UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 2019
ChoiceOne Financial Services, Inc.
(Exact Name of Registrant as
Specified in its Charter)
Michigan
(State or Other Jurisdiction of Incorporation) |
000-19202
(Commission File Number) |
38-2659066
(IRS Employer Identification No.) |
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109 E. Division Street
Sparta, Michigan (Address of Principal Executive Offices) |
49345
(Zip Code) |
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Registrant’s telephone number, including area code: (616) 887-7366
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common stock | COFS | OTC Pink Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.01 | Completion of Acquisition or Disposition of Assets. |
Effective at 12:01 a.m. Michigan time on October 1, 2019, pursuant to the Agreement and Plan of Merger dated March 22, 2019 (the “Merger Agreement”), by and between ChoiceOne Financial Services, Inc. (“ChoiceOne”) and County Bank Corp. (“County”), County was merged with and into ChoiceOne, with ChoiceOne as the surviving corporation in the merger (the “Merger”).
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, each share of County common stock was converted into the right to receive 2.0632 shares of ChoiceOne common stock plus cash in lieu of any fractional shares.
The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which was attached as Exhibit 2.1 to ChoiceOne’s Form 8-K filed on March 25, 2019, and which is incorporated herein by reference.
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Directors of ChoiceOne
Pursuant to the Merger Agreement and effective as of the effective date of the Merger, the size of ChoiceOne’s board of directors was increased to 14 members, to be comprised of seven persons designated by ChoiceOne and seven persons designated by County. The following persons designated by County were appointed to fill the resulting vacancies, who are in addition to the existing directors of ChoiceOne as set forth below:
Newly-Appointed Directors With Terms
Michael J. Burke, Jr. David H. Bush
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Existing Directors With Terms Expiring in
Keith D. Brophy Jack G. Henion
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Newly-Appointed Directors With Terms
Harold J. Burns Patrick A. Cronin Gregory A. McConnell
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Existing Directors With Terms Expiring in
Paul L. Johnson Roxanne M. Page |
Newly-Appointed Directors With Terms
Eric E. Burrough Bruce J. Cady |
Existing Directors With Terms Expiring in
James A. Bosserd Nels W. Nyblad Kelly J. Potes
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ChoiceOne's Audit Committee will consist of Keith D. Brophy, Harold J. Burns, Patrick A. Cronin, Jack G. Hendon, Gregory A. McConnell, and Roxanne M. Page. ChoiceOne's Personnel
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& Compensation Committee will consist of Harold J. Burns, Eric E. Burrough, Jack G. Hendon, and Nels W. Nyblad. ChoiceOne's Governance Committee will consist of James A. Bosserd, Keith D. Brophy, David H. Bush, Patrick A. Cronin, and Paul L, Johnson.
Effective as of the effective date of the Merger, Greg L. Armock and Bradley F. McGinnis resigned from ChoiceOne’s board of directors in order to accommodate the changes to the ChoiceOne board of directors required under the Merger Agreement. There is no disagreement between ChoiceOne and either of Mr. Armock or Mr. McGinnis known to an executive officer of ChoiceOne, as defined in 17 CFR 240.3b-7, on any matter relating to ChoiceOne's operations, policies or practices.
Transition Agreement
Bruce J. Cady, formerly the Chairman and Chief Executive Officer of County, entered into a transition agreement with ChoiceOne, which became effective as of the effective date of the Merger, pursuant to which Mr. Cady joined ChoiceOne’s board of directors and was appointed Vice Chairman of the board. Mr. Cady’s transition agreement provides for his employment with ChoiceOne from the effective date of the Merger until December 31, 2019, with an annual salary of $304,321, prorated for such term of employment. Mr. Cady’s transition agreement also provides him the severance benefits to which he would have been entitled under his existing employment agreement with County, including a payment of $608,642, plus an amount equal to 12 months of health care continuation costs, and the net present value of Mr. Cady’s benefit under County’s Supplemental Executive Retirement Plan, payable in a lump sum following termination of Mr. Cady’s employment. The foregoing description of Mr. Cady’s transition agreement is qualified in its entirety by reference to the complete terms and conditions of the agreement, which was previously filed as Exhibit 10.8 to ChoiceOne's Pre-Effective Amendment No. 2 to Form S-4 Registration Statement, filed with the Commission on August 5, 2019, and which is incorporated herein by reference.
Employment Agreements
Michael J. Burke, Jr. (age 49), formerly a Director and President of County, entered into an employment agreement with ChoiceOne on March 22, 2019 (the “Burke Employment Agreement”), pursuant to which Mr. Burke was appointed the President of ChoiceOne as of the effective date of the Merger. Mr. Burke joined County in December 2016 following the merger of Capac Bancorp, Inc. and County. From February 2012 until December 2016, Mr. Burke served as a director and President/CEO of Capac Bancorp Inc. and CSB Bank. Prior to joining Capac Bancorp Inc. and CSB Bank, Mr. Burke spent 11 years working as an Area Manager for JPMorgan Chase & Co., which involved him managing a team of business bankers that covered three counties in Michigan, including Lapeer County. Mr. Burke is actively involved in the Community Bankers of Michigan organization, including serving in officer positions, which allows him to interact and collaborate with executives from other Michigan banks. Mr. Burke received his Bachelor of Business Administration and Finance degree from the University of Michigan-Flint in 2004. Mr. Burke’s extensive business and banking background, as well as his perspective and institutional knowledge, qualify him to serve as the President of ChoiceOne.
Kelly J. Potes, the President and Chief Executive Officer of ChoiceOne, entered into an employment agreement on September 30, 2019, effective as of the effective date of the Merger (the “Potes Employment Agreement”), pursuant to which Mr. Potes will continue to serve as the Chief Executive Officer of ChoiceOne after the Merger.
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The terms of the Potes Employment Agreement and Burke Employment Agreement (together, the “Agreements”) are substantially similar. Under each Agreement, in the event of ChoiceOne’s termination of Mr. Potes or Mr. Burke, as applicable (the "Executive"), without cause, or by the Executive for good reason (each as defined in the Agreements), the Executive will be entitled to continued salary for two years and monthly health care continuation payments for twelve months or until the commencement of new employment. In the event of a change of control and a qualifying termination within six months before or three years after the change in control (excluding the Merger), the Executive will be entitled to a lump-sum cash payment equal to three times their then-current base salary and monthly health care continuation payments for twelve months or until the commencement of new employment. If any payment to be received by the Executive following a change in control is determined to constitute a “parachute payment” as such term is defined in Section 280G(b)(2) of the Code, ChoiceOne will act in good faith to mitigate the impact of Section 280G of the Code such that no “parachute payment” will result. To the extent this effort is unsuccessful, ChoiceOne will reduce the amount of such payment to ensure that the total payments to the applicable Executive do not exceed 2.99 times the Executive's “base amount” as defined in Section 280G(b)(3) of the Code.
The Agreements contain provisions related to non-solicitation and non-competition that generally preclude the Executive, during his time of employment and for a period of 24 months thereafter, from engaging in activities competitive with ChoiceOne in any county in which ChoiceOne or its affiliates has a branch office or loan production office or in any contiguous counties, and from diverting from ChoiceOne any trade or business with any customer or supplier with whom the Executive had contact during his employment, subject to certain conditions and exceptions. The Agreements also require the Executive to maintain the confidentiality of non-public information with respect to ChoiceOne and its affiliates.
Pursuant to the Potes Employment Agreement, Mr. Potes' annual salary will be $360,000 for 2019 and 2020. Pursuant to the Burke Employment Agreement, Mr. Burke's annual salary will be $310,000 for 2019 and 2020. After 2020, the salaries of each of Mr. Potes and Mr. Burke will be subject to annual review and adjustment in accordance with ChoiceOne’s normal procedures. Mr. Potes and Mr. Burke will be eligible to participate in ChoiceOne’s bonus programs and equity-based compensation programs.
Additionally, the Burke Employment Agreement provides that Mr. Burke will be entitled to a transaction bonus payment of $250,000, payable upon completion of the Merger, which payment equals half of the amount to which Mr. Burke would have been entitled under his existing employment agreement with County if he had terminated his employment following completion of the Merger. If Mr. Burke terminates his employment without good reason before December 31, 2020, Mr. Burke will be entitled to the remainder of the amount to which he would have been entitled under his existing employment agreement with County.
The foregoing description of the Potes Employment Agreement is qualified in its entirety by reference to the complete terms and conditions of the Potes Employment Agreement, which is filed as Exhibit 10.1 to this Form 8-K. The foregoing description of the Burke Employment Agreement is qualified in its entirety by reference to the complete terms and conditions of the Burke Employment Agreement, which was previously filed as Exhibit 10.7 to ChoiceOne's Pre-Effective Amendment No. 2 to Form S-4 Registration Statement, filed with the Commission on August 5, 2019, and here incorporated by reference.
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Item 5.03 | Amendments to Articles of Incorporation and Bylaws; Change in Fiscal Year. |
Pursuant to the Merger Agreement, effective as of the effective date of the Merger, the Bylaws of ChoiceOne, as amended, were amended to (i) provide for mandatory retirement of a director after reaching 72 years of age, (ii) add provisions related to the nomination of directors and vacancies on the board of directors, and (iii) provide that the provisions related to the nomination of directors and vacancies on the board of directors may be amended only by the vote of two-thirds of the total authorized directorships. The Bylaws of ChoiceOne, as amended, are filed as Exhibit 3.1 hereto and are incorporated herein by reference.
Item. 8.01 | Other Events. |
On October 1, 2019, ChoiceOne issued a press release announcing the completion of the Merger, a copy of which is filed as Exhibit 99.1 to this Form 8-K.
Item 9.01 | Financial Statements and Exhibits. |
(a) | Financial Statements of Business Acquired. |
(i) The financial statements for County required by Item 9.01(a) of Form 8-K for the year ended December 31, 2018 are included under Annex G of ChoiceOne’s Form S-4, filed with the Commission on June 17, 2019, and are incorporated herein by reference.
(ii) The interim period financial statements for County required by Item 9.01(a) of Form 8-K will be filed no later than 71 calendar days after the date of this report.
(b) | Pro Forma Financial Information. |
(i) The pro forma condensed statement of income for the year ended December 31, 2018 required by Item 9.01(b) of Form 8-K is included in the Form S-4 Registration Statement, filed with the Commission on June 17, 2019, is here incorporated by reference.
(ii) The interim period pro forma financial statements required by Item 9.01(b) of Form 8-K will be filed no later than 71 calendar days after the date of this report.
(d) Exhibits.
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10.1 | Employment Agreement between ChoiceOne Financial Services, Inc. and Michael J. Burke, Jr., dated as of March 22, 2019. Previously filed as Exhibit 10.7 to ChoiceOne’s Pre-Effective Amendment No. 2 to Form S-4 filed August 5, 2019. Incorporated herein by reference. |
10.2 | Employment Agreement between ChoiceOne Financial Services, Inc. and Kelly J. Potes, dated as of September 30, 2019. |
10.3 | Transition Agreement between ChoiceOne Financial Services, Inc. and Bruce J. Cady, dated as of March 22, 2019. Previously filed as Exhibit 10.8 to ChoiceOne’s Pre-Effective Amendment No. 2 to Form S-4 filed August 5, 2019. Incorporated herein by reference. |
99.1 | Press release dated October 1, 2019. |
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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 hereunto duly authorized.
Dated: | October 1, 2019 |
CHOICEONE FINANCIAL SERVICES, INC.
(Registrant) |
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By: | /s/ Thomas Lampen | ||
Thomas Lampen
Its Treasurer |
EXHIBIT 3.1
BYLAWS
OF
CHOICEONE FINANCIAL SERVICES, INC.
(As amended through June 3, 2019)
ARTICLE I
SHAREHOLDERS
Section 1. Time and Place of Meetings. Shareholder meetings shall be held at the Corporation's principal executive office during regular business hours or at such other time and place as the Board of Directors determines.
Section 2. Annual Meetings of Shareholders. An annual meeting of shareholders shall, unless action to be taken at the meeting is instead taken by written consent as permitted by law, be held on the fourth Tuesday of April (or the next business day if that Tuesday is a holiday) after the end of the Corporation's fiscal year at the time designated in the notice of the meeting or at such other date and time as the Board of Directors determines.
Section 3. Special Meetings. A special meeting of shareholders may be called by the Board of Directors, the Chairperson of the Board, the President or by shareholders holding, in the aggregate, not less than 10% of all shares entitled to vote at a meeting. Upon delivery to the President or the Secretary of a written instrument setting forth the date and purposes of the meeting, signed by an officer or director on behalf of the Board of Directors, the Chairperson, or the President, or by holders of a sufficient number of shares, notice of the meeting shall be given to each shareholder entitled to vote at the meeting.
Section 4. Notice of Meetings. Written notice of the date, time, place, and purposes of a shareholder meeting shall be given not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, to each shareholder of record entitled to vote at the meeting. Notice of the purposes of the meeting shall include notice of any shareholder proposals that are proper subjects for shareholder action and are intended to be presented by shareholders who have notified the Corporation in writing of their intention to present the proposals at the meeting in accordance with these Bylaws.
Section 5. Shareholder Proposals. Except as otherwise provided by statute, the Articles of Incorporation, or these Bylaws:
(a) No matter may be presented for shareholder action at an annual or special meeting of shareholders unless such matter is: (i) specified in the notice of the meeting (or any supplement to the notice) given by or at the direction of the Board of Directors; (ii) otherwise presented at the meeting by or at the direction of the Board of Directors; (iii) properly presented for action at the meeting by a shareholder in accordance with the notice provisions set forth in this Section and any other applicable requirements; or (iv) a procedural matter presented, or accepted for presentation, by the chairperson of the meeting in his or her sole discretion.
(b) For a matter to be properly presented by a shareholder, the shareholder must have given timely notice of the matter in writing to the Secretary of the Corporation. To be timely, the notice must be delivered to or mailed to and received at the principal executive offices of the Corporation not less than 120 calendar days prior to the date corresponding to the date of the Corporation's proxy statement or notice of meeting released to shareholders in connection with the last preceding annual meeting of shareholders in the case of an annual meeting (unless the Corporation did not hold an annual meeting within the last year, or if the date of the upcoming annual meeting changed by more than 30 days from the date of the last preceding meeting, then the notice must be delivered or mailed and received not more than seven days after the earlier of the date of the notice of the meeting or public disclosure of the date of the meeting), and not more than seven days after the earlier of the date of the notice of the meeting or public disclosure of the date of the meeting in the case of a special meeting. The notice by the shareholder must set forth: (i)
a brief description of the matter the shareholder desires to present for shareholder action; (ii) the name and record address of the shareholder proposing the matter for shareholder action; (iii) the class and number of shares of capital stock of the Corporation that are beneficially owned by the shareholder; and (iv) any material interest of the shareholder in the matter proposed for shareholder action.
(c) The shareholder proposal, together with any accompanying supporting statement, shall not in the aggregate exceed 500 words. Except to the extent that a shareholder proposal submitted pursuant to this Section is not made available at the time of mailing, the notice of the purposes of the meeting shall include the name and address of and the number of shares of the voting security held by the proponent of each shareholder proposal.
(d) A shareholder may submit matters and proposals for shareholder action at any annual or special shareholder meeting if the matters and proposals are of general concern to, and are proper subjects for action by, the shareholders. A submitted proposal or matter may not be presented for shareholder action if it: (i) relates to the enforcement of a personal claim or the redress of a personal grievance against the Corporation, its management or any other person; (ii) consists of a recommendation, request or mandate that action be taken with respect to a matter, including a general economic, political, racial, religious, social or similar cause, that is not significantly related to the Corporation's business or is not within the Corporation's power to effectuate; (iii) has, at the shareholder's request, previously been submitted in either of the last two annual shareholder meetings and the shareholder has failed to present the proposal, in person or by proxy, for action at the meeting; (iv) is substantially similar to a matter or proposal presented within the preceding five calendar years: (x) if it was submitted once during the past five annual meetings and it received less than 3% of the total votes cast, or (y) if it was submitted twice during the past five annual meetings and it received less than 6% of the total votes cast at the time of its second submission, or (z) if it was submitted three times during such period and it received less than 10% of the votes cast at the time of its third submission (if any of (x), (y) or (z) apply, the proposal may not be submitted for three years after the latest previous submission); or (v) consists of a recommendation or request that the management take action with respect to a matter relating to the conduct of the Corporation's ordinary business operations.
(e) Notwithstanding the above, if the Corporation is subject to the solicitation rules and regulations of the Securities Exchange Act of 1934, as amended, and the shareholder desires to require the Corporation to include the shareholder's proposal in the Corporation's proxy materials, matters and proposals submitted for inclusion in the Corporation's proxy materials shall be governed by those rules and regulations.
Section 6. Adjournments. If a meeting is adjourned, it is not necessary to give notice of the adjourned meeting if (i) the date, time, and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and (ii) at the adjourned meeting only such business is transacted as might have been transacted at the original meeting. If after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with Section 4 above.
Section 7. Waiver of Notice. A shareholder or a shareholder's attorney-in-fact may waive the shareholder's right to notice before or after a meeting by a signed waiver of notice. A shareholder's attendance at a meeting will result in a waiver of objection to:
(a) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and
(b) consideration of a particular matter at the meeting that is not within the purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.
Section 8. List of Shareholders Entitled to Vote. The officer or agent having charge of the stock transfer books for shares of the Corporation shall make and certify a complete list of the shareholders entitled to vote at a shareholder meeting or any adjournment thereof. The list shall be:
(a) arranged alphabetically within each class and series, with the address of, and the number of shares held by, each shareholder;
(b) produced at the time and place of the meeting;
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(c) subject to inspection by any shareholder at any time during the meeting; and
(d) prima facie evidence as to who are the shareholders entitled to examine the list or to vote at the meeting.
Failure to comply with the requirements of this Section shall not affect the validity of an action taken at the meeting before a shareholder makes a demand to comply with the requirements.
Section 9. Quorum. Unless a greater quorum is required by the Articles of Incorporation, these Bylaws or statute, shares entitled to cast a majority of the votes at a shareholder meeting constitute a quorum at the meeting. The shareholders present in person or by proxy at the meeting are counted for the purpose of determining a quorum. Once a quorum is present, business may be conducted until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Whether or not a quorum is present, the meeting may be adjourned by a vote of the shares present. When the holders of a class or series of shares are entitled to vote separately on an item of business, each class or series must have a quorum, as determined by this Section, for the purpose of transacting the item of business.
Section 10. Voting Rights. Except as otherwise provided by statute or the Articles of Incorporation, each share is entitled to one vote on each matter submitted to a vote.
Section 11. Vote Required. An action, other than the election of directors, to be taken by shareholder vote shall be authorized by a majority of the votes cast by shareholders entitled to vote on the action, unless a greater vote is required by statute, the Articles of Incorporation, or these Bylaws. Unless the Articles of Incorporation provide otherwise, directors shall be elected by a plurality of votes cast. Shareholders may not cumulate their votes.
Section 12. Class Voting. If the Articles of Incorporation provide that a class of shares or a series of a class shall vote as a class, either generally or to authorize one or more specified actions, such voting as a class or series shall be in addition to any other required vote. Where voting as a class or series is required on an action other than the election of directors, the action shall be authorized by a majority of the votes cast by the holders of the class or series entitled to vote on the action, unless a greater vote is required by statute or the Articles of Incorporation.
Section 13. Electronic Participation in Meeting. A shareholder may participate in a shareholder meeting by a conference telephone or by other similar communications equipment through which all persons participating in the meeting may communicate with the other participants, if all participants are advised of the communications equipment and the names of the participants in the meeting are disclosed to all participants. Such participation in a meeting constitutes presence in person at the meeting.
Section 14. Conduct of Meetings. Shareholder meetings shall be conducted as follows:
(a) The chairperson of the meeting shall determine the order of business and shall have the authority to establish rules for the conduct of the meeting. Any rules adopted for, and the conduct of, the meeting shall be fair to shareholders.
(b) The chairperson of the meeting shall announce at the meeting when the polls close for each matter voted upon. If no announcement is made, the polls shall close upon the final adjournment of the meeting. After the polls close, no ballots, proxies, or votes nor any revocations or changes to ballots, proxies, or votes may be accepted.
(c) If disorder arises that prevents the continuation of the business of the meeting, the chairperson may adjourn the meeting.
(d) The chairperson may require any person who is not a shareholder of record or holding a proxy to leave the meeting.
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Section 15. Business Transacted. The business effectively transacted at a shareholder meeting shall be confined to the following:
(a) any matter specified in the notice or reasonably related to a matter specified in the notice; and
(b) any matter (i) the consideration of which is not objected to by any shareholder attending the meeting, and (ii) notice of which is waived by all shareholders not attending the meeting.
Section 16. Action Without a Meeting. Any action required or permitted to be taken at a shareholder meeting may be taken without a meeting, without prior notice, and without a vote if, before or after the action, all the shareholders entitled to vote at the meeting consent in writing.
Section 17. Record Date.
(a) For the purpose of determining shareholders entitled to notice of and to vote at a shareholder meeting or an adjournment of a meeting, the Board of Directors may fix a record date, which may not precede the date on which the Board adopts the resolution fixing the record date. The date may not be more than 60 nor less than 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 shareholder meeting 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 shareholder meeting is made as provided in this Section, the determination applies to any adjournment of the meeting, unless the Board of Directors fixes a new record date under this Section for the adjourned meeting.
(b) 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 may not be more than 60 days before effectuation of the action proposed to be taken. If a record date is not fixed and prior action by the Board of Directors is required with respect to the corporate action to be taken without a meeting, the record date is the close of business on the day on which the Board resolution is adopted. If a record date is not fixed and prior Board action is not required, the record date is the first date on which a signed written consent is delivered to the Corporation as provided in these Bylaws.
(c) For the purpose of determining shareholders entitled to receive payment of a share dividend or distribution, or allotment of a right, or for the purpose of any other action, the Board of Directors may fix a record date, which may not precede the date on which the Board adopts the resolution fixing the record date. The date may not be more than 60 days before the payment of the share dividend or distribution, allotment of a right, or other action. If a record date is not fixed, the record date is the close of business on the day on which the Board resolution relating to the corporate action is adopted.
Section 18. Proxies. A shareholder entitled to vote at a shareholder meeting or to express consent or dissent without a meeting may authorize one or more other persons to act for the shareholder by proxy only by the following methods:
(a) The execution of a writing authorizing another person or persons to act for the shareholder as proxy. Execution may be accomplished by the shareholder or by an authorized officer, director, employee, or agent of the shareholder by either signing the writing or causing his or her signature to be affixed to the writing by any reasonable means including, without limitation, facsimile signature;
(b) Transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will hold the proxy or to a proxy solicitation firm, proxy support service organization, or similar agent fully authorized by the person who will hold the proxy to receive that transmission. Any telegram, cablegram, or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram, or other electronic transmission was authorized by the shareholder. If a telegram, cablegram, or other electronic transmission is determined to be valid, the inspectors, or, if there are no inspectors, the persons making the determination shall specify the information upon which they relied.
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A copy, facsimile telecommunication, or other reliable reproduction of the writing or transmission created pursuant to subsections (a) or (b) may be substituted or used in lieu of the original writing or transmission for any purpose for which the original writing or transmission could be used, if the copy, facsimile telecommunication, or other reproduction is a complete reproduction of the entire original writing or transmission.
A proxy is not valid after the expiration of three years from its date unless otherwise provided in the proxy. A proxy must be filed with the Corporation at or before the meeting.
ARTICLE II
DIRECTORS
Section 1. Number and Term of Directors. Except as otherwise provided in the Articles of Incorporation, the Board of Directors shall consist of one or more directors as determined initially by the incorporator(s) and, thereafter, from time to time by the Board of Directors. Except as otherwise provided in the Articles of Incorporation, a number of directors equal to the number whose term expires at the time of the meeting shall be elected at each annual shareholder meeting and each director shall hold office until the third succeeding annual shareholder meeting and until a successor is elected and qualified. If shareholders of any class or series of shares have the exclusive right to elect one or more directors, those directors may be elected only by the vote of those shareholders.
Section 2. Mandatory Retirement. No director may continue to serve on the Board of Directors after reaching 72 years of age.
Section 3. Resignation. A director may resign by written notice to the Corporation. A resignation is effective upon its receipt by the Corporation or at a later time specified in the notice.
Section 4. Powers. The Corporation's business and affairs shall be managed by or under the direction of the Board of Directors, except as otherwise provided by statute or the Articles of Incorporation.
Section 5. Directors' Compensation. The Board of Directors, by affirmative vote of a majority of directors in office and irrespective of any personal interest of any of them, may establish reasonable compensation for a director's services to the Corporation as a director or officer. Directors may also be reimbursed for their expenses, if any, of attendance at each meeting of the Board or a committee.
Section 6. Regular Meetings. Regular meetings of the Board of Directors shall be held at the date, time, and place that the Board determines. A notice to directors is not required for a regular meeting, except that, when the Board establishes or thereafter changes the schedule of regular meetings, or changes the date, time, or place of a previously scheduled regular meeting, notice of the action shall be given to each director who was absent from the meeting at which the action was taken.
Section 7. Special Meetings. The Chairperson, the President, or directors constituting at least one-third of the directors then in office may call a special meeting of the Board of Directors by giving notice to each director.
Section 8. Notice of Meetings. Except as otherwise provided by these Bylaws, notice of the date, time, and place of each meeting of the Board of Directors shall be given to each director by either of the following methods:
(a) by mailing a written notice of the meeting to the address that the director designates or, in the absence of designation, to the last known address of the director, at least five days before the date of the meeting; or
(b) by delivering a written notice of the meeting to the director at least one full business day before the meeting, personally or by telecopier or telex, to the director's last known office or home.
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Section 9. Waiver of Notice. A director's attendance at or participation in a meeting waives any required notice to the director of the meeting, unless, at the beginning of the meeting or promptly upon the director's arrival, the director objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to any action taken at the meeting. A director may waive notice in writing before or after a meeting.
Section 10. Purpose of Meetings. Neither the business to be transacted nor the purpose of a regular or special meeting need be specified in the notice or waiver of notice of the meeting. If the purpose is stated in the notice, the business transacted at the meeting is not limited to the purpose stated.
Section 11. Quorum and Required Vote. A majority of the directors then in office, or of the members of a committee of the Board of Directors, constitutes a quorum for the transaction of business, unless the Articles of Incorporation, these Bylaws or, in the case of a committee, the Board resolution establishing the committee, provide for a larger or smaller number. The vote of the majority of members present at a meeting at which a quorum is present constitutes the action of the Board or of the committee, unless the vote of a larger number is required by statute, the Articles of Incorporation, these Bylaws, or, in the case of a committee, the Board resolution establishing the committee.
Section 12. Action by Written Consent. Action required or permitted to be taken under authorization voted at a meeting of the Board of Directors or a committee of the Board may be taken without a meeting if, before or after the action, all members of the Board then in office or of the committee consent to the action in writing. The written consents shall be filed with the minutes of the Board or committee. The consent has the same effect as a vote of the Board or committee for all purposes.
Section 13. Electronic Participation in Meeting. A member of the Board of Directors or of a committee of the Board may participate in a meeting by means of conference telephone or similar communications equipment through which all persons participating in the meeting can communicate with each other. Such participation in a meeting constitutes presence in person at the meeting. A director must be permitted to participate in a meeting by such means if the director so requests.
Section 14. Committees of Directors. The Board of Directors may designate one or more committees consisting of one or more directors. The Board may designate one or more directors as alternate members of a committee, who may replace an absent or disqualified member at a meeting of the committee. Unless prohibited by the Board resolution creating the committee, in the absence or disqualification of a committee member, the committee members present at a meeting and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of the absent or disqualified member. A committee, to the extent provided in the Board resolution creating the committee, may exercise all of the Board's power and authority in the management of the business and affairs of the Corporation, except that a committee may not: (i) amend the Articles of Incorporation, except that a committee may prescribe the relative rights and preferences of a series of a class of shares for which the Board of Directors has such authority under the Articles of Incorporation; (ii) adopt an agreement of merger or consolidation; (iii) recommend to shareholders the sale, lease, or exchange of all or substantially all of the Corporation's property and assets; (iv) recommend to the shareholders a dissolution of the Corporation or a revocation of a dissolution; (v) amend the Bylaws of the Corporation; or (vi) fill vacancies in the Board of Directors. Unless a resolution of the Board of Directors expressly so provides, a committee may not declare a distribution or dividend or authorize the issuance of stock. A committee exists, and each member serves, at the pleasure of the Board. A committee may establish a time and place for regular meetings, for which no notice is required, except that, if the committee changes the date, time, or place of a regular meeting, notice of the change shall be given to each member who was absent from the meeting at which the change was made. Otherwise, a notice of a committee meeting shall be given in the same manner as a notice of a Board meeting.
Section 16. Miscellaneous Powers of the Directors. Unless the Articles of Incorporation provide otherwise, the Board of Directors may adopt one or more of the following amendments to the Corporation's Articles of Incorporation without shareholder action:
(a) Extend the duration of the Corporation if it was incorporated at a time when limited duration was required by law;
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(b) Delete the names and addresses of the initial directors;
(c) Delete the name and address of the initial resident agent or registered office, if a statement of change is on file with the administrator;
(d) Change each issued and unissued authorized share of an outstanding class into a greater number of whole shares if the Corporation has only shares of that class outstanding;
(e) Adopt and file an amendment of the Articles of Incorporation eliminating a series of shares if there are no outstanding shares of the series, no outstanding shares or bonds convertible into shares of the series, or other rights, options, or warrants issued by the Corporation that could require issuing shares of the series;
(f) Change the Corporation name by substituting the word "corporation," "incorporation," "company," "limited," or the abbreviation "corp.," "inc.," "co.," or "ltd.," for a similar word or abbreviation in the corporate name, or by adding, deleting, or changing a geographical attribution for the Corporation name.
(g) Any other change that the Michigan Business Corporation Act expressly permits the Board of Directors to make without shareholder action.
Section 17. Director Nomination. The Corporation entered into an Agreement and Plan of Merger with County Bank Corp. ("County"), dated as of March 22, 2019, pursuant to which County merged with and into the Corporation (the "Merger"). As of the Effective Time of the Merger, the Board consists of seven directors designated by County (the "County Designees") and seven directors designated by the Corporation (the "ChoiceOne Designees"). From the effective time of the Merger until the completion of the third (3rd) annual shareholder meeting of the Corporation thereafter (the "Designation Period"), the Board will nominate for election to the Board at each shareholder meeting the County Designees and the ChoiceOne Designees, or such replacement designees as selected by the remaining County Designees (in the case of a vacancy caused by departure of a County Designee) or ChoiceOne Designees (in the case of a vacancy caused by departure of a ChoiceOne Designee), as applicable.
