-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fg0M2q1zXXeAzIapEp+yX6KaT4cMrfib+vy6/gPZlsbGFlKc2u8Xm7oGftIDQ/ye BgTeyvDR8FZbxdf4/dX2tg== /in/edgar/work/20000814/0000892712-00-000118/0000892712-00-000118.txt : 20000921 0000892712-00-000118.hdr.sgml : 20000921 ACCESSION NUMBER: 0000892712-00-000118 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH COUNTRY FINANCIAL CORP CENTRAL INDEX KEY: 0000036506 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 382062816 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20167 FILM NUMBER: 696633 BUSINESS ADDRESS: STREET 1: 130 S CEDAR ST STREET 2: PO BOX 369 CITY: MANISTIQUE STATE: MI ZIP: 49854 BUSINESS PHONE: 9063418401 MAIL ADDRESS: STREET 1: 130 S CEDER ST STREET 2: P O BOX 369 CITY: MANISTIQUE STATE: MI ZIP: 49854 FORMER COMPANY: FORMER CONFORMED NAME: FIRST MANISTIQUE CORP DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from <> to <> Commission file number: 0-20167 NORTH COUNTRY FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) MICHIGAN 38-2062816 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3530 NORTH COUNTRY DRIVE, TRAVERSE CITY, MI 49684 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (231) 929-5600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of July 31, 2000, there were outstanding 6,960,100 shares of the registrant's common stock, no par value. NORTH COUNTRY FINANCIAL CORPORATION INDEX PART 1. FINANCIAL INFORMATION Page No. Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 2000 (Unaudited) and December 31, 1999 1 Condensed Consolidated Statements of Income - Three and Six Months Ended June 30, 2000 (Unaudited) and June 30, 1999 (Unaudited) 2 Condensed Consolidated Statements of Changes in Shareholders' Equity - Three and Six Months Ended June 30, 2000 (Unaudited) and June 30, 1999 (Unaudited) 3 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2000 (Unaudited) and June 30, 1999 (Unaudited) 4-5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-13 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15 CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) June 30, December 31, 2000 1999 (Unaudited) ASSETS Cash and due from banks $ 22,250 $ 26,160 Federal funds sold 7,005 0 -------- -------- Total cash and cash equivalents 29,255 26,160 Interest-bearing deposits in other financial institutions 1,367 679 Securities available for sale 57,543 43,343 Total loans 524,239 466,621 Allowance for loan losses (7,720) (6,863) -------- ------- 516,519 459,758 Premises and equipment 18,383 19,118 Other assets 22,063 19,384 -------- -------- Total assets $645,130 $568,442 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing $ 42,422 $ 43,606 Interest-bearing 460,222 419,392 Total deposits 502,644 462,998 Borrowings 81,593 46,878 Accrued expenses and other liabilities 5,175 5,296 -------- -------- Total liabilities 589,412 515,172 -------- -------- Guaranteed preferred beneficial interests in the Corporation's subordinated debentures 12,450 12,450 -------- -------- Shareholders' equity Preferred stock, no par value, 500,000 shares authorized, no shares outstanding Common stock, no par value, 18,000,000 shares authorized, 6,968,012 and 7,000,176 issued and outstanding at June 30, 2000 and December 31, 1999 15,926 16,418 Retained earnings 27,814 25,058 Accumulated other comprehensive deficit (472) (656) -------- -------- Total shareholders' equity 43,268 40,820 -------- -------- Total liabilities and shareholders' equity $645,130 $568,442 ======== ======== See accompanying notes to consolidated finacial statements. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data) (Unaudited) Three months ended Six months ended ------June 30,----- ----- June 30,----- 2000 1999 2000 1999 Interest income Interest and fees on loans $12,589 $ 9,896 $23,824 $19,345 Interest on securities Taxable 797 167 1,574 353 Tax-exempt 175 10 344 29 Other interest income 100 114 191 192 ------- ------- ------- ------- Total interest income 13,661 10,187 25,933 19,919 ------- ------- ------- ------- Interest expense Deposits 5,971 4,445 11,143 8,675 Borrowings 1,113 316 1,918 708 Subordinated debentures 281 156 554 156 ------- ------- ------- ------- Total interest expense 7,365 4,917 13,615 9,539 ------- ------- ------- ------- Net interest income 6,296 5,270 12,318 10,380 Provision for loan losses 1,525 213 1,875 426 ------- ------- ------- ------- Net interest income after provision for loan losses 4,771 5,057 10,443 9,954 ------- ------- ------- ------- Other income Service fees 504 469 983 892 Gain on sales of loans 12 30 25 59 Gain on sales of securities 49 0 49 0 Net gain on sale of branches 0 0 292 0 Other operating income 842 150 1,024 313 ------- ------- ------- ------ Total other income 1,407 649 2,373 1,264 ------- ------- ------- ------ Other expenses Salaries and employee benefits 1,818 1,530 3,477 3,002 Occupancy and equipment 734 622 1,504 1,252 Other 1,963 2,015 3,748 3,349 ------- ------- ------- ------- Total other expenses 4,515 4,167 8,729 7,603 ------- ------- ------- ------- Income before provision for income taxes 1,663 1,539 4,087 3,615 Provision for income taxes 201 232 675 767 ------- ------- ------- ------- Net income $ 1,462 $ 1,307 $ 3,412 $ 2,848 ======= ======= ======= ======= Basic earnings per common share $ .21 $ .19 $ .49 $ .40 ======= ======= ======= ======= Diluted earnings per common share $ .21 $ .18 $ .49 $ .40 ======= ======= ======= ======= Dividends paid per common share $ .05 $ .05 $ .09 $ .09 ======= ======= ======= ======= See accompanying notes to consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Dollars in thousands) (Unaudited) Three months ended Six months ended ------June 30,------ -----June 30,------ 2000 1999 2000 1999 Balance - beginning of period $42,411 $38,214 $40,820 $39,469 Net income for period 1,462 1,307 3,412 2,848 Net unrealized gain (loss) on securities available for sale 25 (78) 184 (119) ------- ------- ------- ------- Total comprehensive income 1,487 1,229 3,596 2,729 Cash dividends (330) (319) (656) (640) Issuance of common stock 100 111 202 204 Common stock retired (400) (200) (694) (2,727) ------- ------- ------- ------- Balance - end of period $43,268 $39,035 $43,268 $39,035 ======= ======= ======= ======= See accompanying notes to consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited), Six months ended June 30, 2000 1999 Cash flows from operating activities Net income $ 3,412 $ 2,848 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 1,169 1,018 Provision for loan losses 1,875 426 Gain on sales of securities (49) 0 Gain on sale of premises and equipment (271) (138) Net gain on sale of branches (292) 0 Change in other assets (2,513) 963 Change in other liabilities (152) 569 -------- -------- Net cash provided by operating activities 3,179 5,686 -------- -------- Cash flows from investing activities Net increase in interest-bearing deposits in other financial institutions (688) 0 Purchase of securities available for sale (24,547) (6,302) Proceeds from sales of securities available for sale 9,946 0 Proceeds from maturities, calls or paydowns of securities available for sale 795 2,389 Net increase in loans (58,644) (15,747) Purchase of premises and equipment (492) (1,418) Proceeds from sales of premises and equipment 774 211 Net cash paid for sale of branches (4,540) 0 Net cash received for net liabilities assumed in acquisition of branches 14,390 15,504 -------- -------- Net cash used in investing activities (63,006) (5,363) -------- -------- Cash flows from financing activities Net increase in deposits 29,355 25,597 Proceeds from borrowings 65,000 8,000 Payment on borrowings (30,285) (12,061) Proceeds from issuance of common stock 202 204 Retirement of common stock (694) (2,727) Net proceeds from the issuance of guaranteed preferred beneficial interests in the Corporation's subordinated debentures 0 11,882 Payment of cash dividends (656) (640) -------- --------- Net cash provided by financing activities 62,922 30,255 -------- -------- Net change in cash and cash equivalents 3,095 30,578 Cash and cash equivalents at beginning of period 26,160 22,641 -------- -------- Cash and cash equivalents at end of period $ 29,255 $ 53,219 ======== ======== See accompanying notes to condensed consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Dollars in thousands) (Unaudited) Six months ended June 30, 2000 1999 Supplemental disclosures of cash flow information Cash paid for: Interest $ 12,502 $ 9,525 Income taxes 1,993 341 Assets and liabilities acquired in branch acquisitions: Premises and equipment, net (139) (286) Core deposit intangibles and goodwill (664) (1,680) Deposits 15,149 17,463 Other liabilities 44 7 Assets and liabilities divested in branch sales: Loans (8) 0 Premises and equipment, net (31) 0 Deposits 4,858 0 Other liabilities 13 0 See accompanying notes to condensed consolidated financial statements. 1.BASIS OF PRESENTATION The unaudited condensed consolidated financial statements of North Country Financial Corporation (the Registrant) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The unaudited consolidated financial statements and footnotes thereto should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. 2.FUTURE ACCOUNTING CHANGES In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". This Statement requires that all derivative financial instruments be recognized as either assets or liabilities in the Balance Sheet. Derivative financial instruments not designated as hedges will be measured at fair value with changes in fair value being recognized in earnings in the period of change. If a derivative is designated as a hedge, the accounting for changes in fair value will depend on the specific exposure being hedged. The Statement is effective for fiscal years beginning after June 15, 2000. Management, at this time, cannot determine the effect adoption of this Statement may have on the consolidated financial statements of the Registrant as the effect is dependent on the amount and nature of derivatives and hedges held at the time of adoption of the Statement. 3.EARNINGS PER SHARE The factors used in the earnings per share computation follow. (In thousands, except per share data) Three months Six months ended ended June 30, June 30, 2000 1999 2000 1999 Basic earnings per common share: Net income $1,462 $1,307 $3,412 $2,848 Weighted average common shares outstanding 6,979 7,031 6,987 7,052 ------ ------ ------ ------ Basic earnings per common share $ .21 $ .19 $ .49 $ .40 ====== ====== ====== ====== Diluted earnings per common share: Net income $1,462 $1,307 $3,412 $2,848 Weighted average common shares outstanding for basic earnings per common share 6,979 7,031 6,987 7,052 Add: Dilutive effect of assumed exercises of stock options 12 91 12 101 Add: Dilutive effect of directors' deferred stock compensation 37 7 37 7 Average shares and dilutive ------ ------ ------ ------ potential common shares 7,028 7,129 7,036 7,160 ------ ------ ------ ------ Diluted earnings per common share $ .21 $ .18 $ .49 $ .40 ====== ====== ====== ====== 4.INVESTMENT SECURITIES The amortized cost and estimated fair value of investment securities available for sale as of June 30, 2000 and December 31, 1999 are as follows (in thousands): June 30, 2000 December 31, 1999 Amortized Estimated Amortized Estimated Cost Fair Value Cost Fair Value U.S. Treasury securities and obligations of U.S. Government agencies and corporations $ 10,904 $ 10,392 $ 9,863 $ 9,392 Obligations of states and political subdivisions 18,852 18,852 16,356 16,210 Corporate securities 4,049 4,134 3,049 3,008 Mortgage-related securities 24,453 24,165 15,070 14,733 -------- -------- -------- -------- Total investment securities available for sale $ 58,258 $ 57,543 $ 44,338 $ 43,343 5.ALLOWANCE FOR LOAN LOSSES Activity in the allowance for loan losses for the six months ended June 30, 2000 and 1999, are summarized as follows (in thousands): June 30, June 30, 2000 1999 Balance at beginning of period $ 6,863 $ 6,112 Charge-offs (1,098) (430) Recoveries 80 52 Provision for loan losses 1,875 426 ------- ------- $ 7,720 $ 6,160 ======= ======= Information regarding impaired loans follows (in thousands): As of and As of and for the six for the year months ended ended June 30, December 31, 2000 1999 Average investment in impaired loans $ 6,682 $ 6,128 Balance of impaired loans 9,041 5,604 6.BORROWINGS Borrowings consist of the following at June 30, 2000 and December 31, 1999 (in thousands): June 30, December 31, 2000 1999 Federal Home Loan Bank advances at various rates with various maturities (see annual financial statements as referenced in Note 1) $79,782 $45,067 Farmers Home Administration, $2,000,000 fixed rate note payable maturing August 24, 2024, interest payable at 1% 1,811 1,811 ------- ------- $81,593 $46,878 The Federal Home Loan Bank borrowings are collateralized by a blanket collateral agreement on the Registrant's residential mortgage loans, U.S. Government and agency securities, and Federal Home Loan Bank stock. Prepayment of the advances is subject to the provisions and conditions of the credit policy of the Federal Home Loan Bank of Indianapolis in effect as of June 30, 2000. Borrowings other than Federal Home Loan Bank advances are not subject to prepayment penalties. 7.CURRENT EVENTS On June 16, 2000, the Registrant purchased branch offices located in Glen Arbor and Alanson from Old Kent Bank. In connection with these acquisitions, the Registrant assumed deposits of $15,149,000 and other liabilities of $44,000. Property and equipment of $139,000 was also acquired. The related core deposit intangibles and goodwill totaled $664,000. These branch acquisitions are consistent with the Registrant's strategy of expanding in Michigan's Lower Peninsula. In April, 2000, the Registrant closed the Newberry Hill branch office. The deposits and loans for this office were transferred to an existing branch office in a nearby location. The Registrant is in the process of establishing new offices in Cadillac and Boyne City in Michigan's Lower Peninsula. The Cadillac office is anticipated to open in the third quarter of 2000 while the Boyne City office is expected to open in 2001. On June 21, 2000, the Board of Directors adopted a Shareholder Rights Plan. The Rights Plan was not adopted in response to any specific effort to acquire control of the Registrant. Rather, it was adopted to protect shareholders against attempts to acquire control of the Registrant by means of "creeping" acquisitions in the open market, a hostile tender offer made at less than a full and fair price, and other takeover tactics that can be used to deprive shareholders of the ability to get a full and fair price for all of their shares in the context of a change in control. The Board believes that rights plans have also proven effective in providing a board of directors of a target company with more time to pursue alternatives to an inadequate hostile bid and negotiating leverage with a bidder should the Board decide to engage in such activities. The following discussion and analysis of financial condition and results of operations provides additional information to assess the condensed consolidated financial statements of the Registrant and its wholly- owned subsidiaries through the second quarter of 2000. The discussion should be read in conjunction with those statements and their accompanying notes. The Registrant is not aware of any market or institutional trends, events, or circumstances that will have or are reasonably likely to have a material effect on liquidity, capital resources, or results of operations except as discussed herein. Also, the Registrant is not aware of any current recommendations by regulatory authorities which will have such effect if implemented. Forward-Looking Statements: This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Registrant intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward- looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Registrant, are generally identifiable by use of the words "believe", "expect", "intend", "anticipate", "estimate", "project" or similar expressions. The Registrant's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Registrant and the subsidiaries include, but are not limited to, changes in: interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Registrant's market area and accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Registrant and its business, including additional factors that could materially affect the Registrant's financial results, is included in the Registrant's filings with the Securities and Exchange Commission. Financial Highlights: Year-to-date consolidated net income was $3.41 million through June 30, 2000 compared to $2.85 million for the same period in 1999. Diluted earnings per share increased from $0.40 through June 30, 1999, to $0.49 for the same period in 2000. The loan portfolio continues a significant growth trend with gross loans increasing $57.6 million or 12.4% since December 31, 1999. Loan growth remains focused in the commercial lending and leasing areas. The loan growth in 2000 has been funded primarily through increases in the deposit portfolio and borrowings. Deposits have increased $39.6 million or 8.6% since December 31, 1999, with the primary area of growth being interest-bearing demand accounts. Borrowings have increased $34.7 million or 74.1% from December 31, 1999 to June 30, 2000. Financial Condition: Cash and Cash Equivalents: Cash and cash equivalents increased $3.1 million or 11.8% through the second quarter of 2000. The increase was largely funded by increases in deposits and borrowings as discussed more fully below, and is available for growth in the Bank's loan and investment portfolios. Investment Securities: Available for sale securities increased $14.2 million or 32.8% through the second quarter of 2000. The growth is a result of strategies to manage interest rate risk through diversification of the balance sheet. Management has utilized its available capacity to borrow additional funds at the Federal Home Loan Bank in order to match the pricing and maturity of investment security purchases. Loans: Through the second quarter of 2000, loan balances increased by $57.6 million or 12.4%. Management believes loans provide the most attractive earning asset yield available to the Registrant and that trained personnel and controls are in place to successfully manage a growing portfolio. Accordingly, management intends to continue to maintain loans at a high level while maintaining adequate liquidity. As shown in the table below, the loan mix remains relatively constant with a slight increase in commercial and governmental leases as a percent of total loans for the six months ended June 30, 2000 compared to December 31, 1999. Following is a summary of the loan mix at June 30, 2000 and December 31, 1999 (in thousands): June 30, % of December 31, % of 2000 Total 1999 Total Loans: Commercial real estate $ 86,226 16.4% $ 79,000 16.9% Commercial, financial, and agricultural 197,204 37.6 179,592 38.5 Leases: Commercial 41,760 8.0 22,541 4.8 Governmental 56,440 10.8 48,148 10.3 1-4 family residential real estate 115,007 21.9 107,751 23.1 Consumer 14,596 2.8 17,051 3.7 Construction 13,006 2.5 12,538 2.7 -------- ------ -------- ------ $524,239 100.0% $466,621 100.0% ======== ===== ======== ====== The allowance for loan losses is maintained by management at a level considered to be adequate to cover probable losses related to specifically identified loans, as well as probable losses inherent in the balance of the loan portfolio. At June 30, 2000 and December 31, 1999, the allowance for loan losses was equal to 1.5% of total loans outstanding. Credit Quality: Management analyzes the allowance for loan losses in detail on a monthly basis to ensure that the losses inherent in the portfolio are properly reserved for in the allowance for loan losses. The Registrant's success in maintaining strong credit quality is demonstrated in its historical charge-off experience. Net charge-offs to gross loans outstanding was 0.20% and 0.08% for the six months ended June 30, 2000 and 1999, respectively. Charge-offs for the six month period ended June 30, 2000 increased $668,000 from the same period in 1999; while increasing, the charge-off level is considered to be manageable. To compensate for the increased charge-offs and increased levels of non-performing loans as described below, the provision for loan losses was increased $1.4 million from $426,000 for the six-month period ended June 30, 1999 to $1.88 million for the same period in 2000. The table presented below shows the balance of non- performing loans - which include nonaccrual loans and loans 90 or more days past due and still accruing - as of June 30, 2000 and December 31, 1999 (in thousands): June 30, December 31, 2000 1999 Nonaccrual loans $ 5,256 $ 95 Loans 90 days or more past due and still accruing 1,820 2,452 Nonaccrual loans have increased $5.2 million from December 31, 1999 to June 30, 2000 while loans 90 days or more past due and still accruing have decreased by $632,000 during that same time period. At June 30, 2000, loans to two commercial borrowers represented $3.8 