-----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, HKmx7++eL8LptwB092omtrWbdugMpScUPi1hhSDUW9JNqlZeTkFWyMEEzE97uVQl X6e0LY7ILoO5vcha3quc7g== 0000892712-99-000173.txt : 19991108 0000892712-99-000173.hdr.sgml : 19991108 ACCESSION NUMBER: 0000892712-99-000173 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH COUNTRY FINANCIAL CORP CENTRAL INDEX KEY: 0000036506 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [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: 99742248 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 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 September 30, 1999 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) 130 S. CEDAR STREET, MANISTIQUE, MI 49854 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (906) 341-8401 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 October 20, 1999, there were outstanding 7,010,253 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 - September 30, 1999 (Unaudited) and December 31, 1998 1 Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 1999 (Unaudited) and September 30, 1998 (Unaudited) 2 Condensed Consolidated Statements of Changes in Shareholders' Equity - Three and Nine Months Ended September 30, 1999 (Unaudited) and September 30, 1998 (Unaudited) 3 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1999 (Unaudited) and September 30, 1998 (Unaudited) 4 Notes to Condensed Consolidated Financial Statements (Unaudited) 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 15 NORTH COUNTRY FINANCIAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars) September 30, December 31, 1999 1998 (Unaudited) ASSETS Cash and due from banks $ 40,270 $ 16,593 Federal funds sold 411 6,048 --------- --------- Total cash and cash equivalents 40,681 22,641 Securities available for sale 28,202 8,565 Federal Home Loan Bank stock 3,034 3,034 Total loans 446,902 411,720 Allowance for loan losses (6,253) (6,112) --------- --------- 440,649 405,608 Premises and equipment 19,311 17,938 Other assets 15,735 13,595 --------- --------- Total assets $ 547,612 $ 471,381 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing $ 42,709 $ 42,077 Interest-bearing 410,736 362,885 --------- --------- Total deposits 453,445 404,962 Other borrowings 37,145 23,270 Accrued expenses and other liabilities 4,429 3,680 --------- --------- Total liabilities 495,019 431,912 Guaranteed preferred beneficial interests in the Corporation's subordinated debentures 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, 7,010,605 and 7,130,760 issued and outstanding at September 30, 1999 and December 31, 1998 16,619 19,436 Retained earnings 23,601 19,989 Accumulated other comprehensive income, net (77) 44 --------- --------- Total shareholders' equity 40,143 39,469 --------- --------- Total liabilities and shareholders' equity $ 547,612 $ 471,381 ========= ========= See accompanying notes to condensed consolidated financial statements. NORTH COUNTRY FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of dollars, except per share data) (Unaudited) Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 Interest income Loans, including fees $10,201 $9,370 $29,546 $27,720 Securities Taxable 414 185 767 582 Exempt from federal taxation 65 14 94 18 Other 111 98 303 345 -------- -------- -------- -------- 10,791 9,667 30,710 28,665 Interest expense Deposits 4,711 4,165 13,386 12,238 Other borrowings 572 382 1,436 975 -------- -------- -------- -------- 5,283 4,547 14,822 13,213 Net interest income 5,508 5,120 15,888 15,452 Provision for loan losses 213 450 639 1,125 -------- -------- -------- -------- Net interest income after provision for loan losses 5,295 4,670 15,249 14,327 Noninterest income Service charges on deposit accounts 529 333 1,421 1,043 Gain (loss) on sales of loans 3 28 63 83 Gain on sales of securities - - - 44 Net gain on sale of branches 430 - - - Other 261 301 1,003 750 -------- -------- -------- -------- 1,223 662 2,487 1,920 Noninterest expense Salaries and employee benefits 1,761 1,590 4,763 4,798 Occupancy and equipment 642 632 1,894 1,798 Other 1,888 1,509 5,237 4,789 -------- -------- -------- -------- 4,291 3,731 11,894 11,385 -------- -------- -------- -------- Income before income tax expense 2,227 1,601 5,842 4,862 Income tax expense 500 453 1,267 1,247 -------- -------- -------- -------- Net income $ 1,727 $ 1,148 $ 4,575 $ 3,615 ======== ======== ======== ======== Basic earnings per common share $ .25 $ .16 $ .65 $ .51 ======== ======== ======== ======== Diluted earnings per common share $ .24 $ .16 $ .64 $ .50 ======== ======== ======== ======== Dividends paid per common share $ .05 $ .04 $ .14 $ .13 ======== ======== ======== ======== See accompanying notes to condensed consolidated financial statements. NORTH COUNTRY FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (In thousands of dollars) (Unaudited) Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 Balance - beginning of period $39,035 $37,760 $39,469 $36,592 Net income for period 1,727 1,148 4,575 3,615 Net change in net unrealized gain on securities available for sale (2) 9 (121) 1 -------- -------- -------- -------- Total comprehensive income 1,725 1,157 4,454 3,616 Cash dividends (323) (315) (963) (934) Issuance of common stock 105 594 309 875 Common stock retired (399) - (3,126) (953) -------- -------- -------- --------- Balance - end of period $40,143 $39,196 $40,143 $39,196 ======== ======== ======== ========= See accompanying notes to condensed consolisated financial statements. NORTH COUNTRY FINANCIAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited) Nine months ended September 30, 1999 1998 Cash flows from operating activities Net income $ 4,575 $ 3,615 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization 1,706 1,574 Provision for loan losses 639 1,125 Gain on sales of securities - (44) Net gain on sale of branches (430) - Change in other assets 37 2,317 Change in other liabilities 804 (62) --------- --------- Net cash from operating activities 7,331 8,525 Cash flows from investing activities Purchase of securities available for sale (23,634) (4,000) Proceeds from sales of securities available for sale 752 Proceeds from maturities, calls or paydowns of securities available for sale 3,663 3,943 Net increase in loans (35,680) (26,929) Purchase of premises and equipment (2,206) (1,900) Net cash paid for sale of branches (10,801) - Net cash received for net liabilities assumed in acquisition of branches 15,504 - --------- --------- Net cash from investing activities (53,154) (28,134) Cash flows from financial activities Net increase in deposits 41,886 26,626 Proceeds from other borrowings 26,000 10,500 Payment on other borrowings (12,125) (6,052) Proceeds from issuance of common stock 309 876 Retirement of common stock (3,126) (953) Net proceeds from the issuance of guaranteed preferred beneficial interests in the Corporation's subordinated debentures 11,882 - Payment of cash dividends (963) (934) --------- --------- Net cash from financing activities 63,863 30,063 --------- --------- Net change in cash and cash equivalents 18,040 10,454 Cash and cash equivalents at beginning of period 22,641 11,143 --------- --------- Cash and cash equivalents at end of period $40,681 $21,597 ========= ========= Supplemental disclosures of cash flow information Increases related to branch acquisitions: Premises and equipment, net $ (286) Core deposit intangibles and goodwill (1,680) Deposits 17,463 Other liabilities 7 Decreases related to branch sales: Premises and equipment, net 65 Deposits (10,866) See accompanying notes to condensed consolidated financial statements. NORTH COUNTRY FINANCIAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 nine-month period ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. 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, 1998. 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 1998, 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 Nine months ended ended September 30, September 30, 1999 1998 1999 1998 Basic earnings per common share: Net income $1,727 $1,148 $4,575 $3,615 Weighted average common shares outstanding 7,015 7,132 7,040 7,133 ------- ------- ------- ------ Basic earnings per common share $ .25 $ .16 $ .65 $ .51 ======= ======= ======= ====== Diluted earnings per common share: Net income $1,727 $1,148 $4,575 $3,615 Weighted average common shares outstanding for basic earnings per common share 7,015 7,132 7,040 7,133 Add: Dilutive effect of assumed exercises of stock options 58 92 84 92 Add: Dilutive effect of directors' deferred stock compensation 5 - 7 - Average shares and dilutive potential ------- ------- ------- ------ common shares 7,078 7,224 7,131 7,225 ------- ------- ------- ------ Diluted earnings per common share $ .24 $ .16 $ .64 $ .50 All share and per share amounts in this filing have been retroactively adjusted to reflect the August of 1998 3-for-1 stock split. 4.INVESTMENT SECURITIES The amortized cost and estimated fair value of investment securities available for sale as of September 30, 1999 and December 31, 1998 are as follows: September 30, 1999 December 30, 1998 Amortized Estimated Amortized Estimated Cost Fair Value Cost Fair Value U.S. Treasury securities and obligations of U.S. Government agencies and corporations $ 8,923,871 $ 8,649,650 $ 4,645,681 $ 4,692,221 Obligations of states and political subdivisions 13,416,203 13,670,956 999,922 1,020,890 Other debt securities 500,000 500,000 - - Mortgage-related securities 5,478,451 5,381,137 2,852,872 2,852,171 ------------ ----------- ------------ ---------- Total investment securities available for sale $28,318,525 $28,201,743 $8,498,475 $8,565,282 ============ =========== ============ ========== 5.ALLOWANCE FOR LOAN LOSSES Activity in the allowance for loan losses for the nine months ended September 30, 1999 and 1998, are summarized as follows: (In thousands of dollars) September 30, September 30, 1999 1998 Balance at beginning of period $ 6,112 $ 5,600 Charge-offs (573) (533) Recoveries 75 78 Provision for loan losses 639 1,125 $ 6,253 $ 6,270 Information regarding impaired loans follows: (In thousands of dollars) As of and As of and for the nine for the year months ended ended September 30, December 31, 1999 1998 Average investment in impaired loans $ 5,438 $ 6,155 Balance of impaired loans 5,489 6,073 6.OTHER BORROWINGS Other borrowings consist of the following at September 30, 1999 and December 31, 1998: September 30, December 31, 1999 1998 (In thousands of dollars) Federal Home Loan Bank advances at various rates with various maturities (see annual financial statements as referenced in Note 1) $35,334 $20,607 Farmers Home Administration, $2,000,000 fixed rate line agreement maturing August 24, 2024, interest payable at 1% 1,811 1,875 Notes payable to South Range State Bank's former stockholders, maturing in three equal annual installments beginning February 1, 1997, interest payable at 5.2% - 788 ---------- ----------- $ 37,145 $ 23,270 The Federal Home Loan Bank borrowings are collateralized by a blanket collateral agreement on the Registrant's residential mortgage loans. 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 September 30, 1999. Borrowings other than Federal Home Loan Bank advances are not subject to prepayment penalties. 7.CURRENT EVENTS A business trust subsidiary of the Registrant sold 12,450 of Trust Preferred Securities at $1,000 per preferred security in a May 1999 offering. The proceeds from the sale of the Trust Preferred Securities were used by the Registrant's subsidiary to purchase an equivalent amount of Subordinated Debentures of the Registrant. The Trust Preferred Securities carry a distribution floating rate of the 3-month LIBOR plus 2.5%, have a stated maturity of May 14, 2029, and are guaranteed by the Registrant. The securities are redeemable at par after May 14, 2009. Distributions on the Trust Preferred Securities are payable quarterly on February 14, May 14, August 14 and November 14. The first distribution was paid on August 14, 1999. In May 1999, the Registrant acquired branches in Kaleva and Mancelona, Michigan from Huntington National Bank. The transaction is accounted for under the purchase method of accounting. The Registrant assumed approximately $17.5 million in deposits, and acquired approximately $286,000 in premises, equipment and sundry assets, and $1.7 million of intangible assets, as more fully disclosed in the Condensed Consolidated Statements of Cash Flows. On July 23, 1999, the Registrant sold two of its branch offices located in Rudyard and Cedarville in Michigan's Upper Peninsula with total deposits of approximately $11 million resulting in a net gain on sale of approximately $430,000, as more fully disclosed in the Condensed Consolidated Statements of Cash Flows. These branch dispositions are consistent with the Registrant's strategy of improving operating efficiency by maintaining a presence only in locations such as commercial centers where it can operate profitably. In addition to the branch acquisitions and branch sales noted above, the Registrant closed the Watersmeet and Lake Linden branch offices in August of 1999. The deposits and loans for these offices were transferred to existing branches in nearby locations. The Registrant also opened a private banking branch in the Bay Harbor area of Petoskey, Michigan in September of 1999. ITEM 2. MANGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERTATIONS 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 third quarter of 1999. 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 $4,575,000 through September 30, 1999 compared to $3,615,000 for the same period in 1998. Diluted earnings per share increased from $.50 through September 30, 1998, to $.64 for the same period in 1999. The loan portfolio continues a significant growth trend with gross loans increasing $35,182,000 or 8.5% since December 31, 1998. Loan growth remains focused in the commercial lending and leasing areas. The loan growth in 1999 has been funded primarily through an increase in the deposit portfolio. Deposits have increased $48,483,000 or 12.0% since December 31, 1998. The primary area of deposit growth for the Registrant has been in interest- bearing demand accounts. Financial Condition: Cash and Cash Equivalents: Cash and cash equivalents increased $18.0 million through the third quarter of 1999. The increase was largely funded by an increase in deposits as discussed more fully below, and is available for planned future growth in the Bank's loan and investment portfolios, as well as to provide additional liquidity in anticipation of the Year 2000. Investment Securities: Available for sale securities increased approximately $19.6 million through the third quarter of 1999. The mix of the portfolio has changed from December 31, 1998, as more fully disclosed in Note 4 of Notes to Condensed Consolidated Financial Statements contained herein. The growth is a result of asset and liability strategies to manage interest rate risk through the diversification of the balance sheet from the purchase of investment securities funded by additional borrowings. 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 third quarter of 1999, loan balances increased by $35.2 million. 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 loans as a percent of total loans for the nine months ended September 30, 1999 compared to December 31, 1998. Management is aware of the risk associated with an increase in average balances of loans but believes that the current level in the allowance for loan losses is adequate. At September 30, 1999 the allowance for loan losses was equal to 1.40% of total loans outstanding compared to 1.48% at December 31, 1998. The allocation of the allowance for loan losses between portfolio categories has not changed significantly since December 31, 1998. Loans to general commercial businesses increased by $34.1 million through the third quarter of 1999. Management continues to focus on loan growth through an increase in the commercial lending area. A significant portion of the growth is due to the Bank's continued ability to penetrate growth markets such as Marquette and Sault Ste. Marie. The other loan categories have remained fairly consistent at September 30, 1999 when compared to December 31, 1998. (In thousands of dollars) September 30, % of December 31, % of 1999 Total 1998 Total Loans: Commercial real estate $78,396 17.6% $82,207 20.0% Commercial, financial, and agricultural 170,914 38.2 136,820 33.2 Leases: Commercial 22,699 5.1 20,097 4.9 Governmental 43,703 9.8 40,098 9.7 1-4 family residential real estate 102,338 22.9 97,415 23.7 Consumer 18,074 4.0 23,160 5.6 Construction 10,778 2.4 11,923 2.9 -------- ------ --------- ------ $446,902 100.0% $411,720 100.0% 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 excellent credit quality is demonstrated in its historical charge-off percentage. Net charge-offs to gross loans outstanding was .11% for September 30, 1999 and 1998. Charge-offs for the period ended September 30, 1999 increased only $40,000 from the same period in 1998 despite strong growth in the loan portfolio. This is mainly the result of management's continued efforts to improve credit quality in such portfolios. Accordingly, the provision for loan losses was decreased from $1,125,000 in the nine-month period ended September 30, 1998 to $639,000 for the same period in 1999. The table presented below shows the balance of non- performing loans, which include nonaccrual loans, loans 90 or more days past due and still accruing, and renegotiated loans as of September 30, 1999 and December 31, 1998. (In thousands of dollars) September 30, December 31, 1999 1998 Nonaccrual loans $ 498 $ 2,174 Loans 90 days or more past due and still accruing 1,467 1,238 While loans 90 days or more past due have increased by $229,000 or 18.5% since December 31, 1998, nonaccrual loans have decreased by $1,676,000 or 77.1%. Management is actively managing the current loan delinquencies and has taken various actions to reduce the level of non-performing loans. Non-performing loans to total gross loans were .44% and .83% at September 30, 1999 and December 31, 1998, respectively. Deposits: Total deposits through the third quarter have increased $48.5 million. Interest bearing deposit balances increased through September 30, 1999, continuing a trend from 1998. The increase in total deposits of $17.5 million was the result of the branch acquisitions during the second quarter of 1999, as more fully disclosed in the Notes to the Condensed Consolidated Financial Statements, contained herein. The remaining growth has come from the branch network, as management has continued to offer attractive deposit products to its customers, generally through premium- based certificate of deposit programs and higher yielding savings accounts. Borrowings: The Registrants 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. Other borrowings increased by $13.9 million through the third quarter of 1999 (refer to the table presented in Note 6 of the Notes to Condensed Consolidated Financial Statements contained herein) as a result of asset and liability strategies utilized to grow the Bank's investment security portfolio as described above. At September 30, 1999, $35.3 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. Such amounts will be used to support the Registrant's current 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 approximately $.7 million from December 31, 1998 to September 30, 1999. The increase primarily resulted from net income of $4.6 million offset by the repurchase of common stock of $3.1 million and cash dividends paid of $1.0 million. 