Section 18. Director Vacancies. During the Designation Period, any vacancy in the Board shall be filled as set forth in subsection (a) below. After the Designation Period, subsection (a) will cease to have any force or effect, and any vacancy in the Board shall be filled as set forth in subsection (b) below.
(a) During the Designation Period, if there is any vacancy on the Board, whether caused by the death, disability, resignation, or removal of a director, such vacancy will be filled by the remaining County Designees (in the case of a vacancy caused by departure of a County Designee) or the remaining ChoiceOne Designees (in the case of a vacancy caused by departure of a ChoiceOne Designee).
(b) After the Designation Period has expired, all vacancies in the membership of the Board shall be filled by appointment made by a majority vote of the remaining directors. Any vacancy resulting from the removal of a director for cause shall be filled solely by appointment made by a majority of the Continuing Directors (as defined in the Articles of Incorporation). Each person so appointed to fill a vacancy shall remain a director until the next election of the class for which that director shall have been chosen and until that director's successor shall be elected by the shareholders.
ARTICLE III
OFFICERS
Section 1. Appointment. The Board of Directors, at its first meeting following the annual shareholder meeting, shall appoint a Chairperson, President, Secretary, and Treasurer and may elect from their number one or more Vice Chairpersons. The Chairperson and the President shall be members of the Board. The Board may also appoint one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers and agents that it deems necessary. The Board of Directors need not appoint or elect an officer to an office that is already filled and whose specified term has not expired. The same person may hold two or more offices, but an officer may not
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execute, acknowledge or verify an instrument in more than one capacity if the instrument is required by law, the Articles of Incorporation, or these Bylaws to be executed, acknowledged, or verified by two or more officers.
Section 2. Term, Removal, and Vacancies. An officer shall hold office for the term the Board specifies upon election or appointment and until a successor is elected or appointed and qualified, or until the officer's death, resignation, or removal. The Board may remove an officer with or without cause. An officer may resign by written notice to the Corporation. The resignation is effective upon its receipt by the Corporation or at a later date specified in the notice.
Section 3. Chairperson of the Board. The Chairperson of the Board shall preside when present at all meetings of the shareholders and the Board of Directors. The Chairperson shall perform any other duties and exercise any other authority that the Board prescribes and, unless otherwise provided by Board resolution, is an ex officio member of all committees. Except where by law the signature of the President is required, the Chairperson possesses the same power and authority as the President to make and execute contracts, instruments, papers, and documents of every kind in the name of and on behalf of the Corporation.
Section 4. Vice Chairperson of the Board. During the unavailability or disability of the Chairperson, or while that office is vacant, the Vice Chairpersons, in the order the Board designates, may exercise all of the powers and discharge all of the duties of the Chairperson. A Vice Chairperson shall perform any other duties that the Board prescribes.
Section 5. President. The President shall be the Corporation's chief executive officer and have the general control and management of its business, under the direction of the Board. The President shall ensure that all orders and resolutions of the Board are carried into effect. Unless the Board specifically provides otherwise, the President shall be an ex officio member of all committees. The President shall perform all duties incident to the office of President and other duties that the Board prescribes. The President may make and execute contracts, instruments, papers, and documents of every kind in the name and on behalf of the Corporation, except when the Board specifies the same to be done by another officer or agent. During the absence or disability of the Chairperson and the Vice Chairpersons, or while those offices are vacant, the President shall preside over all meetings of the Board of Directors and the shareholders and perform all of the duties and have all of the power and authority of the Chairperson.
Section 6. Vice Presidents. The Board may designate one or more Vice Presidents to perform the duties and exercise the authority of the President during the President's absence or disability. Each Vice President shall perform other duties that the President assigns or the Board prescribes.
Section 7. Secretary. The Secretary shall cause to be recorded and maintained minutes of all meetings of the Board, Board committees, and shareholders. The Secretary shall cause to be given all notices required by law, these Bylaws, or resolution of the Board and shall perform other duties that the President assigns or the Board prescribes.
Section 8. Treasurer. The Treasurer shall cause to be kept in books belonging to the Corporation a full and accurate account of all receipts, disbursements, and other financial transactions of the Corporation. The Treasurer shall perform other duties that the President assigns or the Board prescribes.
Section 9. Assistant Secretaries and Assistant Treasurers. An Assistant Secretary or an Assistant Treasurer may perform any duty or exercise any authority of the Secretary or Treasurer, respectively. An Assistant Secretary or Assistant Treasurer also shall perform duties that the Secretary or the Treasurer, respectively, or the President assigns or that the Board prescribes.
Section 10. Other Officers. The Board of Directors may appoint other officers to perform duties and exercise authority that the President assigns or the Board prescribes.
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ARTICLE IV
SUBSIDIARIES AND DIVISIONS
Section 1. Divisional Officers. The Board of Directors or the President may appoint divisional officers. The Board of Directors or the President may withdraw a divisional officer's title at any time and without cause. A divisional officer may, but need not, be a director or an executive officer of the Corporation. A divisional officer shall perform duties and exercise authority that the President assigns or the Board prescribes.
Section 2. Subsidiary Directors. The Corporation may cause to be elected to the board of directors of a subsidiary corporation such persons as it determines, any of whom may, but need not, be directors, executive officers, or other employees or agents of the Corporation. The Board of Directors or the President may instruct the directors of a subsidiary corporation as to the manner in which they are to vote upon any issue properly coming before them as the directors of the subsidiary corporation, and such directors shall have no liability to the Corporation as the result of any action taken in accordance with those instructions.
Section 3. Divisional and Subsidiary Officers Not Executive Officers. A divisional officer or officer of a subsidiary corporation shall not, by virtue of holding office, be deemed to be an executive officer of the Corporation, nor shall a divisional officer or officer of a subsidiary corporation (unless also a director or executive officer of the Corporation) be entitled to have access to any files, records, or other information relating to the Corporation or its business and finances or to attend or receive the minutes of meetings of the Board of Directors or a committee of the Corporation, except as and to the extent that the Board of Directors or the President expressly authorize.
ARTICLE V
INDEMNIFICATION
Section 1. Indemnification in Action by Third Party. The Corporation may indemnify 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 (other than an action by or in the right of the Corporation), whether civil, criminal, administrative, or investigative and whether formal or informal, by reason of the fact that the person is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, whether for profit or not for profit, against expenses (including attorney fees), judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit, or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation or its shareholders and, with respect to a criminal action or proceeding, the person had no reasonable cause to believe his or her conduct was unlawful. The termination of an action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner that the person reasonably believed to be in or not opposed to the best interests of the Corporation or its shareholders and, with respect to a criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
Section 2. Indemnification in Action by or in Right of the Corporation. The Corporation may indemnify 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 the person is or was a director, officer, employee, or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise, whether for profit or not for profit, against expenses, including attorney fees and amounts paid in settlement actually and reasonably incurred by the person in connection with the action or suit, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Corporation or its shareholders. Indemnification shall not be made for a claim, issue, or matter in which the person shall have been found liable to the Corporation except to the extent authorized by statute.
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Section 3. Expenses. To the extent that a director, officer, employee, or agent of the Corporation has been successful on the merits or otherwise in defense of an action, suit, or proceeding referred to in Section 1 or 2 of this Article, or in defense of a claim, issue, or matter in the action, suit, or proceeding, the Corporation shall indemnify that person against actual and reasonable expenses, including attorney fees that person incurred in connection with the action, suit, or proceeding and an action, suit, or proceeding brought to enforce the mandatory indemnification provided in this Section.
Section 4. Determination, Evaluation, and Authorization of Indemnification.
(a) Except as otherwise provided in Subsection (e) or unless ordered by a court, the Corporation shall make an indemnification under Section 1 or 2 of this Article only upon a determination that indemnification of the director, officer, employee, or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 1 or 2 of this Article and upon an evaluation of the reasonableness of expenses and amounts paid in settlement. This determination and evaluation may be made in any of the following ways:
(1) By a majority vote of a quorum of the Board of Directors consisting of directors who are not parties or threatened to be made parties to the action, suit, or proceeding.
(2) If a quorum cannot be obtained under Subsection (1) above, by majority vote of a committee duly designated by the Board and consisting solely of two or more directors not at the time parties or threatened to be made parties to the action, suit, or proceeding.
(3) By independent legal counsel in a written opinion, which counsel shall be selected in one of the following ways:
(A) By the Board or its committee in the manner prescribed in Subsections (1) or (2) above.
(B) If a quorum of the Board cannot be obtained under Subsection (1) above and a committee cannot be designated under Subsection (2) above, by the Board.
(4) 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 the action, suit, or proceeding.
(5) 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.
(b) In the designation of a committee under Subsection (a)(2) or in the selection of independent legal counsel under Subsection (a)(3)(B), all directors may participate.
(c) If a person is entitled to indemnification under Section 1 or 2 for a portion of expenses, including reasonable attorney fees, judgments, penalties, fines, and amounts paid in settlement, but not for the total amount, the Corporation may indemnify the person for the portion of the expenses, judgments, penalties, fines, or amounts paid in settlement for which the person is entitled to be indemnified.
(d) The Corporation shall authorize payment of indemnification under this Section in one of the following ways:
(1) By the Board in one of the following ways:
(A) If there are two or more directors who are not parties or threatened to be made parties to the action, suit, or proceeding, by a majority vote of all directors who are not parties or threatened to be made parties, a majority of whom shall constitute a quorum for this purpose.
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(B) By a majority of the members of a committee of two or more directors who are not parties or threatened to be made parties to the action, suit, or proceeding.
(C) If the Corporation has one or more independent directors who are not parties or threatened to be made parties to the action, suit, or proceeding, by a majority vote of all independent directors who are not parties or are threatened to be made parties, a majority of whom shall constitute a quorum for this purpose.
(D) If there are no independent directors and less than two directors who are not parties or threatened to be made parties to the action, suit, or proceedings, by the vote necessary for action by the Board in accordance with Section 523 of the Michigan Business Corporation Act, in which authorization all directors may participate.
(2) 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.
(e) To the extent that the Articles of Incorporation include a provision eliminating or limiting the liability of a director pursuant to Section 209(1)(c) of the Michigan Business Corporation Act, the Corporation may indemnify a director for the expenses and liabilities described in this Subsection without a determination that the director has met the standard of conduct set forth in Sections 1 or 2 of this Article, but no indemnification shall be made except to the extent authorized in Section 564c of the Michigan Business Corporation Act 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. In connection with an action or suit by or in the right of the Corporation as described in Section 2 of this Article, indemnification under this Subsection shall be for expenses, including attorneys' fees, actually and reasonably incurred. In connection with an action, suit, or proceeding other than an action, suit, or proceeding by or in the right of the Corporation, as described in Section 1 of this Article, indemnification under this Subsection shall be for expenses, including attorneys' fees, actually and reasonably incurred, and for judgments, penalties, fines, and amounts paid in settlement actually and reasonably incurred.
