant of an Incentive Award shall
not be construed as giving a Participant the right to be retained in the
employ of the Company or any Subsidiary. The Company or any Subsidiary may
at any time dismiss a Participant from employment, free from any liability
or any claim under the Plan, unless otherwise expressly provided in the
Plan or in any written agreement with a Participant.
9.6 SUSPENSION OF RIGHTS UNDER INCENTIVE AWARDS. The Company, by
written notice to a Participant, may suspend a Participant's and any
transferee's rights under any Incentive Award for a period not to exceed 30
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days while the termination for cause of that Participant's employment with
the Company and its Subsidiaries is under consideration.
9.7 GOVERNING LAW. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Michigan and applicable federal
law.
9.8 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining provisions of the Plan and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
SECTION 10
TERMINATION AND AMENDMENT
The Board may terminate the Plan at any time, or may from time to
time amend the Plan as it deems proper and in the best interests of the
Company, provided that no such amendment may impair any outstanding
Incentive Award without the consent of the Participant, except according to
the terms of the Plan or the Incentive Award. No termination, amendment or
modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written
consent of the Participant holding such Incentive Award unless such
amendment or modification operates solely to the benefit of the
Participant.
SECTION 11
EFFECTIVE DATE AND DURATION OF THE PLAN
This Plan shall take effect April 29, 1997, subject to approval
by the shareholders at the 1997 Annual Meeting of Shareholders or any
adjournment thereof or at a Special Meeting of Shareholders. No Incentive
Award shall be granted under the Plan after April 28, 2007.
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1ST COMMUNITY BANCORP, INC.
P R O X Y 109 EAST DIVISION P R O X Y
SPARTA, MICHIGAN 49345
ANNUAL MEETING OF SHAREHOLDERS - APRIL 29, 1997
The undersigned shareholder appoints Jae M. Maxfield, Linda R.
Pitsch and Lawrence D. Bradford, or any of them, each with the power to
appoint his or her substitute, attorneys and proxies to represent the
shareholder and to vote and act, with respect to all shares that the
shareholder would be entitled to vote at the annual meeting of shareholders
of 1st Community Bancorp, Inc. referred to above and any adjournment of
that meeting, on all matters that come before the meeting.
1. Election of Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated below) to vote for all nominees
listed below
William F. Cutler, Jr. L. Edmond Eary, Jr., M.D. Andrew W. Zamiara
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES
2. Proposal to Approve and Adopt Restated Articles of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL
3. Proposal to Approve the Executive Stock Incentive Plan of 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. IF THIS PROXY
IS PROPERLY EXECUTED AND DELIVERED, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL
BE VOTED FOR ELECTION OF ALL NOMINEES NAMED ON THIS PROXY AND FOR EACH OF
THE PROPOSALS IDENTIFIED ABOVE. THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTERS THAT MAY
COME BEFORE THE MEETING OR ANY ADJOURNMENT OF THE MEETING.
<PAGE>
Dated: _________________, 1997 Please sign exactly as your name appears
on this proxy. If signing for estates,
trusts or corporations, title or
capacity should be stated. IF SHARES
ARE HELD JOINTLY, EACH HOLDER SHOULD
SIGN.
________________________________________
Signature
________________________________________
Signature if held jointly
IMPORTANT -- PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE