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 September 30, 1999 increased by 7.6% compared to the same period one year ago. The increase in net interest income was largely the result of an increase in the average volume of the loan portfolio for the third quarter of 1999 compared to the third quarter of 1998. The increase related to volume was partially offset by a decrease in the net interest margin. The net interest margin, on a fully taxable equivalent basis for the quarter ended September 30, 1999 was 4.72%, compared to 5.04% for the same period of 1998. The decrease in the net interest margin has been impacted by the low interest rate environment and the competitive nature of the Registrant's market. Interest income from loans represented 94.5% of total interest income for the third quarter of 1999 compared to 96.9% for the same period of 1998. In all cases, the total amount of interest income and the yield on total earning assets is strongly influenced by lending activities. Net interest income for the nine months ended September 30, 1999 increased by 2.8% compared to the same period in 1998. The net interest margin, on a fully taxable equivalent basis for the nine months ended September 30, 1999 decreased from 5.15% for the same period in 1998 to 4.74% for the same reasons mentioned in the preceding paragraph. Interest income from loans represented 96.2% of total interest income through the third quarter of 1999 compared to 96.7 % for the same period of 1998. Provision for Loan Losses: The Registrant maintains the allowance for loan losses 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 decreased by $237,000 for the three months ended September 30, 1999 and $486,000 for the nine months ended September 30, 1999 compared to the same periods in 1998 primarily as a result of the Registrant's favorable net charge-off and non- performing loan trends 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 allowance for loan losses to gross loans was 1.40% and 1.48% at September 30, 1999 and December 31, 1998, respectively. Noninterest Income: Noninterest income increased by $561,000 for the three months ended September 30, 1999 compared to the same period in 1998. The increase was primarily due to an increase in other noninterest income of $390,000, largely the result of the net gain on the sale of the Rudyard and Cedarville branches as discussed in Note 7, and an increase in service charges on deposit accounts of $196,000. Noninterest income increased by $567,000 for the nine months ended September 30, 1999 compared to the same period one year ago. The increase was the result of an increase in service charges on deposits of $378,000 and an increase in other noninterest income of $253,000. As discussed above, the increase in other noninterest income was mainly due to the net gain on the sale of the Rudyard and Cedarville branches. Noninterest Expenses: Noninterest expense increased $560,000 for the three months ended September 30, 1999 compared to the same period of 1998. A primary objective of management is to hold the rate of increase in this category below future asset growth. Assets increased 20% from September 30, 1998 to September 30, 1999. Salary expense increased by $171,000 during the third quarter of 1999 compared to the second quarter of 1998. Occupancy expense increased by $10,000 for the third quarter of 1999 compared to the same period in 1998. Other noninterest expense increased by $379,000 for the third quarter of 1999 compared to the same period in 1998. This increase is mainly due to an increase in professional fees related to data processing. Noninterest expense increased $509,000 or 4.5% for the nine months ended September 30, 1999 compared to the same period of 1998. Management believes this low level of growth is attributable to significant efficiencies obtained in operational areas of the Bank based on a heightened level of management emphasis in this area. The increase in noninterest expense was primarily due to an increase in other noninterest expense of $448,000 for reasons noted in the preceding paragraph. Occupancy expense increased $96,000 and salary expense decreased $35,000 for the nine months ended September 30, 1999 compared to same period of 1998. Federal Income Tax: The provision for income taxes was 22.5% of income before income tax for the quarter ended September 30, 1999 compared to 28.3% for the quarter ended September 30, 1998. For the nine months ended September 30, 1999, the provision for income taxes was 21.7% of income compared to 25.6% for the same period in 1998. 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 in place the last few 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 September 30, 1999, the Registrant had a cumulative liability gap position of approximately $205 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 1 Total Risk-Based Risk-Based Leverage Capital Capital Ratio Ratio Ratio Regulatory minimum 4.0% 4.0% 8.0% The Registrant September 30, 1999 8.6 12.0 13.2 December 31, 1998 7.2 9.4 10.7 The capital levels as of September 30, 1999 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 September 30, 1999, 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. Year 2000 Issue: In January 1997, the Registrant and its subsidiary, North Country Bank and Trust, began assessing the impact of the century change associated with the failure to renovate, validate, and implement mission critical systems to ensure they were Year 2000 (Y2K) ready. A Y2K Committee made up of a team of professionals, representing all disciplines within the organization, was actively involved in the assessment, renovation, validation, and implementation of Y2K issues. All internal testing has been completed in accordance with the regulatory requirements, and will continue to be periodically validated and tested throughout the fourth quarter of 1999. A Business Resumption Contingency Plan was developed which involved mitigating operational risks should core business processes fail, regardless if mission-critical systems were remediated for Y2K. All expenses made to date and expected through the Y2K date change regarding preparations necessary for Y2K are consistent with amounts disclosed in prior Registrant filings. In March 1999, the Registrant engaged Wipfli, Ulrich, Bertelson to perform an independent third party review of the Registrant's Y2K status. The objective of the third party review is to provide management with an independent review of the status and satisfaction of regulatory requirements of Y2K, with completion scheduled for the fourth quarter of 1999. The regulators continue to monitor closely the Y2K efforts of Financial Institutions. Regulators have conducted their quarterly reviews, which look at the overall progress that is made in the Registrant's Y2K efforts, as well as its compliance with federally mandated requirements. Examiners check to see that financial institutions are performing any ongoing system renovation and testing that may be needed, establishing comprehensive contingency plans, mitigating any identified Y2K related business risk, and effectively informing their customers of their Y2K preparedness. In August 1999, The Federal Financial Institutions Examination Council issued a statement that 99% of Insured Financial Institutions are prepared for Y2K. In October 1999, the Registrant received its latest regulatory rating from the Regulators, a positive rating concluding "everything is in order." Regulators will perform follow-up phone interviews during the weekend of the Y2K change date to ensure ending results are favorable. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibits are filed as part ofthis report Number Exhibit 3.1 Articles of Incorporation, as amended. 3.2 Bylaws, as amended. 10.1 Consulting Agreement dated September 15, 1999 between the Company and Ronald G. Ford. 10.2 Second Amendment to Employment Agreement dated August 18, 1999, between the Company and Ronald G. Ford. 10.3 Management Continuity Agreement dated May 22, 1996 between the Company and Sherry Littlejohn. 10.4 First Amendment to Employment Contract dated August 18, 1999 between the Company and Sherry Littlejohn. 10.5 Employment Agreement dated September 1, 1997 between the Company and Anthony Palumbo. 10.6 North Country Financial Corporation Supplemental Executive Retirement Plan. 27 Financial Data Schedule. (b) There were no reports filed on Form 8-K during the quarter ended September 30, 1999. 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) 11/5/99 /s/ Ronald G. Ford - --------------- --------------------------------- Date RONALD G. FORD, CEO 11/5/99 /s/ Sherry Littlejohn - --------------- --------------------------------- Date SHERRY LITTLEJOHN CHIEF ACCOUNTING OFFICER, PRESIDENT AND COO EX-3.1 2 ARTICLES 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%) ofthe 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 EX-3.2 3 BYLAWS, AS AMENDED AMENDED AND RESTATED BYLAWS OF NORTH COUNTRY FINANCIAL CORPORATION ARTICLE I. OFFICES Section 1. Registered Office. The registered office of the Corporation shall be as specified in the Articles of Incorporation. The Corporation shall keep records containing the names and addresses of all shareholders, the number, class and series of shares held by each, and the dates when they respectively became holders of record thereof, at its registered office or at the office of its transfer agent. Section 2. Other Offices. The business of the Corporation may be transacted in such locations other than the registered office, within or outside the State of Michigan, as the Board of Directors may from time to time determine. ARTICLE II. CAPITAL STOCK Section 1. Stock Certificates. Certificates representing shares of the Corporation shall be in such form as is approved by the Board of Directors. Certificates shall be signed by the Chairman of the Board of Directors, Vice Chairman of the Board of Directors, Chief Executive Officer, President or a Vice President, and by the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary of the Corporation, and shall be sealed with the seal of the Corporation, or a facsimile thereof, if one be adopted. The signatures of the officers may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself, or its employees. In the event an officer who has signed, or whose facsimile signature has been placed upon, a certificate ceases to be such officer before the certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. Section 2. Replacement of Lost or Destroyed Certificates. In the event of the loss or destruction of a stock certificate, no new certificate shall be issued in place thereof until the Corporation has received from the registered holder such assurances, representations, warranties and/or guarantees as the Board of Directors, in its sole discretion, shall deem advisable, and until the Corporation receives sufficient indemnification protecting it against any claim that may be made on account of such loss or destroyed certificate, or the issuance of any new certificate in place thereof, including an indemnity bond in such amount and with sureties, if any, as the Board of Directors, in its sole discretion, deems advisable. Any new certificate issued in place of any such lost or destroyed certificate shall be plainly marked "duplicate" upon its face. Section 3. Registered Owner. The Corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares; the Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provide by the laws of Michigan. Section 4. Transfer of Shares. Shares of stock of the Corporation shall be transferable only upon the books of the Corporation. The old certificates shall be surrendered to the Corporation by delivery thereof to the person in charge of the stock transfer books of the Corporation, or to such other person as the Board of Directors may designate, properly endorsed for transfer, and such certificates shall be cancelled before a new certificate is issued. The Corporation shall be entitled to treat the person in whose name any share, right or option is registered as the owner thereof for all purposes, and shall not be bound to recognize any equitable or other claim with respect thereto, regardless of any notice thereof, except as may be specifically required by the laws of the State of Michigan. Section 5. Rules Governing Stock Certificates. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration of certificates of stock, and may appoint a transfer agent and a registrar of transfer, and may require all such certificates to bear the signature of such transfer agent and/or such registrar of transfers. Section 6. Record Date for Stock Rights. The Board of Directors may fix, in advance, a date not exceeding sixty (60) days preceding the date of payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the shareholders entitled to receive payment of any such dividends, or any such allotment of rights, or to exercise the rights with respect to any such change, conversion, or exchange of capital stock; and in such case, only shareholders of record on the date so fixed shall be entitled to receive payment of such dividends, or allotment of rights, or exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date is fixed. In the event the Board of Directors shall fail to fix a record date as provided in this Section 6 of Article II, the record date for the purposes specified herein shall be the close of business on the day on which the resolution of the Board of Directors relating thereto is adopted. Section 7. Dividends. The Board of Directors, in its discretion, may from time to time declare and direct payment of dividends or other distributions upon its outstanding shares out of funds legally available for such purposes, which dividends may be paid in cash, the Corporation's bonds or the Corporation's property, including the shares or bonds of other corporations. In the event a dividend is paid or any other distribution made, in any part, from sources other than earned surplus, payment or distribution thereof shall be accompanied by written notice to the shareholders (a) disclosing the amounts by which the dividend or distribution affects stated capital, capital surplus and earned surplus, or (b) if such amounts are not determinable at the time of the notice, disclosing the approximate effect of the dividend or distribution upon stated capital, capital surplus and earned surplus, and stating that the amounts are not yet determinable. In addition to the declaration of dividends and other distributions provided in the preceding paragraph of this Section 7 of Article II, the Board of Directors, in its discretion, from time to time may declare and direct the payment of a dividend in shares of this Corporation, upon its outstanding shares, in accordance with and subject to the provisions of the Michigan Business Corporation Act. A share dividend or other distribution of shares of the Corporation shall be accompanied by a written notice to shareholders (a) disclosing the amounts by which the distributions affects stated capital, capital surplus and earned surplus, or (b) if such amounts are not determinable at the time of the notice, disclosing the approximate effect of the distribution upon stated capital, capital surplus and earned surplus, and stating that the amounts are not yet determinable. Section 8. Acquisition of Shares. Subject to the limitations of the Michigan Business Corporation Act, the Board of Directors may authorize the Corporation to acquire its own shares, and shares so acquired shall constitute authorized but unissued shares. Section 9. Redemption of Control Shares. Control shares acquired in a control share acquisition, with respect to which no acquiring person statement has been filed with the Corporation, shall, at any time during the period ending 60 days after the last acquisition of control shares or the power to direct the exercise of voting power of control shares by the acquiring person, be subject to redemption by the Corporation. After an acquiring person statement has been filed with the Corporation and after the meeting at which the voting rights of the control shares acquired in a control share acquisition are submitted to the shareholders, the shares shall be subject to redemption by the Corporation unless the shares are accorded full voting rights by the shareholders as provided in Section 798 of the Michigan Business Corporation Act or any successor provision thereof. Redemptions of shares pursuant to this Section 9 of Article II of the Bylaws shall be at the fair value of the shares pursuant to procedures adopted by the Board of Directors of the Corporation. The terms "control shares," "control share acquisition," "acquiring person statement," "acquiring person" and "fair value" as used in this Section 9 of Article II of the Bylaws, shall have the meanings ascribed to them, respectively, in Chapter 7B of the Michigan Business Corporation Act or any successor provision thereof. ARTICLE III. SHAREHOLDERS Section 1. Place of Meetings. Meetings of shareholders shall be held at the registered office of the Corporation or at such other place, within or outside the State of Michigan, as may be determined from time to time by the Board of Directors; provided, however, if a meeting of shareholders is to be held at a place other than the registered office of the Corporation, the notice of the meeting shall designate such place. Section 2. Annual Meeting. Annual meetings of shareholders for election of directors and for such other business as may come before the meeting shall be held on the third Tuesday of April in each year but, if such day is a legal holiday, then the meeting shall be held on the first full business day following, at such hour as may be fixed in the notice. If the annual meeting is not held as specified, the Board of Directors shall cause a meeting to be held as soon thereafter as convenient. Section 3. Special Meetings. Special meetings of shareholders may be called by the Chairman of the Board, the President or the Secretary, and shall be called by either of them pursuant to resolution therefor by the Board of Directors. Section 4. Record Date for Notice and Vote. For the purpose of determining shareholders entitled to notice of and to vote at a meeting of shareholders or an adjournment of a meeting, the Board of Directors may fix a record date which shall not precede the date on which the resolution fixing the record date is adopted by the Board. The date shall be not more than sixty (60) nor less than ten (10) days before the date of the meeting. If a record date is not fixed, the record date for determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the close of business on the day next preceding the day on which notice is given or, if no notice is given, the day next preceding the day on which the meeting is held. When a determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders has been made as provided in this Section 4, the determination applies to any adjournment of the meeting, unless the Board fixes a new record date under this section for the adjourned meeting. For the purpose of determining shareholders entitled to express consent to or to dissent from a proposal without a meeting, the Board of Directors may fix a record date which shall not precede the date on which the resolution fixing the record date is adopted by the Board and shall be not more than ten (10) days after the Board resolution. If a record date is not fixed and prior action by the Board is required with respect to the corporate action to be taken without a meeting, the record date shall be the close of business on the day on which the resolution of the Board is adopted. If a record date is not fixed and prior action by the Board is not required, the record date shall be the first date on which a signed written consent is delivered to the Corporation as provided in Section 407 of the Michigan Business Corporation Act. Section 5. Notice of Shareholder Meetings. Written notice of the time, place and purposes of any meeting of shareholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each shareholder of record entitled to vote at the meeting. Such notice may be given either by delivery in person to such shareholders or by mailing such notice to shareholders at their addresses as the same appear on the stock books of the Corporation. A shareholder's attendance at a meeting, in person or by proxy, constitutes a waiver of his objection to lack of notice or defective notice of the meeting unless, at the beginning of the meeting, the shareholder objects to holding the meeting or transacting business at the meeting, and constitutes a waiver of his objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Section 6. Voting Lists. The Corporation's officer or agent having charge of its stock transfer books shall prepare and certify a complete list of the shareholders entitled to vote at a shareholders' meeting or any adjournment thereof, which list shall be arranged alphabetically within each class and series, and shall show the address of, and the number of shares held by each shareholder. The list shall be produced at the time and place of the meeting of shareholders and be subject to inspection by any shareholder at any time during the meeting. If for any reason the requirements with respect to the shareholder list specified in this Section 6 of Article III have not been complied with, any shareholder, either in person or by proxy, who in good faith challenges the existence of sufficient votes to carry any action at the meeting, may demand that the meeting be adjourned and the same shall be adjourned until the requirements are complied with; provided, however, that failure to comply with such requirements does not affect the validity of any action taken at the meeting before such demand is made. Section 7. Voting. Except as may otherwise be provided in the Articles of Incorporation, each shareholder entitled to vote at a meeting of shareholders, or to express consent or dissent without a meeting, shall be entitled to one (1) vote, in person or by proxy, for each share of stock entitled to vote held by such shareholder, provided however, no proxy shall be voted after three (3) years from its date unless such proxy provides for a longer period. A vote may be cast either orally or in writing as announced or directed by the chairperson of the meeting prior to the taking of the vote. When an action other than the election of directors is to be taken by vote of the shareholders, it shall be authorized by a majority of the votes cast by the holders of shares entitled to vote thereon, unless a greater plurality is required by express requirement of the Michigan Business Corporation Act or of the Articles of Incorporation, in which case such express provision shall govern and control the decision of such question. Except as otherwise expressly required by the Articles of Incorporation, directors