As filed with the Securities and Exchange Commission on February 26,
1996
Registration No. 333-00669
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CHEMICAL FINANCIAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 6022 38-2022454
(State or Other Jurisdiction (Primary Standard Industrial (IRS Employer
of Incorporation or Classification Code Number) Identification
Organization No.)
333 EAST MAIN STREET
MIDLAND, MICHIGAN 48640
(517) 631-3310
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
ALAN W. OTT COPIES OF COMMUNICATIONS TO:
PRESIDENT AND CHIEF
EXECUTIVE OFFICER GORDON R. LEWIS
333 EAST MAIN STREET WARNER NORCROSS & JUDD LLP
MIDLAND, MICHIGAN 48640 900 OLD KENT BUILDING
(517) 631-3310 111 LYON STREET, N.W.
(Name, Address, Including Zip Code, GRAND RAPIDS, MICHIGAN 49503
and Telephone Number, Including Area (616) 752-2752
Code, of Agent For Service)
Approximate date of commencement of proposed sale of the securities
to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Each Amount to Proposed Maximum Proposed Maximum Amount of
Class of Securities be Registered Offering Price Aggregate Offering Registration
to be Registered Per Share<F1> Price <F1> Fee<F1>
<S> <C> <C> <C> <C>
Common Stock, $10 par value 584,000 $15.95 $9,315,596 $3,212.27
__________________
<FN>
<F1> The registration fee has been computed pursuant to Rule 457(f)(2)
based on the aggregate book value of the shares of Common Stock, $20
par value, of State Savings Bancorp, Inc. computed as of September 30,
1995 ($9,315,596). The proposed maximum offering price per share is
determined by dividing the proposed maximum aggregate offering price
by the number of shares to be registered.
</FN>
</TABLE>
_______________
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
___________________________________________________________________________
CHEMICAL FINANCIAL CORPORATION
CROSS-REFERENCE SHEET
AMENDMENT NO. 2 TO FORM S-4
HEADING IN PROSPECTUS
ITEM OF FORM S-4 AND PROXY STATEMENT
1. Forepart of Registration Statement Outside Front Cover Page
and Outside Front Cover Page of of Prospectus
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside
Pages of Prospectus Back Cover Pages of
Prospectus; Table of
Contents
3. Risk Factors, Ratio of Earnings to Introduction and Summary
Fixed Charges, and Other
Information
4. Terms of the Transaction The Merger
5. PRO FORMA Financial Information Not Applicable
6. Material Contracts with the Company The Merger--Summary of the
Being Acquired Terms of the Merger, and
--Resales by Affiliates;
Voting and Management
Information--Interests of
Certain Persons
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and General Information--Experts
Counsel
9. Disclosure of Commission Position Not Applicable
on Indemnification for Securities
Act Liabilities
10. Information with Respect to S-3 Introduction and Summary--
Registrants Chemical Financial
Corporation and--Chemical
Financial Corporation
Summary of Recent Finan-
cial Information
HEADING IN PROSPECTUS
ITEM OF FORM S-4 AND PROXY STATEMENT
11. Incorporation of Certain Informa- Inside Front Cover Page of
tion by Reference Prospectus; Incorporation of
Certain Documents by
Reference
12. Information with Respect to S-2 Not Applicable
or S-3 Registrants
13. Incorporation of Certain Infor- Not Applicable
mation by Reference
14. Information with Respect to Not Applicable
Registrants Other Than S-3
or S-2 Registrants
15. Information with Respect to S-3 Not Applicable
Companies
16. Information with Respect to S-2 Not Applicable
or S-3 Companies
17. Information with Respect to Introduction and Summary--
Companies Other Than S-2 or State Savings Bancorp, Inc.;
S-3 Companies State Savings Bancorp, Inc.;
Voting and Management Infor-
mation--Voting Securities
and Principal Shareholders
of SSBI
18. Information if Proxies, Consents Introduction and Summary;
or Authorizations are to be General Proxy Information;
Solicited Voting and Management Infor-
mation; General Information;
Inside Front Cover Page of
Prospectus
19. Information if Proxies, Consents Not Applicable
or Authorizations are Not to be
Solicited, or in an Exchange
Offer
-ii-
PROSPECTUS AND PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
STATE SAVINGS BANCORP, INC.
IN CONNECTION WITH AN OFFERING OF UP TO
584,000 SHARES
CHEMICAL FINANCIAL CORPORATION
COMMON STOCK, $10.00 PAR VALUE
The Board of Directors of State Savings Bancorp, Inc. ("SSBI") is
furnishing this Prospectus and Proxy Statement on or about March 1,
1996, to solicit proxies to vote at the special meeting of SSBI's
shareholders to be held on April 1, 1996, and at any adjournment
thereof. At the special meeting, the shareholders will consider and vote
upon the approval of an Agreement and Plan of Merger (the "Plan of Merger")
pursuant to which SSBI would become affiliated with Chemical Financial
Corporation ("Chemical") through the merger of SSBI with and into Chemical
(the "Merger").
This Prospectus and Proxy Statement is a prospectus of Chemical
relating to an offering of Chemical Common Stock, $10 par value. This
offering is made only to the holders of SSBI Common Stock, $20 par value.
(See "The Merger.")
If the Merger is consummated, each share of SSBI Common Stock
outstanding immediately prior to the effective time of the Merger will be
converted into 5 validly issued, fully paid, and nonassessable shares of
Chemical Common Stock (the "Exchange Rate"), subject to payment in cash for
fractional shares and adjustment under certain circumstances. (See "The
Merger--Stock Price Condition.") The Exchange Rate will be reduced
proportionately if and to the extent that SSBI's "Adjusted Shareholders' Equity"
(as defined in the Plan of Merger) is less than $9,300,000 as of a date not
more than one month before the closing of the transactions contemplated by
the Plan of Merger to be specified by either Chemical or SSBI. (See "The
Merger--Minimum Adjusted Shareholders' Equity.") The Board of Directors of
SSBI will resubmit the Plan of Merger for approval by SSBI's shareholders if,
as a result of such adjustments, the Exchange Rate would be less than 4.5
shares of Chemical Common Stock for each share of SSBI Common Stock. The
Exchange Rate is also subject to upward or downward adjustment upon the
occurrence of certain events specified in the Plan of Merger. (See "The
Merger.")
In the written opinion of Austin Associates, Inc. ("Austin"),
financial adviser to SSBI, the terms of the Merger are fair from a
financial point of view to the shareholders of SSBI. (See "The Merger--Opinion
of Financial Adviser.")
Consummation of the Merger is subject to SSBI shareholder and
regulatory approvals and certain other conditions. (See "The Merger--Conditions
to the Merger and Abandonment.")
YOUR VOTE IS IMPORTANT. APPROVAL OF THE MERGER REQUIRES THE
AFFIRMATIVE VOTE OF TWO-THIRDS OF THE OUTSTANDING SHARES OF SSBI COMMON
STOCK. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE
SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS AND
PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus and Proxy Statement is dated February 26, 1996
AVAILABLE INFORMATION
Chemical is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). These
materials and other information filed by Chemical can be inspected and
copied at the public reference facilities maintained by the Commission
(Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549) and at the
Commission's Regional Offices in New York (7 World Trade Center, Suite
1300, New York, New York 10048) and Chicago (Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661). Copies of such
materials can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission (450 Fifth Street, N.W., Washington,
D.C. 20549).
Chemical has filed a Registration Statement under the Securities Act
of 1933, as amended (the "Securities Act"), with the Commission relating to
the Chemical Common Stock offered in connection with the Merger described
in this Prospectus and Proxy Statement. This Prospectus and Proxy
Statement does not contain all of the information set forth in the
Registration Statement, certain portions of which are omitted in accordance
with the rules and regulations of the Commission. Reference is made to the
Registration Statement and exhibits for further information about Chemical,
SSBI, and their respective securities. Any person may inspect the
Registration Statement without charge at the Public Reference Section of
the Commission and may obtain copies of all or any part of it at prescribed
rates from the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS AND PROXY STATEMENT INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE
DOCUMENTS ARE AVAILABLE UPON REQUEST FROM ALOYSIUS J. OLIVER, EXECUTIVE
VICE PRESIDENT AND SECRETARY, CHEMICAL FINANCIAL CORPORATION, 333 EAST MAIN
STREET, MIDLAND, MICHIGAN 48640, TELEPHONE NUMBER (517) 631-3310. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
MARCH 25, 1996.
Chemical undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus and Proxy Statement is
delivered, upon written or oral request, a copy of any and all information
that has been incorporated by reference in this Prospectus and Proxy
Statement (not including exhibits to the information that is incorporated
by reference unless such exhibits are specifically incorporated by
reference into the information that this Prospectus and Proxy Statement
incorporates). Any such request should be directed to the individual
identified in the paragraph above.
Chemical incorporates by reference into this Prospectus and Proxy
Statement the following documents and information:
FORM 10-K REPORT. Chemical's Annual Report on Form 10-K
filed with the Commission for the year ended December 31, 1994.
OTHER REPORTS.
(1) Chemical's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.
(2) Chemical's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995.
(3) Chemical's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995.
(4) Chemical's Report by Issuer of Securities Quoted
on NASDAQ Interdealer Quotation System on Form 10-C dated
January 20, 1995.
DESCRIPTION OF STOCK. The description of Chemical's common
stock contained in Chemical's Form 8-A Registration Statement
filed with the Commission on January 2, 1976, and any other
amendments and reports filed for the purpose of updating such
description.
SUBSEQUENT FILINGS. All other reports Chemical files with
the Commission subsequent to the date of this Prospectus and
Proxy Statement, but prior to the date of the special meeting of
SSBI shareholders, pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act.
STATE SAVINGS BANCORP, INC.
240 NORTH STATE STREET
CARO, MICHIGAN 48723-0146
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the shareholders of State Savings Bancorp, Inc.:
A special meeting of shareholders of State Savings Bancorp, Inc. will
be held at the main office of State Savings Bank of Caro at 240 North State
Street, Caro, Michigan, on April 1, 1996, at 4:00 p.m., local time,
for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and
Plan of Merger between State Savings Bancorp, Inc. and Chemical
Financial Corporation.
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on
February 13, 1996, as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting and any
adjournment of the meeting.
By Order of the Board of Directors,
F. DOUGLAS CAMPBELL, President
March 1, 1996
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO
ATTEND THE MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY PROMPTLY.
PROSPECTUS AND PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
STATE SAVINGS BANCORP, INC.
240 NORTH STATE STREET
CARO, MICHIGAN 48723-0146
(517) 673-3184
TO APPROVE AN
AGREEMENT AND PLAN OF MERGER
INVOLVING AN OFFERING OF COMMON STOCK,
$10.00 PAR VALUE, OF
CHEMICAL FINANCIAL CORPORATION
333 EAST MAIN STREET
MIDLAND, MICHIGAN 48640
(517) 631-3310
INTRODUCTION AND SUMMARY
INTRODUCTION
Chemical Financial Corporation ("Chemical") and State Savings Bancorp,
Inc. ("SSBI") are furnishing this Prospectus and Proxy Statement and the
accompanying form of proxy on or about March 1, 1996, to record holders of
SSBI Common Stock, $20 par value ("SSBI Common Stock"). The board of
directors of SSBI is soliciting proxies to vote at the special meeting of
SSBI shareholders to be held on Monday, April 1, 1996, and at any adjournment
of that meeting. The shareholders' meeting will be held at the main office
of State Savings Bank of Caro, 240 North State Street, Caro, Michigan, at
4:00 p.m., local time.
The purpose of the special meeting of SSBI shareholders is to consider
and vote on approval of the Agreement and Plan of Merger (the "Plan of
Merger") attached as Appendix A to this Prospectus and Proxy Statement.
The Plan of Merger provides for the merger of SSBI with and into Chemical
(the "Merger"). Approval of the Plan of Merger requires the affirmative
vote of the holders of two-thirds of the outstanding shares of SSBI Common
Stock. (See "The Merger.") SSBI does not anticipate that any other matter
will come before the special meeting.
SSBI's board of directors unanimously voted to approve the Plan of
Merger at its October 31, 1995, meeting. (See "Voting and Management
Information--Interests of Certain Persons.")
THE BOARD OF DIRECTORS OF SSBI UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF THE PLAN OF MERGER.
CHEMICAL FINANCIAL CORPORATION
Chemical is a bank holding company with its headquarters in Midland,
Michigan. At September 30, 1995, Chemical, on a consolidated basis, had
assets of $1.6 billion, deposits of $1.4 billion, a net loan portfolio of
$706.1 million and shareholders' equity of $178.8 million. Chemical is the
parent company of 10 banking subsidiaries that operate 85 banking offices
in 54 Michigan communities. Chemical also has one non-banking subsidiary,
CFC Data Corp.
Chemical and its subsidiaries are engaged in the business of
commercial banking and other related activities. The services offered by
Chemical cover a wide spectrum of banking and fiduciary services. These
include commercial and retail loans, business and personal checking
accounts, savings and individual retirement accounts, time deposit
instruments, automated transaction machine services, money transfer
services, safe deposit facilities, cash management, real estate financing,
and corporate, pension and personal trust services.
Chemical's principal markets for financial services presently are the
Michigan communities in which Chemical's subsidiaries are located and the
areas immediately surrounding those communities. The Midland market is the
source of a substantial portion of Chemical's business. Chemical has no
material foreign assets or operations.
Chemical's largest subsidiary is Chemical Bank & Trust Company
("Chemical Bank"). At September 30, 1995, Chemical Bank had assets of
$558.9 million, deposits of $447.1 million and a net loan portfolio of
$209.4 million. At September 30, 1995, Chemical Bank's assets represented
34.5% of Chemical's consolidated assets. Chemical Bank is headquartered in
Midland, Michigan, and conducts a general commercial banking business with
individuals and corporate and governmental entities through 17 offices.
Chemical Bank serves an area consisting primarily of Midland, Gratiot,
western Bay and northwestern Saginaw counties.
Chemical's 9 other subsidiary banks ranged in size from $54.2 million
to $252.7 million in total assets as of September 30, 1995.
STATE SAVINGS BANCORP, INC.