million of the $5.3 million of nonaccrual loans. Management anticipates charge-offs on these specific loans of approximately $1.5 million; therefore, as discussed above, the provision for loan losses has been increased accordingly during the quarter ended June 30, 2000. The remaining increase in nonaccrual loans of $1.4 million relates to loans to thirteen borrowers with individual balances less than $200,000. Management continues to monitor the situation on these and other non-performing loans and has taken various actions to reduce the level of non-performing loans. Non-performing loans to total gross loans were 1.00% and 0.55% at June 30, 2000 and December 31, 1999, respectively. Deposits: Total deposits through the second quarter have increased $39.6 million or 8.6%. While noninterest-bearing deposit balances decreased, interest-bearing deposit balances increased through June 30, 2000. Of the total increase, $10.3 million represents the net increase due to branch acquisitions and divestitures as disclosed in the Condensed Consolidated Statements of Cash Flows. The remaining growth is attributed to the branch network as well as from the issuance of brokered deposits. Borrowings: The Registrant's branching network is a relatively high cost network in comparison to peers. Accordingly, the Registrant uses alternative funding sources to provide funds for lending activities and to grow the Bank's investment portfolio as described above. At June 30, 2000, $79.8 million of the total borrowings were from the Federal Home Loan Bank of Indianapolis. Alternative sources of funding can be obtained at interest rates which are competitive with, or lower than, retail deposit rates and with minimal administrative costs. Guaranteed Preferred Beneficial Interests in the Corporation's Subordinated Debentures: Consistent with the Registrant's strategic plan, the Registrant completed a private offering in May 1999 of Capital, or Trust Preferred, securities in the amount of $12,450,000. The proceeds were used to support the Registrant's capital position allowing for future growth and increased common shareholder value. Under regulatory guidelines, such securities are eligible as regulatory capital, as defined, subject to certain limitations. Shareholder's Equity: Total shareholder's equity increased $2.5 million from December 31, 1999 to June 30, 2000. The increase primarily resulted from net income of $3.4 million offset by the repurchase of common stock of $694,000 and cash dividends paid of $656,000. The Registrant will continue to selectively repurchase common stock as opportunities arise. Results of Operations: Net Interest Income: Net interest income for the quarter ended June 30, 2000 increased by $1.0 million or 19.5% compared to the same period one year ago. The increase in net interest income was largely the result of an increase in the loan volume for the second quarter of 2000 compared to the second quarter of 1999. The net interest margin, on a fully taxable equivalent basis, for the quarter ended June 30, 2000 was 5.03%, compared to 5.16% for the same period of 1999. The net interest margin has been impacted by the current economic conditions, the competitive nature of the Registrant's market, and the issuance of the subordinated debentures as discussed above. Overall, as interest rates continue to increase, the Registrant is not able to increase its lending rates at the same rate as the increases experienced in the cost of funds; therefore, margins are squeezed. Interest income from loans represented 92.2% of total interest income for the second quarter of 2000 compared to 97.1% for the same period of 1999. For both periods, the total interest income and the yield on total earning assets are strongly influenced by lending activities. Net interest income for the six months ended June 30, 2000 increased by 18.7% compared to the same period in 1999. The net interest margin, on a fully taxable equivalent basis for the six months ended June 30, 2000 decreased from 5.15% for the same period in 1999 to 5.01% for the same reasons mentioned in the preceding paragraph. Interest income from loans represented 91.9% of total interest income through the second quarter of 2000 compared to 97.1% for the same period of 1999. Provision for Loan Losses: The allowance for loan losses is maintained at a level adequate to cover losses inherent in the portfolio. The Registrant records a provision for loan losses necessary to maintain the allowance at that level after considering factors such as loan charge-offs and recoveries, changes in the mix of loans in the portfolio, loan growth, and other economic factors. The provision for loan losses increased by $1.3 million and $1.4 million for the quarter ended and six month period ended June 30, 2000, respectively, compared to the same periods in 1999. This is due primarily to increased net charge- off and non-performing loan levels as previously discussed. Management continues to fund the allowance at a rate consistent with its analysis of problem credits, also considering changes in the size and mix of its loan portfolio. The Registrant anticipates that, for the balance of 2000, its quarterly provision for loan losses will continue to be higher than the comparable periods in 1999. Other Income: Other income increased by $758,000 for the quarter ended June 30, 2000 compared to the same period in 1999. The increase was primarily due to an increase in other operating income of $692,000, largely the result of gains recognized on the sale of premises and equipment and other assets. Noninterest income increased by $1.1 million for the six months ended June 30, 2000 compared to the same period one year ago. The increase was primarily due to the net gain on the sale of the Garden office during the first quarter of 2000 and the net increase in other operating income, as discussed above, during the second quarter of 2000. Noninterest Expenses: Noninterest expense increased $348,000 or 8.4% for the quarter ended June 30, 2000 compared to the same period of 1999. Salary expense increased by $288,000 or 18.8% during the second quarter of 2000 compared to the second quarter of 1999. Occupancy expense increased by $112,000 or 18.0% for the second quarter of 2000 compared to the same period in 1999. Other noninterest expense decreased by $52,000 or 2.6% for the second quarter of 2000 compared to the same period in 1999. Noninterest expense increased $1.1 million or 14.8% for the six months ended June 30, 2000 compared to the same period of 1999. Salary expense increased by $475,000 or 15.8% through the second quarter of 2000 compared to the same period in 1999. Occupancy expense increased by $252,000 or 20.1% through the second quarter of 2000 compared to the same period in 1999. Other noninterest expense increased by $399,000 or 11.9% through the second quarter of 2000 compared to the same period in 1999. Federal Income Tax: The provision for income taxes was 12.1% of income before income tax for the quarter ended June 30, 2000 compared to 15.1% for the quarter ended June 30, 1999. For the six months ended June 30, 2000, the provision for income taxes was 16.5% of income compared to 21.2% for the same period in 1999. The difference between the effective tax rate and the federal corporate income tax rate of 34% is primarily due to tax-exempt interest earned on loans, leases, and investments. The effective tax rate has decreased as tax-exempt income has become a larger percentage of total interest income. Interest Rate Risk: Management actively manages the Registrant's interest rate risk. In relatively low interest rate environments which have been experienced during the past several years, borrowers have generally tried to extend the maturities and repricing periods on their loans and place deposits in demand or very short term accounts. Management has taken various actions to offset the imbalance which those tendencies would otherwise create. Commercial and real estate loans are written at variable rates or, if necessary, fixed rates for relatively short terms. Products have also been offered to give customers an incentive to accept longer term deposits. Management can also manage interest rate risk with the maturity periods of securities purchased, selling securities available for sale, and borrowing funds with targeted maturity periods. As of June 30, 2000, the Registrant had a cumulative liability gap position of approximately $90 million within the one-year timeframe. This position suggests that if the market interest rates decline in the next 12 months, the Registrant has the potential to earn more net interest income. Conversely, if market interest rates increase in the next 12 months, the Registrant has the potential to earn less net interest income. Management believes that it is properly positioned against significant changes in rates without severely altering operating results. Liquidity: The Registrant's sources of liquidity include principal payments on loans and investments, sales of securities available for sale, deposits from customers, borrowings from the Federal Home Loan Bank, other bank borrowings, and the issuance of common stock. The Registrant has ready access to significant sources of liquidity on an almost immediate basis. Management anticipates no difficulty in maintaining liquidity at the levels necessary to conduct the Registrant's day-to-day business activities. Capital Resources: It is the policy of the Registrant to maintain capital at a level consistent with both safe and sound operations and proper leverage to generate an appropriate return on shareholders' equity. The capital ratios of the Registrant exceed the regulatory minimum guidelines. The table below shows a summary of the Registrant's capital position in comparison to regulatory requirements. Tier I Tier I Total Capital to Capital to Capital to Average Risk Weighted Risk Weighted Assets Assets Assets Regulatory minimum 4.0% 4.0% 8.0% The Registrant June 30, 2000 7.8% 10.2% 11.5% December 31, 1999 8.4% 11.8% 13.0% The capital levels include adjustment for the Capital, or Trust Preferred, Securities issued in May 1999, subject to certain limitations. Federal Reserve guidelines limit the amount of cumulative preferred securities which can be included in Tier 1 capital to 25% of total Tier 1 capital. As of June 30, 2000, all of the $12,450,000 of Capital Securities were available as Tier 1 capital of the Registrant. As previously noted, the Capital Securities will be used to support the Registrant's current capital position allowing for future growth. PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds On April 3, 2000, the Registrant issued five shares of stock each to two employees of the Company. The shares were given to the employees in connection with an employee recognition program. The issuance of stock to the employees was exempt from registration under The Securities Act because the transaction did not involve an offer or sale of stock for value. Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of the Registrant's shareholders was held on April 18, 2000. The purpose of the meeting was to elect directors, each for a three year term, and to approve the North Country Financial Corporation 2000 Stock Incentive Plan. The name of each director elected, along with the number of votes cast for or authority withheld) follows: Authority Directors Elected For Withheld Paul W. Arsenault 4,525,902 99,612 Bernard A. Bouschor 4,510,655 114,859 C. Ronald Dufina 4,529,183 96,331 Wesley W. Hoffman 4,527,309 98,205 The North Country Financial Corporation 2000 Stock Incentive Plan received the following votes: For 3,837,942 Against 601,814 Abstained 160,999 Authority withheld 24,759 Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibits are filed as part of this report Number Exhibit 3 Articles of Incorporation, as amended 10 Employment Agreement dated July 3, 2000 between North Country Financial Corporation and Ronald G. Ford 27 Financial Data Schedule. (b) There were no reports filed on Form 8-K during the quarter ended June 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NORTH COUNTRY FINANCIAL CORPORATION ----------------------------------- (Registrant) August 11, 2000 /s/ Ronald G. Ford - ---------------- ------------------ Date RONALD G. FORD, CHAIRMAN AND CEO August 11, 2000 /s/ Kristine E. Hoefler - ---------------- ----------------------- Date KRISTINE E. HOEFLER, EXECUTIVE VICE PRESIDENT AND CFO EX-3 2 0002.txt ATRICLES OF INCORPORATION AS AMENDED RESTATED ARTICLES OF INCORPORATION OF FIRST MANISTIQUE CORPORATION The following Restated Articles of Incorporation are executed by the undersigned corporation pursuant to the provisions of Sections 641-651, Act 284, Public Acts of 1972, as amended. 1. The present name of the corporation, and its only name since its incorporation is First Manistique Corporation. 2. The corporation identification number (CID) assigned by the bureau is 063-316. 3. All of the former names of the corporation are: None 4. The date of filing the original Articles of Incorporation was December 6, 1974. 5. The following Restated Articles of Incorporation supersede the original Articles of Incorporation, as heretofore amended, and shall be the Articles of Incorporation of the corporation. ARTICLE I The name of the corporation is First Manistique Corporation. ARTICLE II The purpose or purposes for which the corporation is organized is to engage in any activity within the purposes for which corporations may be organized under the Business Corporation Act of Michigan, as amended from time to time, and including without limitation the power to act as a bank holding company as permitted by the Federal Bank Holding Company Act of 1956, as amended, or hereafter supplemented or amended. ARTICLE III The total authorized shares: 1. Common Shares 2,000,000 -------- Preferred Shares 25,000 --------- 2. A statement of all or any of the relative rights, preferences and limitations of the shares of each class is as follows: The Board of Directors may cause the Corporation to issue Preferred Shares in one or more series, each series to bear a distinctive designation and to have such relative rights and preferences as shall be prescribed by resolution of the Board. Such resolutions, when filed, shall constitute amendments to these Articles of Incorporation. ARTICLE IV 1. The address of the current registered office is: 130 South Cedar Street, P.O. Box 369, Manistique, Michigan 49854, which is also the mailing address of the current registered office. 2. The name of the current resident agent is: Ronald G. Ford ARTICLE V When a compromise or arrangement or a plan of reorganization of this corporation is proposed between this corporation and its creditors or any class of them or between this corporation and its shareholders or any class of them, a court of equity jurisdiction within the state, on application of this corporation or of a creditor or shareholder thereof, or on application of a receiver appointed for the corporation, may order a meeting of the creditors or class of creditors or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as the court directs. If a majority in number representing 3/4 in value of the creditors or class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement, agree to a compromise or arrangement, or a reorganization of this corporation as a consequence of the compromise or arrangement, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on this corporation. ARTICLE VI A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for a breach of fiduciary duty as a director, except for liability: (a) for any breach of the director's duty of loyalty to the Corporation or its shareholders; (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (c) resulting from a violation Section 551(1) of the Michigan Business Corporation Act; or (d) for any transaction from which the director derived an improper personal benefit. In the event the Michigan Business Corporation Act is amended, after approval by the shareholders of this Article VII, to authorize corporate action further eliminating or limiting 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 so amended. Any repeal, modification or adoption of any provision in these Articles of Incorporation inconsistent with this Article VI shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal, modification or adoption. These Restated Articles of incorporation were duly adopted by the Board of Directors without a vote of the shareholders in accordance with the provisions of Section 642, Act 284, Public Acts of 1972, as amended. These Restated Articles of Incorporation only restate and integrate and do not further amend the provisions of the Articles of Incorporation as heretofore amended and there is no material discrepancy between those provisions and the provisions of these Restated Articles. Signed this 28th day of December, 1995. FIRST MANISTIQUE CORPORATION By: /s/ Ronald G. Ford -------------------------- (Name) Its: President & CEO -------------------------- CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION Pursuant to the provisions of Act 284, Public Acts of 1972, as amended, the undersigned corporation executes the following Certificate: 1. The present name of the corporation is: First Manistique Corporation 2. The identification number assigned by the Bureau is: 063 316 3. The location of the registered office is: 130 South Cedar P.O. Box 369 Manistique, MI 49854 4. The following amendments to the Articles of Incorporation were duly adopted on the 23rd day of April, 1996. The amendments were duly adopted in accordance with Section 611(2) of the Act by the vote of the shareholders. The necessary votes were cast in favor of the amendments. Article III of the Corporation's Articles of Incorporation is hereby amended to read as follows: ARTICLE III The total number of shares of all classes of stock which the corporation shall have authority to issue is 6,500,000 shares, of which 6,000,000 shares shall be of a single class of common stock and 500,000 shares shall be series preferred stock. The authorized shares of common stock are all of one class with equal voting power, and each such share shall be equal to every other such share. The Board of Directors of the corporation may cause the corporation to issue preferred shares in one or more series, each series to bear a distinctive designation and to have such relative rights and preferences as shall be prescribed by resolution of the Board. Such resolutions, when filed, shall constitute amendments to these Articles of Incorporation. A new Article VII is added to the Corporation's Articles of Incorporation and reads as follows: ARTICLE VII BOARD OF DIRECTORS Section 1. Authority and Size of Board. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors. The number of directors of the corporation that shall constitute the Board of Directors shall be determined from time to time by resolution adopted by the affirmative vote of: A. At least eighty percent (80%) of the Board of Directors, and B. A majority of the Continuing Directors (as hereinafter defined). Section 2. Classification of Board and Filling of Vacancies. Subject to applicable law, the directors shall be divided into three (3) classes, each class to be as nearly equal in number as possible. At each annual meeting of shareholders, the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting and until their successors shall be duly elected and qualified or their resignation or removal. Any vacancies in the Board of Directors for any reason, and any newly created directorships resulting from any increase in the number of directors, may be filled only by the Board of Directors, acting by an affirmative vote of a majority of the Continuing Directors (as hereinafter defined) and an eighty percent (80%) majority of all of the directors then in office, although less than a quorum, and any director so chosen shall hold office until the next election of the class for which the director was chosen and until his successor shall be duly elected and qualified or his resignation or removal. No decrease in the number of directors shall shorten the term of any incumbent director. Section 3. Removal of Directors. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the corporation (and notwithstanding the fact that some lesser percentage may be specified by law or by these Articles of Incorporation or the Bylaws of the corporation), any one or more directors of the corporation may be removed at any time, with or without cause, but only by either (i) the affirmative vote of a majority of the Continuing Directors and at least eighty percent (80%) of the Board of Directors or (ii) the affirmative vote, at a meeting of the shareholders called for that purpose, of the holders of at least eighty percent (80%) of the voting power of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors (the "Voting Stock") voting together as a single class. Section 4. Certain Definitions. For the purposes of this Article VII: A. A "person" shall mean any individual, firm, corporation or other entity. B. "Interested Shareholder" shall mean any person, other than the corporation or any Subsidiary, who or which: (i) is the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the outstanding Voting Stock; or (ii) is an Affiliate of the corporation and at any time within the two (2) year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of ten percent (10%) or more of the voting power of the then outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two (2) year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. C. A person shall be a "beneficial owner" of any Voting Stock: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. D. For the purposes of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Section 4, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph C of this Section 4 but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. E. "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the date this Article of the Articles of Incorporation is filed with the Corporation Division of the Michigan Department of Commerce. F. "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph B of this Section 4, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the corporation. G. "Continuing Director" means any member of the Board of Directors of the corporation (the "Board") who is unaffiliated with the Interested Shareholder and was a member of the Board prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is unaffiliated with the Interested Shareholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board. Section 5. Powers of Continuing Directors. A majority of the Continuing Directors of the corporation shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article VII, including without limitation (i) whether a person is an Interested Shareholder, (ii) the number of shares of Voting Stock beneficially owned by any person and (iii) whether a person is an Affiliate or Associate of another; and the good faith determination of a majority of the Continuing Directors on such matters shall be conclusive and binding for all the purposes of this Article VII. Section 6. Nominations for Board. Nominations for the election of directors may be made by the Board of Directors or by a shareholder entitled to vote in the election of directors. A shareholder entitled to vote in the election of directors, however, may make such a nomination only if written notice of such shareholder's intent to do so has been given, either by personal delivery or by United States mail, postage prepaid, and received by the corporation (a) with respect to an election to be held at an annual meeting of shareholders, not later than sixty (60) nor more than ninety (90) days prior to the first anniversary of the preceding year's annual meeting (or, if the date of the annual meeting is changed by more than twenty (20) days from such anniversary date, within ten (10) days after the date the corporation mails or otherwise gives notice of the date of such meeting), and (b) with respect to an election to be held at a special meeting of shareholders called for that purpose, not later than the close of business on the tenth (10th) day following the date on which notice of the special meeting was first mailed to the shareholders by the corporation. Each shareholder's notice of intent to make a nomination shall set forth: (i) the name(s) and address(es) of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the shareholder (a) is a holder of record of stock of the corporation entitled to vote at such meeting, (b) will continue to hold such stock through the date on which the meeting is held, and (c) intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination is to be made by the shareholder; (iv) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to Regulation 14A promulgated under Section 14 of the Securities Exchange Act of 1934, as amended, as now in effect or hereafter modified; and (v) the consent of each nominee to serve as a director of the corporation if so elected. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the qualifications of such proposed nominee to serve as a director. No person shall be eligible for election as a director unless nominated (i) by a shareholder in accordance with the foregoing procedure or (ii) by the Board of Directors. A new Article VIII is added to the Corporation's Articles of Incorporation and reads as follows: ARTICLE VIII NOTIFICATION OF SHAREHOLDER PROPOSALS The Board of Directors of the corporation shall submit for consideration and vote by the shareholders, at annual meetings of the shareholders, only those proposals that are first brought before the meeting by or at the direction of the Board of Directors, or by any shareholder entitled to vote at such meeting (a) who submits to the corporation a timely Notice of Proposal in accordance with the requirements of this Article VIII and the proposal is a proper subject for action by shareholders under Michigan law, or (b) whose proposal is included in the corporation's proxy materials in compliance with all the requirements set forth in the applicable rules and regulations in the Securities and Exchange Commission. Each shareholder's Notice of Proposal shall set forth: (a) The name and address of the shareholder submitting the proposal, as they appear on the corporation's books and records; (b) A representation that the shareholder (i) is a holder of record of stock of the corporation entitled to vote at such meeting, (ii) will continue to hold such stock through the date on which the meeting is held, and (iii) intends to appear in person or by proxy at the meeting to submit the proposal for shareholder vote; (c) A brief description of the proposal desired to be submitted to the meeting for shareholder vote and the reasons for conducting such business at the meeting; and (d) A description of any financial or other interest of such shareholder in the proposal. A Notice of Proposal must be given, either by personal delivery or by United States mail, postage prepaid, and received by the corporation not less than thirty (30) days prior to the date of the originally scheduled meeting, regardless of any adjournments thereof to a later date; provided that, if less than forty (40) days' notice of the meeting of shareholders is given by the corporation, the Notice of Proposal must be received by the corporation not later than the close of business on the tenth (10th) day following the date on which the notice of the scheduled meeting was first mailed to the shareholders. The secretary of the corporation shall notify a shareholder in writing whether his or her Notice of Proposal has been made in accordance with all the requirements of this Article VIII. The chairman of the meeting may refuse to acknowledge the proposal of any shareholder not made in compliance with all such requirements. A new Article IX is added to the Corporation's Articles of Incorporation and reads as follows: ARTICLE IX AMENDMENT OF ARTICLES VII, VIII OR IX Notwithstanding anything contained in these Articles of Incorporation to the contrary, the affirmative vote of at least 80% of the outstanding shares of voting stock of the corporation, voting as a single class, shall be required to amend or repeal Article VII, Article VIII or Article IX of these Articles of Incorporation or to adopt any provision inconsistent therewith, unless, such amendment or repeal or inconsistent provision has been recommended for approval by at least 80% of all directors then holding office and by a majority of the Continuing Directors. The term "Continuing Directors" is defined in Article VII. A new Article X is added to the Corporation's Articles of Incorporation and reads as follows: ARTICLE X BOARD EVALUATION OF CERTAIN OFFERS Section 1. Matters to be Evaluated. The Board of Directors of this corporation shall not approve, adopt or recommend any offer of any person or entity, other than the corporation, to make a tender or exchange offer for any capital stock of the corporation, to merge or consolidate the corporation with any other entity or to purchase or otherwise acquire all or substantially all of the assets or business of the corporation unless and until the Board of Directors shall have first evaluated the offer and determined that the offer would be in compliance with all applicable laws and that the offer is in the best interests of the corporation and its shareholders. In connection with its evaluation as to compliance with laws, the Board of Directors may seek and rely upon an opinion of legal counsel independent from the offeror and it may test such compliance with laws in any state or federal court or before any state or federal administrative agency which may have appropriate jurisdiction. In connection with its evaluation as to the best interests of the corporation and its shareholders, the Board of Directors shall consider all factors which it deems relevant, including without limitation: (i) the adequacy and fairness of the consideration to be received by the corporation and/or its shareholders under the offer considering 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 trading prices which have been proposed or offered with respect to the securities of other companies in the past in connection with similar offers and the future prospects for this corporation and its business; (ii) the potential social and economic impact of the offer and its consummation on this corporation, and its subsidiaries and their respective employees, depositors and other customers and vendors; (iii) the potential social and economic impact of the offer and its consummation on the communities in which the corporation and any subsidiaries operate or are located; (iv) the business and financial condition and earnings prospects of the proposed acquiror or acquirors; and (v) the competence, experience and integrity of the proposed acquiror or acquirors and its or their management. Section 2. Amendment, Repeal, etc. Notwithstanding any other provision of these Articles of Incorporation or the Bylaws of the corporation to the contrary (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the Bylaws of the corporation), the affirmative vote of the holders of eighty percent (80%) or more of the outstanding shares of capital stock entitled to vote for the election of directors, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with this Article X; provided, however, that this Section 2 of Article X shall be of no force or effect if the proposed amendment, repeal or other action has been recommended for approval by at least eighty percent (80%) of all directors then holding office. Signed this 25th day of April, 1996. By: /s/ Ronald G. Ford ------------------------- Ronald G. Ford, President and Chief Executive Officer CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION Pursuant to the provisions of Act 284, Public Acts of 1972, as amended, the undersigned corporation executes the following Certificate: 1. The present name of the corporation is: First Manistique Corporation 2. The identification number assigned by the Bureau is: 063 316 3. The location of the registered office is: 130 South Cedar Manistique, MI 49854 4. The following amendments to the Articles of Incorporation were duly adopted on the 14th day of April, 1998. The amendment was duly adopted in accordance with Section 611(2) of the Act by the vote of the shareholders. The necessary votes were cast in favor of the amendment. Article I is hereby amended to read as follows: ARTICLE I The name of the Corporation is North Country Financial Corporation. Signed this 18th day of August, 1998. By: /s/ Ronald G. Ford ------------------------- Ronald G. Ford, President and Chief Executive Officer CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION Pursuant to the provisions of Act 284, Public Acts of 1972 (profit corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the undersigned corporation executes the following Certificate: 1. The present name of the corporation is: North Country Financial Corporation 2. The identification number assigned by the Bureau is: 063 316 3. The location of the registered office is: 130 South Cedar P.O. Box 369 Manistique, MI 49854 4. The first paragraph of Article III of the Articles of Incorporation is hereby amended to read as follows: The total number of shares of all classes of stock which the corporation shall have authority to issue is 18,500,000 shares of which 18,000,000 shares shall be a single class of common stock and 500,000 shares shall be series preferred stock. 5. The foregoing amendments to the Articles of Incorporation was duly adopted on the 11th day of August, 1998 by the shareholders if a profit corporation, or by the shareholders or members if a nonprofit corporation at a meeting. The necessary votes were cast in favor of the amendment. Signed this 11th day of August, 1998. By: /s/ Ronald G. Ford ------------------------- Ronald G. Ford, President and Chief Executive Officer CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION Pursuant to the provisions of Act 284, Public Acts of 1972, as amended, the undersigned corporation executes the following Certificate: 1. The present name of the corporation is: North Country Financial Corporation 2. The identification number assigned by the Bureau is: 063316 3. Article III of the Articles of Incorporation is hereby amended by adding at the end of Article III the provisions set forth on Exhibit A attached hereto creating a series of Preferred Stock designated as "Series B Junior Participating Preferred Stock" Signed this 14th day of July, 2000. By: /s/ Ronald G. Ford ------------------------- Ronald G. Ford, Chairman and Chief Executive Officer Exhibit A ATTACHMENT TO THE CERTIFICATE OF AMENDMENT OF NORTH COUNTY FINANCIAL CORPORATION NOW, THEREFORE, BE IT RESOLVED, That pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Articles of Incorporation, a series of Preferred Stock of the Corporation be and it hereby is created, and that the designation and number of shares and relative rights, preferences and limitations thereof are as follows: 1. Designation and Amount. The shares of such series shall be designated as "Series B Junior Participating Preferred Stock" (the "Series B Preferred Stock"); the number of shares constituting such series shall be one hundred thousand (100,000). Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation into Series B Preferred Stock. 2. Dividends and Distributions. (a) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series B Preferred Stock with respect to dividends, the holders of shares of Series B Preferred Stock, in preference to the holders of Common Stock, without par value (the "Common Stock"), of the Corporation and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $10 or (ii) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph (a) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. 3. Voting Rights. The holders of shares of Series B Preferred Stock shall have the following voting rights: (a) Subject to the provision for adjustment hereinafter set forth, each share of Series B Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the shareholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein, in any certificate of amendment or such other similar document creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all makers submitted to a vote of shareholders of the Corporation. (c) Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 4. Certain Restrictions. (a) Whenever quarterly dividends or other dividends or distributions payable on the Series B Preferred Stock as provided in Section 1, above, are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock; (ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except dividends paid ratably on the Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up), to the Series B Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series B Preferred Stock; or (iv) redeem or purchase or otherwise acquire for consideration any shares of Series B Preferred Stock, or any shares of stock ranking on a parity with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 3, purchase or otherwise acquire such shares at such time and in such manner. 5. Reacquired Shares. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation, or in any certificate of amendment or such other similar document creating a series of Preferred Stock or any similar stock or as otherwise required by law. 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (a) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received $1,000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series B Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (b) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the proviso in clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 8. No Redemption. The shares of Series B Preferred Stock shall not be redeemable. 9. Rank. The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock. EX-10 3 0003.txt EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into this 3rd day of July, 2000 by and between NORTH COUNTRY FINANCIAL CORPORATION, a Michigan corporation (the "Company"), and RONALD G. FORD (the "Executive"). RECITALS The Executive is employed by the Company as its Chief Executive Officer and serves as Chairman and a Director of the Company. The Company desires to continue to employ the Executive pursuant to the terms of this Employment Agreement and the Executive desires to continue to be employed by the Company in accordance with the terms and provisions contained herein. NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements contained herein, the parties hereto hereby agree as follows. 1. Employment. (a) The Company hereby employs Executive, and Executive hereby accepts employment, on the terms and subject to the conditions contained herein. (b) During the Employment Term as defined in Section 2, below, Executive shall serve as the Chief Executive Officer ("CEO") of the Company, faithfully and to the best of the Executive's ability, subject to the direction of the Board of Directors and, in such capacity, shall supervise, manage and administer the operations, business and affairs of the Company and shall perform such duties and exercise such power and authority as may from time to time be delegated to the Executive by the Board of Directors consistent with the Executive's status as CEO. During the Employment Term, Executive shall also serve as a Director of the Company and the Chairman (for so long as the Executive shall be nominated and elected to fill such positions). During the Employment Term, and for no additional consideration, Executive shall also serve as the CEO of North Country Bank and Trust (the "Bank") and as a Director of the Bank and the Chairman (for so long as the Executive shall be nominated and elected to fill such positions).In addition, Executive shall serve as an officer and/or director of such subsidiaries of the Company as may be designated by their Boards of Directors and/or shareholders. (c) During the Employment Term, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote substantially all of his business time, efforts and skills to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Term, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not materially interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. 2. Employment Term. The term of the employment of Executive under this Agreement (the "Employment Term") shall commence as of the date hereof and shall continue, unless sooner terminated under Section 7 hereof, until July 3rd, 2005. At the end of each day of the Employment Term, this Agreement shall be automatically extended for one (1) day unless either the Company or the Executive shall have given written notice to the other at least thirty (30) days prior thereto that the Employment Term shall not be so extended. 3. Salary. (a) During the Employment Term, Executive shall be paid a salary at the rate of two hundred thirty thousand and 00/100 ($230,000) per annum (the "Annual Base Salary"), payable in equal installments in accordance with the Company's customary payroll practices in effect from time to time. (b) Executive's Annual Base Salary shall be reviewed at least annually by the Compensation Committee of the Company's Board of Directors (the "Compensation Committee") and may be increased at any time and from time to time as the Board of Directors, in its sole discretion, shall deem appropriate taking into account the Compensation Committee's recommendation. The term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to Executive under this Agreement. Annual Base Salary shall not be reduced at any time during the Employment Term. Annual Base Salary is subject to income and employment tax withholding and all amounts in this Agreement are stated prior to any such deductions. 4. Bonus and Long-Employment Term Incentives. (a) In addition to Annual Base Salary, Executive shall be eligible to receive, for each fiscal year ending during the Employment Term, an annual bonus (the "Annual Bonus") determined in accordance with the Company's bonus plan adopted by the Board of Directors as in effect from time to time (the "Bonus Plan"). (b) Executive shall be eligible to participate in those long-term incentive plans available to senior executives of the Company, including the 2000 Stock Incentive Plan, or any successors thereto, in an amount and on such terms as shall be determined by the Compensation Committee . Executive shall also be eligible to participate in the Company's Supplemental Executive Retirement Plan in accordance with its terms. 