Section 5. Advances.
(a) The Corporation may pay or reimburse the reasonable expenses incurred by a director, officer, employee, or agent who is a party or threatened to be made a party to an action, suit, or proceeding before final disposition of the proceeding if both of the following apply:
(1) The person furnishes the Corporation a written affirmation of the person's good faith belief that he or she has met the applicable standard of conduct set forth in Section 1 or 2 of this Article.
(2) The person furnishes the Corporation a written undertaking, executed personally or on the person's behalf, to repay the advance if it is ultimately determined that the person did not meet the standard of conduct set forth in Section 1 or 2 of this Article.
(b) The undertaking required by Subsection (a)(2) above must be an unlimited general obligation of the person, but need not be secured and may be accepted without reference to the financial ability of the person to make repayment.
(c) Determinations and evaluations under this Section shall be made in the manner specified in Section 4(a) above, and authorizations shall be made in the manner specified in Section 4(d) above.
(d) A provision in the Articles of Incorporation or Bylaws, a resolution of the Board or shareholders, or an agreement making indemnification mandatory shall also make the advancement of expenses mandatory unless the provision, resolution, or agreement specifically provides otherwise.
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Section 6. Other Indemnification Agreements. The indemnification or advancement of expenses provided by this Article is not exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the Articles of Incorporation, these Bylaws, or a contractual agreement. The total amount of expenses advanced or indemnified from all sources combined may not exceed the amount of actual expenses incurred by the person seeking indemnification or advancement of expenses. The indemnification provided in Sections 1 to 6 of this Article continues as to a person who ceases to be a director, officer, employee, or agent and shall inure to the benefit of the person's heirs, executors, and administrators.
Section 7. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against the person and incurred by the person in any such capacity or arising out of the person's status as such, whether or not the Corporation would have power to indemnify the person against the liability under Sections 1 to 6 of this Article. To the extent that the Articles of Incorporation include a provision eliminating or limiting the liability of a director pursuant to Section 209(1)(c) of the Michigan Business Corporation Act, the Corporation may purchase insurance on behalf of a director from an insurer owned by the Corporation, but insurance purchased from that insurer may insure a director against monetary liability to the Corporation or its shareholders only to the extent that the Corporation could indemnify the director under Section 4(e).
Section 8. Constituent Corporation. For the purposes of this Article, "Corporation" includes all constituent corporations absorbed in a consolidation or merger and the resulting or surviving corporation, so that a person who is or was a director, officer, employee, or agent of the constituent corporation or is or was serving at the request of the constituent corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, or other enterprise whether for profit or not shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as the person would if the person had served the resulting or surviving corporation in the same capacity.
ARTICLE VI
SHARE CERTIFICATES AND TRANSFERS
Section 1. Share Certificates: Required Signatures. Except as otherwise required by the Articles of Incorporation or these Bylaws and permitted by statute, shares of the Corporation's stock shall be represented by certificates. Each certificate must be signed by one of the following: the Chairperson, a Vice Chairperson, the President, or a Vice President. Share certificates may be sealed with the seal of the Corporation or a facsimile of the seal. 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 employee. The Corporation may issue a certificate even though the officer who has signed or whose facsimile signature has been placed upon the certificate ceases to be an officer before the certificate is issued.
Section 2. Replacement of Certificates. The Corporation shall issue a new certificate for shares in place of a certificate alleged to have been lost or destroyed. The Board of Directors may require the owner of the lost or destroyed certificate, or his legal representative, to give the Corporation a bond or other security and/or execute an indemnity agreement sufficient to indemnify the Corporation against any claim that may be made against it on account of the lost or destroyed certificate or the issuance of a replacement certificate.
Section 3. Registered Shareholders. The Corporation may treat the registered holder of a share as the absolute owner of the share and shall not be bound to recognize any equitable interest in or other claim to the share by any other person, whether or not the Corporation has actual notice of the interest or claim, except as otherwise provided by law.
Section 4. Transfer Agent and Registrar. The Board of Directors may appoint a transfer agent and a registrar for the transfer and registration of its securities.
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Section 5. Transfer of Shares. A sale, assignment, exchange, conveyance, gift, pledge, hypothecation, or other transfer of shares of the Corporation's stock, whether by operation of law or otherwise, shall not be effective as to the Corporation until recorded on the Corporation's stock transfer books.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends or Other Distributions. By action of the Board of Directors, the Corporation may declare and pay dividends or make other distributions as permitted by law.
Section 2. Voting of Securities. Unless the Board directs otherwise, the Chairperson or the President, or, during their absence or disability, the Vice Presidents in the order that the Board designates, may on behalf of the Corporation attend and vote (or execute in the name or on behalf of the Corporation a consent in writing in lieu of a meeting of shareholders or a proxy authorizing an agent or attorney-in-fact for the Corporation to attend and vote) at any meeting of security holders of any corporation in which the Corporation holds securities. At such meetings such person may exercise all rights incident to the ownership of such securities which the Corporation might exercise if present. The Board may confer this voting power upon any other person.
Section 3. Checks. The Corporation's checks, drafts, and orders for the payment of money shall be signed in the name of the Corporation in the manner and by the persons that the Board of Directors designates.
Section 4. Signing of Instruments. When the Board or these Bylaws authorize the signing of a contract, conveyance, or other instrument without specification of the signing officer, the Chairperson, the President, any Vice President, the Secretary, or the Treasurer may sign in the name and on behalf of the Corporation and may affix the corporate seal to the instrument. The Board may authorize other officers and agents to sign instruments in the name and on behalf of the Corporation.
Section 5. Corporate Books and Records. The Corporation shall keep books and records of account and minutes of the proceedings of its shareholders, Board of Directors, and executive committee, if any. The books, records, and minutes may be kept outside the State of Michigan. The Corporation shall keep at its registered office, or at the office of its transfer agent within or without the State of Michigan, 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. Any of the books, records, or minutes may be in written form or in any other form capable of being converted into written form within a reasonable time. The Corporation shall convert into written form without charge any record not in written form, unless otherwise requested by a person entitled to inspect the record.
Section 6. Seal. The Corporation may have a seal in the form that the Board of Directors determines. The seal may be used by causing it or a facsimile to be affixed, impressed, or reproduced.
ARTICLE VIII
AMENDMENTS
The shareholders or the Board of Directors may amend or repeal these Bylaws or adopt new bylaws, unless the Articles of Incorporation or these Bylaws provide that the power to adopt new bylaws is reserved exclusively to the shareholders or that the Board may not alter or repeal these Bylaws or any particular bylaw. Amendment of these Bylaws by the Board requires the vote of a majority of the directors then in office. Notwithstanding the foregoing, Article II, Section 17 (excluding subsection (b)) and Section 18 may be amended during the Designation Period only by the vote of two-thirds of the total number of authorized directorships of the Board of Directors, regardless of any vacancies.
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made by CHOICEONE FINANCIAL SERVICES, INC., a Michigan corporation (the “Corporation”), and KELLY J. POTES (“Executive”). The parties agree as follows.
WHEREAS, the Board of Directors of the Corporation believes that the future services of Executive as provided in this Agreement will be of significant value to the Corporation; and
WHEREAS, the Corporation will own and operate two wholly owned subsidiaries, ChoiceOne Bank and Lakestone Bank & Trust (“Banks”), which are engaged in the general business of banking; and
WHEREAS, the Board of Directors of the Corporation has determined that it is in the best interests of the Corporation, its shareholders and the Banks to secure Executive’s continued services and to ensure Executive’s continued dedication and objectivity in the event of any potential or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as hereafter defined) of the Corporation, without concern as to whether Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage Executive’s full attention and dedication to the Corporation and the Banks, the Board of Directors has authorized the Corporation to enter into this Agreement; and
WHEREAS, Executive is willing to serve in the employ of the Corporation and the Banks on a full-time basis as an at-will employee as provided in this Agreement.
NOW, THEREFORE, the parties agree as follows.
1. Effective Date and Term. This Agreement will take effect as of the Effective Time of the Corporation’s acquisition of County Bank Corp. (“County”), as defined in the Agreement and Plan of Merger dated as of March 22, 2019, between the Corporation and County (the “Merger Agreement”) (“Effective Date”). If the merger of the Corporation and County does not close, this Agreement shall be null and void. The initial term of this Agreement shall be three years, and, beginning on the first anniversary of the Effective Date, the term shall automatically be extended by another year on each anniversary of the Effective Date unless either party gives the other notice (as provided in Section 15) of intention to terminate this Agreement at least thirty (30) days before an anniversary of the Effective Date, in which case this Agreement shall terminate at the end of the then-current term without any further extension; provided, however, that:
(a) except for termination as provided above pursuant to notice from Executive to the Corporation, this Agreement will not terminate during an “Active Change in Control Proposal Period” (as defined in Section 10), even if the Corporation has given Executive notice of intention to terminate this Agreement;
(b) except for termination as provided above pursuant to notice from Executive to the Corporation, upon the occurrence of a “Change in Control” (as defined in Section
9), the term of this Agreement shall automatically be extended until the third anniversary of the effective date of the Change in Control, even if the Corporation has given notice of intention to terminate this Agreement; and
(c) termination of this Agreement shall not affect the obligations of either party accrued before termination of this Agreement, including Executive’s obligations under Sections 11, 12 and 13.
2. Employment. Executive will serve as: (A) Chief Executive Officer of the Corporation (the “principal position”); and (B) in such positions with Affiliates (defined for purposes of this Agreement as any organizations controlling, controlled by or under common control with the Corporation) as reasonably requested by the Corporation, provided that the duties of such positions are consistent with Executive’s responsibilities in Executive’s principal position (together, the “Employment”). As used in this Agreement, the term “Corporation” includes the Banks, unless the context clearly requires otherwise.
Executive will serve the Corporation and the Banks well and faithfully during the Employment and will devote Executive’s best reasonable full time business efforts to the Employment, except that Executive may engage in civic and professional activities, service on boards of directors, and similar activities as long as such activities do not constitute a conflict of interest or impair Executive’s performance of the duties of the Employment. The Employment may be terminated during the term of this Agreement as provided in Sections 4 and 5.