SSBI is a bank holding company with its headquarters in Caro,
Michigan. At September 30, 1995, SSBI, on a consolidated basis, had assets
of $59.9 million, deposits of $50.1 million, a net loan portfolio of $21.2
million and shareholders' equity of $9.3 million. SSBI is the parent
company of State Savings Bank of Caro (the "Bank"). The Bank conducts its
business from its main office and auto bank branch in Caro, Michigan, and a
branch office in Fairgrove, Michigan.
-2-
SSBI and its subsidiary are engaged in the commercial banking business
and other related activities. The services offered by SSBI include taking
deposits, making secured and unsecured loans, and financing commercial
transactions.
SSBI's principal markets for financial services presently are Caro and
Fairgrove, Michigan, and the areas immediately surrounding those
communities. SSBI has no foreign assets or operations.
SUMMARY OF CERTAIN ASPECTS OF THE MERGER
SSBI shareholders should consider the following summary in conjunction
with the more detailed information appearing elsewhere in this Prospectus
and Proxy Statement.
CONSIDERATION TO BE RECEIVED IN THE MERGER. If the Merger is
consummated, SSBI will be merged with and into Chemical. The surviving
corporation will be Chemical. The surviving corporation will own the Bank
and all of the other assets of SSBI.
Each share of SSBI Common Stock outstanding immediately prior to the
effective time of the Merger will be converted into 5 validly issued, fully
paid, and nonassessable shares of Chemical Common Stock (the "Exchange
Rate"), subject to payment in cash for fractional shares and adjustment
under certain circumstances. The Exchange Rate may be increased if certain
conditions exist, SSBI requests an increase in the Exchange Rate, and
Chemical agrees to such increase. In no event will the Exchange Rate be
greater than 5.8333 shares of Chemical Common Stock for each share of SSBI
Common Stock. See "The Merger--Stock Price Condition" for a discussion of
the conditions that must exist before SSBI may request an increase in the
Exchange Rate. The Exchange Rate will be reduced proportionately if and to
the extent that SSBI's "Adjusted Shareholders' Equity" (as defined in the
Plan of Merger) is less than $9,300,000 as of a date not more than one month
before the closing of the transactions contemplated by the Plan of Merger
to be specified by either Chemical or SSBI. The Board of Directors of SSBI
will resubmit the Plan of Merger for approval by SSBI's shareholders if, as a
result of such adjustments, the Exchange Rate would be less than 4.5 shares
of Chemical Common Stock for each share of SSBI Common Stock. See "The
Merger--Minimum Adjusted Shareholders' Equity" for a discussion of the factors
to be considered in determining SSBI's Adjusted Shareholders' Equity and the
date as of which such amount will be determined.
The Exchange Rate is also subject to adjustment to prevent dilution
upon the occurrence of certain events specified in the Plan of Merger which
result in changes in the number of shares of Chemical Common Stock
outstanding and certain other events which could otherwise affect the
nature or amount of the consideration to be received by SSBI shareholders
in exchange for their shares of SSBI Common Stock. See "The Merger--Conversion
of SSBI Shares."
-3-
The Exchange Rate and the possible adjustments to the Exchange Rate
were determined through the parties' negotiation of the Plan of Merger.
These terms reflect Chemical's and SSBI's judgment as to the value of the
shares of SSBI Common Stock relative to the historical and anticipated
market price of Chemical Common Stock. See "The Merger--Stock Price
Condition" for a discussion of SSBI's ability to request an increase in the
Exchange Rate or avoid consummating the Merger in the event of a downward
movement in the market price of Chemical Common Stock and "The Merger--Minimum
Adjusted Shareholders' Equity" for a discussion of the
circumstances that would result in a reduction in the Exchange Rate.
Chemical will not issue fractional shares of Chemical Common Stock in
the Merger. An SSBI shareholder who would otherwise be entitled to receive
a fraction of a share of Chemical Common Stock in the Merger will receive
instead an amount of cash (without interest) determined by multiplying that
fraction of a share by the mean between the high and low transaction prices
of Chemical Common Stock reported on The NASDAQ Stock Market for the last
trading date preceding the effective time of the Merger.
OPINION OF FINANCIAL ADVISER. The board of directors of SSBI has
engaged Austin to serve as a financial adviser to the board in connection
with the Merger and to render its opinion on the terms of the Plan of
Merger. Austin has rendered an opinion to the effect that the terms of the
Merger are fair from a financial point of view to the shareholders of SSBI.
The opinion of Austin is attached as Appendix B. For a more detailed
description of this opinion, see "The Merger--Opinion of Financial
Adviser." Austin provides consulting services to banking and other
financial institutions.
CONSUMMATION OF THE MERGER. Consummation of the Merger is subject to
certain conditions, including among others that the shareholders of SSBI
approve the Plan of Merger, that necessary regulatory approvals be
obtained, that no proceeding seeking to prevent the Merger be pending or
threatened, and that Chemical and SSBI obtain various ancillary
certificates, opinions and agreements. SSBI has the right to abandon the
Merger if either of the following conditions exists as of a date when the
closing of the Merger could be convened: (1) the average of the means
between the high and low transactions prices of Chemical Common Stock
reported on The NASDAQ Stock Market (the "Reference Price") during the 20
consecutive trading days immediately preceding a date when the closing
could be convened (the "Reference Period") as reported in THE WALL STREET
JOURNAL, MIDWEST EDITION, is less than $28.00, subject to adjustment; or
(2)(a) the Reference Price is less than $30.00, subject to adjustment, and
(b) the percentage determined by dividing the Reference Price by $35.00 is
more than 15 percentage points less than the percentage determined by
dividing the aggregate price per share of certain comparison stocks defined
in the Plan of Merger on the last day of the Reference Period by the
aggregate price per share of those stocks on October 25, 1995, subject to
adjustments provided in the Plan of Merger. At any time prior to the
-4-
effective time of the Merger, the boards of directors of Chemical and SSBI,
or duly authorized committees thereof, may by mutual consent abandon the
Merger. In addition, for certain specified reasons the board of directors
of either Chemical or SSBI may abandon the Merger. See "The Merger--Conditions
to the Merger and Abandonment."
It is expected that the closing of the Merger will occur, and the
Merger will become effective, before June 30, 1996.
VOTE REQUIRED. Pursuant to the Michigan Business Corporation Act (the
"MBCA") and SSBI's Articles of Incorporation, the affirmative vote of the
holders of two-thirds of the outstanding shares of SSBI Common Stock
entitled to vote on the Plan of Merger is required to approve the Plan of
Merger. Failures to vote, abstentions and broker non-votes will have the
same effect as votes against approval of the Plan of Merger. As of
January 1, 1996, SSBI's directors and executive officers and their
affiliates held 26.44% of the outstanding shares of SSBI Common Stock. (See
"Voting and Management Information--Interests of Certain Persons.")
Chemical Bank, as trustee for the Chemical Financial Corporation Pension
Plan, holds 454 shares of SSBI Common Stock. As of January 1, 1996, none
of Chemical's directors and executive officers or their affiliates held
shares of SSBI Common Stock. No approval by Chemical's shareholders is
required.
REGULATORY APPROVALS. Consummation of the Merger is subject to the
approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"). Chemical filed an application for approval of
the Merger with the Federal Reserve Board on November 24, 1995 and received
final approval from the Federal Reserve Board on January 26, 1996. The Merger
cannot be consummated for a period of 30 days after receipt of the Federal
Reserve Board's final approval. During this 30-day period, the United States
Department of Justice may review the competitive effects of the Merger to
determine whether it will take action to block the Merger.
DISSENTERS' RIGHTS. Holders of SSBI Common Stock are not entitled to
dissenters' rights under the MBCA in connection with the Merger.
FEDERAL INCOME TAX CONSEQUENCES. As a condition precedent to
consummation of the Merger, Chemical and SSBI must each receive an opinion
from Chemical's counsel regarding the federal income tax consequences of
the Merger. The opinion of Chemical's counsel must be substantially to the
effect, among other matters, that SSBI shareholders will not recognize
taxable income by reason of receiving shares of Chemical Common Stock in
the Merger and that shares of Chemical Common Stock received by SSBI
shareholders in the Merger will have the same basis and holding period as
the respective shares of SSBI Common Stock surrendered in exchange for
-5-
them. Cash received in lieu of fractional shares of Chemical Common Stock
will be taxable. See "The Merger--Federal Income Tax Consequences."
Due to the complexities of federal, state and local income tax laws,
it is strongly recommended that SSBI shareholders consult their own tax
advisers concerning the federal, state, and local tax consequences of the
Merger.
ACCOUNTING TREATMENT. Chemical expects to account for the Merger
under the pooling of interests method of accounting. See "The
Merger--Accounting Treatment."
MARKET VALUE OF SHARES
Chemical Common Stock is traded in the over-the-counter market and
quoted on The NASDAQ Stock Market under the symbol CHFC. SSBI Common Stock
is not actively traded, although occasional transactions occur informally
between individuals and local and regional brokerage firms. The prices at
which such transactions are effected are only occasionally reported to
SSBI. The last transaction prior to September 18, 1995, in which SSBI
Common Stock was bought and sold and the price is known to SSBI management
was on April 30, 1993, when 220 shares traded at a price of $70 per share.
The following table sets forth the ranges of bid prices for Chemical Common
Stock for the periods indicated. The high and low bid prices reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and
may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
PERIOD 1994 1995
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C>
First Quarter $28.00 $26.67 $27.50 $25.50
Second Quarter 26.67 25.33 28.25 27.50
Third Quarter 26.00 24.33 36.00 28.25
Fourth Quarter 26.67 25.00 39.00 36.00
</TABLE>
The following table sets forth the last trade price for Chemical Common
Stock that The NASDAQ Stock Market reported on September 18, 1995 (the last
trading date before the public announcement of the proposed transaction, the
price of SSBI Common Stock in the last sale prior to September 18, 1995, for
which the price was reported to SSBI management, and the estimated value of
Chemical Common Stock to be received for each share of SSBI Common Stock on
an equivalent per share basis:
-6-
<TABLE>
<CAPTION>
CHEMICAL
COMMON STOCK SSBI COMMON STOCK
LAST REPORTED
SALE PRICE PRIOR TO EQUIVALENT
DATE ACTUAL PRICE SEPTEMBER 18, 1995 PER SHARE<F1>
<S> <C> <C> <C>
September 18, 1995 $37.50 $70.00 $187.50
_________________
<FN>
<F1> The Equivalent Per Share value of SSBI Common Stock is the estimated
market value of Chemical Common Stock to be received in the Merger by
SSBI shareholders for each share of SSBI Common Stock. This value is
estimated assuming a market value of $37.50 per share for Chemical
Common Stock and an Exchange Rate of 5 shares of Chemical Common Stock
for each share of SSBI Common Stock.
</FN>
</TABLE>
As of December 1, 1995, there were 9,187,957 shares of Chemical Common
Stock issued and outstanding held by 3,493 holders of record. As of
December 31, 1995, there were 100,000 shares of SSBI Common Stock issued and
outstanding held by 150 holders of record.
Chemical and SSBI urge each SSBI shareholder to obtain a current
market quote on Chemical Common Stock.
SELECTED FINANCIAL DATA
The following unaudited table presents selected historical financial
information and selected PRO FORMA combined financial information for
Chemical and SSBI. This information should be read in conjunction with the
historical financial statements and notes thereto included elsewhere in or
incorporated by reference into this Prospectus and Proxy Statement. The
PRO FORMA combined financial information gives effect to the Merger. The
PRO FORMA combined financial information may not be indicative of the
results that actually would have occurred if the Merger had been in effect
on the dates indicated or which may be attained in the future. The PRO
FORMA combined financial information has been prepared on the assumption
that the Merger will be accounted for under the pooling of interests method
of accounting. Historical financial information has been restated to
reflect stock splits and stock dividends.
-7-
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1990 1991 1992 1993 1994 1994 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
CHEMICAL FINANCIAL CORPORATION
(HISTORICAL)
Income Statement Data:
Net Interest Income $ 50,259 $ 54,170 $ 59,624 $ 60,113 $ 60,796 $ 45,156 $ 45,650
Provision for Loan Losses 1,629 2,214 1,414 1,089 1,081 811 750
Other Income 8,691 8,920 10,420 11,482 10,880 8,119 8,837
Operating Expenses 37,725 40,873 44,087 44,936 43,826 33,855 33,257
Net Income 13,350 13,871 16,541 19,268 18,268 12,799 13,802
Balance Sheet Data
(period end):
Assets $1,442,593 $1,494,713 $1,573,072 $1,589,693 $1,593,417 $1,602,192 $1,621,570
Deposits 1,258,202 1,306,073 1,368,386 1,370,996 1,366,701 1,363,800 1,367,261
Loans (net) 682,538 706,327 697,694 697,552 725,081 729,223 706,083
Long-term Debt 17,802 16,186 16,057 14,104 12,099 14,101 12,097
Shareholders' Equity 117,842 127,981 141,241 156,379 161,680 159,177 178,826
STATE SAVINGS BANCORP, INC.
(HISTORICAL)
Income Statement Data:
Net Interest Income $ 2,107 $ 2,274 $ 2,696 $ 2,640 $ 2,674 $ 1,989 $ 1,987
Provision for Loan Losses 42 56 49 15 19 0 0
Other Income 170 166 193 206 193 146 140
Operating Expenses 1,589 1,571 1,698 1,730 1,721 1,258 1,287
Net Income 533 663 943 897 842 651 646
Balance Sheet Data
(period end):
Assets $ 60,116 $ 60,699 $ 61,983 $ 63,553 $ 64,606 $ 62,837 $ 59,895
Deposits 52,173 52,436 53,155 54,419 54,977 53,096 50,078
Loans (net) 19,452 18,307 18,158 18,386 20,487 19,868 21,162
Long-term Debt 0 0 0 0 0 0 0
Shareholders' Equity 7,204 7,592 8,160 8,658 9,000 9,159 9,346
</TABLE>
-8-
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
1992 1993 1994 1994 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED<F1>
Income Statement Data:
Net Interest Income $ 62,320 $ 62,753 $ 63,470 $ 47,145 $ 47,637
Provision for Loan Losses 1,463 1,104 1,100 811 750
Other Income 10,613 11,688 11,073 8,265 8,977
Operating Expenses 45,785 46,666 45,547 35,113 34,544
Net Income 17,484 20,165 19,110 13,450 14,448
Balance Sheet Data (period end):
Assets $1,635,055 $1,653,246 $1,658,023 $1,665,029 $1,681,465
Deposits 1,421,541 1,425,415 1,421,678 1,416,896 1,417,339
Loans 715,852 715,938 745,568 749,091 727,245
Long-term Debt 16,057 14,104 12,099 14,101 12,097
Shareholders' Equity 149,401 165,037 170,680 168,336 188,172
_____________________
<FN>
<F1> The PRO FORMA financial information was prepared using an Exchange Rate of 5 shares of Chemical
Common Stock for each share of SSBI Common Stock. The Exchange Rate assumes that SSBI's
Adjusted Shareholders' Equity on the Final Statement Date, adjusted as discussed in this
Prospectus and Proxy Statement, is at least $9,300,000. The Exchange Rate also assumes the
nonexistence of the conditions that could permit SSBI to request an increase in the Exchange
Rate.
</FN>
</TABLE>
-9-
COMPARATIVE PER SHARE DATA
The following unaudited table sets forth certain historical and
PRO FORMA combined per common share information for Chemical, and
certain historical and equivalent PRO FORMA combined per common share
information for SSBI. The data is derived from financial statements
of Chemical and SSBI incorporated by reference or included elsewhere
in this Prospectus and Proxy Statement. The PRO FORMA data do not
purport to be indicative of the results of future operations or the
actual results that would have occurred had the Merger been
consummated at the beginning of the period presented. The PRO FORMA
combined per common share information for Chemical and the equivalent
PRO FORMA combined per common share information for SSBI are stated as
if SSBI had always been affiliated with Chemical, giving effect to the
proposed transaction under the pooling of interests method of
accounting. The information presented below has been restated to
reflect stock dividends and stock splits.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
1990 1991 1992 1993 1994 SEPTEMBER 30, 1995
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL PER SHARE DATA
Chemical Financial Corporation
Net Income per Common Share $ 1.49 $ 1.55 $ 1.81 $ 2.08 $ 1.97 $ 1.48
Cash Dividends Declared per
Common Share .40 .44 .47 .51 .56 .50
Book Value per Common
Share (at period end) 13.21 14.31 15.61 17.19 17.69 19.49
State Savings Bancorp, Inc.
Net Income per Common Share $ 5.33 $ 6.63 $ 9.43 $ 8.97 $ 8.42 $ 6.46
Cash Dividends Declared per
Common Share 2.75 2.75 3.75 4.00 5.00 3.00
Book Value per Common
Share (at period end) 72.04 75.92 81.60 86.58 90.00 93.46
</TABLE>
-10-
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
1992 1993 1994 SEPTEMBER 30, 1995
<S> <C> <C> <C> <C>
PRO FORMA PER SHARE DATA
PRO FORMA Combined (per
Chemical Share)
Net Income per Common Share $ 1.79 $ 2.07 $ 1.98 $ 1.47
Cash Dividends Declared per
Common Share<F1> .47 .51 .56 .50
Book Value per Common
Share (at period end) 15.65 17.20 17.71 19.45
Equivalent PRO FORMA Combined
per SSBI Share<F2>
Net Income per Common Share $ 8.95 $ 10.35 $ 9.90 $ 7.35
Cash Dividends Declared per
Common Share 2.35 2.55 2.80 2.50
Book Value per Common
Share (at period end) 78.25 86.00 88.55 97.25
____________________
<FN>
<F1> The PRO FORMA combined cash dividends declared per common share
are assumed to be the same as the cash dividends declared per
common share by Chemical on a historical basis.
<F2> The SSBI equivalent PRO FORMA combined per common share
information is calculated by multiplying the PRO FORMA income per
share, PRO FORMA book value per share, and the PRO FORMA
dividends per share of Chemical by the Exchange Rate so that the
per share amounts are equated to the respective values for one
share of SSBI. This information assumes an Exchange Rate of 5.0
(assuming the nonexistence of the conditions that could cause the
Exchange Rate to be increased to 5.8333 and no adjustments to
SSBI's Adjusted Shareholders' Equity that could cause the
Exchange Rate to be reduced).
</FN>
</TABLE>
CHEMICAL FINANCIAL CORPORATION SUMMARY OF RECENT FINANCIAL INFORMATION
The following tables present summary results of operations of
Chemical for the three and twelve-month periods ended December 31, 1995,
and for the comparable periods in the preceding year, and selected
balance sheet data as of December 31, 1995 and December 31, 1994. In
-11-
the opinion of Chemical, the figures for such periods and as of such
dates contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial condition and
results of operations of Chemical for such periods and as of such
dates. This information should be read in conjunction with the
historical financial information included elsewhere in or incorporated
by reference into this Prospectus and Proxy Statement.
<TABLE>
<CAPTION>
QUARTER ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
(Dollars in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C>
Net interest income $15,707 $15,640 $61,357 $60,796
Provision for credit losses 303 270 1,053 1,081
Net income 5,929 5,469 19,731 18,268
Net income per common share .64 .59 2.12 1.97
Cash dividends per common share .18 .14 .68 .56
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
1995 1994
(Dollars in Thousands, Except Per Share Data)
<S> <C> <C>
Assets $ 1,643,880 $ 1,593,417
Deposits 1,397,266 1,366,701
Loans 738,716 740,176
Long-term debt 12,080 12,099
Shareholders' equity 185,544 161,680
Book value per common share 20.18 17.69
</TABLE>
For the fourth quarter of 1995, Chemical's earnings per share
increased by 8.5% compared to the fourth quarter of 1994. Net income
per share for the three months ended December 31, 1995, was $.64, compared
to $.59 for the same period last year. Net income for the three months
ended December 31, 1995 was $5,929,000, compared to $5,469,000 for the
fourth quarter of 1994. For the year ended December 31, 1995, net
income per share was $2.12, an increase of 7.6% over 1994 earnings per
share of $1.97. Net income for 1995 was $19,731,000, an increase of
8.0% over 1994 net income of $18,268,000. Return on average
shareholders' equity was 11.1% in 1995, compared to 11.2% in 1994.
Return on average total assets was 1.24% in 1995, compared to 1.14% in
1994.
Total cash dividends paid in 1995 were $.68 per share, a 21.4%
increase over 1994 cash dividends paid per share of $.56.
-12-
Net interest margin increased to 4.19% in 1995, from 4.17% in
1994. The net interest margin increase was primarily attributable to
a combined increase in average noninterest bearing deposits and
shareholders' equity of $26.2 million during 1995.
Total loans were $738.7 million as of December 31, 1995, compared
to $740.2 million as of December 31, 1994. The lack of growth in
Chemical's loan portfolio was partially attributable to the sale of
approximately $19.5 million in loans during 1995. During 1995,
Chemical sold its $2.9 million credit card portfolio, approximately $1
million in student loans and $15.6 million in longer term residential
mortgage loans originated during 1995. Loan quality remains strong as
nonperforming loans were $2.6 million as of December 31, 1995, compared
to $3.1 million a year ago. Additionally, the allowance for credit
losses was 604% of nonperforming loans as of December 31, 1995.
-13-
GENERAL MEETING INFORMATION
PURPOSE
The special meeting will be held for the purpose of considering
and voting upon a proposal to approve the Plan of Merger and to
transact any and all other business that may properly come before the
meeting, or any adjournment of that meeting.
VOTING BY PROXY
If a holder of shares of SSBI Common Stock as of the record date
properly executes and returns a proxy in the form distributed by SSBI,
the proxies named will vote the shares represented by that proxy at
the special meeting of SSBI shareholders, and at any adjournment of
that meeting. Where a shareholder specifies a choice, the proxy will
be voted in accordance with the shareholder's specification. If no
specific direction is given, the proxies will vote the shares in favor
of approval of the Plan of Merger.
SSBI's management does not currently know of any other matter to
be presented at the special meeting. If other matters are presented,
the shares for which proxies have been received will be voted in
accordance with the discretion of the proxies.
A shareholder may revoke a proxy at any time prior to its
exercise by written notice delivered to the President of SSBI or by
attending the special meeting of shareholders and voting in person.
PROXY SOLICITATION
The board of directors and management of SSBI will initially
solicit proxies by mail. If they deem it advisable, directors,
officers and employees of SSBI may also solicit proxies in person or
by telephone without additional compensation. In addition, nominees
and other fiduciaries may solicit proxies. Such persons may at the
request of SSBI's management mail material to or otherwise communicate
with the beneficial owners of shares held by them. Although it does
not presently plan to do so, SSBI's management may request that
directors, officers and employees of Chemical and its subsidiaries
assist in the proxy solicitation. If management makes such a request,
such persons may also solicit proxies of SSBI shareholders by mail,
telephone and personal interview without additional compensation.
-14-
VOTING RIGHTS AND RECORD DATE
Only shareholders of record of SSBI Common Stock at the close of
business on February 13, 1996 (the "Record Date"), are entitled to
notice of and to vote at the special meeting of SSBI shareholders or
at any adjournment of that meeting. At the close of business on the
Record Date, 100,000 shares of SSBI Common Stock were issued and
outstanding. As of January 1, 1996, 26,439 shares, or 26.44
percent of the outstanding shares of SSBI Common Stock, were
beneficially owned by directors and executive officers of SSBI and
their affiliates. These individuals have agreed that they will use
their best efforts to cause the Plan of Merger to be approved by the
shareholders of SSBI and consummated according to its terms. Each
holder of record of SSBI Common Stock on the Record Date will be
entitled to one vote for each share registered in his or her name on
each matter presented to a vote of the shareholders at the special
meeting. The Plan of Merger must be approved by the affirmative vote
of the holders of two-thirds of the outstanding shares of the SSBI
Common Stock. For the purpose of counting votes on this proposal,
failures to vote, abstentions, and broker non-votes will have the same
effect as votes against approval of the Plan of Merger.
EXPENSES
Chemical will pay all printing expenses and filing fees
pertaining to the Registration Statement. SSBI will pay all printing
and mailing expenses associated with the Prospectus and Proxy
Statement. Except in the case of certain breaches of the Plan of
Merger by Chemical or SSBI, each party will pay its own expenses
incident to preparing for, entering into, and carrying out the Plan of
Merger, and incident to the consummation of the Merger.
THE MERGER
The respective boards of directors of Chemical and SSBI have
adopted an Agreement and Plan of Merger dated as of October 31, 1995
(the "Plan of Merger").
The following discussion summarizes certain provisions of the
Plan of Merger and aspects of the Merger. This summary discussion does
not purport to be a complete description of the Merger and is
qualified in its entirety by reference to the Plan of Merger, which is
attached as Appendix A and incorporated by reference into this
Prospectus and Proxy Statement.
-15-
BACKGROUND OF THE MERGER
On March 24, 1995, SSBI's board of directors engaged Austin
Associates, Inc. ("Austin"), an investment banking firm of Toledo,
Ohio, to explore the possibility of enhancing shareholder value
through an affiliation with a regional bank holding company.
Proposals were solicited from 10 potentially interested acquiring
institutions. SSBI received three proposals, including Chemical's,
and SSBI's board of directors determined that Chemical's proposal
presented the best opportunity for enhancing shareholder value. After
an exchange of additional information and preliminary negotiations,
Chemical and SSBI entered into the Plan of Merger with regard to the
Merger on October 31, 1995, following approval of the Plan of Merger
by their respective boards of directors. Chemical's management and
SSBI's management and board of directors, and their respective
representatives, negotiated the Exchange Rate and other terms of the
Plan of Merger on an arm's-length basis.
REASONS FOR THE TRANSACTION
The board of directors of SSBI has unanimously determined that
the Merger is in the best interests of SSBI and its shareholders. The
terms of the Merger and the Plan of Merger, including the Exchange
Rate, were the result of arms-length negotiations between SSBI and
Chemical and their respective representatives. In the course of
reaching its decision to approve the Plan of Merger, the board of
directors of SSBI consulted with its legal and financial advisers as
well as with management of SSBI and, without assigning any relative or
specific weights, considered numerous factors, including, without
limitation, the financial results and conditions of SSBI and Chemical,
the perceived prospects for each in the future, and the business
philosophies of SSBI and Chemical.
SSBI's board of directors believes the Merger provides to SSBI
shareholders an opportunity to have an interest in a larger and more
diversified financial organization. SSBI's board of directors also
believes that the Merger will assist SSBI in becoming a more effective
competitor in its markets through access to greater financial and
managerial resources. The directors consider this access to be
important in light of the increased competition from a wider range of
financial institutions that SSBI has been encountering in the banking
industry. The board of directors also believes that the combined
organization can achieve certain economies of scale in areas such as
holding company management, data processing and regulatory compliance.
Chemical believes the proposed Merger will enable Chemical to
improve its ability to service customers and increase its market share
in the markets currently served by SSBI. Chemical believes that the
-16-
Merger will permit the achievement of certain economies of scale with
respect to Chemical's business conducted in the Thumb region of
Michigan.
OPINION OF FINANCIAL ADVISER
Austin is a recognized investment banking firm regularly engaged
in the valuation of financial institutions and other businesses and
their securities in connection with mergers and acquisitions and in
valuation for estate, corporate and other purposes. SSBI selected
Austin to act as SSBI's financial adviser in connection with the
Merger on the basis of its reputation and qualifications in evaluating
financial institutions.
Austin has rendered a separate written opinion to the board of
directors of SSBI to the effect that the terms of the Merger are fair
from a financial point of view to the shareholders of SSBI as of the
date of the opinion. Austin based its opinion upon, among other
things: (1) a comparison of the financial statements and other
financial information concerning SSBI and Chemical set forth or
incorporated by reference in this Prospectus and Proxy Statement;
(2) certain other financial information concerning SSBI, including,
but not limited to, operating budgets, board of directors' reports and
loan loss reserve adequacy reports; (3) financial and share price data
of SSBI, Chemical, and comparable banking organizations; (4) the
financial terms, to the extent publicly available, of certain
comparable transactions; (5) the terms of certain other proposals
received by SSBI from other banking institutions; and (6) discussions
with the management of SSBI and Chemical. Austin did not make an
independent appraisal of SSBI's assets.
No limitations were imposed on the scope of Austin's
investigation. Austin did participate in the negotiation of the terms
of the Plan of Merger and other related agreements associated with the
Merger. The terms of the Plan of Merger, however, including the
Exchange Rate, were negotiated by the boards of directors of Chemical
and SSBI, and their representatives, on an arm's-length basis. A copy
of the fairness opinion is attached as Appendix B to this Prospectus
and Proxy Statement and should be read in its entirety.