shall be elected by a plurality of the votes cast at an election. Section 8. Quorum. Shares equaling a majority of all of the voting shares of the capital stock of the Corporation issued and outstanding represented in person or by proxy, shall constitute a quorum at the meeting. Meetings at which less than a quorum is represented may be adjourned by a vote of a majority of the shares present to a further date without further notice other than the announcement at such meeting, and when the quorum shall be present upon such adjourned date, any business may be transacted which might have been transacted at the meeting as originally called. Shareholders present in person or by proxy at any meeting of shareholders may continue to do business until adjournment, notwithstanding the withdrawal of shareholders to leave less than a quorum. Section 9. Conduct of Meetings. The Chairman of the Board of Directors of the Corporation or his designee shall call meetings of the shareholders to order and shall act as chairman of such meetings unless otherwise determined by the affirmative vote of a majority of all the voting shares of the capital stock of the Corporation issued and outstanding. The Secretary of the Corporation shall act as secretary of all meetings of shareholders, but in the absence of the Secretary at any meeting of shareholders, or his inability or refusal to act as secretary, the presiding officer may appoint any person to act as secretary of the meeting. Section 10. Inspector of Elections. The Board of Directors may, in advance of a meeting of shareholders, appoint one or more inspectors to act at the meeting or any adjournment thereof. In the event inspectors are not so appointed, or an appointed inspector fails to appear or act, the person presiding at the meeting of shareholders may, and on request of a shareholder entitled to vote shall, appoint one or more persons to fill such vacancy or vacancies, or to act as inspector. The inspector(s) shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine challenges and questions arising in connection with the right to vote, count and tabulate votes, ballots or consents, determine the results, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. Section 11. Notification of Shareholder Proposals. The Board of Directors of the Corporation shall submit for consideration and vote by the shareholders, at any 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 Section 11 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 Section 11. The chairman of the meeting may refuse to acknowledge the proposal of any shareholder not made in compliance with all such requirements. ARTICLE IV. DIRECTORS Section 1. Board of Directors. Except as may otherwise be provided in the Articles of Incorporation or these Bylaws, the general management of the business and affairs of the corporation shall be vested in a Board consisting of not less than five (5) directors and not more than fifteen (15) directors, as determined by the Board from time to time. Commencing with the annual meeting of the shareholders at which this by-law Section 1 is adopted, the directors shall be divided into three (3) classes, with the first class consisting of one-third (1/3) of the total number of directors, rounded up to the nearest whole number, the second class consisting of one-third (1/3) of the total number of directors, rounded up to the nearest whole number, and the third class consisting of one-third (1/3) of the total number of directors, rounded down to the nearest whole number. The term of office of directors in the first class shall expire at the first annual meeting of the shareholders after their election, the second class shall expire at the second annual meeting after their election, and the third class shall expire at the third annual meeting after their election. At each succeeding annual meeting, a number of directors equal to the number of the class whose term expires at the time of the meeting shall be elected to hold office until the third succeeding annual meeting. A director's term of office may not be shortened by a Board action reducing the number of directors on the Board. If the Board authorizes an increase in the number of directors in between annual meetings of the shareholders, the new director positions so created shall be treated as vacancies, and the new director positions shall be distributed among the three classes of directors so that the classes will be as nearly equal in number as possible. Vacancies in the Board of Directors may be filled by the remaining members of the Board as provided in the Articles of Incorporation, and each person so elected shall be a director until the next election of directors by the shareholders. No person shall be eligible for election as a director after he or she has attained age 65. Section 2. Nominations for Board. Nominations of candidates for election to the Board of Directors shall be made in the manner provided in the Articles of Incorporation. Section 3. Resignation. A director may resign by written notice to the Corporation. A director's resignation is effective upon its receipt by the Corporation or a later time set forth in the notice of resignation. Section 4. Place of Meetings and Records. The directors shall hold their meetings, and maintain the minutes of the proceedings of meetings of shareholders, Board of Directors, and executive and other committees, if any, and keep the books and records of account for the Corporation, in such place or places, within or outside the State of Michigan, as the Board may from time to time determine. Section 5. Annual Meetings of Directors. The newly elected Directors shall hold their first meeting, without notice other than these Bylaws, at the same place and immediately after the annual meeting of the Shareholders at which they are elected, or the time and place of such meeting may be fixed by consent in writing of all the Directors. Section 6. Regular Meetings of the Board. Regular meetings of the Board of Directors may be held at such times and places and pursuant to such notice, if any, as may be established from time to time by resolution of the Board of Directors. Section 7. Special Meetings of the Board. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or the Secretary, and shall be called by one of them upon the written request of a majority of the Directors. Written notice of the time and place of special meetings of the Board shall be delivered personally or mailed to each director at least forty-eight (48) hours prior thereto. Attendance of a Director at a special meeting constitutes a waiver of notice of the meeting, except where a director attends the meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Section 8. Meeting Participation By Means Of Communication Equipment. Members of the Board of Directors or any committee designated by the Board of Directors may participate in the meeting of the Board of Directors or of such committee by means of a conference telephone or similar communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 8 shall constitute presence in person at such meeting. Section 9. Quorum and Vote. At all meetings of the Board or a committee thereof, a majority of the members of the Board of Directors then in office or members of such committee, but not less than two (2) (if there are at least two (2) members of the Board or such committee), shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which there is a quorum shall be the act of the Board of Directors or the committee. If a quorum shall not be present at any meeting of the Board of Directors or a committee, a majority of the members present thereat may adjourn the meeting from time to time into another place without notice other than an announcement at the meeting until a quorum shall be present. Section 10. Action of the Board Without a Meeting. Any action required or permitted to be taken pursuant to authorization voted at a meeting of the Board of Directors, or any committee thereof, may be taken without a meeting if, before or after the action, all members of the Board of Directors then in office, or of such committee, consent thereto in writing. Such written consent shall be filed with the minutes of the proceedings of the Board of Directors and the consent shall have the same effect as a vote of the Board of Directors for all purposes. Section 11. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member of any committee. In the absence or in the event of the disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. A committee and each member thereof shall serve at the pleasure of the Board. Any committee, to the extent provided in the resolution of the Board or in these Bylaws, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation. No committee, however, shall have the power or authority to amend the Articles of Incorporation or Bylaws of the Corporation, adopt an agreement of merger or consolidation, recommend to the shareholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the shareholders a dissolution of the Corporation or a revocation of a dissolution, or fill vacancies in the Board of Directors. The committee shall not have the power or authority to declare a distribution, dividend or authorize the issuance of stock unless such power is granted to such committee by specific resolution of the Board of Directors. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. The committees shall keep regular minutes of their proceedings and report the same to the Board when required. If a committee is designated as an Executive Committee, its members shall consist of the Chairman of the Board, the President, and such other directors as shall be designated by the Board of Directors. Section 12. Compensation. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board or of any committees of which they are a member, and may be paid a fixed sum for attendance at each meeting of the Board or such committee, or a stated fee for serving as a director or for serving on any such committee. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE V. OFFICERS Section 1. Designation of Officers. The officers of the Corporation shall consist of such officers as the Board of Directors shall determine from time to time, and may include a Chairman of the Board, a Chief Executive Officer, a President, a Secretary, a Treasurer, one or more Vice Presidents, and such other or different offices as may be established by the Board of Directors. The officers of the Corporation need not be directors or shareholders. Any two or more offices may be held by the same person, but an officer shall not execute, acknowledge or verify any instrument in more than one capacity if the instrument is required by law to be executed, acknowledged or verified by two or more officers. An officer has such authority and shall perform such duties in the management of the Corporation as provided in these Bylaws, or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws, and as generally pertain to their offices, subject to the control of the Board of Directors. Section 2. Election of Officers. The officers of the Corporation shall be elected at the first meeting of the Board of Directors, or by action taken pursuant to written consent, after the annual meeting of shareholders. Officers shall hold office for the term of their election and until their respective successors are elected and qualified, or until resignation or removal. The election or appointment of an officer does not, by itself, create contract rights. Section 3. Resignation and Removal. Each officer shall serve at the pleasure of the Board of Directors. An officer may resign by written notice to the Corporation, which resignation is effective upon its receipt by the Corporation or at a subsequent time specified in the notice of resignation. The Chairman and Chief Executive Officer may be removed at any time, with or without cause, but only on the affirmative vote of a majority of the full Board of Directors. The President and all vice presidents, the secretary and the treasurer may be removed at any time, with or without cause, by the Chief Executive Officer or by majority vote of the directors present at any meeting. Any assistant secretary or assistant treasurer, or subordinate officer or agent appointed pursuant to Section 2 of Article V of these Bylaws may be removed at any time, with or without cause, by a majority vote of directors present in a meeting, by the Chief Executive Officer, or any committee or other officer in power to do so by resolution of the Board. Any vacancy in any office of the Corporation shall be filled by the Board of Directors. Section 4. Compensation of Officers. The Board of Directors, by affirmative vote or a majority or Directors in office and irrespective of any personal interest of any of them, may establish reasonable compensation of officers for services to the Corporation. Section 5. Chairman of the Board. The Chairman of the Board of Directors, if one be elected, shall be elected by the directors from among the directors then serving. The Chairman of the Board shall preside at all meetings of the Board of Directors and meetings of the shareholders, and shall perform such other duties as from time to time may be determined by resolution of the Board of Directors not inconsistent with these Bylaws. Section 6. Chief Executive Officer. The Chief Executive Officer of the Corporation shall have such authority and shall perform such duties in the management of the Corporation as usually are vested in or incident to the office of a chief executive officer of a corporation. In the absence or nonelection of the Chairman of the Board of Directors, the Chief Executive Officer shall preside at all meetings of the Board of Directors and meetings of the shareholders. Section 7. President. The President of the Corporation shall have such authority and shall perform such duties as shall be assigned to him by the Board of Directors. Section 8. Vice Presidents. The Vice Presidents shall have such authority and shall perform such duties as shall be assigned to them by the Board of Directors and may be designated by such special titles as the Board of Directors shall approve. Section 9. Treasurer. The Treasurer, or other officer performing the duties of a Treasurer, shall have custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the Corporation. The Treasurer shall deposit all money and other valuables in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors or the Chief Executive Officer taking proper vouchers for such disbursements. The Treasurer shall render to the Chief Executive Officer and Board of Directors, or any member thereof, at such times as they may request within reason, an account of all his transactions as Treasurer and of the financial condition of the Corporation. In general the Treasurer shall perform all duties incident to the office of Treasurer and such other duties as may be assigned by the Board of Directors. The Treasurer may be required to give bond for the faithful performance of his duties in such sum and with such surety, at the expense of the Corporation, as the Board of Directors may from time to time require. Section 10. Secretary. The Secretary shall give or cause to be given notice or all meetings of shareholders and Directors and all other notices required by law or by these Bylaws, and in case of his absence or refusal or neglect to do so, any such notice may be given by the shareholders upon whose requisition the meeting is called, as provided in these Bylaws. The Secretary shall record all the proceedings of the meetings of the shareholders and of the Directors in one or more books provided for that purpose. The Secretary shall have custody of the seal of the Corporation, if one be provided, and shall affix the same to all instruments requiring it when authorized by the Directors or the Chief Executive Officer. The Secretary shall have such authority and perform such other duties as may be assigned by the Board of Directors. All records in the possession or custody of the Secretary shall be open to examination by the Chairman of the Board, Chief Executive Officer and Board of Directors, or any member thereof, during regular business hours. Section 11. Other Offices. Other officers elected by the Board of Directors shall have such authority and shall perform such duties in the management of the Corporation as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws. Section 12. Bonds. If the Board of Directors shall so require, the treasurer, and the assistant treasurer and/or other officer or agent of the Corporation, shall give bond to the Corporation in such amount and with such surety as the Board of Directors may deem sufficient, conditioned upon the faithful performance of the respective duties and offices. Section 13. Absence. In the case of the absence or inability to act of any officer, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors or the Chief Executive Officer may delegate for the time being the powers or duties of such officer to any other director or officer. ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the Corporation, and no evidences of indebtedness shall be issued in its name, unless authorized by resolution of the Board of Directors. Such authorization may be general or confined to specific instances. Section 3. Checks. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. Any signature on any check, draft or other order may be signed by the facsimile signature of any person authorized to sign under this Section 3 of Article VI. If any officer who has signed or whose facsimile signature has been used shall cease to be such officer, such document may nevertheless be signed by means of such facsimile signature and delivered as though the person who signed such document or whose facsimile signature has been used thereon had not ceased to be such officer. Section 4. Deposits. All funds of the Corporation, not otherwise employed, shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may determine. ARTICLE VII. INDEMNIFICATION Section 1. Indemnification for Actions Brought by Third Parties. Any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a director or officer of the Corporation or a subsidiary, or, while serving as such a director or officer, is or was serving at the request of the Corporation or a subsidiary as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, whether for profit or not, shall be indemnified by the Corporation against expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation or its shareholders, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation or its shareholders, or with respect to any criminal action or proceeding, that he or she had reasonable cause to believe that his or her conduct was unlawful. Persons who are not directors or officers of the Corporation or a subsidiary may be similarly indemnified in respect of such service to the extent authorized at any time by the Board of Directors, except as otherwise provided by statute or the Articles of Incorporation. Section 2. Indemnification in Actions Brought for the Benefit of the Corporation. Any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director or officer of the Corporation or a subsidiary, or, while serving as such a director or officer, is or was serving at the request of the Corporation or a subsidiary as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, whether for profit or not, shall be indemnified by the Corporation against expenses (including attorneys' fees) and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation or its shareholders. Indemnification shall not be made for any claim, issue or matter in which such person has been found liable to the Corporation except to the extent authorized in Section 7 of this Article VII. Persons who are not directors or officers of the Corporation or a subsidiary may be similarly indemnified in respect of such service to the extent authorized at any time by the Board of Directors, except as otherwise provided by statute or the Articles of Incorporation. Section 3. Limitation of Director Liability. Notwithstanding Sections 1 and 2 of this Article VII, and in accordance with Article VI of the Articles of Incorporation, the Corporation shall indemnify a director for expenses and liabilities without a determination that the director has met the standard of conduct set forth in Sections 1 and 2, except with respect to settlements of actions by or on behalf of the corporation; provided, however, that no indemnification may be made without court approval if the director received a financial benefit to which he or she was not entitled, intentionally inflicted harm on the Corporation or its shareholders, violated Section 551 of the Michigan Business Corporation Act, or intentionally committed a criminal act. Section 4. Expenses. To the extent that a director or officer, or other person whose indemnification is authorized by the Board of Directors, has been successful on the merits or otherwise, including the dismissal of an action without prejudice, in the defense of any action, suit or proceeding referred to in Section 1 or 2 of this Article VII, or in the defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith and any action, suit or proceeding brought to enforce the mandatory indemnification provided in this Section VII. Section 5. Authorization of Indemnification. Except as otherwise provided in Section 3 of this Article VII, any indemnification under Section 1 or 2 of this Article VII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification is proper in the circumstances because the person has met the applicable standard of conduct set forth in this Article VII and upon an evaluation of the reasonableness of expenses and amounts paid in settlement. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who are not parties or threatened to be made parties to such action, suit or proceeding, or if such a quorum cannot be obtained, by a majority vote of a committee duly designated by the Board consisting solely of two or more directors not at the time parties or threatened to be made parties to such action, suit or proceeding; (b) by independent legal counsel (who may be the regular counsel of the Corporation) in a written opinion, which counsel shall be selected as provided in (a) above, provided that if a committee cannot be designated as provided in (a) above, then the Board shall select such independent counsel; (c) by all Independent Directors (as that term is defined in the Michigan Business Corporation Act) who are not parties or threatened to be made parties to such action, suit or proceeding; or (d) by the shareholders, but shares held by directors, officers, employees or agents who are parties or threatened to be made parties to such action, suit or proceeding may not be voted. In designating a committee under (a) above, or in the selection of independent legal counsel in the event a committee cannot be designated pursuant to (b) above, all directors may participate. The Corporation may indemnify a person for a portion of expenses (including reasonable attorneys' fees), judgments, penalties, fines and amounts paid in settlement for which the person is entitled to indemnification under Section 1 or 2 of this Article VII, even though the person is not entitled to indemnification for the total amount of such expenses, judgments, penalties, fines and amounts paid in settlement. An authorization of indemnification under this Section 5 of Article VII shall be made (a) by the Board of Directors in one of the following ways: (i) by a majority vote of the Board of Directors consisting of two or more directors not at the time parties or threatened to be made parties to such action, suit or proceeding, (ii) by a majority vote of a committee consisting solely of two or more directors not at the time parties or threatened to be made parties to such action, suit or proceeding, (iii) by a majority vote of one or more Independent Directors who are not parties or threatened to be made parties to such action, suit or proceeding, or (iv) if there are no Independent Directors and less than 2 directors who are not parties or threatened to be made parties to the action, suit or proceeding, by the full Board of Directors in accordance with Section 523 of the Michigan Business Corporation Act, or (b) by the shareholders, but shares held by directors, officers, employees or agents who are parties or threatened to be made parties to the action, suit or proceeding may not be voted on the authorization. Section 6. Advancing of Expenses. Expenses incurred by any person who is or was serving as a director or officer of the Corporation or a subsidiary in defending a civil or criminal action, suit or proceeding described in Section 1 or 2 of this Article VII shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding if (a) the person furnishes the Corporation a written affirmation of his or her good faith belief that he or she has met the applicable standard of conduct set forth in Section 1 or 2 of this Article VII; (b) the person furnishes the Corporation a written undertaking, executed personally or on his or her behalf, to repay the advance if it is ultimately determined that he or she did not meet the applicable standard of conduct; and (c) a determination is made that the facts then known to those making the determination would not preclude indemnification under the Michigan Business Corporation Act. Persons who are or were not serving as a director or officer of the Corporation or a subsidiary may receive similar advances of expenses to the extent authorized at any time by the Board of Directors, except as otherwise provided by statute or the Articles of Incorporation. Determinations under this Section VII shall be made in the manner specified in Section 5 of this Article. Notwithstanding the foregoing, in no event shall any advance be made in instances where the Board or independent legal counsel reasonably determines that such person deliberately breached his or her duty to the Corporation or its shareholders. Section 7. Right to Indemnification upon Application; Procedure upon Application. A director, officer or other person who is a party or threatened to be made a party to an action, suit or proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of an application, the court may order indemnification if it determines that the person is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he or she met the applicable standard of conduct set forth in Section 1 or 2 of this Article VII or was adjudged liable as described in Section 2 of this Article VII, provided, however, that if he or she was adjudged liable, his or her indemnification shall be limited to reasonable expenses incurred. Section 8. Non-Exclusivity of Rights. The right to indemnification conferred in this article shall not be exclusive of any other right that any person may have or acquire under any statute, provision of the articles of incorporation, bylaws, agreement, vote of shareholders or disinterested directors, or otherwise. Section 9. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee, or agent of the corporation or of another corporation, partnership, joint venture, trust, or other enterprise against any expense, liability, or loss, whether or not the corporation would have the power to indemnify the person against the expenses, liability, or loss under the MBCA. Section 10. Mergers. For the purposes of this Article VII, references to the "Corporation" include all constituent Corporations absorbed in a consolidation or merger, as well as the resulting or surviving Corporation, so that any person who is or was a director, officer, employee or agent of such constituent Corporation, or is or was serving at the request of such constituent Corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic Corporation, partnership, joint venture, trust or other enterprise, whether for profit or not, shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving Corporation if he or she had served the resulting or surviving Corporation in the same capacity. Section 11. Savings Clause. If this Article VII or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director, officer or other person whose indemnification is authorized by the Board of Directors as to expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including a grand jury proceeding and an action by the Corporation, to the full extent permitted by any applicable portion of this Article VII that shall not have been invalidated or by any other applicable law. Section 12. Amendment. If this Article VII is repealed, amended or modified, it shall not affect any right or protection existing at the time of such repeal, amendment or modification. ARTICLE VIII. MISCELLANEOUS Section 1. Fiscal Year. The fiscal year of this Corporation shall end on the last Saturday of December of each year. Section 2. Notices. Whenever any notice is required to be given under the provisions of any law, the Articles of Incorporation for this Corporation, or by these Bylaws, it shall not be construed or interpreted to mean personal notice, unless expressly so stated, and any notice so required shall be deemed to be sufficient if given in writing by mail, by depositing the same in a Post Office box, postage prepaid, addressed to the person entitled thereto at his last known Post Office address, and such notice shall be deemed to have been given on the day of such mailing. Shareholders not entitled to vote shall not be entitled to receive notice of any meetings, except as otherwise provided by law or these Bylaws. Section 3. Waiver of Notice. Whenever any notice is required to be given under the provisions of any law, or the Articles of Incorporation for this Corporation, or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Section 4. Voting of Securities. Securities of another corporation, foreign or domestic, standing in the name of this Corporation which are entitled to vote shall be voted, in person or by proxy, by the Chief Executive Officer of this Corporation or by such other or additional persons as may be designated by the Board of Directors. ARTICLE IX. AMENDMENTS Except as may otherwise be provided in the Articles of Incorporation or these Bylaws, these Bylaws may be amended, repealed or new Bylaws adopted either by a majority vote of the Board of Directors at a regular or special meeting of the Board, or by vote of the holders of a majority of the outstanding voting stock of the Corporation at any annual or special meeting, if notice of the proposed amendment, repeal or adoption be contained in the notice of such meeting. EX-10.1 4 CONSULTING AGREEMENT CONSULTING AGREEMENT THIS AGREEMENT, made effective as of September 15, 1999 between NORTH COUNTRY FINANCIAL CORPORATION (the "Company"), with its principal executive offices at 130 South Cedar Street, Manistique, Michigan, and RONALD G. FORD ("Executive"). RECITALS Executive has over 22 years of experience with the Company, NORTH COUNTRY BANK & TRUST (the "Bank"), and/or their affiliates and is currently employed as Chairman of the Board and Chief Executive Officer of the Company and the Bank. Executive possesses intimate knowledge of the business and affairs of the Company, the Bank, and their affiliates and their respective policies, markets and financial and human resources. By virtue of his employment, Executive has acquired certain confidential information and data (as described further herein) with respect to the Company, the Bank, and their affiliates. The Company and the Bank desire to assure the continued services of Executive on their own behalf and/or on behalf of their affiliates following termination of his employment by the Company and the Bank for the period provided in this Agreement, and Executive is willing to continue to provide certain services to the Company, the Bank, and/or their affiliates for such period, upon the terms and conditions hereinafter set forth. In addition, the Company and the Bank wish to prevent Executive from competing with them for the period provided in this Agreement and Executive is willing to consent to such a limitation. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties agree as follows: 1. Consulting. As of the Retirement Date, as defined herein, Executive agrees to provide the services described in Paragraph 3 hereof for the period stated in Paragraph 2 hereof, subject to the other terms and conditions herein provided. For the purposes of this Agreement, "Retirement Date" means the day after the date the Executive leaves the full-time employ of the Company other than because of death or Disability (as defined in Paragraph 5A hereof). 2. Term. The term shall commence as of the Retirement Date and shall continue until the tenth anniversary of such date, unless this Agreement is sooner terminated as hereinafter set forth (the "Term"). 3. Duties. During the Term, Executive shall devote his best efforts and such of his business time, attention, skill and efforts as he deems necessary to consult with the executive officers of the Company and the Bank with respect to such matters as may be reasonably requested by the Company and the Bank; provided, however, that nothing in this Agreement shall preclude Executive from devoting reasonable periods required for serving as a director or consultant to any business organization which does not involve a material conflict of interest with the Company's business, from engaging in charitable and community activities, and from managing his personal investments. The parties hereto acknowledge and agree that (i) Executive shall be free to reside and work at the geographical location of his choice, (ii) in most circumstances, Executive may respond to the Company's requests for his services by telephone, mail, facsimile or similar means of communication, (iii) in requiring Executive's services hereunder, the Company shall consider the reasonable convenience of Executive and the demands of his other commitments and shall require his physical attendance at meetings and events remote from his residence only in matters for which Executive's presence is essential; (iv) the conduct and control of the consulting services to be performed hereunder shall be the sole responsibility of Executive, and (v) the Company shall have no power to direct or dictate Executive's schedule or the hours during which he shall be required to perform consulting services hereunder. The Company hereby acknowledges and agrees that Executive shall continue to receive compensation and benefits pursuant to this Agreement as set forth in Paragraph 4 hereof notwithstanding the failure or refusal of the Company to request the performance of consulting services by Executive hereunder. The Company may terminate this Agreement only for Cause as set out in Paragraph 5B hereof. 4. Compensation. As compensation for the services to be provided pursuant to this Agreement, Executive shall receive from the Company or its affiliates the compensation, expense reimbursement and other benefits set forth below: A. Cash Compensation. The Company will pay to Executive Seven Thousand Dollars ($7,000.00) per month for the Term. The payments shall be made on a monthly basis in arrears. B. Reimbursement of Expenses. The Company shall pay or reimburse Executive for all reasonable travel and other expenses incurred by Executive in the performance of his duties hereunder. Upon the Executive's request, the Company shall, during the Term and at its expense, furnish Executive with secretarial services and office space sufficient for the Executive to perform his duties hereunder at a location mutually convenient for the Company and the Executive. C. Benefits. For the Term, the Company shall continue to provide medical and dental benefits to the Executive and/or the Executive's spouse and dependents at the Company's expense in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies applicable generally to other peer executives who are active employees and their spouse and dependents as in effect from time to time thereafter; provided, however, that (1) if the Executive becomes reemployed with another employer and is eligible to receive medical or other benefits under another employer provided plan, the medical and other benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility, provided that the aggregate coverage of the combined benefit plans is no less favorable to the Executive, in terms of amounts, deductibles and costs to him, than the coverage required hereunder, and (2) that if the Executive and/or the Executive's spouse qualifies for coverage by Medicare or any successor program, the Company may require that the Executive and/or the Executive's spouse fully participate in Medicare and pay the premiums therefor personally. D. Company Car. The Executive shall have the right to purchase the car provided to him by the Company or its affiliates during the twelve (12) month period immediately preceding the Retirement Date (or a comparable car acceptable to the Executive if such car is no longer owned by the Company or its affiliates), at the book value thereof on the Retirement Date, exercisable within thirty (30) days after the Retirement Date. If the car is not purchased, Executive shall return the car to the Company. 5. Consequences of Executive's Death or Disability, Voluntary Termination or Termination by the Company for Cause. A. Death or Disability. Executive's obligations under this Agreement shall terminate upon the death or Disability of Executive. The Company's obligations to pay the cash compensation discussed in Paragraph 4A shall also terminate upon the death or Disability of Executive. The Company will have the obligation to reimburse the Executive for expenses allowed under Paragraph 4B hereof which were incurred prior to the date of death or Disability. Thereafter, the Company's obligations under Paragraph 4B will cease. The health benefits discussed in Paragraph 4C will continue for ten years from the Retirement Date, notwithstanding the death or Disability of Executive or, if shorter, until the death of the last to die of the Executive or his spouse. For purposes of this Agreement, the Executive shall have suffered a "Disability" if he is disabled within the meaning of the Company's long-term disability plan. If the Company does not have such a plan, the Executive shall have suffered a "Disability" if he is unable to perform his duties with or without reasonable accommodation for ninety (90) consecutive business days or one hundred twenty (120) business days in the aggregate during a 365-day period as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative, provided if the parties are unable to agree, the parties shall request that the President of the Schoolcraft County Medical Society choose such physician. B. Termination by the Company for Cause. The Company may terminate the Executive's employment hereunder for Cause. There will be Cause for termination under any of the following circumstances: (i) any act of Personal Dishonesty (as hereinafter defined) by the Executive; (ii) any act of Willful Misconduct (as hereinafter defined) by the Executive; (iii) any act by the Executive constituting a breach of his fiduciary duty to the Company which results or is intended to result in gain to, or personal enrichment of, the Executive at the Company's expense; or (iv) any breach by Executive of Paragraph 6A through 6D of this Agreement (noncompetition, confidential information, and nonsolicitation). For purposes of this Agreement: "Personal Dishonesty" means conduct on the part of the Executive which evinces a want of integrity or an intentional breach of trust and which directly causes (or the Board of Directors determines is reasonably likely to cause) material injury to the Company; and "Willful Misconduct" means conduct on the part of the Executive which evinces a deliberate disregard of the interest of the Company and which causes (or the Board of Directors determines is reasonably likely to cause) material injury to the Company. Executive acknowledges and agrees that after the Termination Date, he shall no longer be entitled to receive any of the compensation provided under Paragraph 4 hereof but that Paragraphs 6A through 6D hereof shall continue to apply to the extent provided therein. C. Termination by Executive. Executive may terminate this Agreement at any time by giving ninety (90) days' prior written notice to the Company. In such event, Executive shall receive no further compensation hereunder after the Termination Date as defined herein. After the Termination Date, the provisions of Paragraphs 6A through 6D hereof shall continue to apply to the extent provided therein. The term "Termination Date" shall mean (A) the date the Company notifies the Executive that his duties hereunder are being terminated for Cause; (B) the day after expiration of the ninety (90) day period specified in Paragraph 5C if this Agreement is terminated by the Executive pursuant to Paragraph 5C unless the Executive and the Company agree on an earlier date; provided, however, that (1) any such Notice of Termination shall be given in accordance with Paragraph 5D hereof, and (2) if a dispute exists concerning the termination, the Termination Date shall be the date on which the dispute is finally settled, either by mutual written agreement of the parties, or by arbitration as provided in Paragraph 7F hereof. D. Termination Notice and Procedure. Any termination by the Company for Cause as provided under Paragraph 5B hereof or by Executive as provided under Paragraph 5C hereof, shall be made by written Notice of Termination to the other party delivered by hand or certified mail (postage prepaid), return receipt requested, addressed, if to the Company, at its main office at 130 South Cedar Street, Manistique, Michigan, or if to the Executive, at the address set forth on the signature page of this Agreement (or such other address as shall be specified in writing by either party to the other). Any such Notice of Termination shall be made in accordance with the following procedures: (i) Any Notice of Termination for Cause under Paragraph 5B shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances alleged to provide a basis for termination. Any termination of employment by Executive under Paragraph 5C shall state such fact therein. (ii) Any Notice of Termination by the Company for Cause under Paragraph 5B hereof shall be approved by a resolution duly adopted by a majority of the Directors of the Company (or any successor corporation) then in office, specifying in detail the basis for such termination. (iii) In the event of a purported termination by the Company for Cause, if within thirty (30) days following the date of receipt of the Notice of Termination, one party notifies the other that a dispute exists concerning the basis for termination, this Agreement shall not be terminated until the dispute is finally resolved either by mutual written agreement of the parties, or by arbitration as provided in Paragraph 7F hereof. 