3. Compensation. Executive will be compensated during the Employment as follows:
(a) Salary. Executive’s annual salary (“Salary”) will be $360,000.00 for 2019 and 2020, prorated for any partial year, subject to required payroll deductions and payable in weekly, bi-weekly or semi-monthly installments pursuant to the Corporation’s normal payroll practices. Such Salary shall be subject to review annually commencing in 2021 and will be subject to adjustment pursuant to the Corporation’s normal procedures.
(b) Bonus. Executive will participate in any bonus programs for senior executives of the Corporation or the Banks, at a level commensurate with Executive’s principal position, subject to the terms and conditions of the applicable bonus program. Such bonus amount shall be subject to review annually and will be subject to adjustment pursuant to the Corporation’s normal procedures.
(c) Equity Plans. Executive will participate in any equity based compensation programs (“Equity Plans”) offered by the Corporation, at a level commensurate with Executive’s principal position, subject to the terms and conditions of the Equity Plans. Awards under the Equity Plans shall be determined periodically pursuant to the Corporation’s normal procedures.
(d) Fringe Benefits. Executive will participate in health and dental, life insurance, short and long term disability insurance, retirement, and other employee fringe benefit programs covering the Corporation’s salaried employees as a group, and in any programs applicable to senior executives of the Corporation or the Banks. The terms of
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applicable insurance policies and benefit plans in effect from time to time will govern with regard to specific issues of coverage and benefit eligibility. All benefit programs are subject to change from time to time in the Corporation’s discretion, except that Executive will receive an annual car allowance of $15,000, prorated for any partial year, paid in weekly, bi-weekly or semi-monthly installments pursuant to the Corporation’s normal payroll practices, or Executive can receive standard IRS mileage reimbursement for business travel.
(e) Paid Time Off. Executive will be entitled to the greater of (i) the number of days of paid time off applicable to senior executives of the Corporation per calendar year, or (ii) 30 days of paid time off per calendar year.
(f) Business Expenses. The Corporation will reimburse Executive for reasonable ordinary and necessary business expenses incurred in the course of the Employment, for fees and expenses of Executive’s attendance in the course of the Employment at banking related conventions and similar events, for reasonable professional association and seminar expenses, and for any additional expenses authorized by the Corporation, subject to Executive’s submission of proper documentation for tax and accounting purposes. Reimbursement under this section will be paid within thirty (30) days after Executive submits documentation as provided by this section, provided that payments may not be made after March 15 of the calendar year following the calendar year in which the expenses were incurred.
4. Termination of the Employment Without Severance Pay. Executive shall not be entitled to any further compensation from the Corporation or any Affiliate after termination of the Employment as permitted by this Section 4, except (A) unpaid Salary installments through the Employment termination date, (B) any vested benefits accrued as of the date of termination of the Employment under the terms of any written Corporation or Bank employment, compensation or benefit program; and (C) any rights of Executive to indemnification under the provisions of the Articles of Incorporation or Bylaws of the Corporation or the Banks or any indemnification agreement entered into between Executive and the Corporation or any Affiliate (together, the “Vested Rights”).
(a) Death. The Employment will terminate automatically upon Executive’s death.
(b) Disability. The Corporation may terminate the Employment due to Executive’s “Disability”, defined as Executive being determined to be “disabled” pursuant to the Corporation’s long-term disability insurance policy as in effect from time to time and without regard to whether Executive is a participant in such long-term disability policy. The Corporation may give Executive notice of its intention to terminate the Employment due to Disability. It is understood that the Corporation has the right to terminate the Employment due to Executive’s Disability without meeting the standards in this Section 4(b), but in that event the termination shall be deemed to be a termination of the Employment pursuant to Section 5(a).
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(c) Termination by Corporation for Cause. The Corporation may terminate the Employment for “Cause”, defined as Executive’s: (i) breach of any material term of this Agreement including, but not limited to, the terms in Sections 11, 12 and 13; (ii) continued failure to perform Executive’s duties; (iii) gross negligence causing or placing the Corporation at risk of significant damage or harm; (iv) misappropriation of or intentional damage to Corporation property; (v) material fraud or dishonesty; (vi) conviction of or pleading guilty or no contest to a felony; or (vii) intentional act or omission that Executive knows or should know is significantly detrimental to the interests of the Corporation. If the Corporation becomes aware after termination of the Employment other than for Cause that Executive engaged before the termination of Employment in conduct constituting Cause, the Corporation may recharacterize Executive’s termination as having been for Cause.
The Corporation may not terminate the Employment for “Cause” under (i) or (ii) above unless:
A. the Chairman of the Board of Directors notifies the Executive in writing, within sixty (60) days after the Board of Directors has concluded after conducting any applicable investigation that an act or omission constitutes Cause and explaining why the Board of Directors considers it to constitute Cause;
B. the Executive fails, within thirty (30) days after notice from the Chairman under A. above, to revoke the action or correct the omission and make the Corporation whole; and
C. the Chairman gives notice of termination within thirty (30) days after expiration of the thirty (30)-day period under B. above.
The Corporation may not terminate the Employment for “Cause” under (iii)-(vii) above unless the Employment is terminated within sixty (60) days after the Board of Directors concludes after conducting any applicable investigation that an act or omission constitutes Cause and the Chairman gives Executive written notice of the act or omission that the Board of Directors has concluded constitutes Cause before or no later than thirty (30) days after termination.
(d) Discretionary Termination by Executive. Executive may terminate the Employment at will, with at least thirty (30) days' advance notice. If Executive gives such notice of termination, the Corporation may (but need not) relieve Executive of some or all of Executive’s offices and responsibilities for part or all of such notice period, provided that Executive’s Salary and benefits are continued for the lesser of thirty (30) days or the remaining period of the Employment.
(e) Termination of Employment after Termination of This Agreement. If Executive continues to be employed by the Corporation or the Banks after termination of this Agreement as provided in Section 1, Executive’s employment shall be terminable by either party at will without any Severance Pay.
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5. Termination With Severance Pay. Executive shall not be entitled to any further compensation from the Corporation or any Affiliate after termination of the Employment as permitted by this Section 5, except (A) Vested Rights; and (B) Severance Pay under Section 6 or the Change in Control Severance under Section 7, whichever is applicable.
(a) Discretionary Termination by Corporation. The Corporation may terminate the Employment during the term of this Agreement at will, with at least thirty (30) days advance notice to Executive. Any termination of Executive’s Employment by the Corporation under Section 4 that is found not to meet the standards of such Section will be considered to have been a termination under this Section 5(a).
(b) Termination by Executive for Good Reason. Executive may terminate the Employment during the term of this Agreement for “Good Reason” if there is a material negative change to the employment relationship between Executive and the Corporation because: (i) Executive is demoted from any of Executive’s principal positions; (ii) the status, authority or responsibility of Executive’s principal positions is materially diminished; (iii) Executive’s Salary as then in effect is materially reduced without a corresponding reduction in the salaries of the Corporation and Banks’ other executives; (iv) the Corporation requires Executive be based in a facility that is more than sixty (60) miles from the facility where Executive is located immediately prior to the relocation; or (v) any material breach by the Corporation or the Banks, or any successor, of its obligations to Executive under this Agreement.
Executive may not terminate the employment for “Good Reason” unless:
A. Executive notifies the Chairman of the Corporation’s Board of Directors in writing, within sixty (60) days after Executive becomes aware of the act or omission constituting Good Reason, that the act or omission in question constitutes Good Reason and explaining why Executive considers it to constitute Good Reason;
B. the Corporation fails, within thirty (30) days after notice from Executive under A. above, to revoke the action or correct the omission and make Executive whole; and
C. Executive gives notice of termination within thirty (30) days after expiration of the thirty (30)-day period under B. above.
6. Severance Pay. The Corporation will pay and provide Executive with the payments and benefit continuation provided in this Section 6 (“Severance Pay”) if Executive’s Employment is terminated during the term of this Agreement as provided in Section 5 in a manner that constitutes a “separation from service” as that term is defined by Section 409A of the Internal Revenue Code of 1986 (the “Code”) and Executive is not entitled to the Change in Control Severance under Section 7. If Executive becomes entitled to Severance Pay under this Section 6, and subsequently becomes entitled to the Change in Control Severance under Section 7, the amount of the lump sum Cash Payment under Section 7(a) shall be reduced by the amount of
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Severance Pay already received by Executive under this Section 6, and no further Severance Pay will be payable under this Section 6.
(a) Amount and Duration of Severance Pay. Subject to the other provisions of this Section, Severance Pay will consist of (i) continued payment of Executive’s then-current Salary (disregarding any reduction in Salary that constitutes Good Reason) for one hundred and four (104) weeks following the week in which the Employment terminates (the “Severance Pay Period”) pursuant to the Corporation’s normal payroll process, subject to required payroll withholding; and (ii) a monthly payment equal to the monthly cost of health care continuation under the Corporation’s health plan based on the coverage (e.g., individual or family) in place for Executive immediately prior to the termination of his employment, until the earlier of (y) twelve (12) months after termination or (z) the date Executive has commenced new employment and has thereby become eligible for comparable benefits, subject to Executive's rights under COBRA.
Executive will receive the Severance Pay provided in Section 6(a) notwithstanding any other earnings that Executive may have, and subject to offset only as provided in Section 6(c). If Executive dies during the Severance Pay Period, the Severance Pay under Section 6(a) will continue for the remainder of the Severance Pay Period for the benefit of Executive’s designated beneficiary (or Executive’s estate if Executive fails to designate a beneficiary).
(b) Conditions to Severance Pay. To be eligible for Severance Pay, Executive must meet the following conditions: (i) Executive must comply with Executive’s obligations under this Agreement that continue after termination of the Employment; (ii) Executive must promptly sign and continue to honor a release, in form acceptable to the Corporation, of any and all claims arising out of or relating to Executive’s Employment or its termination and that Executive might otherwise have against the Corporation, the Corporation’s Affiliates, or any of their officers, directors, employees and agents, provided that the release will not waive Executive’s right to claims or rights related to (A) Severance Pay due under this Agreement; (B) unpaid salary through the employment termination date; (C) unpaid expense reimbursements for authorized business expenses incurred before the employment termination date; (D) any Equity Plan benefits; (E) benefit plans (for example to convert life insurance); (F) any rights under the terms of any qualified retirement plan covering Executive; and (G) rights of indemnification under the Corporation’s Articles of Incorporation or Bylaws or any indemnification agreement entered into between Executive and the Corporation or any Affiliate (in addition, the release does not affect Executive’s right to cooperate in an investigation by the Equal Employment Opportunity Commission); and (iii) Executive must resign upon written request by Corporation from all positions with or representing the Corporation or any Affiliate, including but not limited to, membership on boards of directors; and (iv) Executive must provide the Corporation for a period of six (6) months after the Employment termination date with consulting services regarding matters within the scope of Executive’s former duties upon request by the Corporation’s Chief Executive Officer; provided, however, that Executive will only be required to provide those services by telephone at Executive’s reasonable convenience and without substantial interference with Executive’s other activities or commitments and the amount
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of consulting services will be limited to ensure Executive’s termination of employment qualifies as a separation from service under Section 409A of the Code.