Austin has no other material relationship with any of the parties
to the merger or their affiliation.
-17-
In connection with rendering its opinion, Austin performed a
variety of financial analyses, which are summarized below. Austin
believes its analyses must be considered as a whole and that selecting
portions of such analyses and the factors considered therein, without
considering all factors and analyses, could create an incomplete view
of the analyses and the process underlying Austin's opinion. The
preparation of a fairness opinion is a complex process involving
subjective judgments and is not necessarily susceptible to partial
analyses or summary description. In its analyses, Austin made
numerous assumptions with respect to industry performance, business
and economic conditions, and other matters, many of which are beyond
SSBI's or Chemical's control. Any estimates contained in Austin's
analyses are not necessarily indicative of future results or values,
which may be significantly more or less favorable than the estimates.
PRELIMINARY APPRAISAL OF SSBI. Austin completed a preliminary
appraisal of SSBI which was presented to the Board of Directors of
SSBI in April of 1995. Austin estimated that a reasonable sale of
control value for SSBI would range between $12.8 to $13.3 million, or
approximately $128 - $133 per share.
THE PROCESS FOR SOLICITING INDICATIONS OF INTEREST FROM OTHER
BANK HOLDING COMPANIES. Through Austin, SSBI contacted ten publicly
traded commercial banking organizations, that were selected by the
SSBI board of directors after consultation with Austin, to assess
their interest in acquiring SSBI. Of the ten organizations contacted,
five requested confidential information packages which provided
detailed information regarding the business and operations of SSBI.
Each organization provided information was requested to submit a
specific proposal to acquire SSBI. Austin pursued discussions with
each organization that had requested the confidential information.
Eventually three organizations submitted proposals to acquire SSBI.
The SSBI board of directors selected the Chemical proposal after
extensive deliberation and negotiation.
COMPARATIVE PRICE ANALYSIS. In determining whether the price
offered by Chemical for SSBI was fair, from a financial point of view,
to the shareholders of SSBI, Austin reviewed a comparison of prices
paid in sale of control transactions in Michigan for banks having
assets of up to $100 million. Austin looked specifically at nine
transactions announced between 1988 and 1993 involving Michigan-based
sellers. The nine transactions had an average price to book value
ratio of 142% and a price to earnings multiple of 14.72 times. The
median multiples were 123% of book value and 14.90 times earnings.
The market value of the consideration to be received by SSBI
shareholders in the Merger is based on an exchange rate of 5 validly
issued, fully paid, nonassessable shares of Chemical Common Stock,
subject to payment in cash for fractional shares and adjustment under
certain circumstances which is estimated at approximately 216% of
-18-
SSBI's book value at September 30, 1995. The market value of the
consideration is further estimated to equal 25.4 times SSBI's
consolidated earnings per share for the twelve months ended
September 30, 1995.
CONTRIBUTION ANALYSIS. Austin compared the PRO FORMA ownership
interest in Chemical that SSBI shareholders would receive, in the
aggregate, to the contribution by SSBI to the total assets, equity and
net income in the combined organization. Assuming a September 30,
1995 Closing date for the Merger, SSBI shareholders would own
approximately 5.2% of Chemical on a PRO FORMA basis. SSBI's
contribution of total assets would equal 3.6%, the contribution of
total equity would equal 5.0%, and the contribution of year-to-date
1995 net income would have equaled 4.5%.
DILUTION ANALYSIS. Austin also reviewed the PRO FORMA effect of
the Merger to SSBI's and Chemical's September 30, 1995 earnings per
share and book value per share. SSBI recorded earnings per share of
$6.46 and a book value of $93.46 per share as of September 30, 1995.
Giving effect to the Merger through September 30, 1995, the equivalent
SSBI earnings per share would have equaled $7.35, an increase of 14%
over actual results. Book value per share would have increased to
$97.25 per share, an increase of 4% over the actual book value of
$93.46. Giving effect to the Merger, Chemical's book value per share
would have been diluted by $.04 or .2% and earnings per share would
have been diluted by $.01 or 1.0%.
DIVIDENDS. Austin reviewed the current cash dividends paid by
SSBI and Chemical. Based on the exchange ratio of 5 Chemical shares
for each share of SSBI, equivalent dividends to SSBI shareholders
would have been $2.80 in 1994, a 44% decrease over actual dividends
received by SSBI shareholders. Equivalent dividends for 1995 would
have been $2.50, a 16.6% decrease from actual dividends received by
SSBI shareholders.
The summary set forth above does not purport to be a complete
description of the analyses performed by Austin. Further, Austin did
not conduct a physical inspection of any of the properties or assets
of SSBI or Chemical. Austin has assumed and relied upon the accuracy
and completeness of the financial and other information provided to it
or publicly available, has relied upon the representations and
warranties of SSBI and Chemical made pursuant to the Plan of Merger,
and has not independently attempted to verify any of such information.
Austin has also assumed that the conditions to the Merger as set forth
in the Plan of Merger would be satisfied and that the Merger would be
consummated on a timely basis in the manner contemplated by the Plan
of Merger. No limitations were imposed by SSBI or Chemical upon
Austin on the scope of its investigation nor were any specific
instructions given to Austin in connection with its fairness opinion.
-19-
For Austin's services as financial adviser, SSBI will pay the
firm a fee of $30,000, plus a contingent amount equal to .625% of the
transaction value when the Merger is consummated. SSBI estimates that
total fees under this arrangement will be $155,000. In addition, SSBI
has agreed to reimburse Austin for reasonable out-of-pocket expenses
and indemnify Austin against certain liabilities, including
liabilities under the securities laws.
CONVERSION OF SSBI SHARES
Pursuant to the Plan of Merger, SSBI is soliciting proxies from
SSBI's shareholders for the purpose of approving the Plan of Merger.
The affirmative vote of the holders of two-thirds of the outstanding
shares of SSBI Common Stock is required to approve the Plan of Merger.
At the time the Merger becomes effective, SSBI will be merged
with and into Chemical. The surviving corporation will be Chemical
and will own the Bank and all of the other assets of SSBI. The
Articles of Incorporation of the surviving corporation will be the
Restated Articles of Incorporation of Chemical without change from the
Restated Articles of Incorporation in effect immediately prior to the
effective time of the Merger. The Bylaws of the surviving corporation
will be the Bylaws of Chemical as in effect immediately prior to the
effective time of the Merger.
At the time the Merger becomes effective, each of the then issued
and outstanding shares of SSBI Common Stock will be converted into 5
(the "Exchange Rate") validly issued, fully paid and nonassessable
shares of Chemical Common Stock, subject to payment in cash for
fractional shares and adjustment under certain circumstances. The
Exchange Rate may be increased if certain conditions exist. See "The
Merger--Stock Price Condition" for a discussion of the conditions that
must exist before SSBI may request an increase in the Exchange Rate.
The Exchange Rate will be reduced proportionately if and to the extent
that SSBI's "Adjusted Shareholders' Equity" (as defined in the Plan of
Merger) is less than $9,300,000 as of a date not more than one month
before the closing of the transactions contemplated by the Plan of
Merger to be specified by either Chemical or SSBI. The Board of
Directors of SSBI will resubmit the Plan of Merger for approval by
SSBI's shareholders if, as a result of such adjustments, the Exchange
Rate would be less than 4.5 shares of Chemical Common Stock for each
share of SSBI Common Stock. See "The Merger--Minimum Adjusted
Shareholders' Equity" for a discussion of the factors to be considered
in determining SSBI's Adjusted Shareholders' Equity and the date as of
which such amount will be determined.
The Exchange Rate and the possible adjustments to the Exchange
Rate were determined through the parties' negotiation of the Plan of
Merger. These terms reflect Chemical's and SSBI's judgment as to the
-20-
value of the shares of SSBI Common Stock relative to the historical
and anticipated market price of Chemical Common Stock.
The Exchange Rate is subject to upward or downward adjustment
upon the occurrence of or the setting of a record date for certain
events between the date of the Plan of Merger and the effective time
of the Merger that result in or would result in changes in the number
of shares of Chemical Common Stock or SSBI Common Stock outstanding,
as the case may be. The purpose of any such adjustment to the
Exchange Rate would be to prevent dilution of the interests of the
respective shareholders of Chemical and SSBI upon the occurrence of
certain events listed in the Plan of Merger. It is expected that none
of these events will occur and that no adjustment of the Exchange Rate
for any such event will be necessary. (See "The Merger--Conversion of
SSBI Shares.") See "The Merger--Minimum Adjusted Shareholders'
Equity" for a discussion of the circumstances that would result in a
reduction in the Exchange Rate.
Chemical will not issue fractional shares of Chemical Common
Stock in the Merger. An SSBI shareholder who would otherwise be
entitled to receive a fraction of a share of Chemical Common Stock in
the Merger will receive instead an amount of cash (without interest)
equal to such fraction of a share multiplied by the mean between the
high and low transaction prices of Chemical Common Stock reported on
The NASDAQ Stock Market for the last trading date preceding the
effective time of the Merger.
STOCK PRICE CONDITION
SSBI will not be obligated to consummate the Merger at any time
when either of the following conditions exist: (1) the average of
the means between the high and low transactions prices of Chemical
Common Stock reported on The NASDAQ Stock Market (the "Reference
Price") during the 20 consecutive trading days immediately preceding a
date (the "Upset Date") when the closing of the Merger could be
convened (the "Reference Period") as reported in THE WALL STREET
JOURNAL, MIDWEST EDITION, is less than $28.00, subject to certain
adjustments; or (2)(a) the Reference Price is less than $30.00,
subject to certain adjustments, and (b) the percentage determined by
dividing the Reference Price by $35.00 is more than 15 percentage
points less than the percentage determined by dividing the sum of the
closing prices of a group of comparison stocks (as defined in the Plan
of Merger) on the last day of the Reference Period by the sum of the
closing prices of those comparison stocks on October 25, 1995, subject
to certain adjustments. The comparison stocks used for this purpose
include the publicly traded common stocks of a group of 6 regional
bank holding companies listed in the Plan of Merger that are similar
in size and nature to Chemical.
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The effect of these provisions is that SSBI need not consummate
the Merger at a time when the price of Chemical Common Stock has
declined substantially from the price prevailing when SSBI's board of
directors approved the Merger and the Exchange Rate or when the price
of Chemical Common Stock has declined less significantly from the
price prevailing when SSBI's board approved the Plan of Merger and
that decline has been disproportionate to any decline in the average
price of the comparison stocks.
If either of these conditions exists, SSBI will have the right
until the fifth business day after the last day of the Reference
Period (the "Exercise Period") to either: (1) abandon the Merger and
terminate the Plan of Merger; (2) proceed with the Merger on the basis
of the Exchange Rate without adjustment; or (3) request Chemical to
increase the Exchange Rate (an "Increase Notice") to 5.8333 shares of
Chemical Common Stock for each share of SSBI Common Stock (the
"Adjusted Rate"). If Chemical receives an Increase Notice, Chemical
may either accept or decline the Adjusted Rate. If Chemical accepts
the Adjusted Rate, the Plan of Merger will remain in effect except
that the Exchange Rate will be equal to the Adjusted Rate. If Chemical
declines the Adjusted Rate or fails to deliver written notice of its
decision to accept or decline the Adjusted Rate, the Merger will be
abandoned and the Plan of Merger terminated; provided, that if
Chemical declines the Adjusted Rate or fails to deliver notice of its
decision to accept or decline the Adjusted Rate, SSBI may elect to
proceed with the Merger on the basis of the Exchange Rate without any
adjustment.
MINIMUM ADJUSTED SHAREHOLDERS' EQUITY
Under the Plan of Merger, the Exchange Rate will be reduced
proportionately if and to the extent that SSBI's "Adjusted Shareholders'
Equity" is less than $9,300,000. Any such adjustment to the Exchange
Rate will be effected by multiplying the Exchange Rate by a fraction
equal to SSBI's Adjusted Shareholders' Equity divided by $9,300,000.
SSBI's "Adjusted Shareholders' Equity" will be SSBI's consolidated
shareholders' equity computed according to generally accepted
accounting principles as of a Final Statement Date (as defined in the
Plan of Merger) not more than one month before the closing of the
transactions contemplated by the Plan of Merger, as set forth on a
Closing Balance Sheet (as defined below), adjusted by subtracting the
following items, net of tax effects, if and to the extent that they
are not reflected in the Closing Balance Sheet: (1) all transaction-related
expenses which SSBI has incurred to date plus a reasonable
estimate of the transaction-related expenses SSBI will incur as a
result of the Merger (including, without limitation, its legal,
accounting, actuarial, tax preparation and investment bankers' fees
and expenses); (2) any additional provision to SSBI's loan loss
allowance necessary to cause SSBI's allowance for loan losses as
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reflected on the Closing Balance Sheet to be not less than 0.97% of
total loans reflected on the Closing Balance Sheet; (3) the amount of
any cash dividends declared by SSBI before the effective time of the
Merger; (4) the amount of any bonuses or other compensation awarded or
payable to directors and/or employees of either SSBI or the Bank
before the effective time of the Merger; (5) the amount of fees and
expenses incurred to date or payable to accountants and other
representatives in connection with an audit of SSBI's 1994 and 1995
consolidated financial statements; and (6) any other amounts upon
which Chemical and SSBI may mutually agree.
The "Closing Balance Sheet" will be a consolidated balance sheet
of SSBI as of the Final Statement Date (as defined in the Plan of
Merger), the subject of an agreed-upon procedures report (the "Closing
Report") by SSBI's independent auditors, and prepared based upon
applicable standards of the American Institute of Certified Public
Accountants in a manner consistent with the audited balance sheet of
SSBI as of December 31, 1995. The computation of SSBI's Adjusted
Shareholders' Equity as of the Final Statement Date shall also be the
subject of the Closing Report.
The Board of Directors of SSBI will resubmit the Plan of Merger
for approval by SSBI's shareholders if, as a result of such adjustments,
the Exchange Rate would be less than 4.5 shares of Chemical Common Stock
for each share of SSBI Common Stock.