5. Benefits. Subject to the application of any applicable anti-discrimination rules, the Executive shall be entitled to participate in all employee benefit plans, programs, practices or arrangements of the Company in which other senior executives of the Company are eligible to participate from time to time, including, without limitation, any qualified or non- qualified pension, profit sharing and savings plans, any death benefit and disability benefit plans, and any medical, dental, health and welfare plans on terms and conditions at least as favorable as provided to other senior executives of the Company. Notwithstanding the foregoing, (a) the Company with provide the Executive with the use of an automobile of his choice with a retail value up to $50,000 (the "Automobile") and (b) the Executive will be entitled to four (4) weeks of vacation per year (and, to the extent the full amount of vacation time is not taken, the Executive may only carry over vacation time to a subsequent year to the extent approved by the Compensation Committee). The Automobile shall be owned by the Company or the Bank and shall be replaced when it is approximately two years old. The Executive shall be responsible for all expenses associated with the Automobile, including repairs and gasoline, other than customary insurance coverage which shall be purchased by the owner of the Automobile. 6. Expenses. The Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses incurred by him in the course of performing his duties for the Company in accordance with the Company's reimbursement policies as in effect from time to time. Executive shall keep accurate records and receipts of such expenditures and shall submit such accounts and proof thereof as may from time to time be required in accordance with such expense account or reimbursement policies that the Company may establish for its employees generally. 7. Termination of Employment. During the Employment Term, the Executive's employment hereunder may be terminated under any of the following circumstances: (a) Death or Disability. The Executive's employment hereunder shall terminate automatically upon the Executive's death during the Employment Term. If the Company determines in good faith that a Disability of the Executive has occurred during the Employment Term (pursuant to the definition of Disability set forth below), the Company may give to the Executive written notice in accordance with Section 7(d) of this Agreement of its intention to terminate the Executive's employment hereunder. In such event, the Executive's employment with the Company shall terminate effective on the thirtieth (30th) day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means a condition rendering the Executive unable, by reason of a medically determinable physical or mental impairment, to perform his duties with the Company or the Bank, which condition, in the opinion of a physician selected by the Company's Board of Directors, is expected to have a duration of more than 90 consecutive days. (b) Termination by Company. The Company may terminate the Executive's employment for Cause or without Cause. For purposes of this Agreement, "Cause" means (i) the willful commission by the Executive of a criminal or other act that causes or will probably cause substantial economic damage to the Company, the Bank or an affiliate, (ii) the commission by the Executive of an act of fraud in the performance of his duties on behalf of the Company, the Bank or an affiliate, (iii) the continuing willful failure of the Executive to perform his duties to the Company, the Bank or an affiliate (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after written notice therefor (specifying the particulars thereof in reasonable detail) and a reasonable opportunity to be heard and cure such failure are given to the Executive; or (iv) the order of a federal or state bank regulatory agency or a court of competent jurisdiction requiring the Executive's termination of employment. For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be deemed "willful" unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interest of the Company, the Bank or an affiliate. The term "affiliate" means a corporation or other business entity that is controlled by, controlling or under common control with the Company. (c) Good Reason Termination. The Executive may voluntarily terminate his employment hereunder for Good Reason. "Good Reason" means, without the Executive's written consent, the material breach by the Company or the Bank of any provision of this Agreement, or, if in anticipation of or after the occurrence of a Change in Control, the occurrence of one or more of the following during the Employment Term: (i) a material diminution of or interference with the Executive's duties and responsibilities with the Company or the Bank immediately prior to the Change in Control, including, but not limited to a material demotion of the Executive, a material reduction in the number or seniority of other Company personnel reporting, directly or indirectly, to the Executive, or a material reduction in the frequency with which, or in the nature of the matters with respect to which, such personnel are to report to the Executive; or (ii) the assignment to the Executive by the Company or the Bank of duties inconsistent with the Executive's position, duties, responsibilities and status immediately prior to the Change in Control; or (iii) a change in the principal workplace of the Executive to a location outside of a 50-mile radius from Manistique, Michigan; or (iv) any failure by the Company or the Bank to continue in effect any qualified plan, welfare benefit or incentive plan or arrangement in which the Executive is participating immediately prior to the Change in Control or to reduce or eliminate the Executive's participation in, or remuneration or benefits under, any such plans or arrangements; or (v) if this Agreement does not become, by operation of law, an obligation of any successor to the Company, any failure by a successor to the Company to expressly assume this Agreement; or (vi) a voluntary termination by the Executive for any reason or no reason during the ninety (90) day period commencing on the date six (6) months after the Change in Control. For purposes of this Agreement, Change in Control has the same meaning as in the Company's 2000 Stock Incentive Plan, as the same may be amended from time to time. Notwithstanding the foregoing, prior to a Change in Control, Executive will not have "Good Reason" to terminate his employment with the Company unless (i) the Executive complies with the requirements of subsection (d) hereof and (ii) within the ten (10) day period after the Board of Directors receives the Notice of Termination, as defined in Section 7(d), below, the Company has not reasonably cured the situation which is the basis for the Executive's claim of Good Reason to terminate. The Executive's continued employment or failure to give Notice of Termination will not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. After the occurrence of a Change in Control, any good faith determination by the Executive that there is Good Reason shall be conclusive and binding on the Company and its successors. (d) Notice of Termination. Any purported termination of employment shall be communicated by Notice of Termination to the other party. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) if applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated; and (iii) indicates the Termination Date. "Termination Date" shall mean in the case of the Executive's death, his date of death, or in all other cases of termination by the Company, the date specified in the Notice of Termination; provided, however, that the date specified in the Notice of Termination shall be at least thirty (30) days after the date the Notice of Termination is given to the Executive, provided, further, that in the case of Disability, the Executive shall not have returned to the full-time performance of his duties during such period of at least thirty (30) days. In the case of the Executive's Good Reason Termination, the "Termination Date" shall be no earlier than thirty (30) days after written notice by the Executive to the Company, unless the Company agrees to an earlier Termination Date. 8. Obligations Upon Termination. (a) Termination by the Company for Cause. If the Executive's employment with the Company is terminated by the Company for Cause, the Company will pay and/or provide the Executive with the following: (i) the Executive's Annual Base Salary through the Termination Date, and (ii) all benefits to which the Executive is entitled under any benefit plans set forth in Section 5 hereof in accordance with the terms of such plans through the Termination Date. (b) Termination by Reason of Disability or Death. If the Executive's employment with the Company is terminated during the Employment Term by reason of the Executive's Disability or death, the Company will pay and/or provide the Executive or the Executive's legal representative, as the case may be, with the following: (i) the Executive's Annual Base Salary as then in effect through the Termination Date (ii) a fraction of the Annual Bonus paid to the Executive for the fiscal year preceding the Termination Date determined by multiplying the prior year's Annual Bonus by a fraction, the numerator of which shall equal the number of days during such fiscal year preceding the Termination Date, and the denominator of which shall equal three hundred sixty-five (365) and (iii) all benefits to which the Executive is entitled under any benefit plans set forth in Section 5 hereof in accordance with the terms of such plans through the Termination Date. Payment of the amount set forth in subparagraph (ii) hereof shall be made within thirty (30) days after the Termination Date. (c) Good Reason Termination or Termination by the Company Without Cause. If the Executive terminates his employment hereunder for Good Reason, or the Company terminates the Executive's employment without Cause, the Company shall make twenty (20) quarterly payments to the Executive, each in an amount equal to twenty-five percent (25%) of his Annual Base Salary commencing on a