(c) Reductions to Severance Pay. The Severance Pay due to Executive under Section 6(a)(i) for any week will be reduced (but not below zero) by: (i) any disability benefits to which Executive is entitled for that week under any disability insurance policy or program of the Corporation or any Affiliate (including but not limited to worker’s disability compensation); (ii) any severance pay payable to Executive under any other agreement or Corporation policy; (iii) any payment due to Executive under the Federal Worker Adjustment and Retraining Notification Act or any comparable state statute or local ordinance; and (iv) up to $5,000.00 of expenses owed by Executive to the Corporation from debt incurred in the ordinary course of the service relationship.
(d) Delay in Payment to a Specified Employee. Notwithstanding any other timing provision in this Section 6, if, at the time any payment that is not exempt from Section 409A would commence due to a separation from service, and Executive is a “specified employee” as that term is defined by Section 409A of the Code, then no such payment under this Agreement may be paid before the date that is six (6) months after Executive’s separation from service (or, if earlier, the individual’s death). Payments that are not exempt from Section 409A and that Executive would otherwise have been entitled during those six (6) months will be accumulated and paid on the first payroll date after six (6) months following Executive’s separation from service (or, if earlier, the individual’s death). All payments that are exempt from Section 409A, or that would otherwise be made more than six (6) months following Executive’s separation from service, will be made in accordance with the general timing provisions described above.
7. Change in Control Severance. The Corporation will make the payments provided for in this Section 7 if Executive’s Employment is terminated under Section 5 during the term of this Agreement in a manner that constitutes a “separation from service” as that term is defined by Section 409A of the Code, and such termination of Employment occurs either (i) within three (3) years after the date of a Change in Control or (ii) within six (6) months before the date of a Change in Control.
(a) Amount and Payment of Cash Payment. The Corporation will (i) make a cash payment (the “Cash Payment”) to Executive in an amount equal to three times the Executive’s then-current Salary (disregarding any reduction in Salary that constitutes Good Reason) ; and (ii) a monthly payment equal to the monthly cost of health care continuation under the Corporation’s health plan based on the coverage (e.g., individual or family) in place for Executive immediately prior to the termination of his employment, until the earlier of (y) twelve (12) months after termination or (z) the date Executive has commenced new employment and has thereby become eligible for comparable benefits, subject to Executive's rights under COBRA. The Cash Payment in (i) above shall be paid to Executive in a single lump sum in the first payroll occurring on or after the thirtieth (30th) business day after the date Executive’s Employment terminates. If Executive dies after becoming entitled to the Cash Payment but before it has been paid in full, the Cash Payment will be made to Executive’s designated beneficiary (or Executive’s estate if Executive fails to designate a beneficiary).
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(b) Reductions to Cash Payment. Executive will receive the Cash Payment notwithstanding any other earnings that Executive may have and without offset of any kind except required payroll deductions.
8. Parachute Cap. The Corporation will act in good faith to mitigate the impact of Section 280G of the Code on any Parachute Payment to Executive in connection with a Change in Control. If, after the parties have cooperated in good faith to mitigate the impact of Section 280G of the Code, and notwithstanding anything in this Agreement to the contrary, any payment, benefit, or amount payable or benefit to be provided to Executive, whether pursuant to this Agreement or otherwise, that is a “Parachute Payment” as defined in Section 280G(b)(2) of the Internal Revenue Code (the “Code”), will be reduced to the extent necessary so that the benefits payable or to be provided to Executive under this Agreement that are treated as Parachute Payments as well as any payments or benefits provided outside of this Agreement that are so treated will not cause the Corporation or any Affiliate to have paid an “Excess Parachute Payment” as defined in Section 280G(b)(1) of the Code. If it is established that an “Excess Parachute Payment” has occurred or will occur under this Agreement or otherwise, any remaining Parachute Payments to be made will be reduced to ensure that the total payments to Executive do not exceed 2.99 times Executive’s “base amount” as defined in Section 280G(b)(3) of the Code. The lump sum cash severance payment under Section 7(a) will be reduced to comply with this Section 8 only to the extent necessary to ensure that the total payments to Executive do not exceed 2.99 times Executive’s “base amount” as defined in Section 280G(b)(3) of the Code. For the avoidance of doubt, in no circumstance shall the Corporation or the Banks pay Executive a “gross up” or similar payment to mitigate the impact of Section 280G of the Code.
9. Definition of Change in Control. As used in this Agreement, the term “Change in Control” means any of the occurrences listed in (a) below, subject to (b) below.
(a) A Change in Control means the occurrence of a change in the ownership of effective control of the Corporation or a change in the ownership of a substantial portion of the assets of the Corporation as provided by Treasury Regulation § 1.409A-3(i)(5), which includes the occurrence of any of the following events:
(i) The acquisition, by a person or persons acting as a group, of stock of the Corporation that together with stock held by such person or group constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Corporation.
(ii) The majority of members of the Board of Directors of the Corporation are replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors prior to the date of appointment or election.
(iii) The acquisition, by a person or persons acting as a group, of the Corporation’s assets that have a total gross fair market value equal to or exceeding fifty percent (50%) of the total gross fair market value of the Corporation’s assets in a single transaction or within a twelve (12) month period ending with the most recent acquisition. For the purpose of this section, gross fair market value means
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the value of the assets of the Corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
The parties agree that the merger between the Corporation and County pursuant to the Merger Agreement does not constitute a Change in Control under this Agreement and does not trigger any payments that may otherwise be required by this Section and Executive waives any right to any payment under this Agreement as a result of that merger.
(b) Notwithstanding the foregoing, no trust department or designated fiduciary or other trustee of such trust department of the Corporation or a subsidiary of the Corporation, or other similar fiduciary capacity of the Corporation with direct voting control of the stock shall be treated as a person or group within the meaning of subsection (a)(i) hereof. Further, no profit-sharing, employee stock ownership, employee stock purchase and savings, employee pension, or other employee benefit plan of the Corporation or any of its subsidiaries, and no trustee of any such plan in its capacity as such trustee, shall be treated as a person or group within the meaning of subsection (a)(i) hereof.
10. Definition of “Active Change in Control Proposal Period”. As used in this Agreement the term “Active Change in Control Proposal Period” shall mean any period:
(a) during which the Board of Directors of the Corporation has authorized solicitation by the Corporation of offers for a transaction which, if consummated, would constitute a Change in Control; or
(b) during which the Corporation has received a proposal for a transaction which, if consummated, would constitute a Change in Control, and the Board of Directors has not determined to reject such proposal without any counter-offer or further discussions; or
(c) during which any proxy solicitation or tender offer with regard to the securities of the Corporation is ongoing, if the intent of such proxy solicitation or tender offer is to cause the Corporation to solicit offers for or enter into a transaction that would constitute a Change in Control.
11. Confidentiality, Return of Property. Executive has obtained and may obtain confidential information concerning the business, operations, financial affairs, organizational and personnel matters, policies, procedures and other non-public matters of Corporation and its Affiliates, and those of third-parties that is not generally disclosed to persons not employed by Corporation or its subsidiaries. Such information (referred to herein as the “Confidential Information”) may have been or may be provided in written form or orally. Executive shall not disclose to any other person the Confidential Information at any time during or after termination of the Employment, except that during the Employment Executive may use and disclose Confidential Information as reasonably required by the Employment. Upon termination of the Employment, Executive will deliver to the Corporation any and all property owned or leased by the Corporation or any Affiliate and any and all Confidential Information (in whatever form) including without limitation all customer lists and information, financial information, business notes, business plans, documents, keys, credit cards and other Corporation-provided equipment.
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Executive’s commitments in this Section will continue in effect after termination of the Employment and after termination of this Agreement. The parties agree that any breach of Executive’s covenants in this Section would cause the Corporation irreparable harm, and that injunctive relief would be appropriate.
12. Inventions, Discoveries and Improvements. Executive hereby agrees to assign and transfer to the Corporation, its successors and assigns, Executive’s entire right, title and interest in and to any and all inventions, discoveries, trade secrets and improvements thereto which he may discover to develop, either solely or jointly with others, during Executive’s employment hereunder and for a period of one (1) year after termination of such employment, which would relate in any way to the business of the Corporation or any Affiliate of the Corporation, together with all rights to letters patent, copyrights or trademarks which may be granted with respect thereto. Immediately upon making or developing any invention, discovery, trade secret or improvement thereto, Executive shall notify the Corporation thereof and shall execute and deliver to the Corporation, without further compensation, such documents as may be necessary to assign and transfer to the Corporation Executive’s entire right, title and interest in and to such invention, discovery, trade secret or improvement thereto, and to prepare or prosecute applications for letters patent with respect to the same in the name of the Corporation. Executive’s obligations under this Section 12 shall continue in effect, as to inventions, discoveries and improvements covered by this Section 12, notwithstanding any termination of the employment or this Agreement. The parties agree that any breach of Executive’s covenants in this Section would cause the Corporation irreparable harm, and that injunctive relief would be appropriate.