DISTRIBUTION OF CHEMICAL COMMON STOCK
As of the effective time of the Merger, holders of SSBI Common
Stock outstanding immediately prior to the effective time of the
Merger will cease to be shareholders of SSBI and will have no rights
as SSBI shareholders. Certificates that represented shares of SSBI
Common Stock outstanding immediately prior to the effective time of
the Merger ("Old Certificates") will then represent the right to
receive shares of Chemical Common Stock having all of the voting and
other rights of shares of Chemical Common Stock and the right to
receive cash in lieu of fractional shares, as provided in the Plan of
Merger, except that no former SSBI shareholder shall be entitled to
receive dividends payable to holders of record of Chemical Common
Stock after the effective time of the Merger until the physical
exchange of that shareholder's Old Certificates for new Chemical
Common Stock certificates has been effected. After the effective time
of the Merger, Old Certificates will be exchangeable for new stock
certificates representing the number of shares of Chemical Common
Stock to which such holders will be entitled.
As soon as practicable after the Merger becomes effective,
Chemical will send to record holders of SSBI Common Stock transmittal
materials to be used to exchange Old Certificates for stock
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certificates representing shares of Chemical Common Stock. The
transmittal materials will contain instructions with respect to the
surrender of Old Certificates.
As soon as practicable after the Merger becomes effective,
Chemical will deliver the number of shares of Chemical Common Stock
issuable and the amount of cash payable for fractional shares in the
Merger to Chemical Bank, or such other bank or trust company as
Chemical may designate for such purpose (the "Exchange Agent").
Promptly after receipt of the proper transmittal documents and
Old Certificates from a SSBI shareholder, the Exchange Agent will
issue and deliver new stock certificates to the shareholder. The
Exchange Agent will issue and deliver certificates in the name and to
the address appearing on SSBI's stock records as of the effective time
of the Merger, or in such other name or to such other address as the
holder of record may specify in transmittal documents received by the
Exchange Agent. The Exchange Agent will not be required to issue and
deliver certificates to a shareholder until it has received all of the
Old Certificates held of record by that shareholder, or an affidavit
of loss and indemnity bond for such certificate or certificates,
together with properly executed transmittal materials. Such Old
Certificates, transmittal materials and affidavits must be in a form
and condition reasonably acceptable to Chemical and the Exchange
Agent.
The Exchange Agent will have reasonable discretion to determine
the rules and procedures relating to the issuance and delivery of
certificates of Chemical Common Stock into which shares of SSBI Common
Stock are converted in the Merger and governing the payment for
fractional shares.
The declaration of a dividend on Chemical Common Stock payable to
shareholders of record of Chemical as of a record date on or after the
effective time of the Merger will include dividends on all shares of
Chemical Common Stock issuable under the Plan of Merger. However, no
former shareholder of SSBI will be entitled to receive a distribution
of such dividends until physical exchange of that shareholder's Old
Certificates shall have been effected. Upon physical exchange of that
shareholder's Old Certificates, he or she will be entitled to receive
from Chemical an amount equal to all such dividends (without interest
and less the amount of taxes, if any, which may have been imposed or
paid) declared and paid with respect to those shares.
At or after the effective time of the Merger, Chemical and SSBI
will not transfer on the stock transfer books of SSBI any shares of
SSBI Common Stock which were issued and outstanding immediately prior
to the effective time of the Merger. If, after the effective time of
the Merger, a shareholder properly presents Old Certificates to
Chemical for transfer, Chemical will cancel and exchange the Old
-24-
Certificates for stock certificates representing shares of Chemical
Common Stock as provided in the Plan of Merger. After the effective
time of the Merger, ownership of shares represented by Old
Certificates may be transferred only on the stock transfer records of
Chemical.
EFFECTIVE TIME OF THE MERGER
The Merger shall be consummated as promptly as possible following
a closing by filing a Certificate of Merger in accordance with the
MBCA. The effective time of Merger will be a date and time specified
in the Certificate of Merger, which will be not later than 3 business
days after the closing. If the shareholders of SSBI adopt the Plan of
Merger at the special meeting of SSBI shareholders, and the other
conditions to the Merger set forth in the Plan of Merger and
summarized under "The Merger--Conditions to the Merger and
Abandonment" in this Prospectus and Proxy Statement are satisfied, the
effective time of the Merger is anticipated to be during the second
quarter of 1996, provided that the Plan of Merger has not been
terminated prior to that time. The Merger may not be consummated
until receipt of approval from the Federal Reserve Board or its
delegate and expiration of the required 30-day waiting period
following such approval. An application for prior approval of the
Merger was submitted to the Federal Reserve Board on November 24,
1995, and the final approval of the Federal Reserve Board was granted
on January 26, 1996. There can be no assurance when or if any other
condition to the Merger will be satisfied.
BUSINESS OF SSBI PENDING THE MERGER
The Plan of Merger also contains covenants to which SSBI has
agreed. The covenants remain in effect until the effective time of
the Merger or until the Plan of Merger has been terminated and
include, among others things (except as consented to in writing by
Chemical or otherwise provided in the Plan of Merger), an agreement
that each of SSBI and the Bank will: (1) conduct its business and
manage its property only in the usual, regular and ordinary course;
(2) not enter into any employment agreement that is not terminable,
without cost of penalty, on 60 days' or less notice; (3) not issue any
capital stock or any security convertible into capital stock, or grant
any warrant or option to acquire capital stock, or otherwise alter its
capital structure; (4) not make any material changes in any policies
or procedures applicable to the conduct of its business; (5) not sell,
mortgage, pledge, encumber or otherwise dispose of any property or
assets, except in the ordinary course of business, having a fair
market value of $25,000 or more; (6) except to reelect persons who are
then incumbent directors and officers at annual meetings, not, without
first consulting Chemical, increase the number of directors or fill
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any vacancy on the board of directors or elect or appoint any person
to an executive office; (7) except for certain exceptions listed in
the Plan of Merger, not increase the salary or compensation payable to
or agree to pay any bonus to any director or officer, or any class or
group of employees as a class or group, and not introduce or change
any employee benefit plan or program of any kind for the benefit of
its employees unless required by law or the Plan of Merger; (8) not
borrow money except in the ordinary course of business; and (9) not
change its articles of incorporation or charter, or its bylaws.
SSBI has agreed not to declare or pay, or agree to declare or
pay, any dividend or distribution of any kind upon SSBI Common Stock
after the Final Statement Date. SSBI has agreed to declare and pay
dividends which are consistent with SSBI's historical practice,
including an agreement to: (1) not declare or pay cash dividends
during any fiscal period which exceed the cash dividends declared or
paid during the comparable period of the prior year; and (2) not
declare or pay cash dividends during any fiscal period which are less
than the cash dividends declared or paid during the comparable period
of the prior year without Chemical's written consent, which consent
may not be withheld unless, in Chemical's reasonable judgment, the
reduction in dividends declared or paid could be inconsistent with the
pooling of interests method of accounting for the Merger. SSBI must
adjust the record date for its regularly scheduled dividend with
respect to the period in which the Merger occurs, if necessary, to
assure that SSBI shareholders receive only one dividend payable in, or
with a record date occurring in, the quarter in which the effective
time of the Merger occurs, with respect to shares of SSBI Common Stock
or Chemical Common Stock received in the Merger.
MANAGEMENT AFTER THE MERGER
Upon the consummation of the Merger, the directors and officers
of the surviving corporation will be the persons who were directors
and officers of Chemical immediately prior to the effective time of
the Merger. The directors, officers and employees of the Bank will
continue immediately after the effective time of the Merger as
directors, officers and employees of the Bank.
CONDITIONS TO THE MERGER AND ABANDONMENT
The obligations of Chemical and SSBI to consummate the Merger are
subject to the fulfillment of certain conditions including, without
limitation, the following:
(1) An affirmative vote of holders of two-thirds of
the outstanding shares of SSBI Common Stock is required to
approve the Plan of Merger.
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(2) The Federal Reserve Board must approve the Merger.
(3) Chemical and SSBI must comply with their
respective covenants, and their respective representations
and warranties must be true in all material respects each as
set forth in the Plan of Merger. (See "The Merger--Business
of SSBI Pending the Merger.")
(4) Chemical and SSBI must receive certain opinions of
counsel.
(5) Chemical must have received evidence of the waiver
of any material rights and the waiver of the loss of any
material rights which may be triggered by the change of
control of SSBI upon consummation of the Merger, all in form
and substance reasonably satisfactory to Chemical.
(6) Chemical must receive reasonable assurance from
its certified public accountants, satisfactory in form and
substance, that the Merger will be treated as a pooling of
interests for accounting purposes, subject to satisfaction
of post-Merger conditions.
(7) Neither Chemical nor SSBI must be subject to any
order, decree or injunction of a court or agency enjoining
or prohibiting the Merger.
(8) There must not be any suit or proceeding pending
or threatened (a) against or relating to SSBI or the Bank
that could result in any liability that could have a
material adverse effect on SSBI and the Bank on a
consolidated basis, (b) against directors or officers of
SSBI in their capacities as such, or (c) that challenges the
Merger or the Plan of Merger.
Either Chemical or SSBI, whichever is entitled to the benefit of
the foregoing conditions, may waive one or more of those conditions
except where satisfaction of the condition is required by law. The
Plan of Merger contains various other conditions to the respective
obligations of Chemical and SSBI which must be satisfied.
The boards of directors, or duly authorized committees thereof,
of SSBI and Chemical may by mutual consent terminate the Plan of
Merger and abandon the Merger at any time prior to the effective time
of the Merger. The board of directors of either SSBI or Chemical may
terminate the Plan of Merger and abandon the Merger on its own action
upon the occurrence of certain events specified in the Plan of Merger
including, among others, the following events:
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(1) Chemical or SSBI discovers that one or more of the
other party's representations and warranties is or has
become untrue, and the cumulative effect of all such untrue
representations and warranties is material to the other
party's income, business or financial condition on a
consolidated basis;
(2) Chemical or SSBI commits one or more breaches of
certain provisions set forth in the Plan of Merger which
would in the aggregate be material and such breach or
breaches are not cured after notice;
(3) there occurs a materially adverse change in the
financial condition of either Chemical or SSBI on a
consolidated basis from that which existed on December 31,
1994;
(4) the Merger is not effective on or before September
30, 1996;
(5) a court of competent jurisdiction issues a final
unappealable injunction or other judgment restraining or
prohibiting consummation of the Merger;
(6) the shareholders of SSBI fail to adopt the Plan of
Merger at the special meeting or any adjournments of that
meeting and the meeting has been finally adjourned; or
(7) the Federal Reserve Board or its delegate refuses
to approve the Merger.
Chemical may terminate the Plan of Merger and abandon the Merger
at any time if its independent public accountants shall have advised
Chemical that the Merger is not likely to qualify for treatment as a
pooling of interests for accounting purposes.
Chemical may terminate the Plan of Merger and abandon the Merger
if any environmental conditions are found, suspected, or indicated by
environmental assessments which are contrary to SSBI's representations
and warranties set forth in the Plan of Merger, and the parties are
unable to agree upon arrangements for the further investigation and
remediation of the condition and/or a mutually acceptable modification
to the Plan of Merger; provided, that Chemical gives SSBI 5 days'
written notice of its intent to terminate the Plan of Merger.
Chemical may terminate the Plan of Merger and abandon the Merger
if SSBI or the Bank, or any of their respective directors, officers,
employees, investment bankers, representatives, or agents, solicits,
encourages, negotiates, accepts, approves or discusses with any party
other than Chemical any proposals, offers, or expressions of interest
-28-
concerning any tender offer, exchange offer, merger, consolidation,
sale of shares, sale of assets, or assumption of liabilities not in
the ordinary course, or other business combination involving SSBI or
the Bank or any of their respective assets or properties.
DESCRIPTION OF CHEMICAL CAPITAL STOCK
Chemical's authorized capital stock consists of 15,000,000 shares
of common stock, $10 par value ("Common Stock"). As of October 16,
1995, Chemical had outstanding 9,173,873 shares of Chemical Common
Stock. Chemical expects to issue 500,000 shares of Chemical Common
Stock in the Merger.
Holders of Chemical Common Stock are entitled to dividends out of
funds legally available for that purpose when, as, and if declared by
the board of directors. Each holder of Chemical Common Stock is
entitled to one vote for each share held on each matter submitted for
shareholder action. Chemical Common Stock has no preemptive rights,
cumulative voting rights, conversion rights or redemption provisions.
In the case of any liquidation, dissolution or winding up of the
affairs of Chemical, holders of Chemical Common Stock will be entitled
to receive, pro rata, any assets distributable to common shareholders
in proportion to the number of shares held by them.
All outstanding shares of Chemical Common Stock are, and shares
to be issued pursuant to the Merger will be, when issued, fully paid
and nonassessable.
COMPARISON OF RIGHTS OF CHEMICAL SHAREHOLDERS AND SSBI SHAREHOLDERS
If the Merger is consummated, a person holding a given percentage
of the outstanding shares of SSBI Common Stock will hold a lesser
percentage of the outstanding shares of Chemical Common Stock after
the Merger. In addition, because Chemical is a larger entity than
SSBI, the universe of financial institutions and other companies that
have the resources to acquire Chemical will be smaller than for SSBI.
SSBI Common Stock is not listed on a securities exchange or
quotation system. Chemical's shareholders enjoy a broader and more
active market for Chemical Common Stock than has historically existed
for SSBI Common Stock. Listing on The NASDAQ Stock Market provides
market quotations which are useful in resolving questions of fair
valuation.
Chemical is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
SSBI is not presently subject to these reporting requirements. SSBI's
-29-
shareholders will therefore benefit from Chemical's registration under
the Exchange Act by virtue of the availability of more current and
detailed information regarding Chemical than presently exists with
respect to SSBI.
As bank holding companies, both Chemical's and SSBI's corporate
affairs are governed by the MBCA. Therefore, persons who receive
shares of Chemical Common Stock in the Merger will have similar rights
to those they presently possess as shareholders of SSBI.
SSBI's Articles of Incorporation contain a provision that
requires the affirmative vote of the holders of two-thirds of the
outstanding shares of SSBI Common Stock to approve any merger,
consolidation, recapitalization, reclassification, liquidation or
dissolution in which SSBI is a party or the sale, lease, exchange or
other disposition of substantially all of the property and assets of
SSBI. Chemical's Restated Articles of Incorporation do not contain
any such super-majority approval requirement and such actions may be
approved by the affirmative vote of the holders of a majority of the
outstanding shares of Chemical Common Stock. Therefore, approval of
such actions requires the affirmative vote of the holders of a lesser
percentage of the outstanding shares of Chemical Common Stock.