6. Obligations of Executive During and After the Term. A. Competition. Executive agrees that during the Term, and for the two-year period following the Term, he shall not, either directly or indirectly as an agent, stockholder, employee, officer, director, trustee, partner, member, proprietor or otherwise, render advice or assistance to (other than on behalf of the Company) or be employed by or render services to any person, company, business entity, or other organization which is engaged in the business of commercial banking within a sixty (60) mile radius of any branch office of the Bank or any other affiliated entity of the Company. The Company, Bank and any other affiliated entity of the Company are hereafter referred to as the "Company Affiliated Group." B. Confidential Information. The Executive shall not make any Unauthorized Disclosure. For purposes of this Agreement, "Unauthorized Disclosure" shall mean disclosure by the Executive without the consent of the Board of Directors to any person, other than an employee of the Company Affiliated Group or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of his duties hereunder or as may be legally required, of any confidential information obtained by the Executive while rendering services to the Company Affiliated Group (including, but not limited to, any confidential information with respect to any of the Company Affiliated Group's customers or methods of operation) the disclosure of which he knows or has reason to believe will be materially injurious to the Company Affiliated Group; provided, however, that such term 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 Paragraph 6B) or any information not otherwise considered confidential by a reasonable person engaged in the same business as that conducted by the Company Affiliated Group. C. Solicitation of Employees. The Executive will not, during the Term and for the two-year period following the Term, directly or indirectly, induce, solicit, entice or procure any person who is an employee of the Company Affiliated Group, or has been such an employee within the three months preceding such contact by Executive, to terminate his or her employment with the Company Affiliated Group so as to accept employment with any person, company, business entity, or other organization whatsoever in which the Executive owns, directly or indirectly, at least a 5% equity interest or from which the Executive receives compensation. D. Solicitation of Customers. During the Term and for the two-year period following the Term, the Executive will not, directly or indirectly, contact any customer or prospective customer of the Company Affiliated Group with whom the Executive has had contact on behalf of the Company Affiliated Group during the two-year period preceding the date of termination of the Term or any customer or prospective customer about whom the Executive has obtained confidential information in connection with the Executive's services to the Company Affiliated Group during such two-year period so as to cause or attempt to cause such customer or prospective customer of the Company Affiliated Group not to do business or to reduce such customer's business with the Company Affiliated Group or divert any business from the Company Affiliated Group. E. 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 6. 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. 7. General Provisions. A. Successors and Assigns. (i) This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns, and the Company shall require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. The term "Company" as used herein shall include such successors and assigns. The term "successors and assigns" as used herein shall mean a corporation or other entity acquiring all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise. (ii) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, nor shall Executive's rights hereunder be subject to encumbrance or to the claims of the Executive's creditors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, Estate, executors, administrators, heirs and beneficiaries. B. Enforcement. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby. C. Amendment. This Agreement may not be amended or modified except by written instrument executed by the Company and Executive. D. Independent Contractor. The parties hereto acknowledge and agree that Executive shall be an independent contractor during the Term and that he shall not be deemed an employee of the Company. In acknowledging that he is providing services as an independent contractor, Executive acknowledges and agrees that, except as specifically provided in Paragraph 4 hereof, he shall not be entitled to participate in any insurance, qualified or nonqualified benefit plans or other fringe benefits provided by the Company to its employees and that, except as required by federal, state or local law, the Company shall not be required to withhold nor shall the Company withhold any income, social security, unemployment or other taxes or similar payments from the amounts payable to Executive hereunder. In the event the Company shall be required by law to withhold any such taxes or payments from amounts payable to Executive under Paragraph 4 hereof, the amounts payable to Executive thereunder shall be reduced accordingly. E. Governing Law. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the internal laws of the State of Michigan without giving effect to its principles of conflicts of laws. F. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, other than a controversy or claim arising in connection with Section 6 hereof (the noncompetition, confidentiality and nonsolicitation provisions) where the Company is seeking injunctive relief, shall be settled exclusively by arbitration by a single arbitrator mutually agreed to by the disputing parties in accordance with the Commercial Arbitration Rules of the American Arbitration Association as then in effect. Such arbitration will be held in Manistique, Michigan or such other place as is mutually agreed to by the disputing parties. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator may award costs and reasonable attorneys' fees to the prevailing party in such an arbitration. G. Notice. Notices given pursuant to this Agreement shall be in writing and shall be considered to be given and received in all respects when personally delivered, when transmitted by facsimile or on the second business day following the date deposited in the United States mail, certified mail, postage pre-paid, return receipt requested, addressed to the parties as set forth below or at such other address as each party may specify by notice to the other party, or in the case of a facsimile, to the facsimile number indicated: If to Company: North Country Financial Corporation 130 South Cedar Street Manistique, Michigan 49854 Attention: President Facsimile: 906.341.8702 If to Executive: HC 01, Box 3288A Manistique, Michigan 49854 Attention: Ronald G. Ford Facsimile: 906.341.5992 H. No Waiver. No waiver by either party at any time of any breach of the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time. I. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. NORTH COUNTRY FINANCIAL CORPORATION: By: /s/ Paulette M. Demers ------------------------------ Title: Secretary EXECUTIVE: /s/ Ronald G. Ford --------------------------------- Ronald G. Ford EX-10.2 5 SECOND AMENDMENT TO EMPLOYMENT AGREEMENT SECOND AMENDMENT TO EMPLOYMENT CONTRACT This Agreement is made and is effective this 18th day of August, 1999, and amends that Employment Contract between FIRST NORTHERN BANK & TRUST n/k/a NORTH COUNTRY BANK & TRUST (the "Bank"), FIRST MANISTIQUE CORPORATION n/k/a NORTH COUNTRY FINANCIAL CORPORATION (the "Company") and RONALD G. FORD ("Ford") dated July 1, 1994, as amended on July 26, 1996. RECITAL The parties wish to amend the Employment Contract in certain respects as described in this Second Amendment. Accordingly, the Boards of Directors of the Bank and the Company have approved this Second Amendment and authorized its execution and delivery on behalf of the Bank and the Company. AGREEMENT 1. Section 7(d) of the Employment Contract is amended to add at the end thereof the following: For purposes of this Section 7(d), any good faith determination by Ford that there is Good Reason shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a voluntary termination of employment by Ford for any reason or no reason during the ninety (90) day period commencing on the date six (6) month is after the Change in Control shall be deemed to be a termination for Good Reason for purposes of this Agreement. 2. Except as amended hereby, the Employment Contract is ratified and confirmed in all respects. IN WITNESS WHEREOF, the parties have executed this Second Amendment effective as of the day first written above. NORTH COUNTRY BANK & TRUST By: /s/ Sherry Littlejohn ---------------------------------------- Its: President and Chief Operating Officer NORTH COUNTRY FINANCIAL CORPORATION By: /s/ Sherry Littlejohn ---------------------------------------- Its: President and Chief Operating Officer /s/ Ronald G. Ford ------------------------------------------- Ronald G. Ford EX-10.3 6 MANAGEMENT CONTINUITY AGREEMENT FORM A MANAGEMENT COMMUNITY AGREEMENT THIS IS AN AGREEMENT between First Manistique Corporation (the "Corporation"), whose principal offices are located at 130 South Cedar, Manistique, Michigan 49854, and Sherry Littlejohn (the "Executive"), who resides at Route 1, Box 1930, Glenwood Drive, Manistique, MI 49854 dated May 22, 1996. RECITALS The Executive is a key executive officer of the Corporation whose continued dedication, availability, advice and counsel to the Corporation is deemed important to the Board of Directors of the Corporation ("Board"), the Corporation and its shareholders. The services of the Executive, his experience and knowledge of the affairs of the Corporation and his reputation and contacts in the industry are extremely valuable to the Corporation. The Corporation wishes t6lattract and retain such well-qualified executives, and it is in the best interests of the Corporation and of the Executive to secure the continued services of the Executive notwithstanding any change in control of the Corporation. The Corporation considers the establishment and maintenance of a sound and vital management to be part of its overall corporate strategy and to be essential to protecting and enhancing the best interests of this Corporation and its shareholders. Accordingly, the Board has approved this Agreement with the Executive and authorized its execution and delivery on behalf of the Corporation. AGREEMENT 1. Term of Agreement. "This Agreement will begin on the date entered above (the "Commencement Date") and will continue in effect through the third anniversary of the Commencement Date. However, on the third anniversary of the Commencement Date, and on each third anniversary date thereafter, the term of this Agreement will be extended automatically for three (3) additional years unless, not later than six (6) months prior to such anniversary date, the Corporation gives written notice to the Executive that it has elected not to extend this Agreement. In addition, if a Change of Control occurs during the term of this Agreement, this Agreement will continue in effect for at least thirty- six (36) months beyond the end of the month in which any Change of Control occurs. 2. Definitions. The following defined terms shall have the meanings set forth below, for purposes of this Agreement: (a) Change of Control. "Change of Control" means an occurrence of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the inclusiveness of the definition in the preceding sentence, a Change of Control of the Corporation shall be deemed to have, occurred if: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing twenty-five percent (25%) or more of the combined voting power of the Corporation's then outstanding securities; or (ii) At any time a majority of the Board of Directors of the Corporation is comprised of other than Continuing Directors (for purposes of this paragraph, the term Continuing Director means a director who was either (A) first elected or appointed as a Director prior to the date of this Agreement; or (B) subsequently elected or appointed as a director if such director was nominated or appointed by at least a majority of the then Continuing Directors); or (iii) Any of the following occur: (A) Any merger or consolidation of the Corporation, other than a merger or consolidation in which the voting securities of the Corporation immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) fifty-one percent (51%) or more of the combined voting power of the Corporation or surviving entity immediately after the merger or consolidation with another entity; (B) Any sale, exchange, lease, mortgage, pledge, transfer, or other disposition (in a single transaction or a series of related transactions) of all or substantially all of the assets of the Corporation which shall include, without limitation, the sale of assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of the Corporation on a consolidated basis; (C) Any liquidation or dissolution of the Corporation; (D) Any reorganization, reverse stock split, or recapitalization of the Corporation which would result in a Change of Control; or (E) Any transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing; or any agreement, contract, or other arrangement providing for any of the foregoing. (b) Disability. "Disability" means that, as a result of Executive's incapacity due to physical or mental illness, the Executive shall have been found to be eligible for the receipt of benefits under the Corporation's long term disability plan. (c) Cause. "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 Corporation or a Subsidiary or substantial injury to the business reputation of the Corporation or a Subsidiary; (ii) the commission by the Executive of an act of fraud in the performance of such Executive's duties on behalf of the Corporation or a Subsidiary; (iii) the continuing willful failure of the Executive to perform the duties of such Executive to the Corporation or a Subsidiary (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) after written notice thereof (specifying the particulars thereof in reasonable detail) and a reasonable opportunity to be heard and cure such failure are given to the Executive by the Nominating and Salary Committee of the Board; or (iv) the order of a federal or state bank regulatory agency or a court of competent jurisdiction requiring the termination of the Executive's employment. For purposes of this subparagraph, 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 Corporation or a Subsidiary. (d) Good Reason. For purposes of this Agreement, "Good Reason" means the occurrence of any one or more of the following without the Executive's express written consent: (i) The assignment to Executive of duties which are materially different from or inconsistent with the duties, responsibilities, and status of Executive's position at any time during the six (6) month period prior to the Change of Control of the Corporation, or which result in a significant reduction in Executive's authority and responsibility as a senior executive of the Corporation; (ii) A reduction by the Corporation in Executive's base salary or salary grade as of the day prior to the Change of Control, or the failure to grant salary increases and bonus payments on a basis comparable to those granted to other executives of the Corporation, or reduction of Executive's most recent incentive bonus potential prior to the Change of Control under the Corporation's Management Bonus Plan, or any successor plan; (iii) The Corporation requiring Executive to be based at a location in excess of forty (40) miles from the location where Executive is currently based, or in the event of any relocation of the Executive with the Executive's express written consent, the failure of the Corporation or a Subsidiary to pay (or reimburse the Executive for) all reasonable moving expenses by the Executive relating to a change of principal residence in connection with such relocation and to indemnify the Executive against any loss realized in the sale of the Executive's principal residence in connection with any such change of residence, all to the effect that the Executive shall incur no loss on an after tax basis; (iv) The failure of the Corporation to obtain a satisfactory agreement from any successor to the Corporation to assume and agree to perform this Agreement, as contemplated in Paragraph 6 hereof; (v) Any termination by the Corporation of Executive's employment that is not effected pursuant to a Notice of Termination; (vi) Any termination of Executive's employment, reduction in Executive's compensation or benefits, or adverse change in Executive's location or duties, if such termination, reduction or adverse change (aa) occurs within six (6) months before a Change of Control, (bb) is in contemplation of such Change in Control, and (cc) is taken to avoid the effect of this Agreement should such action occur after such Change in Control; (vii) The failure of the Corporation to provide the Executive with substantially the same fringe benefits (including, without limitation, Benefit Restoration Plan, health care, insurance, stock options and paid vacations) that were provided to him immediately prior to the Change in Control, or with a package of fringe benefits that, though one or more of such benefits may vary from those in effect immediately prior to such Change in Control, is substantially comparable in all material respects to such fringe benefits taken as a whole. The existence of Good Reason shall not be affected by Executive's incapacity due to physical or mental illness. Executive's continued employment shall not constitute a waiver of Executive's rights with respect to any circumstance constituting Good Reason under this Agreement. (e) Notice of Termination. Notice of Termination" means a written notice indicating the specific termination provision in this Agreement relied upon and setting forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the employment under the provision so indicated. The Executive shall not be entitled to give a Notice of Termination that the Executive is terminating employment for Good Reason more than six (6) months following the occurrence of the event alleged to constitute Good Reason, except with respect to an event which occurred before the Change of Control, in which case the Notice of Termination must be given within six (6) months Mowing the Change of Control. Any termination by the Corporation for Cause or due to Executive's Disability, or by Executive for Good Reason shall be communicated by Notice of Termination to the other party. (f) Retirement. "Retirement" means having reached normal retirement age as defined in the Corporation's noncontributory pension plan or taking early retirement in accordance with the terms of the Corporation's noncontributory pension plan. (g) Subsidiary. "Subsidiary," means a corporation with at least eighty percent (80%) of its outstanding capital stock owned by the Corporation. 3. Eligibility for Severance Benefits. Subject to Paragraph 5, the Executive shall receive the Severance Benefits described in Paragraph 4 if the Executive's employment is terminated during the term of this Agreement, and (a) The termination occurs within thirty-six (36) months after a Change of Control, unless the termination is (i) because of Executive's death or Disability, (ii) by the Corporation for Cause, or (iii) by the Executive other than for Good Reason; or (b) The Corporation terminates the employment within six (6) months before a Change of Control, in contemplation of such Change of Control, and to avoid the effect of this Agreement should such action occur after such Change of Control. 