13. Noncompetition and Nonsolicitation.
(a) In view of Executive’s importance to the success of the Corporation, Executive and Corporation agree that the Corporation would likely suffer significant harm from Executive’s competing with Corporation during the Employment and for some period of time thereafter. Accordingly, Executive agrees that Executive shall not engage in competitive activities either: (A) while employed by Corporation; or (B) if Executive’s Employment is terminated during the term of this Agreement, during the Restricted Period (as defined below). Executive shall be deemed to engage in competitive activities if he shall, without the prior written consent of the Corporation, (i) in any county in which the Corporation or any of its Affiliates has a branch office or loan production office and all contiguous counties (including the municipalities therein), render services directly or indirectly, as an employee, officer, director, consultant, advisor, partner or otherwise, for any organization or enterprise which competes directly or indirectly with the business of Corporation or any of its Affiliates in providing financial products or services (including, without limitation, banking, insurance, or securities products or services) to consumers and businesses, or (ii) directly or indirectly acquires any financial or beneficial interest in (except as provided in the next sentence) any organization which conducts or is otherwise engaged in a business or enterprise in any county in which the Corporation or any of its Affiliates has a branch office or loan production office and all contiguous counties (including all municipalities therein) which competes directly or indirectly with the business of Corporation or any of its Affiliates in providing financial products or services (including, without limitation, banking, insurance or securities products or services) to consumers and businesses. Notwithstanding the preceding sentence, Executive shall not be
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prohibited from owning less than 1 percent of any class of publicly traded securities of a competitor. For purposes of this Section 13 the term “Restricted Period” shall equal twenty-four (24) months, commencing as of the date of termination of Executive’s Employment during the term of this Agreement.
(b) While employed by Corporation and during the Restricted Period, Executive agrees that Executive shall not, in any manner directly (i) solicit by mail, by telephone, by personal meeting, or by any other means, any customer or prospective customer of Corporation to whom Executive provided services, or for whom Executive transacted business, or whose identity become known to Executive in connection with Executive’s services to Corporation (including employment with or services to any predecessor or successor entities), to transact business with a person or an entity other than the Corporation or its Affiliates or reduce or refrain from doing any business with the Corporation or its Affiliates or (ii) interfere with or damage (or attempt to interfere with or damage) any relationship between Corporation or any of its Affiliates and any such customer or prospective customer, or any shareholder of the Corporation. The term “solicit” as used in this Section 13 means any communication of any kind whatsoever, inviting, encouraging or requesting any person to take or refrain from taking any action with respect to the business of Corporation or any of its Affiliates.
(c) While employed by Corporation and during the Restricted Period, Executive agrees that Executive shall not, in any manner directly solicit any person who is an employee of Corporation or any of its Affiliates to apply for or accept employment or a business opportunity with any other person or entity.
(d) The parties agree that nothing herein shall be construed to limit or negate the common law of torts or trade secrets where it provides broader protection than that provided herein.
(e) Executive’s obligations under this Section shall survive termination of this Agreement.
(f) The parties agree that any breach of Executive’s covenants in this Section would cause the Corporation irreparable harm, and that injunctive relief would be appropriate.
14. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any merger or consolidation of the Corporation whereby the Corporation is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Corporation. In the event of any such merger, consolidation, or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred.
(b) The Corporation agrees that concurrently with any merger, consolidation or transfer of assets constituting a Change in Control, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to Executive (or Executive’s
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beneficiary or estate), all of the obligations of the Corporation hereunder. Failure of the Corporation to obtain such assumption prior to the effective date of any Change in Control shall be a material breach of the Corporation’s obligations to Executive under this Agreement.
(c) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive’s estate.
15. Notice. For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or received by facsimile transmission or five (5) days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:
If to the Corporation: |
ChoiceOne Financial Services, Inc.
Attn: Chairman 109 E. Division Sparta, MI 49345 |
If to Executive: |
Kelly J. Potes
____________________ ____________________ |
Either party may change its address for notices by notice to the other party.
16. Amendment and Waiver. No provisions of this Agreement may be amended, modified, waived or discharged unless the waiver, modification, or discharge is authorized by the Corporation’s Board of Directors, or a committee of the Board of Directors, and is agreed to in a writing signed by Executive and by the Chairman of the Board of Directors. No waiver by either party at any time of any breach or non-performance of this Agreement by the other party shall be deemed a waiver of any prior or subsequent breach or non-performance.
17. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, which will remain in full force and effect. If a court of competent jurisdiction ever determines that any provision of this Agreement (including, but not limited to, all or any part of the non-competition covenant in this Agreement) is unenforceable as written, the parties intend that the provision shall be deemed narrowed or revised in that jurisdiction (as to geographic scope, duration, or any other matter) to the extent necessary to allow enforcement of the provision. The revision shall thereafter govern in that jurisdiction, subject only to any allowable appeals of that court decision.
18. Entire Agreement. No agreements or representations, oral or otherwise, express or implied, with respect to Executive’s Employment with the Corporation or any of the subjects
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covered by this Agreement have been made by either party that are not set forth expressly in this Agreement, and this Agreement supersedes any pre-existing employment agreements and any other agreements on the subjects covered by this Agreement, including the Change in Control Agreement between the parties dated May 13, 2016, which Executive agrees terminates as of the Effective Time of the Merger.
19. Governing Law. The validity, interpretation, and construction of this Agreement are to be governed by Michigan laws, without regard to choice of law rules. The parties agree that any judicial action involving a dispute arising under this Agreement will be filed, heard and decided in the Kent County Circuit Court. The parties agree that they will subject themselves to the personal jurisdiction and venue of either court, regardless of where Executive or the Corporation may be located at the time any action may be commenced. The parties agree that the locations specified above are mutually convenient forums and that each of the parties conducts business in Kent County.
20. Section 409A. Payments under this Agreement are intended to comply with Section 409A of the Internal Revenue Code to the extent payments under this Agreement are not otherwise exempt from Section 409A of the Internal Revenue Code as an involuntary separation pay plan (as that term is understood under Treasury Regulation § 1.409A-1(b)(9)) or as providing for short-term deferrals (as that term is understood under Treasury Regulation § 1.409A-1(b)(4)) and shall be interpreted and operated consistently with those intentions. To the extent Section 409A is found to be applicable to this Agreement, this Agreement is to be interpreted to comply with Section 409A and shall be interpreted and operated consistently with those intentions, including but not limited to, any applicable six-month delay in payment if Executive is a specified employee of the Corporation. Each payment that the Executive may receive under this Agreement shall be treated as a “separate payment” for purposes of Section 409A of the Code, to the extent applicable.
21. Counterparts. This Agreement may be signed in original or by fax in counterparts, each of which shall be deemed an original, and together the counterparts shall constitute one complete document.
Signature Page to Follow
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The parties made this Agreement effective as of the Effective Date in Section 1.
CHOICEONE FINANCIAL SERVICES, INC. | |||
By | /s/ Paul L. Johnson | ||
Paul L. Johnson, Chairman |
EXECUTIVE | ||
/s/ Kelly J. Potes | ||
Kelly J. Potes |
[signature page to Employment Agreement]
EXHIBIT 99.1
For Immediate Release
ChoiceOne Financial Services and County Bank Corp
Announce Completion of Merger
SPARTA, Mich. and LAPEER, Mich., October 1, 2019 /PRNewswire/ – ChoiceOne Financial Services, Inc. (OTC: COFS) (“ChoiceOne”), the parent company of ChoiceOne Bank and County Bank Corp (OTC: CBNC) (“County”), the parent company of Lakestone Bank and Trust, today jointly announced the completion of the merger in which County has merged with and into ChoiceOne, with ChoiceOne surviving the merger. The combined holding company is traded on the OTC Pink Open Market under the symbol “COFS” and is headquartered in Sparta, Michigan.
With the merger of the holding company complete, ChoiceOne Bank and Lakestone Bank & Trust are expected to consolidate in the second quarter of 2020. Below is ChoiceOne’s leadership going forward.
· | Kelly J. Potes -- CEO of ChoiceOne Financial Services Inc. and President and CEO of ChoiceOne Bank. |
· | Paul L. Johnson -- Chairman of ChoiceOne Financial Services Inc. and ChoiceOne Bank. |
· | Bruce J. Cady -- Chairman of Lakestone Bank & Trust (with a retirement date of December 31, 2019) and Vice Chairman of ChoiceOne Financial Services Inc. |
· | Michael J. Burke, Jr. -- CEO and President of Lakestone Bank & Trust and President of ChoiceOne Financial Services Inc. |
“We are excited to complete our holding company merger and announce our leadership going forward,” said Kelly Potes. "As Bruce prepares to retire in December, we wish him well in his retirement. However, we are also very pleased that he will continue to provide his guidance as a director of ChoiceOne. We believe our combined companies will result in one exceptional organization presenting efficiencies and new growth opportunities in our expanded network across Michigan.”
“Now that our merger is complete, we look forward to positioning our combined organization as the premier community bank in Michigan,” said Bruce Cady. “Our vision is to bring together the best of both banks to benefit our shareholders, customers, employees and the communities we serve. As I prepare to retire, I know that because of our excellent collaborative efforts to merge our companies, we can expect limited overlap and disruption as we move forward. Our teams have become experts at leveraging our strengths and I am very proud of our collective efforts.”
Following completion of the merger, ChoiceOne is an approximately $1.3 billion-asset bank holding company with 29 offices in West and Southeastern Michigan making it the 12th largest bank holding company in Michigan based on asset size.
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About ChoiceOne
ChoiceOne Financial Services, Inc. is a financial holding company headquartered in Sparta, Michigan and the parent corporation of ChoiceOne Bank, Member FDIC. ChoiceOne Bank operates 14 full-service offices in parts of Kent, Ottawa, Muskegon, and Newaygo Counties. ChoiceOne Bank offers insurance and investment products through its subsidiary, ChoiceOne Insurance Agencies, Inc. ChoiceOne Financial Services, Inc. common stock is quoted on the OTC under the symbol “COFS.” For more information, please visit Investor Relations at ChoiceOne’s website at www.choiceone.com.
About County Bank Corp
County Bank Corp, located in Lapeer, Michigan, is the holding company for Lakestone Bank & Trust, Member FDIC. Lakestone Bank & Trust operates 15 offices in parts of Lapeer, Macomb and St. Clair Counties. County Bank Corp common stock is quoted on the OTC under the symbol "CNBC." For more information, please visit Investor Relations at Lakestone's website at www.lakestonebank.com/about/who-we-are/investor-relations.
Forward-Looking
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current beliefs as to the expected outcomes of future events and are not guarantees of future performance. These statements involve
certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent,
likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed,
implied or forecasted in such forward-looking statements. Furthermore, neither ChoiceOne nor County undertake any obligation to
update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. Such
risks, uncertainties and assumptions, include, among others, the following:
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Additional risk factors include, but are not limited to, the risk factors described in Item 1A in ChoiceOne Financial Services, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2018.
Contacts
ChoiceOne Financial Services, Inc.
Kelly Potes
President & CEO
ChoiceOne Bank
616-887-6837
kpotes@choiceone.com
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