PROVISIONS AFFECTING CONTROL OF CHEMICAL
CONTROL SHARE ACT. Michigan law regulates the acquisition of
"control shares" of large public Michigan corporations (the "Control
Share Act"). The Control Share Act applies to Chemical and its
shareholders. The Control Share Act establishes procedures governing
"control share acquisitions." A control share acquisition is defined
as an acquisition of shares by an acquirer which, when combined with
other shares held by that person or entity, would give the acquirer
voting power at or above any of the following thresholds: 20%, 33
1/3% or 50%. Under the Control Share Act, an acquirer may not vote
"control shares" unless the corporation's disinterested shareholders
(defined to exclude the acquiring person, officers of the target
corporation, and directors of the target corporation who are also
employees of the corporation) vote to confer voting rights on the
control shares. The Control Share Act does not affect the voting
rights of shares owned by an acquiring person prior to the control
share acquisition.
The Control Share Act entitles corporations to redeem control
shares from the acquiring person under certain circumstances. In
other cases, the Control Share Act confers dissenters' rights upon all
of a corporation's shareholders except the acquiring person.
FAIR PRICE ACT. Certain provisions of the MBCA (the "Fair Price
Act") establish a statutory scheme similar to the supermajority and
-30-
fair price provisions found in many corporate charters. The Fair
Price Act provides that a supermajority vote of 90% of the
shareholders and no less than two-thirds of the votes of noninterested
shareholders must approve a "business combination." The Fair Price Act
defines a "business combination" to encompass any merger,
consolidation, share exchange, sale of assets, stock issue,
liquidation, or reclassification of securities involving an
"interested shareholder" or certain "affiliates." An "interested
shareholder" is generally any person who owns 10% or more of the
outstanding voting shares of the corporation. An "affiliate" is a
person who directly or indirectly controls, is controlled by, or is
under common control with a specified person.
The supermajority vote required by the Fair Price Act does not
apply to business combinations that satisfy certain conditions. These
conditions include, among others, that: (1) the purchase price to be
paid for the shares of the corporation is at least equal to the
highest of either (a) the market value of the shares or (b) the
highest per share price paid by the interested shareholder within the
preceding two-year period or in the transaction in which the
shareholder became an interested shareholder, whichever is higher; and
(2) once a person has become an interested shareholder, the person
must not become the beneficial owner of any additional shares of the
corporation except as part of the transaction which resulted in the
interested shareholder becoming an interested shareholder or by virtue
of proportionate stock splits or stock dividends.
The requirements of the Fair Price Act do not apply to business
combinations with the interested shareholder that the board of
directors has approved or exempted from the requirements of the Fair
Price Act by resolution prior to the time that the interested
shareholder first became an interested shareholder.
INDEMNIFICATION AND LIMITATION OF LIABILITY
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF CHEMICAL.
Chemical's Restated Articles of Incorporation require indemnification
of Chemical's directors, officers, employees and agents as of right to
the fullest extent now or hereafter permitted by law in connection
with any actual or threatened civil, criminal, administrative or
investigative action, suit or proceeding (whether brought by or in the
name of Chemical, a subsidiary, or otherwise) arising out of their
service as directors, officers, employees or agents or in any other
capacity to Chemical or a subsidiary, or to another organization at
the request of Chemical or a subsidiary.
Chemical may purchase and maintain insurance to protect itself
and any director, officer or other person against any liability
asserted against and incurred by him or her in respect of such service
-31-
regardless of whether Chemical would have the power to indemnify him
or her against such liability by law or otherwise.
LIMITATION OF CHEMICAL DIRECTORS' LIABILITY. Article VIII of
Chemical's Restated Articles of Incorporation provides that directors
of Chemical shall not be personally liable to Chemical or its
shareholders for monetary damages for breaches of fiduciary duty,
except to the extent that such a limitation of liability is contrary
to the MBCA. This provision is designed to promote an environment in
which Chemical's directors are free to function decisively and
effectively in directing the operation of the corporation without the
potential inhibiting threat of litigation.
Article VIII eliminates the personal liability of directors of
Chemical in their capacity as directors (but not directors in their
capacity as officers) to Chemical and its shareholders to the full
extent permitted by Michigan law. Article VIII does not affect a
director's fiduciary duties. Each director would continue to owe to
Chemical and its shareholders a duty of care (which requires that a
director make informed and well-reasoned business judgments) and a
duty of loyalty (which requires that a director act in good faith and
with the honest belief that his or her actions are in the best
interests of Chemical and its shareholders). Article VIII does,
however, prevent a director from being monetarily liable to Chemical
or its shareholders for violations of his or her duty of care, even if
the director makes a negligent business decision.
Article VIII does not limit a director's liability to parties
other than Chemical and its shareholders, nor does Article VIII
eliminate or limit the liability of a director for breaching his or
her duty of loyalty, failing to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying an illegal
dividend, approving an illegal distribution, or obtaining an improper
personal benefit. In addition, Article VIII does not affect the
availability of equitable remedies, such as an action to enjoin or
rescind a transaction involving a breach of fiduciary duty, or limit a
director's liability under the federal securities laws. However,
equitable remedies available to shareholders may in some instances be
ineffective as a practical matter. For instance, shareholders may not
be aware of a proposed transaction or other action until it is too
late to prevent its completion.
Because Article VIII limits the situations in which a director
may be held monetarily liable, it could have the effect of reducing
the likelihood of derivative litigation against Chemical's directors.
Article VIII may also discourage or deter shareholders from bringing a
lawsuit against Chemical's directors for breach of their duties of
care, even though such an action, if successful, might otherwise have
benefited Chemical and its shareholders. Insulation of directors from
personal liability could influence their decisions with respect to any
-32-
future proposals to acquire Chemical. This could have the effect of
making it more difficult for others to acquire Chemical and might
discourage efforts to acquire Chemical.
Chemical's board of directors does not believe the limitation of
director liability under Article VIII results in directors acting with
less concern for their fiduciary duties. Chemical's board of
directors believes that the diligence exercised by directors stems
primarily from their desire to act in the best interests of Chemical,
and not from a fear of monetary damage awards. Consequently,
Chemical's board of directors believes that the level of scrutiny and
care exercised by directors is not lessened by Article VIII.
An amendment to or repeal of Article VIII may not apply to or
affect the liability or alleged liability of any director of Chemical
for or with respect to any act or omission of such director prior to
such amendment or repeal.
AGREEMENTS OF AFFILIATES
The shares of Chemical Common Stock to be issued to shareholders
of SSBI under the Plan of Merger have been registered under the
Securities Act of 1933, as amended (the "Securities Act"). That
registration, however, does not cover resales by SSBI shareholders who
may be deemed to control or be controlled by, or be under common
control with, SSBI at the time of the special meeting of shareholders
("Affiliates").
Each director and certain other individuals of SSBI who may be
deemed Affiliates of SSBI have agreed that he or she will not sell,
transfer or otherwise dispose of shares of Chemical Common Stock
received in the Merger in a manner which would result in a violation
of the Securities Act or applicable rules and regulations or prior to
publication of financial results of the post-Merger combined
operations of Chemical covering a period of at least 30 days.
Chemical may place a legend reflecting the transfer restrictions on
the certificates representing the shares of Chemical Common Stock. In
addition, each director and certain other individuals who may be
deemed Affiliates of SSBI have agreed not to voluntarily sell or
dispose of any shares of SSBI Common Stock (except as may be necessary
to discharge a fiduciary duty or by gift made for estate planning
purposes).
SSBI's directors, as Affiliates of SSBI, have each executed a
letter agreement setting forth the obligations described above and
requiring in addition that the Affiliates use their best efforts to
cause the Merger to be consummated. See "Voting and Management
Information--Interests of Certain Persons."
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ACCOUNTING TREATMENT
Chemical expects to treat the Merger as a pooling of interests
for accounting purposes. Under generally accepted accounting
principles governing pooling of interests accounting, Chemical would
carry forward to its accounts the assets and liabilities of SSBI in
the amounts reported by SSBI. See "The Merger--Pro Forma Condensed
Combined Financial Statements." If the Merger does not qualify for
the pooling of interests accounting method, Chemical may terminate the
Plan of Merger and abandon the Merger.
One of the conditions of eligibility for the pooling of interests
method of accounting is that, at the date of consummation of the plan
of combination, each combining company must be independent of the
other combining company. SSBI has warranted to Chemical that it does
not own any shares of Chemical's capital stock, any securities
convertible into such stock, or any rights to acquire such stock,
except in a fiduciary capacity as to which it has no beneficial
interest. SSBI has further warranted to Chemical that, during the
past two years, it has not acquired any shares of its own capital
stock or Chemical's capital stock, any securities convertible into
such stock, or any other rights to acquire such stock except in a
fiduciary capacity and as permitted for purposes other than a business
combination under the pooling of interests method of accounting.
FEDERAL INCOME TAX CONSEQUENCES
As a condition precedent to the Merger, Chemical and SSBI must
receive opinions of Chemical's legal counsel substantially to the
effect that for federal income tax purposes:
(1) The Merger of SSBI with and into Chemical will
constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), and Chemical and SSBI will each be a
"party to a reorganization" within the meaning of Section
368(b) of the Code;
(2) No gain or loss will be recognized by the
shareholders of SSBI who receive shares of Chemical Common
Stock in exchange for all of their shares of the SSBI Common
Stock, except to the extent of any cash received in lieu of
a fractional share of Chemical Common Stock;
(3) The basis of the Chemical Common Stock to be
received by the shareholders of SSBI will, in each instance,
be the same as the basis of the respective shares of SSBI
Common Stock surrendered in exchange therefore;
-34-
(4) The holding period of the assets of SSBI in the
hands of Chemical will include the holding period during
which such assets were held by SSBI;
(5) No gain or loss will be recognized to Chemical on
the receipt by Chemical of the assets of SSBI in exchange
for Chemical Common Stock and the assumption by Chemical of
the liabilities of SSBI;
(6) The basis of the SSBI assets in the hands of
Chemical will be the same as the basis of those assets in
the hands of SSBI immediately prior to the Merger; and
(7) The holding period of the Chemical Common Stock
received by shareholders of SSBI will, in each instance,
include the period during which the SSBI Common Stock
surrendered in exchange therefor was held, provided that the
SSBI Common Stock was, in each instance, held as a capital
asset in the hands of the shareholder of SSBI at the
effective time of the Merger.
EACH SHAREHOLDER OF SSBI SHOULD CONSULT A PROFESSIONAL TAX
ADVISER ON THE TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER. THE
TAX AND OTHER MATTERS DESCRIBED IN THIS PROSPECTUS AND PROXY STATEMENT
DO NOT CONSTITUTE LEGAL OR TAX ADVICE.
-35-
STATE SAVINGS BANCORP, INC.
BUSINESS
SSBI is a Michigan bank holding company with its headquarters in Caro,
Michigan. SSBI was formed on March 1, 1989. SSBI is the parent company of
the Bank, which is SSBI's only subsidiary.
SSBI and the Bank are engaged in the business of commercial banking
and other related activities. Bank is a full service bank offering
customary commercial banking services, which include commercial and retail
loans, business and personal checking accounts, savings and individual
retirement accounts, time deposit instruments, automated transaction
machine services, money transfer services, and safe deposit facilities. No
material part of the business of SSBI and the Bank is dependent upon a
single customer or very few customers, the loss of which would have a
materially adverse effect on SSBI.
The principal markets for SSBI's financial services are presently Caro
and Fairgrove, Michigan, and the areas immediately surrounding those
communities. SSBI and the Bank serve these markets through its main office
and an auto bank branch in Caro, Michigan, and a branch office in
Fairgrove, Michigan. SSBI and the Bank have no foreign assets or income.
The principal source of revenue for SSBI and the Bank is interest on
investment securities. On a consolidated basis, interest on investment
securities accounted for 55.7% of total revenues in 1994, 55.2% in 1993, and
50.5% in 1992. Interest and fees on loans accounted for 40.7% of total
revenues in 1994, 41.2% in 1993, and 42.1% in 1992.
SSBI and the Bank employed approximately 36 persons (32 persons on a
full-time equivalent basis) at December 31, 1994.
Additional statistical information describing the business of SSBI
appears in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" below.
SSBI is a bank holding company which, through its subsidiary, is
engaged in the business of commercial banking. The business of banking is
highly competitive. In addition to competition from other commercial
banks, banks face significant competition from saving and loan
associations, credit unions, finance companies, insurance companies and
investment and brokerage firms. The principal methods of competition for
financial services are price (interest rates paid on deposits, interest
rates charged on borrowings and fees charged for services) and service
(convenience and quality of services rendered to customers).
-36-
MARKET PRICE AND DIVIDENDS
MARKET INFORMATION. There is no established public trading market for
SSBI Common Stock. Transactions in SSBI Common Stock are occasionally
effected by individuals on an informal basis. Some transactions are
effected through the involvement of local or regional brokerage firms. The
prices at which such transactions are effected are only occasionally
reported to SSBI. The most recent transaction effected in SSBI Common
Stock for which the price was reported to SSBI was effected on
April 30, 1993, when 220 shares traded at a price of $70 per share.
As of September 30, 1995, there were 150 holders of shares of SSBI
Common Stock.
DIVIDENDS. SSBI has paid regular cash dividends every quarter since
March, 1990. The following table summarizes the quarterly cash
dividends paid to common shareholders during the last two full years for
which financial information is presented.
<TABLE>
<CAPTION>
QUARTER 1995 1994
<S> <C> <C> <C>
1st $ 1.00 $ .50
2nd 1.00 .50
3rd 1.00 .50
4th 1.00 3.50
TOTAL $ 4.00 $ 5.00
</TABLE>
Holders of SSBI Common Stock are entitled to receive dividends when, as and
if declared by SSBI's board of directors out of funds legally available for
that purpose. The earnings of SSBI are the principal source of funds to
pay cash dividends. Consequently, cash dividends are dependent upon the
earnings, capital needs, regulatory constraints and other factors affecting
SSBI. See "The Merger--Business of SSBI Pending the Merger" for a
discussion of certain restrictions on SSBI's ability to pay future
dividends contained in the Plan of Merger.