4. Severance Benefits. Subject to Paragraph 5, the Executive shall receive the following Severance Benefits (in addition to accrued compensation and vested benefits) if eligible under Paragraph 3: (a) A lump sum cash amount equal to Executive's annual base salary at the highest annual rate in effect during the twelve (12) month period immediately prior to the Change of Control or, if greater, at the rate in effect at the time Notice of Termination is given (or on the date the employment is terminated if no Notice of Termination is required), multiplied by 3; (b) One hundred percent (100%) of Executive's incentive bonus potential under the Corporation's Management Bonus Plan in effect at the time Notice of Termination is given (or on the date the employment is terminated if no Notice of Termination is required) or, if greater, the average bonus paid to Executive over the preceding three (3) year period, multiplied by 3; (c) For a three (3) year period after the date the employment is terminated, the Corporation will arrange to provide `to Executive at the Corporation's expense, with: (i) Health care coverage equal to that in effect for Executive prior to the termination (or, if more favorable to Executive, that furnished generally to salaried employees of the Corporation), including, but not limited to, hospital, surgical, medical, dental, prescription and dependent coverages. Upon the expiration of the health care benefits required to be provided pursuant to this subparagraph 4(c), the Executive shall be entitled to the continuation of such benefits under the provisions of the Consolidated Omnibus Budget Reconciliation Act. Health care benefits otherwise receivable by Executive pursuant to this subparagraph 4(c) shall be reduced to the extent comparable benefits are actually received by Executive from a subsequent employer during the three (3) year period following the date the employment is terminated and any such benefits actually received by Executive shall be reported to the Corporation; (ii) Life and accidental death and dismemberment insurance coverage (including supplemental coverage purchase opportunity and double indemnity for accidental death) equal (including policy terms) to that in effect at the time Notice of Termination is given (or on the date the employment is terminated if no Notice of Termination is required) or, if more favorable to Executive, equal to that in effect at the date the Change of Control occurs; and (iii) Disability insurance coverage (including policy terms) equal to that in effect at the time Notice of Termination is given (or on the date employment is terminated if no Notice of Termination is required) or, if more favorable to Executive, equal to that in effect immediately prior to the Change of Control; provided, however, that no income replacement benefits will be payable under such disability policy with regard to the three (3) year period following a termination of employment provided that the payments payable under subparagraphs 4(a) and (b) above have been made; (d) The Executive will be entitled to receive retirement benefits as provided herein, so that the total retirement benefits the Executive receives from the Corporation will approximate the total retirement benefits the Executive would have received under all retirement plans (which shall not include severance plans) and other employment contracts of the Corporation in which the Executive participates were the Executive hilly vested under such retirement plans and entitled to all benefits payable under such other employment contracts and had the Executive continued in the employ of the Corporation for thirty-six (36) months following the date of his termination or until his retirement, if earlier (provided that such additional period shall be inclusive of and shall not be in addition to any period of service credited under any severance plan of the Corporation). The benefits specified in this subparagraph will include all ancillary benefits, such as early retirement and survivor rights and benefits available at retirement. The amount payable to the Executive or his beneficiaries under this subparagraph shall equal the excess of (1) the benefits that would be paid to the Executive or his beneficiaries, under all retirement plans and other employment contracts of the Corporation in which the Executive participates if (A) the Executive were fully vested under such plans and entitled to all benefits payable under such other employment contracts; (B) the thirty-six (36) month period (or the period until his Retirement, if less) following the date of his termination were added to his credited service under such plans and contracts, (C) the terms of such plans were those most favorable to the Executive which were in effect at any time during the period commencing prior to the Change of Control and ending on the date of Notice of Termination (or on the date employment is terminated if no Notice of Termination is required), and (D) the Executive's highest average annual compensation as defined under such retirement plans and other employment contracts were calculated as if the Executive had been employed by the Corporation for a thirty-six (36) month period (or the period until his Retirement, if earlier) following the date of his termination and bad the Executive's compensation during such period been equal to the Executive's compensation used to calculate his benefit under subparagraphs 4(a) and 4(b); over (2) the benefits that are payable to the Executive or his beneficiaries under all retirement plans and other employment contracts of the Corporation in which the Executive participates. These Special Retirement Benefits are to be provided on an unfunded basis, are not intended to meet the qualification requirements of Section 401 of the Internal Revenue Code and shall be payable solely from the general assets of the Corporation. These Special Retirement Benefits shall be payable at the time and in the manner provided in the applicable retirement plans and other employment contracts to which they relate; (e) The Corporation shall pay all fees for outplacement services for the Executive up to a maximum equal to fifteen percent (15%) of the Executive's base salary used to calculate his benefit under subparagraph 4(a) plus provide a travel expense account of up to $5000 to reimburse job search travel; (f) In computing and determining Severance Benefits under subparagraphs 4(a), (b), (c), (d) and (e) above, a decrease in Executive's salary, incentive bonus potential, or insurance benefits shall be disregarded if such decrease occurs within six (6) months before a Change of Control is in contemplation of such Change of Control, and is taken to avoid the effect of this Agreement should such action be taken after such Change of Control; in such event, the salary , incentive bonus potential, and/or insurance benefits used to determine Severance Benefits shall be that in effect immediately before the decrease that is disregarded pursuant to this subparagraph 4(f); (g) Executive shall not be required to mitigate the amount of any payment provided for in this Paragraph 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Paragraph 4 be reduced by any compensation earned by Executive as the result of employment by another employer after the date the employment is terminated, or otherwise, with the exception of a reduction in health insurance coverage as provided in subparagraph 4(c)(i). The payments provided in subparagraphs 4(a) and (b) above shall be made not later than thirty (30) business days following the date the employment terminates. 5. Tax Gross-Up. If any payments or other benefit paid or provided under Paragraph 4 or the acceleration of stock option vesting or the payment or distribution of consideration in satisfaction of any share appreciation rights are subject to excise tax pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended, the Corporation shall pay to the Executive such additional compensation as is necessary (after taking into account all Federal, state and local income taxes payable by the Executive as a result of the receipt of such compensation) to place the Executive in the same after-tax position he would have been in had no such excise tax (or any interest or penalties thereon) been paid or incurred. The Corporation shall pay such additional compensation at the time when the Corporation withholds such excise tax from any payments to the Executive. The calculation of the tax gross-up shall be approved by the Corporation's independent certified public accounting firm engaged by the Corporation immediately prior to the Change in Control. 6. Successors; Binding Agreements. This Agreement shall inure to the benefit of and be enforceable by Executive's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Executive's rights and benefits under this Agreement may not be assigned, except that if Executive dies while any amount would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement, to the beneficiaries designated by the Executive to receive benefits under this Agreement in a writing on file with the Corporation at the time of the Executive's death or, if there is no such beneficiary, to Executive's estate. The Corporation win require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Corporation (or of any division or Subsidiary thereof employing Executive) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Corporation in the same amount and on the same terms to which Executive would be entitled hereunder if Executive terminated the employment for Good Reason following a Change of Control. 7. Withholding of Taxes. The Corporation may withhold from any amounts payable under this Agreement all federal, state, city, or other taxes as required by law. 8. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addressees set forth on the first page of this Agreement, or at such other addresses as the parties may designate in writing. 9. Miscellaneous. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by Executive and such officer as may be specifically designated by the Board of Directors of the Corporation. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Michigan. 10. Employment Rights. This Agreement shall not confer upon Executive any right to continue in the employ of the Corporation or its subsidiaries and shall not in any way affect the right of the Corporation or its subsidiaries to dismiss or otherwise terminate Executive's employment at any time with or without cause. 11. No Vested Interest. Neither Executive nor Executive's beneficiary shall have any right, title, or interest in any benefit under this Agreement prior to the occurrence of the right to the payment thereof, or in any property of the Corporation or its subsidiaries or affiliates. 12. Prior Agreements. This Agreement contains the understanding between the parties hereto with respect to Severance Benefits in connection with a Change of Control of the Corporation and supersedes any such prior agreement between the Corporation (or any predecessor of the Corporation) and Executive. If there is any discrepancy or conflict between this Agreement and any plan, policy, or program of the Corporation regarding any term or condition of Severance Benefits in connection with a Change of Control of the Corporation, the language of this Agreement shall govern. 13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 14. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 15. Arbitration. The sole and exclusive method for resolving any dispute arising out of this Agreement shall be arbitration in accordance with this paragraph. Except as provided otherwise in this paragraph, arbitration pursuant to this paragraph shall be governed by the Commercial Arbitration Rules of the American Arbitration Association. A party wishing to obtain arbitration of an issue shall deliver written notice to the other party, including a description of the issue to be arbitrated. Within fifteen (15) days after either party demands arbitration, the Corporation and the Executive shall each appoint an arbitrator. Within fifteen (15) additional days, these two arbitrators shall appoint the third arbitrator by mutual agreement; if they fail to agree within said fifteen (15) day period, then the third arbitrator shall be selected promptly pursuant to the rules of the American Arbitration Association for Commercial Arbitration. The arbitration panel shall hold a hearing in Schoolcraft County, Michigan, within ninety (90) days after the appointment of the third arbitrator. The fees and expenses of the arbitrator, and any American Arbitration Association fees, shall be paid by the Corporation. Both the Corporation and the Executive may be represented by counsel and may present testimony and other evidence at the hearing. Within ninety (90) days after commencement of the hearing, the arbitration panel will issue a written decision; the majority vote of two of the three arbitrators shall control. The majority decision of the arbitrators shall be final and binding on the parties, and shall be enforceable in accordance with law. Judgment may be entered on the arbitrators' award in any court having jurisdiction. The Executive shall be entitled to seek specific controversy arising under or in connection with this Agreement. The Corporation will reimburse Executive for all reasonable attorney fees incurred by Executive as the result of any arbitration with regard to any issue under this Agreement (or any judicial proceeding to compel or to enforce such arbitration); (i) which is initiated by Executive if the Corporation is found in such proceeding to have violated this Agreement substantially as alleged by Executive; or (ii) which is initiated by the Corporation, unless Executive is found in such proceeding to have violated this Agreement substantially as alleged by the Corporation. IN WITNESS WHEREOF, the parties have signed this Agreement as of the day and year written above. FIRST MANISTIQUE CORPORATION: By: /s/ John Lindroth --------------------------------------- John Lindroth, Chairman of the Compensation Committee EXECUTIVE: /s/ Sherry Littlejohn ------------------------------------------- Sherry Littlejohn, Executive Vice President EX-10.4 7 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT FIRST AMENDMENT TO EMPLOYMENT CONTRACT This Agreement is made and is effective this 18th day of August, 1999, and amends an Employment Contract between FIRST NORTHERN BANK & TRUST n/k/a NORTH COUNTRY BANK & TRUST (the "Bank"), FIRST MANISTIQUE CORPORATION n/k/a NORTH COUNTRY FINANCIAL CORPORATION (the "Company") and SHERRY LITTLEJOHN ("Littlejohn") dated May 22, 1996. RECITAL The parties wish to amend the Employment Contract in certain respects as described in this First Amendment. Accordingly, the Boards of Directors of the Bank and the Company have approved this First Amendment and authorized its execution and delivery on behalf of the Bank and the Company. AGREEMENT 1. Section 7(d) of the Employment Contract is amended to add at the end thereof the following: "For purposes of this Section 7(d), any good faith determination by Littlejohn that there is Good Reason shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a voluntary termination of employment by Littlejohn for any reason or no reason during the ninety (90) day period commencing on the date six (6) months after the Change in Control shall be deemed to be a termination for Good Reason for purposes of this Agreement." 2. Except as amended hereby, the Employment Contract is ratified and confirmed in all respects. IN WITNESS WHEREOF, the parties have executed this Amendment Agreement, effective as of the day first written above. NORTH COUNTRY BANK & TRUST By: /s/ Ronald G. Ford ---------------------------------------- Its: Chairman and Chief Executive Officer NORTH COUNTRY FINANCIAL CORPORATION By: /s/ Ronald G. Ford ---------------------------------------- Its: Chairman and Chief Executive Officer /s/ Sherry Littlejohn ------------------------------------------ Sherry Littlejohn EX-10.5 8 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT AGREEMENT made and entered into this 1st day of September, 1997, but as of the Effective Date hereinafter defined, by and between NORTH COUNTRY BANK AND TRUST, a Michigan banking corporation ("Bank") and Anthony Palumbo ("Employee"); RECITAL: The parties desire to set forth the terms of the employment relationship between the Bank and the Employee. NOW, THEREFORE, IT IS AGREED as follows: 1. Employment. The Employee is employed to render such executive services to Bank as may from time to time be reasonably directed by Bank's President and CEO and/or the Bank board of directors. Among his other duties, it is contemplated that he will serve as the Vice President of Central Credit of Bank. 2. Compensation. Bank agrees to pay the Employee during the term of this Agreement a salary in the sum of Sixty Five Thousand Dollars ($65,000) per annum. The salary provided herein shall be payable in accordance with the periodic payment procedures for all employees of Bank. The Employee's salary shall be reviewed by the board of directors of Bank not less often than annually beginning as of September 1, 1997 and may be adjusted from time to time in such amounts as the board in its discretion may determine. The Employee's salary shall be subject to the usual withholding taxes required with respect to compensation paid by a corporation to an employee. 3. Bonuses. In addition to the salary provided for in Section 2, the Employee shall be entitled to participate in discretionary or performance goal bonuses as may be from time to time authorized and declared by the board of directors of Bank to its executive employees. However, the Employee shall not be entitled to participate in or to receive all or any portion of any such bonus unless he is employed by Bank on the last day of the calendar year for which the bonus is to be paid. 4. Retirement Employee Benefit Plans and Fringe Benefits. The Employee shall also be entitled to the following: (a) The Employee shall be entitled to participate in any plan of Bank relating to pension, thrift, deferred profit-sharing, group life insurance, medical coverage, education, or other retirement or employee benefits that Bank may have in effect or adopt for the benefit of its executive employees. (b) The Employee shall be eligible to participate in any other fringe benefits which may be applicable to Bank's executive employees, including, but not limited to, the following: use of a company automobile; membership in various social, business and trade organizations; a reasonable expense account; the payment of reasonable expenses for attending annual and periodic meetings of trade associations; and any other benefits which are commensurate with the responsibilities and functions to be performed by the Employee under this Agreement. 5. Term. The term of employment under this Agreement shall be a period commencing on the Effective Date hereof and ending at midnight on ________________. 6. Effective Date. For purposes of this Agreement, the "Effective Date" is ______________. 