date which is no later than ten (10) business days after compliance with subsection (d) hereof. If such termination of employment occurs after a Change in Control, the term Annual Base Salary shall refer to the greater of the Executive's Annual Base Salary before or after the Change in Control. (d) Release of Claims. Notwithstanding the foregoing, the Company will not pay to the Executive, and the Executive will not have any right to receive any payments described in Sections 8(b) and (c),above, unless and until the Executive or his legal representative (in the case of the Executive's death or if the Executive is disabled such that he is unable to consent) executes, and there shall be effective following any statutory period for revocation, a release, in a form reasonably acceptable to the Company, that irrevocably and unconditionally releases, waives, and fully and forever discharges the Company and its past and current shareholders, members of the Board of Directors, officers, employees, and agents from and against any and all claims, liabilities, obligations, covenants, rights, demands and damages of any nature whatsoever, whether known or unknown, anticipated or unanticipated, relating to or arising out of the Executive's employment with the Company, including without limitation claims arising under the Age Discrimination in Employment Act of 1977, as amended, Title VII of the Civil Rights Act of 1974, as amended, the Civil Rights Act of 1991, as amended, the Equal Pay Act, as amended, and any other federal, state, or local law or regulation. (e) Withholding, Waiver of Vacation Pay and Other Issues. Payments to be made to Executive under this Section 8 will be reduced by any applicable income or employment taxes which are required by be withheld under applicable law, and all amounts are stated before any such deduction. Furthermore, none of the payments under this Section 8 shall be included as compensation for purposes of any pension, deferred compensation or welfare benefit plan or program of the Company. Finally, in consideration of all of the payments to be made under this Section 8 to the Executive by the Company pursuant to this Agreement, the Executive hereby waives any claim he may have for accrued and unpaid vacation pay as of the Termination Date. 9. Nondisclosure. (a) During the Employment Term and after the Executive's termination of employment with the Company, the Executive shall not make any Unauthorized Disclosure. For purposes of this Agreement, "Unauthorized Disclosure" shall mean use by the Executive or disclosure by the Executive without the consent of the Board of Directors of the Company to any person, other than use or disclosure that is reasonably necessary or appropriate in connection with the performance by the Executive of his duties as an executive of the Company or as may be legally required (provided the provisions of Section 9(c) hereof are complied with), of any confidential information obtained by the Executive while in the employ of the Company, including, but not limited to, confidential information with respect to any of the Company's customers, suppliers, contractors, methods of operation, services, products, mechanisms, databases, processes, programs and access codes (the "Confidential Information"); provided, however, that Confidential Information shall not include the use or disclosure by the Executive, without consent, of any information known generally to the public (other than as a result of disclosure by him in violation of this Section 9(a)). (b) The Executive agrees that all memoranda, notes, records, papers, financial models, mechanisms, programs, flow charts, work papers, source codes, computer codes, designs, software, data and other documents and all copies thereof relating to the operations or business of the Company, some of which may be prepared by him, and all objects associated therewith (such as samples) in any way obtained by him in connection with the performance of his duties hereunder shall be the exclusive property of the Company. The Executive shall not, except for the Company's use, copy or duplicate any of the aforementioned, not remove them from the Company's facilities, nor use any information concerning them, in each case, except for the Company's benefit, either during his employment or thereafter. The Executive agrees that he will deliver the original and all copies of all of the aforementioned that may be in his possession to the Company on termination of his employment, or at any other time on the request of the Board of Directors of the Company. (c) If the Executive is requested or becomes legally required or compelled (by oral questions, interrogatories, requests for information or documents, subpoena, civil or criminal investigative demand, or similar process) or is required by a governmental body to make any disclosure that is prohibited or otherwise constrained by this Agreement, the Executive will provide the Company with prompt notice of such request so that it may seek an appropriate protective order or other appropriate remedy. Subject to the foregoing, the Executive may furnish that portion (and only that portion) of the Confidential Information that the Executive is legally compelled or is otherwise required to disclose or else stand liable for contempt or suffer other material censure or material penalty. (d) Enforcement of Covenants. The Executive recognizes that irreparable and incalculable injury will result to the Company Affiliated Group, its businesses or properties in the event of his breach of any of the restrictions imposed by this Section 9. The Executive therefore agrees that, in the event of any such actual, impending or threatened breach, the Company or any affiliate thereof will be entitled, in addition to any other remedies and damages, to temporary and permanent injunctive relief (without the necessity of posting a bond or other security) restraining the violation, or further violation, of such restrictions by the Executive and by any other person or entity for whom the Executive may be acting or who is acting for the Executive or in concert with the Executive. 10. Exclusive Remedy. The payments, severance benefits and severance protections provided to the Executive pursuant to this Agreement are to be paid and provided in lieu of any severance payments, severance benefits and severance protections provided in any other plan or policy of the Company. 11. Excise Tax Payments. Notwithstanding anything contained in this Agreement to the contrary, in the event that any payment or distribution to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, his employment with the Company (a "Payment" or "Payments"), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1996, as amended (the "Code")), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any interest and penalties, are collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The Company shall pay the Gross-Up Payment to the Executive, or to the taxing authorities on behalf of the Executive, at the time when the Excise Tax is required to be paid to the taxing authorities. Calculation of the Gross-Up Payment shall be made by the Company's independent certified public accounting firm engaged by the Company immediately prior to the Change in Control and shall be subject to the Executive's review and consent at least ten (10) days prior to the date on which an Excise Tax payment must be made hereunder. 12. Trial by Jury. THE COMPANY, THE BANK AND THE EXECUTIVE ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. THE COMPANY, THE BANK AND THE EXECUTIVE ACKNOWLEDGE THAT EACH HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL OF CHOICE, BEFORE SIGNING THIS CONTRACT, AND THE COMPANY, THE BANK AND THE EXECUTIVE EACH HEREBY KNOWINGLY AND VOLUNTARILY, WITHOUT COERCION, WAIVES ALL RIGHTS TO TRIAL BY JURY OF ALL DISPUTES BETWEEN THEM. 13. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors. 14. Legal Fees and Expenses. If any legal proceeding is necessary to enforce or interpret the terms of this Agreement, or to recover damages for breach hereof, Executive, if the prevailing party, shall be entitled to recover from the Company reasonable attorneys' fees and necessary costs and disbursements incurred in such litigation, in addition to any other relief to which he may be entitled. 15. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the Company and the Executive or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party, delivered by overnight courier, or by certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: Ronald G. Ford HC Box 2801A Manistique, MI 49854 If to the Company: North Country Financial Corporation 333 East State Street Traverse City, Michigan 49684 Attention: Chairman - Compensation Committee or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. By way of example and not by wary of limitation, if any payments provided for hereunder are found to be beyond limits permissible to be paid by the Company or the Bank by statute or regulation, it is intended that the payments shall be made to the maximum of any such lesser amount as is permissible to be paid by the Company or the Bank. (d) The Executive's or Company's failure to insist upon strict compliance with any provision hereof shall not be deemed to be a waiver of such provision or any other provision thereof. (e) This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. It is expressly agreed that this Agreement supersedes and replaces any other agreements, understandings and arrangements, oral or written, between the parties hereto regarding the subject matter of this Agreement, including that Employment Contract dated July 1, 1994, as amended, between the Company and the Executive, other than the terms of all qualified, welfare benefit and compensation plans and awards in which the Executive participates and the Consulting Agreement dated as of September 15, 1999 between the Company and the Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. NORTH COUNTRY FINANCIAL CORPORATION By: /s/ Wesley W. Hoffman ------------------------ Wesley W. Hoffman Compensation Committee Chairman and Authorized Signatory EXECUTIVE /s/ Ronald G. Ford ---------------------- Ronald G. Ford EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-2000 JUN-30-2000 22,250 1,367 7,005 0 57,543 0 0 524,239 7,720 645,130 502,644 0 5,175 81,593 0 0 15,926 27,342 645,130 23,824 1,918 191 25,933 11,143 13,615 12,318 1,875 49 8,729 4,087 4,087 0 0 3,412 .49 .49 5.01 5,256 1,820 0 0 6,863 1,098 80 7,720 7,720 0 2,260
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