SSBI'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1994
AND 1993
The following discussion and analysis is intended to cover the
significant factors affecting SSBI's balance sheets and income statements.
It provides shareholders with a more comprehensive review of the operating
results and financial position than could be obtained from an examination
of the financial statements alone.
NET INCOME. Net income for the year 1994 was $842,000, compared to
$897,000 in 1993. Per share net income for 1994 was $8.42, compared to
-37-
$8.97 in 1993. Net income and earnings per share for 1994 decreased 6.1%
over 1993 amounts. The decrease in net income in 1994 was primarily the
result of a change in the effective income tax rate to 25.2% in 1994
compared to 18.5% in 1993. This rate difference is largely attributed to a
tax credit used in 1993.
BOOK VALUE PER SHARE. Book value per share at December 31, 1994, was
$90.00 per share. This represents a 3.95% increase from the book value per
share of $86.58 at December 31, 1993.
DIVIDENDS PER SHARE. SSBI paid cash dividends of $5 per share for
1994 and $4 per share for 1993.
FINANCIAL CONDITION. Total assets were $64.6 million at December 31,
1994 compared to $63.6 million at December 31, 1993, an increase of $1
million or 1.66%.
Loans increased 11.3% or $2,101 million at year end 1994 from year end
1993. SSBI's loan to deposit ration increased to 37.3% at December 31,
1994 from 33.4% a year earlier. This increase was primarily in the real
estate portfolio and was due to competitive pricing to take advantage of
increased refinancings during this period.
Federal funds sold decreased $1,700 million and were used to fund the
loan growth.
Securities held to maturity remained substantially unchanged.
Deposits increased $558,000 or 1%, during 1994.
NET INTEREST INCOME. Interest income is the total amount earned on
funds invested in loans, securities and other money market instruments,
such as federal funds sold. Interest expense is the amount of interest
paid on interest-bearing checking accounts, such as NOW accounts, savings
and time deposits. The amount of net interest income (or the difference
between interest income and interest expense) varies from year to year
according to the volume and mix of assets and liabilities and the level of
interest rates. The tax equivalent adjustment restates tax exempt interest
income (from municipal bonds and tax exempt loans) on a basis as if it were
taxable interest income. Net interest income is referred to as being on a
fully taxable equivalent (FTE) basis after this adjustment is made. The
net interest margin is net interest income (FTE) as a percentage of average
earning assets.
The single most important factor in analyzing the results of SSBI's
operations is net interest income. Net interest income is influenced by
changes in: (i) the volume of earning assets; (ii) the mix of earning
assets and interest-bearing liabilities; (iii) the proportion of earning
assets that are funded by noninterest-bearing liabilities (demand deposits)
-38-
and equity capital; and (iv) market rates of interest. Some of these
factors are controlled to a certain extent by management policies and
actions. However, conditions quite often beyond management's control have
a significant impact on changes in net interest income, as occurred
throughout 1993 and 1994. The prime lending rate was 6.0% at the beginning
of 1993. It stayed constant throughout 1993. The prime lending rate began
increasing in 1994 to a high of 8.50%. Other factors impacting net
interest income include the strength of credit demands by customers,
increased competition from other financial institutions, the growth of
deposit accounts by non-bank financial competitors and the continued growth
in mutual fund investments. As shown in Tables 1 and 2, net interest
income, on an FTE basis, increased by $42,000 in 1994 over 1993 to
$2,820,000. Table 1 presents average daily balances, interest income on an
FTE basis and interest expense, as well as average rates earned and paid on
SSBI's assets and liabilities for various periods.
SSBI's net interest margin was 4.22% and 4.26% for the years ended
December 31, 1994 and 1993, respectively. Though rates increased during
1994, SSBI's average rate on earning assets declined as shown in Table 1.
That is because changes in rates on SSBI's earning assets tend to lag
behind changes in prime rate since SSBI's loans and investments tend to be
at fixed rates and for longer terms. During 1994, the effective yield on
earning assets declined 54 basis points to 7.15%, while the average
interest rate paid on interest-bearing liabilities declined 50 basis points
to 2.93%. The overall change in net interest margin was a decline in the
net interest earnings (FTE) as a percent of average earning assets to 4.75%
in 1994 from 4.84% in 1993.
Table 3 allocates net interest income (FTE) between that portion of
assets which are funded by: (i) interest-bearing liabilities at the
"interest spread," and (ii) noninterest-bearing liabilities and equity
capital. Interest spread on assets funded by interest-bearing liabilities
equals the average rate earned on earning assets minus the average rate
paid on the interest-bearing liabilities. The interest spread decreased 4
basis points to 4.22% in 1994, from 4.26% in 1993. Interest on assets
funded by noninterest-bearing liabilities and equity decreased to 7.15% at
December 31, 1994. This was a 54 basis point decrease in the rates in 1994
compared to 1993. Net interest income increased, however, because this
rate decrease was offset by an increase in the volume of noninterest-bearing
liabilities and equity used to fund earning assets.
-39-
<TABLE>
TABLE 1
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(DOLLARS IN THOUSANDS)
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993
AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal fund sold $ 4,255 $ 160 3.76% $ 3,414 $ 104 3.05%
Time deposits - - 545 47 8.62
Investment securities:
Taxable 31,119 1,989 6.39 31,291 2,093 6.69
Tax-exempt<F1> 4,901 429 8.75 3,914 405 10.34
Loans<F2><F3> 19,108 1,668 8.73 18,275 1,766 9.66
Total interest-earning
assets 59,383 4,246 7.15 57,439 4,415 7.69
Noninterest-bearing assets:
Cash and due from banks 2,534 2,639
Premises and equipment 675 545
Other nonearning assets 765 887
Allowance for loan losses (200) (195)
Total assets $63,157 $61,315
Interest-bearing liabilities:
NOW & money mrkt accts $13,650 $ 341 2.50% $12,794 $ 384 3.00%
Savings 16,972 399 2.35 16,108 483 3.00
Time, $100,000 and over 1,943 63 3.24 1,677 56 3.34
Other time 16,126 623 3.86 17,186 714 4.15
Total interest-bearing
liabilities 48,691 1,426 2.93 47,765 1,637 3.43
Noninterest-bearing liabilities:
Noninterest-bearing demand 5,117 4,599
Other liabilities 331 417
Shareholder's equity 9,018 8,534
Total liabilities and share-
holders' equity $63,157 $61,315
Net interest earnings $ 2,820 $ 2,778
Net interest earnings as a %
of interest earning assets 4.75% 4.84%
Net interest spread 4.22% 4.26%
<FN>
<F1> Interest income is adjusted to taxable equivalents for tax-exempt assets based on a federal
income tax rate of 34% for each year.
<F2> The bank did not have any nonaccrual loans.
-40-
<F3> Interest includes loan fees.
</FN>
</TABLE>
<TABLE>
TABLE 2
RATE/VOLUME ANALYSIS
(DOLLARS IN THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 COMPARED TO 1993 1993 COMPARED TO 1992
INCREASE (DECREASE) INCREASE (DECREASE)
CHANGE CHANGE CHANGE CHANGE
TOTAL DUE TO DUE TO TOTAL DUE TO DUE TO
CHANGE VOLUME <F3> RATE <F3> CHANGE VOLUME <F3> RATE <F3>
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Interest on time deposits $ (47) $ (24) $ (23) $ (128) $ (139) $ 11
Federal funds sold 56 28 28 (68) (47) (21)
Investment securities:
Taxable (104) (11) (93) 60 350 (290)
Tax-exempt<F1> 24 92 (68) (103) (111) 8
Loans <F1><F2> (98) 22 (120) (209) 59 (268)
Total interest income (169) 107 (276) (448) 112 (560)
Interest expense:
NOW and money markets (43) 24 (67) 16 64 (48)
Savings (84) 25 (109) - 55 (55)
Time, $100,000 and over 7 9 (2) (47) (30) (17)
Other time (91) (43) (48) (325) (139) (186)
Total interest expense (211) 15 (226) (356) (50) (306)
Net interest earnings $ 42 $ 92 $ (50) $ (92) $ 162 $ (254)
<FN>
<F1> Interest income is adjusted to taxable equivalents for the tax-exempt assets based on
federal income tax rate of 34% each year.
<F2> There are no nonaccruing loans which have been included in the average loan balances for
purposes of this computation.
<F3> Changes in rates and volume are computed on a consistent basis using the absolute values
of changes in volume compared to the absolute values of the changes in rates. Loan fees
included in interest income are not material.
</FN>
</TABLE>
-41-
<TABLE>
TABLE 3
ANALYSIS OF NET INTEREST INCOME
(DOLLARS IN THOUSANDS)
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993
AVERAGE INTEREST NET AVERAGE INTEREST NET
EARNING SPREAD/ INTEREST EARNING SPREAD/ INTEREST
ASSETS YIELD INCOME ASSETS YIELD INCOME
<S> <C> <C> <C> <C> <C> <C>
Source of funding:
Interest-bearing liabilities $ 48,691 4.22 $ 2,055 $ 47,765 4.26 $ 2,034
Noninterest-bearing
liabilities and equity
capital 10,692 7.15 765 9,674 7.69 744
TOTAL $ 59,383 $ 2,820 $ 57,439 $ 2,778
</TABLE>
__________________________________________________________________________
Table 2 identifies the dollar change in net interest income (FTE)
attribute to interest rate movement versus the change in the volume of
assets and liabilities, including the change in the mix of SSBI's assets
and liabilities. Table 2 shows that SSBI's net interest income (FTE)
increased by $42,000 for calendar 1994. The majority of the increase in
net interest income in 1994 is attributable to the overall increase in
the volume of earning assets which more than offset the impact of a
decline in rates.
LOANS. Tables 4 through 6 provide detailed information about
SSBI's loan portfolio, loan mix and nonperforming loans. Total loans
increased by $2,101,000, or 11.3%, in 1994 as the change in rates caused
increased refinancing. In 1994, consumers were active in the
refinancing of residential mortgage loans to take advantage of
significantly lower rates. Real estate mortgages were up $1,472,000 as
of December 31, 1994, compared to the previous year end. The installment
loan and commercial loan departments increased their respective
portfolios by $473,000 and $157,000, respectively.
__________________________________________________________________________
-42-
<TABLE>
TABLE 4
SUMMARY OF NON-PERFORMING LOANS
(DOLLARS IN THOUSANDS)
<CAPTION>
DECEMBER 31,
1994 1993
<S> <C> <C> <C>
Nonaccrual loans $ 0 $ 0
Past due loans 90 days or more 72 83
Restructured loans 0 0
</TABLE>
(1) SSBI's policy is to transfer a loan to nonaccrual status whenever
management determines that payment in full of interest or the
principal amount cannot be expected, or the loan has been in
default for a period of 90 days or more, unless it is both well
secured and in the process of collection (this category excludes
one- to four-family residential loans and consumer installment
loans).
__________________________________________________________________________
Table 5 presents a summary of commercial, real estate, and
installment loans, as well as the maturity distribution for such loans.
The percentage of these loans maturing within one year was 10.8% at
December 31, 1994. All of these loans are fixed rate and loan
maturities remain at levels acceptable to management to provide
management with flexibility in maintaining a balance between interest
rate sensitive assets and liabilities.
SSBI's loan portfolio at December 31, 1994 is diversified
geographically and along industry lines. Commercial loans are primarily
secured by business assets, and installment loans are secured by various
items of personal property. Mortgage loans are secured principally by
residential real estate, agricultural land and some commercial property.
The loan to value ratio does not normally exceed 80%. SSBI is located in
east central Michigan which is primarily an agricultural area. SSBI has
no loans to foreign countries or borrowers.
__________________________________________________________________________
-43-
TABLE 5
LOAN PORTFOLIO
(DOLLARS IN THOUSANDS)
The following indicates loans, net of unearned income, by type at:
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1993
<S> <C> <C> <C>
Commercial $ 1,642 $ 1,485
Real estate mortgage 16,651 15,179
Installment 2,394 1,921
Total loans $ 20,687 $ 18,585
</TABLE>
The following presents the balance of loans outstanding as of December
31, 1994 by maturities, based on the contractual repayments of principal
(dollars in thousands):
<TABLE>
<CAPTION>
ONE OVER 1
YEAR THROUGH OVER
OR LESS 5 YEARS 5 YEARS TOTAL
<S> <C> <C> <C> <C> <C>
Commercial $ 1,307 $ 335 $ - $ 1,642
Real estate mortgage 728 2,049 13,874 16,651
Installment 207 2,167 20 2,394
Total loans $ 2,242 $ 4,551 $ 13,894 $ 20,687
Percentage of total 10.84% 22.00% 67.16% 100.00%
</TABLE>
__________________________________________________________________________
As of December 31, 1994, loans with maturities over one year
consisted of $18.45 million in fixed rate loans. The loan maturities
noted above are based on the contractual provisions of the individual
loans. The Bank has no general policy regarding renewals, and borrower
requests for such are handled on a case-by-case basis.
PROVISION FOR LOAN LOSSES. The provision for loan losses (the
"provision") is credited annually to an allowance for loan losses
account (the "allowance"), which is maintained at a level considered by
management to be adequate to absorb potential future losses.
-44-
Criteria such as customers' financial statements, financial ratios,
cash flow on business and income producing property, net worth,
collateral position and guarantees, as well as other outside economic
factors, are evaluated by management in determining whether loans should
be written off as uncollectible. In evaluating the adequacy of the
allowance for loan losses, management evaluates these same criteria to
determine whether specific loans should be considered in determining the
allowance for loan losses. In determining whether specific loans should
be considered in the allowance, management reviews the loan to determine
if there are weaknesses in current conditions or facts which cause the
possibility of loss. Management also must use historical loss
percentages on the loan portfolio as a whole, since the portfolio will
contain some loans that have weaknesses which have not been brought to
its attention. A loan is charged off when deemed uncollectible by
management or, if applicable, by the periodic reviews of the banking
regulatory agencies. Recoveries of previous charge-offs are added to
the allowance. The economic climate and other outside influences often
indicate to management that loan losses will increase or decrease, as
the case may be. Thus, if necessary, an estimate of unforeseen losses
is included as well as an allocation for specific loans.