7. Standards and Policies. The Employee shall perform his duties under this Agreement in accordance with reasonable standards and policies established from time to time by the board of directors of Bank. 8. Paid Time Off. At such reasonable times as the board of directors of Bank shall in their discretion permit, the Employee shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment under this Agreement, all such voluntary absences to count as paid time off, provided that: (a) The Employee shall be entitled to paid time off of not less than ______ (__) weeks per full calendar year of employment, with paid time off prorated for employment for any period of less than a full calendar year. (b) The timing of paid time off shall be scheduled in a reasonable manner by Bank. The Employee shall not be entitled to receive any additional compensation from Bank on account of his failure to take paid time off, nor shall he be entitled to accumulate paid time off from one calendar year to the next except that up to, but no more than, twenty (20) days of paid time off may be accumulated and carried forward. Any accumulated paid time off not used by Employee prior to termination of his employment shall be forfeited, unless Bank terminates his employment without "cause" (as defined in Section 10) in which case he shall be compensated for any unused paid time off. 9. Confidentiality, Noncompetition, Etc. Employee acknowledges that (i) the Bank business is intensely competitive and that the Employee's employment by Bank requires that the Employee have access to and knowledge of confidential information of Bank, including, but not limited to, the identity of Bank's customers, the kinds of services provided by Bank to customers and offered to be performed for potential customers, the service needs of actual or prospective customers, product and service pricing information, computer software applications and other programs, personnel information and other trade secrets ("Confidential Information"); (ii) the direct and indirect disclosure of any such Confidential Information to existing or potential competitors of Bank would place Bank at a competitive disadvantage and would cause damage, monetary or otherwise, to Bank's business; and (iii) the engaging by the Employee in any of the activities prohibited by this Section 9 may constitute improper appropriation and/or use of such information and trade secrets. The Employee expressly acknowledges the trade secret status of the Confidential Information and that the Confidential Information constitutes a protectable business interest of Bank. Accordingly, Bank and the Employee agree as follows: (a) For purposes of this Section 9, Bank shall be construed to include Bank and its affiliates. (b) During the term of this Agreement and at all times after the termination of the Employee's employment by expiration of the term or otherwise, the Employee shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee, principal or agent of any business, or in any other capacity, make known, disclose, furnish, make available or utilize any of the Confidential Information, other than in the proper performance of the duties contemplated herein, or as required by a court of competent jurisdiction or other administrative or legislative body; provided that, prior to disclosing any of the Confidential Information to a court or other administrative or legislative body, Employee shall promptly notify Bank so that Bank may seek a protective order or other appropriate remedy. Employee agrees to return all Confidential Information, including all photocopies, extracts and summaries thereof, and such information stored electronically on tapes, computer discs or in any other manner to Bank upon termination of his employment for any reason. (c) Employee shall not, so long as he is employed by Bank, engage in "Competition" with Bank. For purposes of this Agreement, Competition by Employee shall mean Employee's engaging in, or otherwise directly or indirectly being employed by or acting as a consultant or lender to, or being a director, officer, employee, principal, licensor, trustee, broker, agent, stockholder, member, owner, joint venturer or partner of, or permitting his name to be used in connection with the activities of any other business or organization anywhere which competes directly or indirectly, with business of Bank as the same shall be constituted at any time during his employment. (d) For a period of two (2) years following the termination of the Employee's employment, whether upon expiration of the term or otherwise, the Employee shall not engage in Competition, as defined above, with Bank in any locality or region in which Bank had operations at the time of, or within six (6) months prior to the Employee's termination, or in which, during the six (6) month period prior to the Employee's termination, Bank had made substantial plans with the intention of establishing operations in such locality or region; provided that, it shall not be a violation of this subparagraph for the Employee to become the registered or beneficial owner of up to 5% of any class of the capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, provided that the Employee does not actively participate in the business of such corporation until such time as this covenant expires; provided further that this subparagraph shall not apply or have any effect if the Employee is terminated by Bank without "cause" (as defined in Section 10) and for reasons other than the Employee's Disability (as defined in Section 10). (e) For a period of three (3) years after he ceases to be employed hereunder by Bank, whether upon expiration of the term or otherwise, the Employee agrees that he will not, directly or indirectly, for his benefit or for the benefit of any other person, firm or entity, do any of tile following: (i) Solicit from any customer doing business with Bank as of the Employee's termination, business of the same or of a similar nature to the business of Bank with such customer; (ii) Solicit from any known potential customer of Bank business of the same or of a similar nature to that which has been the subject of a known written or oral bid, offer or proposal by Bank, or of substantial preparation with a view to making such a bid, proposal or offer, within six (6) months prior to the Employee's termination; (iii) Solicit the employment or services of, or hire any person who was known to be employed by or was a known consultant to Bank upon termination of the Employee's employment, or within six months prior thereto; or (iv) Otherwise interfere with the business or accounts of Bank including the making of any statements or comments of a defamatory or disparaging nature to third parties regarding Bank or its officers, directors, personnel or services. (f) Employee acknowledges that Bank would not be adequately compensated by damages in an action at law as a result of a material breach of this Agreement and that a material breach or threatened breach by him of any of the provisions contained in this Section 9 would cause Bank irreparable injury. Employee therefore agrees that Bank shall be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining Employee from any such violation or threatened violations. (g) Employee further acknowledges and agrees that due to the uniqueness of his services and confidential nature of the information he will possess, the covenants set forth herein are reasonable and necessary for the protection of the business and goodwill of Bank. 10. Termination of Employment. (a) The Employee's employment under this Agreement may be terminated at any time by the board of directors of Bank with or without "cause" (as defined below). The Employee shall have no right to receive severance pay or any other remuneration whatsoever under this Agreement for any period after his voluntary termination or termination for cause. For purposes of this Agreement, for "cause" shall mean termination for only the following reasons: (i) Personal dishonesty materially affecting Bank or any of its affiliates; (ii) Willful misconduct; (iii) Willful breach of a fiduciary duty involving personal profit; (iv) Intentional failure to perform stated duties; (v) WHIM violation of any law, rule, or regulation relating to the operation of Bank or any of its affiliates; (vi) The order of any court or supervising agency with jurisdiction over the affairs of Bank or any of its affiliates; or (vii) The Employee's violation of any material provision of this Agreement or any Bank policy. (b) This Agreement may be terminated by the Employee at any time upon ninety (90) days' written notice to Bank or upon such shorter period as may be agreed upon between the Employee and the board of directors of Bank. In the event of such termination, Bank shall be obligated only to continue to pay the Employee's salary and provide the other benefits provided by this Agreement up to the date of the termination. (c) If the Employee's employment is terminated by Bank without cause, and for reasons other than the Employee's Disability (as defined below), then, in lieu of any and all damages or other compensation to which Employee might otherwise be entitled under this Agreement, Bank shall continue to pay to the Employee as severance pay, the full amount of the salary required by Section 2 of this Agreement, without reduction, discount or a duty to mitigate damages, until the end of the employment term specified in Section 5; subject, however, to Bank's right to discontinue such payments in the event of the Employee's breach of any of the provisions of Section 9 of this Agreement. (d) If the Employee's employment is terminated by Bank because of the Employee's Disability (as defined below), he shall be entitled to receive whatever benefits may be provided by the Bank disability plan in effect at that time for executive officers but he shall have no right to receive severance payments or any other remuneration or other benefits under this Agreement of any kind subsequent to tile date of his termination because of his Disability. For purposes of this Agreement, "Disability" shall mean an illness, injury or other incapacitating condition as a result of which the Employee is unable to perform the services required to be performed under this Agreement for (i) ninety (90) consecutive days during the term of this Agreement, or (ii) a period or periods aggregating more than ninety (90) days in any six (6) consecutive months. In any such event, Bank may, in its discretion reasonably exercised, terminate this Agreement by giving notice to the Employee of termination for Disability. The Employee agrees to submit to such medical examinations as may be necessary to determine whether a Disability exists, pursuant to such reasonable request made by Bank from time to time. (e) In the event of the death of the Employee during the term of this Agreement, the Employee's estate shall be entitled to receive the salary due the Employee through the last day of the calendar month in which his death shall have occurred plus such other benefits as shall have accrued under this Agreement. (f) If the Employee is temporarily prohibited from participating in the conduct of Banks affairs at the request of or by the order of any court or supervising agency with jurisdiction over Bank, Bank's obligations under this Agreement shall not terminate and the Employee shall be placed on administrative leave with or without pay in the discretion of Bank's board of directors. If the charges in the proceeding out of which such request or order is issued mature into a permanent prohibition order, unless stayed by appropriate proceedings, Bank's obligations hereunder shall terminate as of the effective date of such permanent order. (g) If the Employee is permanently prohibited from participating in the conduct of Bank's affairs by the final order of any court or supervising agency with jurisdiction over Bank, all obligations of Bank under this Agreement shall terminate, as of the effective date of the order, but vested rights of the parties shall not be affected (h) All obligations under this Agreement may be terminated, except to the extent determined that continuation of the Agreement is necessary for the continued operation of Bank: (i) By the Federal Deposit Insurance Corporation ("FDIC") at the time the FDIC enters into an agreement to provide assistance to or on behalf of Bank; and (ii) By the FDIC, or any other agency, at the time the FDIC or other agency approves a supervisory merger to resolve problems related to the operation of Bank or when Bank is determined by the FDIC or other agency to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action. 11. Affiliate Defined. For purposes of this Agreement, the term "affiliate" means any corporation or other entity that controls, is controlled by or under common control with Bank, and includes, without limitation, First Manistique Corporation and each of its subsidiaries, as well as any subsidiary of Bank. 12. No Assignments. This Agreement is personal to each of the parties hereto, and neither party may assign or delegate any of the rights or obligations hereunder without first obtaining the written consent of the other party. 13. Other Contracts. As of the Effective Date, all other prior agreements regarding conditions of employment, whether written or oral, are hereby terminated and superseded by this Agreement. 14. Notices. Any notices under this Agreement shall be deemed given when in writing and delivered personally or sent by certified mail, postage prepaid, to the last known address of the party to whom notice is given. If sent by mail, notice shall be deemed given on the second day after mailing. 15. Amendments. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties. 16. Paragraph Headings. The paragraph headings used in this Agreement are included solely for convenience and shall not affect or be used in connection with the interpretation of this Agreement. 17. Severability. The provisions of this Agreement shall be deemed severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. Moreover, if any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provision shall be construed by limiting and reducing them so as to be enforceable to the maximum extent allowed by applicable law. 18. Arbitration. Any dispute, controversy, or claim arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted in Manistique, Michigan, before a panel of three arbitrators, each of whom is a resident of Schoolcraft County, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators award in any court having jurisdiction. Unless otherwise provided in the Rules of the American Arbitration Association, the arbitrators shall, in their award, allocate between the parties the costs of arbitration, which shall include reasonable attorneys fees and expenses of the parties, as well as the arbitrators fees and expenses, in such proportions as the arbitrators deem just. 19. Governing Law. This Agreement shall be governed by the laws of the United States of America and the State of Michigan. IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. Employer: Employee: NORTH COUNTRY BANK AND TRUST /s/ Anthony Palumbo ------------------------ By: /s/ Sherry Littlejohn --------------------------- Its: President EX-10.6 9 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN NORTH COUNTRY FINANCIAL CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ARTICLE I Establishment of Plan and Purpose 1.01. Establishment of Plan. This document contains the North Country Financial Corporation Supplemental Executive Retirement Plan, effective as of November 1, 1999 (the "Plan"). 1.02. Preamble and Purpose. North Country Financial Corporation is a sponsoring employer of the North Country Financial Corporation 401(k) Profit Sharing Plan (the "401(k) Profit Sharing Plan"), a defined contribution retirement plan, qualified under Section 401(a) of the Code. Allocations for any given plan year under the 401(k) Profit Sharing Plan may be restricted for certain employees because of the compensation limit under Code Section 401(a)(17), the nondiscrimination test for elective deferrals under Code Section 401(k)(3), the nondiscrimination test for matching contributions under Code Section 401(m)(2), the limit on elective deferrals under Code Section 402(g), and/or the limit on annual additions under Code Section 415(c)(1). If it is necessary to restrict allocations to such employees under the 401(k) Profit Sharing Plan as a result of the rules of Code Sections 401(a)(17), 401(k)(3), 401(m)(2), 402(g), and/or 415(c)(1), North Country Financial Corporation desires to provide supplementary unfunded payments under this Plan designed to maintain the level of total retirement benefits, which, but for the limitations on benefits required by Code Sections 401(a)(17), 401(k)(3), 401(m)(2), 402(g), and/or 415(c)(1), would otherwise be payable under the 401(k) Profit Sharing Plan. The parties intend that, for purposes of Title I of ERISA, the arrangement described herein be unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated Employees. ARTICLE II Definitions and Construction As used herein, the following words shall have the following meanings: 2.01. Definitions. (a) "Account" means the bookkeeping account maintained for each Participant pursuant to Article IV, below. (b) "Administrator" means the person or persons selected pursuant to Article VII below to control and manage the operation and administration of the Plan. (c) "Beneficiary" or "Beneficiaries" means the person or persons designated by a Participant, on the Beneficiary Designation Form provided by the Administrator, to receive benefits hereunder or, failing such a designation, the Participant's spouse or, if none, his estate. (d) "Beneficiary Designation Form" means a form filed by a Participant with the Administrator which indicates the Beneficiary or Beneficiaries who will receive the remainder of his Account, if any, in the event of his death, as provided in Section 6.02. (e) "Change of Control," with respect to the Company, means any of the following: (a) the commencement by any person or group of persons, other than one or more of the Companies, of a tender or exchange offer for twenty-five percent (25%) or more of the outstanding shares of the common stock of the Company; (b) the acceptance by the board of directors of the Company of, or the public recommendation by such board that the stockholders of the Company accept, an offer from any person or group of persons, other than one or more of the Companies, to acquire twenty-five percent (25%) or more of either the outstanding shares of the common stock of the Company or the consolidated assets of the Company; (c) the acquisition, by any person or group of persons, of the beneficial ownership or the right to acquire beneficial ownership of twenty-five percent (25%) or more of the outstanding shares of the common stock of the Company (the term "group" and "beneficial ownership" as used in this paragraph having the meanings assigned thereto in Section 13(d) of the Securities Exchange Act of 1934 and the regulations promulgated thereunder); or (d) the Company (or any of the Companies in the aggregate representing at least twenty-five (25%) of the consolidated assets of the Companies), shall have entered into an agreement with any person, or any person shall have filed a draft or final application or notice with the Board of Governors of the Federal Reserve System or the Office of the Comptroller of the Currency or any other federal or state regulatory agency for approval, to (i) merge or consolidate with, or enter into any similar transaction with, the Company or such Companies, in which the Company or one of the Companies is not the survivor, (ii) purchase, lease or otherwise acquire all or substantially all of the assets of the Company or such Companies, or (iii) purchase or otherwise acquire (including by way of merger, consolidation, share exchange or any similar transaction) or otherwise hold or own, securities representing twenty-five percent (25%) or more of the voting power of the Company or such Companies. (f) "Code" means the Internal Revenue Code of 1986, as amended. (g) "Companies" means North Country Financial Corporation and any subsidiary thereof now or hereinafter created. (h) "Company" means North Country Financial Corporation, a Michigan corporation, or a successor thereof. (i) "Disability" shall have the same meaning as in the Company's Long-Term Disability Plan. (j) "Employee" means an employee of any one or more of the Companies. (k) "Employment" means employment with any one or more of the Companies. (l) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (m) "Excess Amount" means, for each Plan Year, the amount of contributions which would have been allocated to a Participant's account under the 401(k) Profit Sharing Plan without giving effect to the limitations imposed by Code Sections 401(a)(17), 401(k)(3), 401(m)(2), 402(g), and/or 415(c)(1) for such Plan Year, less the amount of contributions actually allocated to the Participant's 401(k) Profit Sharing Plan account for such Plan Year. (n) "401(k) Profit Sharing Plan" means the North Country Financial Corporation 401(k) Profit Sharing Plan, as amended from time to time. (o) "Investment Election" means the form filed by the Participant with the Administrator from time to time, which designates the Participant's investment choices. (p) "Participant" means any select management or highly compensated Employee who (i) is entitled to an allocation of contributions for any Plan Year under the 401(k) Profit Sharing Plan but such allocation is reduced by reason of the application of the limitations of Code Sections 401(a)(17), 401(k)(3), 401(m)(2), 402(g), and/or 415(c)(1), and (ii) is designated by the Company, in its sole discretion, as eligible to participate in this Plan. (q) "Payment Election Form" means a form provided by the Administrator on which a Participant may designate the payment method by which he will receive a benefit he is due under the Plan. (r) "Plan" means the North Country Financial Corporation Supplemental Executive Retirement Plan, as stated herein and as amended from time to time. (s) "Plan Year" means (i) the two (2)-month period beginning on November 1, 1999 and ending on December 31, 1999, and (ii) thereafter, the 12- month period beginning on each January 1 and ending on the following December 31. (t) "Year of Service" shall have the same meaning as in the 401(k) Profit Sharing Plan. 2.02. Construction. The laws of the State of Michigan, as amended from time to time, shall govern the construction and application of this Plan. Words used in the masculine gender shall include the feminine and words used in the singular shall include the plural, as appropriate. All references to statutory sections shall include the section so identified as amended from time to time or any other statute of similar import. If any provisions of the Code, ERISA, or other statutes or regulations render any provisions of this Plan unenforceable, such provision shall be of no force and effect only to the minimum extent required by such law. ARTICLE III Eligibility Any Employee who meets the definition of Participant in Section 2.01(p), above, shall be eligible to participate in this Plan in any Plan Year. Eligibility to participate in the Plan for one Plan Year does not guarantee eligibility for a subsequent Plan Year. ARTICLE IV Account 4.01. Establishment of Account. Only for the purpose of measuring payments due Participants hereunder, the Company shall maintain on behalf of each Participant an Account to which the Company shall credit the Excess Amounts and earnings thereon for each Plan Year as set forth in Section 4.03, below. 4.02. Nature of Account. The Account hereunder and assets, if any, acquired by the Company to measure a Participant's benefits hereunder, shall not constitute or be treated for any reason as a trust for, property of, or a security interest for the benefit of, a Participant, his Beneficiaries or any other person. Participants and the Company acknowledge that the Plan constitutes a promise by the Company to pay benefits to the Participants or their Beneficiaries, that a Participant's rights hereunder are limited to those of a general unsecured creditor of the Company and that the establishment of the Plan or acquisition of assets to measure a Participant's benefits hereunder does not prevent any property of the Company from being subject to the right of all the Company's creditors. 4.03. Maintenance of Account. (a) Accounts shall be reconciled no less frequently than semi-annually. The Company shall increase the Account of each Participant by (i) the Excess Amount, if any, which shall be credited as of December 31 of the Plan Year, and (ii) any income or gains resulting as if the Account, computed in accordance with Subsection 4.03(b), below, were invested pursuant to the timely-filed Investment Elections in effect from time to time during such Plan Year and decrease the Account by (i) any withdrawals from the Account during any Plan Year, and (ii) any losses resulting as if the Account, computed in accordance with Subsection 4.03(b), below, were invested pursuant to the timely-filed Investment Elections in effect from time to time during such Plan Year. (b) For purposes of computing the investment return on the Account for any Plan Year, the principal balance as of the first day of the relevant Plan Year shall equal the balance as of the final day of the preceding Plan Year, including the Excess Amount, if any, credited to the Account for the prior Plan Year, pursuant to Subsection 4.03(a) hereof, and decreased by any distributions made to the Participant or his Beneficiaries during the Plan Year. 4.04. Investment Elections. (a) A Participant may file an Investment Election with the Administrator setting forth his investment preferences used to value his Account. The initial investment options available to Participants are (i) the Moody's A Long-Term Corporate Bond Rate (the "fixed rate investment option") adjusted annually to equal the average yield for the month of September of the previous year, and (ii) the total return of the Standard & Poor's 500 Index for the applicable period. All Investment Elections must be in increments of 10%. If a Participant does not file an Investment Election with the Administrator, the Account shall be deemed to be invested in the fixed rate investment option. The Participant may change his Investment Election as of January 1 or July 1 in any Plan Year by delivering to the Administrator a new Investment Election at least 15 days prior to such January 1 or July 1. (b) A Participant's Account shall reflect only the performance of such investment indices and the Participant shall have no property right or security interest in the actual investment performance of any assets invested by the Company to provide for the payment of benefits under this Plan. (c) Upon a Change of Control, the Company, the Administrator, or any successor thereto, may not change the investment choices available to Participants hereunder without the consent of a majority of the holders of Account balances under the Plan. ARTICLE V Vesting Subject to the rights of the Company's creditors as set forth in Section 4.02 above, the Account of a Participant, including all earnings accrued thereto, shall become fully vested only after such Participant has three Years of Service, as defined in the 401(k) Profit Sharing Plan. Notwithstanding anything herein to the contrary, if a Participant terminates Employment prior to completing three Years of Service, he shall be entitled to nothing under this Plan. ARTICLE VI Distributions 6.01. For Reasons Other Than Death. (a) In the event that the value of a Participant's Account exceeds $25,000 as of January 1 of the Plan Year in which his Employment terminates, the Company shall pay an amount equal to the balance of a Participant's Account to him in accordance with his choice on the Payment Election Form that he has filed with the Administrator prior to the date his Employment terminates. (b) If a Participant's Employment terminates on or after the date he reaches age 55, other than because of death or Disability, and after he has completed at least ten Years of Service, he may elect to have his Account balance distributed in accordance with one of the following methods: (i) In a lump sum, on or before February 15 of the Plan Year immediately following the Plan Year in which the Participant's Employment terminates. (ii) In monthly installments, starting on January 1 of the Plan Year immediately following the Plan Year in which the Participant's Employment terminates, over five years, using the declining balance method, computed annually. (iii) In monthly installments, starting on January 1 of the Plan Year immediately following the Plan Year in which the Participant's Employment terminates, over ten years, using the declining balance method, computed annually. (iv) In monthly installments, starting on January 1 of the Plan Year immediately following the Plan Year in which the Participant's Employment terminates, over fifteen years, using the declining balance method, computed annually. (v) In monthly installments, starting on January 1 of the sixth Plan Year following the Plan Year in which the Participant's Employment terminates, over five years, using the declining balance method, computed annually. (vi) In monthly installments, starting on January 1 of the sixth Plan Year following the Plan Year in which the Participant's Employment terminates, over ten years, using the declining balance method, computed annually. (c) Notwithstanding the foregoing provisions of this Section 6.01, if the Participant's Employment terminates (i) before the date he reaches age 55, (ii) on or after the date he reaches age 55 because of death or Disability, or (iii) on or after the date he reaches age 55 with fewer than ten Years of Service, and he has elected pay-out pursuant to one of the monthly installment options above, his Account balance will be paid in monthly installments, starting on January 1 of the Plan Year immediately following the Plan Year in which his Employment terminates, over five years, regardless of his election. (d) A Participant may change his Payment Election Form at any time; provided, however, that the change will only be effective if he files a new Payment Election Form with the Administrator at least one year prior to his termination of Employment, except in the case of his initial Payment Election Form under the Plan. Notwithstanding any other provision of this Section 6.01 and any Payment Election Form previously filed by the Participant with the Administrator, in the event that the value of the Account of the Participant is less than $25,000 as of January 1 of the Plan Year in which his Employment terminates, any distribution to, or on behalf of, such Participant shall be in the form of a lump sum paid on or before February 15 of the Plan Year immediately following the Plan Year in which the Participant's Employment terminates. If a Participant does not timely file a Payment Election Form with the Administrator, he will be deemed to have elected payment in a lump sum. 6.02. Upon Death. (a) Upon a Participant's death, any balance remaining in his Account shall be paid by the Company in accordance with his most recent Payment Election Form on file with the Administrator, except that such payments shall be made to the Beneficiary or Beneficiaries specified by the Participant on such Beneficiary Designation Form, or, if none, to his surviving spouse or, if none, to his estate. Each Participant may file a Beneficiary Designation Form with the Administrator on which he shall designate a Beneficiary or Beneficiaries to receive the unpaid balance of his Account upon his death and may revoke or modify such Beneficiary Designation Form at any time and from time to time by submitting to the Administrator a new Beneficiary Designation Form. (b) If a Participant dies prior to the payment of any amount to him from his Account, his Beneficiary or Beneficiaries shall receive payments in accordance with Section 6.01 hereof. (c) If a Participant designates multiple Beneficiaries on his Beneficiary Designation Form as either primary or contingent Beneficiaries, and one of the Beneficiaries has predeceased the Participant, the deceased Beneficiary's share shall be paid to the Beneficiary's estate unless the Participant provides otherwise in his Beneficiary Designation Form. For example, if a Participant designates his spouse on his Beneficiary Designation Form as his sole primary Beneficiary and his three children as equal contingent Beneficiaries, and if his spouse and one such child predecease the Participant, each of the two surviving children would receive one-third of the distributions from the Participant's Account, the predeceased child's one-third share would be paid to his estate, and no distributions would be paid to his spouse's estate. (d) If a Beneficiary survives a Participant but dies before he receives the entire amount in the Account due him, the Company shall make payments to the estate of the Beneficiary in accordance with the Participant's most recent Payment Election Form on file with the Administrator. For example, if a Participant designates his spouse as his sole primary Beneficiary and his three children as equal contingent Beneficiaries, and if his spouse survives the Participant and begins to receive distributions from the Participant's Account pursuant to the terms of this Plan, but dies before receiving all of the distributions to which she is entitled, any remaining distributions shall be paid to the spouse's estate and not to the Participant's contingent Beneficiaries. ARTICLE VII Administration of the Plan 7.01. Appointment of Separate Administrator. The Company shall be the Administrator of the Plan, unless the Company designates an individual or individuals to administer the Plan on its behalf. Persons serving as Administrator may resign by written notice to the Company and the Company may appoint or remove such persons. An Administrator consisting of more than one person (for example, a committee of individuals) shall act by a majority of its members at the time in office. An Administrator consisting of more than one person may authorize any one or more of its members to execute any document or documents on behalf of the Administrator, in which event the Administrator shall notify the Company of the member or members so designated. The Company shall accept and rely upon any document executed by such member or members as written evidence of such designation. No person serving as Administrator shall vote or decide upon any matter relating solely to himself or solely to any of his rights or benefits pursuant to the Plan. 7.02. Powers and Duties. The Administrator shall administer the Plan in accordance with its terms. The Administrator shall have full and complete authority and control with respect to Plan operations and administration unless the Administrator allocates and delegates such authority or control pursuant to the procedures stated in Subsection 7.02(b) or (c), below. Any decisions of the Administrator or its delegate shall be final and binding upon all persons dealing with the Plan or claiming any benefit under the Plan. The Administrator shall have all powers which are necessary to manage and control Plan operations and administration including, but not limited to, the following: (a) To employ such accountants, counsel, or other persons as it deems necessary or desirable in connection with Plan administration. The Company shall bear the costs of such services and other administrative expenses. (b) To designate in writing persons other than the Administrator to perform any of its powers and duties hereunder. (c) The discretionary authority to construe and interpret the Plan, including the power to construe disputed provisions. (d) To resolve all questions arising in the administration, interpretation, and application of the Plan including, but not limited to, questions as to the eligibility or the right of any person to a benefit. (e) To adopt such rules, regulations, forms, and procedures from time to time as it deems advisable and appropriate in the proper administration of the Plan. (f) To prescribe procedures to be followed by any person in applying for distributions pursuant to the Plan and to designate the forms or documents, evidence, and such other information as the Administrator may reasonably deem necessary, desirable, or convenient to support an application for such distribution. 7.03. Records and Notices. The Administrator shall maintain all books of accounts, records, and other data as may be necessary for proper Plan administration. 7.04. Compensation and Expenses. The expenses incurred by the Administrator in the proper administration of the Plan shall be paid by the Company. An Administrator who is an Employee shall not receive any additional fee or compensation for services rendered as an Administrator. 7.05. Limitation of Authority. The Administrator shall not add to, subtract from, or modify any of the terms of the Plan, change or add to any benefits prescribed by the Plan, or waive or fail to apply any Plan requirement for benefit eligibility. 7.06. Claim and Appeal Procedures. Any Participant or Beneficiary, or the duly authorized representative of either such person (a "Claimant") may file a written claim with the Administrator if he believes he is being denied any rights or benefits under the Plan. The Claimant must file any such claim by certified mail, return receipt requested, to the address for notice contained in Section 8.04 hereof. If the Claimant's claim is wholly or partially denied, the Administrator will notify him of its decision on the claim in writing. The Administrator's notice to the Claimant will be given to the Claimant within 90 days after the Administrator receives his claim (or within 180 days, if special circumstances require an extension of time for processing his claim, and if the Administrator notifies the Claimant, in writing, within the initial 90-day period, of such extension and circumstances). If the Administrator's notice is not provided to the Claimant within such period, the claim will be considered denied as of the last day of the period and the Claimant may request an appeal of his denied claim. The Administrator's notice to the Claimant will set forth: (a) The specific reasons for the denial; (b) Specific references to pertinent Plan provisions on which the Administrator based its denial; (c) A description of any additional material and information necessary for the Claimant to perfect his claim and an explanation of why the material or information is necessary; and (d) That if the Claimant wishes to appeal the denial of his claim, he may file a written appeal with the Administrator, by certified mail, return receipt requested, to the address for notice contained in Section 8.04 hereof, within 60 days after he receives the Administrator's written notice of the denial of his claim. The Administrator's written notice of the denial of his claim will also inform the Claimant that if he fails to appeal the Administrator's denial of his claim, in writing, within the 60-day period for filing such appeals, the Administrator's denial of his claim will become final, binding, and conclusive upon the expiration of such 60-day period. The Administrator's written notice of the denial of the Claimant's claim must identify the persons who serve as the Administrator and the name and address of the Administrator to whom the Claimant may file his appeal. Within the 60-day period described in Section 7.06(d) above, the Claimant (or his duly authorized representative) may (i) file a written appeal with the Administrator for a review of his denied claim and of pertinent documents, and (ii) submit written issues and comments to the Administrator. The Administrator will notify the Claimant (or his duly authorized representative) of its decision in writing. Such notice will be written in a manner calculated to be understood by such person and will contain specific references to pertinent Plan provisions. The Administrator's decision on appeal will be made within 60 days after the Administrator receives the Claimant's written appeal (or within 120 days, if special circumstances require an extension of time for processing the appeal, such as an election by the Administrator to hold a hearing, and if written notice of such extension and circumstances is given by the Administrator to such person within the initial 60- day period). If the Administrator does not make its decision on appeal within such period, the Claimant's claim will be considered denied. ARTICLE VIII General Provisions 8.01. Assignment. No Participant or Beneficiary may sell, assign, transfer, encumber, or otherwise dispose of the right to receive payments hereunder. A Participant's rights to benefit payments under the Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of a Participant or a Beneficiary. 8.02. Employment Not Guaranteed by Plan. The establishment of this Plan and the Company's designation of an eligible Employee as a Participant, shall not give any Participant the right to continued Employment or limit the right of the Company to dismiss or impose penalties upon the Participant or modify the terms of his Employment. 8.03. Termination and Amendment. The Company may at any time terminate, suspend, alter, or amend this Plan and no Participant or any other person shall have any right, title, interest, or claim against the Company, its directors, officers, or employees for any amounts, except that (i) the Participant shall be fully vested in his Account hereunder as of the date on which the Plan is terminated or suspended if he has met the vesting requirements contained in Article V hereof, (ii) no amendment shall eliminate the crediting of an investment return on an Account prior to the complete distribution thereof or provide for a distribution method which accelerates the timing of distributions hereunder without the consent of a Participant, and (iii) subsequent to a Change of Control, unless a majority of the holders of Account balances agree to the contrary, the Company or the Administrator may not alter (a) the choice of investments in the Investment Election as in effect immediately before the Change of Control, and (b) the payout options contained in the Payment Election Form as in effect immediately before the Change of Control. 8.04. Notice. Any and all notices, designations or reports provided for herein shall be in writing and delivered personally or by certified mail, return receipt requested, addressed, in the case of the Company, to the Secretary of the Company at 130 South Cedar Street, Manistique, Michigan 49854; in the case of the Administrator, to the Administrator, in care of the Secretary of the Company, at such address; and, in the case of a Participant or Beneficiary, to his home address as shown on the records of the Company. The addresses referenced herein may be changed by a notice delivered in accordance with the requirement of this Section 8.04. 8.05. Limitation on Liability. In no event shall the Company, Administrator, or any employee, officer, or director of the Company incur any liability for any act or failure to act unless such act or failure to act constitutes a lack of good faith, willful misconduct, or gross negligence with respect to the Plan or the trust established in connection with the Plan. 8.06. Indemnification. The Company shall indemnify the Administrator and any employee, officer, or director of the Company against all liabilities arising by reason of any act or failure to act unless such act or failure to act is due to such person's own gross negligence or willful misconduct or lack of good faith in the performance of his duties to the Plan. Such indemnification shall include, but not be limited to, expenses reasonably incurred in the defense of any claim, including reasonable attorney and legal fees, and amounts paid in any settlement or compromise; provided, however, that indemnification shall not occur to the extent that it is not permitted by applicable law. Indemnification shall not be deemed the exclusive remedy of any person entitled to indemnification pursuant to this section. The indemnification provided hereunder shall continue as to a person who has ceased acting as a director, officer, member, agent, or employee of the Administrator or as an officer, director, or employee of the Company and such person's rights shall inure to the benefit of his heirs and representatives. 8.07. Headings. All articles and section headings in this Plan are intended merely for convenience and shall in no way be deemed to modify or supplement the actual terms and provisions stated thereunder. 8.08. Severability. Any provision of this Plan prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. The illegal or invalid provisions shall be fully severable and this Plan shall be construed and enforced as if the illegal or invalid provisions had never been inserted in this Plan. EX-27 10
9 9-MOS DEC-31-1999 SEP-30-1999 40,270 0 411 0 28,202 0 0 446,902 6,253 547,612 453,445 0 4,429 37,145 0 0 16,619 23,524 547,612 29,546 861 303 30,710 13,386 14,822 15,888 639 0 11,894 5,842 5,842 0 0 4,575 .65 .64 4.74 498 1,467 0 3,524 6,112 573 75 6,253 6,253 0 2,172
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