__________________________________________________________________________
TABLE 6
SUMMARY OF LOAN LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
Loan loss experience is summarized as follows:
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1994 1993
<S> <C> <C>
Average loans outstanding $ 19,108 $ 18,275
Allowance at beginning of year $ 200 $ 184
Loan losses:
Commercial 3 6
Real estate mortgage - -
Installment 33 24
36 30
Recoveries:
Commercial - 6
Real estate mortgage - -
Installment 17 25
17 31
Net loan losses (recoveries) 19 (1)
Provision for loan losses 19 15
-45-
Allowance at end of year $ 200 $ 200
Ratio of net charge-offs to
average loans 0.10% -0.01%
Ratio of allowance for loan
losses to loans outstanding at
end of year 0.97 1.08
</TABLE>
The provision charged to operations in 1994 was $19,000, an
increase of $4,000 from 1993. SSBI experienced net loan losses of
$19,000 in 1994 and net loan recoveries of $1,000 in 1993.
__________________________________________________________________________
TABLE 7
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSS
(DOLLARS IN THOUSANDS)
The allowance for loan losses, in management's judgment, would be
allocated as follows to cover potential loan losses.
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
% OF % OF
ALLOWANCE LOANS ALLOWANCE LOANS
FOR LOAN TO TOTAL FOR LOAN TO TOTAL
LOSSES LOANS LOSSES LOANS
<S> <C> <C> <C> <C>
Balance at end of
period applicable to:
Commercial $ 50 7.94% $ 50 7.99%
Real estate mortgage 50 80.49 50 81.67
Installment 50 11.57 50 10.34
Total allocated $ 150 100.00% $ 150 100.00%
Unallocated: 50 - 50 -
Allowance at end of year $ 200 100.00% $ 200 100.00%
</TABLE>
__________________________________________________________________________
The allocation of the allowance in Table 7 is based upon management
estimates and is not intended to imply limitations on the usage of the
allowance or exactness of the specific amounts. The entire allowance is
available to absorb any future losses without regard to the categories
in which the charged-off loans are classified. The allowance for loan
losses is allocated to the individual loan categories by a specific
reserve for all classified loans plus a percentage of loans not
classified, based on historical losses.
-46-
OTHER INCOME. Other income is derived from deposit account fees
and fees for customer services. Total other income decreased $13,000,
or 6.1%, during 1994 compared to 1993.
OTHER EXPENSES. Other expenses include a variety of expenses, of
which the most significant are salaries and employee benefits, occupancy
expense, Federal Deposit Insurance Corporation ("FDIC") premiums,
professional fees, office supplies and state taxes. The "other"
category of other expenses includes such items as costs of general
insurance, postage, printing, marketing and advertising. These can be
reviewed in more detail in relation to other components of net income in
Table 8.
The largest component of other expense is the category of salaries
and benefits, which accounted for 57.0% and 56.9% of other expenses
during 1994 and 1993, respectively. During 1994, salaries and benefits
decreased nominally. All other expenses combined were virtually
unchanged from 1993, reflecting management's cost controls and only
nominal growth in assets.
INCOME TAXES. SSBI's effective federal income tax rate was 25.2%
and 18.5% for 1994 and 1993, respectively, as compared to the statutory
rate of 34% in each of these years. The change in the effective tax
rate reflects the change in the proportion of interest income exempt
from federal taxation, non-deductible interest expense and other
non-deductible expenses. In addition, the alternative minimum tax
credit carryforward in 1993 was approximately $80,000 higher than in
1994, significantly reducing federal income tax expense in 1993.
LIQUIDITY. In basic banking terms, liquidity relates to the
ability to convert assets into cash or to acquire deposit funds to meet
the cash withdrawal needs of depositors or to provide funds for
borrowers. In a more complex business environment, it also represents
the ability to fund expanding operations, allow for contingencies, and
provide investment opportunities.
SSBI manages its liquidity to meet the cash flow needs of
customers, such as borrowing and deposit withdrawals, while at the same
time striving to maximize the yield on investments and loans. To meet
these cash flow requirements and also to be able to expand service in
existing markets, there must be sufficient sources of liquid funds and
adequate capital. The major sources of liquidity are money market
instruments such as federal funds sold and that portion of the
securities portfolio that matures within one year. These sources are
supplemented by new deposit growth and by loans that are paid during the
period.
-47-
<TABLE>
TABLE 8
TWO-YEAR INCOME STATEMENT - TAXABLE EQUIVALENT BASIS<F1>
AS A PERCENTAGE OF AVERAGE TOTAL ASSETS
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994 1993
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans 2.63% 2.87%
Interest on securities 3.80 4.06
Interest on short-term investments - .08
Interest on federal funds sold .25 .17
Total interest income 6.68 7.18
INTEREST EXPENSE
Interest on deposits 2.25 2.66
Net interest income (FTE) 4.43 4.52
Provision for possible loan losses .03 .02
Net interest income after provision
for loan losses 4.40 4.50
OTHER INCOME
Service charges on deposit accounts .24 .24
Other .07 .09
Total other income .31 .33
OTHER EXPENSE
Salaries and employee benefits 1.55 1.60
Occupancy expense .37 .37
Professional fees .08 .07
FDIC insurance premiums .19 .18
Office supplies .07 .08
Michigan taxes .08 .08
Other .38 .43
Total other expense 2.72 2.81
INCOME BEFORE TAXES 1.99 2.02
Federal income taxes .45 .33
Taxable equivalent adjustment .21 .23
Net income 1.33% 1.46%
Average total assets $63,157 $61,315
-48-
<FN>
<F1> Taxable equivalent basis using a federal income tax rate of 34%.
</FN>
</TABLE>
Table 9 presents the maturity distribution of time certificates of
deposit of $100,000 or more at the end of 1994 and 1993. All time
deposits of $100,000 or more held by SSBI are in the form of time
certificates of deposit. At December 31, 1994, 60% of these deposits
mature in less than three months as compared to 83.2% at December 31,
1993. Time deposits of $100,000 or more as a percentage of total
deposits increased in 1994 to $2,230,000, or 4.1%, of total deposits at
December 31, 1994, from $1,782,000, or 3.3%, of total deposits at
December 31, 1993. SSBI historically has not utilized these deposits as
a source of liquidity. SSBI has and expects to continue to have more
than sufficient funds to meet the liquidity requirements of its
deposits.
__________________________________________________________________________
TABLE 9
MATURITIES OF TIME DEPOSITS OF $100,000 OR MORE
(DOLLARS IN THOUSANDS)
The following sets forth the maturity of time deposits of $100,000
or more:
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1993
<S> <C> <C> <C>
Maturing within 3 months $ 1,339 $ 1,482
After 3 but within 6 months 459 -
After 6 but within 12 months 132 -
After 12 months 300 300
Total $ 2,230 $ 1,782
</TABLE>
__________________________________________________________________________
There were no time deposits of $100,000 or more issued by foreign
offices at December 31, 1994.
Table 1 shows the daily average amounts of deposits with balances
greater than $100,000 and rates paid on such deposits for the periods
indicated therein.
Table 10 presents the book value, maturities and yields of
investment securities at December 31, 1994. This table shows that at
December 31, 1994, 18.9% of SSBI's securities mature in one year or
less.
-49-
U.S. Agency securities at December 31, 1994 and 1993 includes
approximately $11,397,000 and $11,000,000, respectively, in amortized
cost of structured notes. The interest on these securities is indexed
based on formulas tied to Treasury and LIBOR rates. The Company has the
ability and intent to hold these securities to maturity. Since full
realization of principal is expected, no ultimate loss is anticipated.
TABLE 10
INVESTMENT PORTFOLIO
(DOLLARS IN THOUSANDS)
The amortized cost and fair value of investment securities held to
maturity at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
<S> <C> <C> <C> <C>
U.S. Treasury and other
U.S. government agency securities $ 26,509 $ 25,021 $ 28,288 $ 28,828
Corporate and other debt securities 1,630 1,599 1,547 1,610
Obligations of states and political
subdivisions 6,786 6,607 3,396 3,619
Mortgage-backed securities and
collaterized mortgage obligations 1,611 1,575 2,473 2,513
TOTAL $ 36,536 $ 34,802 $ 35,704 $ 36,570
</TABLE>
The following indicates the expected maturities of investment
securities at December 31, 1994, and the weighted average yield for each
range of maturities:
<TABLE>
<CAPTION>
AMORTIZED COST MATURING IN
ONE AFTER ONE AFTER FIVE
YEAR THROUGH THROUGH OVER
OR LESS FIVE YEARS TEN YEARS TEN YEARS TOTAL
<S> <C> <C> <C> <C> <C>
U.S. Treasury and other
U.S. government agency securities<F1> $ 5,517 $ 14,403 $ 6,589 $ 0 $ 26,509
Obligations of states and political
subdivisions<F1> 1,176 2,078 3,316 216 6,786
Corporate and other debt securities<F1> 200 1,430 0 0 1,630
$ 6,893 $ 17,911 $ 9,905 $ 216 34,925
-50-
Mortgage-backed securities and
collaterized mortgage obligations<F1> 1,611
Total $ 36,536
Weighted average yield<F2> 7.83% 6.06% 5.39% 5.68% 6.25%
Full taxable equivalent yield<F3> 8.48 6.45 6.24 8.53 6.83
<FN>
The weighted average yields are calculated on the basis of the cost
and effective yields weighted for the scheduled maturity of each
security. Full taxable equivalent yields have been calculated using the
statutory tax rate of 34%.
<F1> The aggregate book value of the securities of no single issuer
except the U.S. government exceeds 10% of SSBI's shareholders'
equity.
<F2> The weighted average yields are calculated on the basis of book
value, effective interest rates and the scheduled maturities of
each issue.
<F3> Yields are computed on a taxable equivalent basis using a 34%
federal income tax rate.
</FN>
</TABLE>
__________________________________________________________________________
<TABLE>
TABLE 11
SHORT-TERM INVESTMENT ANALYSIS
(AS A PERCENT OF TOTAL ASSETS)
<CAPTION>
DECEMBER 31,
1994 1993
<S> <C> <C>
Interest-bearing deposits with banks 0.00% 0.00%
Federal funds sold 4.64 7.40
Investment securities maturing within 1 year 10.67 12.67
TOTAL 15.31% 20.07%
</TABLE>
__________________________________________________________________________
-51-
<TABLE>
TABLE 12
MATURITY ANALYSIS OF INVESTMENT SECURITIES
(AS A PERCENT OF TOTAL PORTFOLIO)
<CAPTION>
DECEMBER 31,
1994 1993
<S> <C> <C>
Under 1 year 18.87% 22.56%
Within 1 to 5 years 49.02 61.60
Within 5 to 10 years 27.11 15.59
Over 10 years 0.59 0.00
Mortgage-backed securities 4.41 0.25
TOTAL 100.00% 100.00%
</TABLE>
__________________________________________________________________________
CAPITAL RESOURCES. Capital provides a foundation for future growth
and expansion. Shareholders' equity was $9,000,000, or 13.93%, of total
assets at December 31, 1994; and $8,658,000, or 13.62%, of total assets
at December 31, 1993.
The adequacy of capital can be evaluated based on guidelines
established by banking regulatory agencies. The current method of
analyzing capital adequacy employs three principal ratio measurements:
capital to total assets, or "leverage," and two risk-based capital ratio
measures prescribed by the Federal Reserve Board. The risk-based
capital ratios are calculated using risk-adjusted assets based on
assigning standard risk weights to on- and off-balance sheet items. The
Tier 1 risk- based capital ratio is based only on SSBI's shareholders'
equity. The total risk-based capital ratio is based on SSBI's
shareholders' equity plus the allowance for loan losses, as adjusted
according to regulatory requirements.
The regulatory minimum capital to assets ratio, Tier 1 risk-based
capital ratio and total risk-based capital ratio are 4% and 8%,
respectively. SSBI's capital to assets ratios are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Capital to asset ratio 13.93% 13.62%
Tier 1 capital ratio 39.90 40.32
Total risk-based capital ratio 40.79 41.25
</TABLE>
SSBI meets the definition of a "well capitalized" institution set
forth by federal regulatory authorities.
-52-
__________________________________________________________________________
<TABLE>
TABLE 13
FINANCIAL RATIOS
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994 1993
<S> <C> <C> <C>
Return on average total assets 1.33% 1.46%
Return on average shareholder's equity 9.34 10.51
Average shareholders' equity to
average total assets 14.28 13.92
Cash dividends paid per share to net
income per share 59.38 44.59
</TABLE>
_______________________________________________________________________
SSBI'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR PERIODS ENDED SEPTEMBER 30, 1995 AND 1994
The following discussion and analysis is intended to cover the
significant factors affecting SSBI's balance sheets and income
statements for the periods ended September 30, 1995 and 1994. It
provides shareholders with a more comprehensive review of the
operating results and financial position that could be obtained from
an examination of the unaudited financial statements alone.
FINANCIAL CONDITION. There was a $4.7 million decrease in total
assets as of September 30, 1995 as compared to December 31, 1994. This
decrease is primarily related to a decline in deposits of $4.9 million
over this period, offset by an increase in equity due to earnings. This
decline in deposits is not attributed to any single event or activity
and was funded by maturities of securities held to maturity of $3.3
million.
Total loans increased approximately 3.3% in 1995 over year end 1994
amounts. The mix of loans changed somewhat, however, with commercial
loans declining approximately $.4 million and real estate and consumer
loans increasing $.612 million and $.453 million, respectively. Real
estate loans continued to represent approximately 80% of total loans.
The Bank adopted SFAS 114, as of January 1, 1995. The impact of
its adoption, however, was not material to SSBI's financial condition
or results of operations.
NET INCOME. For the nine months ended September 30, 1995, net
income was $646,000 as compared to $651,000 for the same period in 1994.
-53-
This modest decline of 1.0% is attributed to an increase of 2.2% in
expenses, other than interest, offset by a reduction in federal income
taxes.
BOOK VALUE PER SHARE. Book value per share at September 30, 1995
was $93.46. At December 31, 1994, the book value was $90.00 per share.
DIVIDENDS PER SHARE. SSBI paid dividends of $3.00 per share for
the nine months ended September 30, 1995, compared to $1.50 paid during
the same period the previous year.
RESULTS OF OPERATIONS. An analysis of the components affecting net
income for the nine months ended September 30, 1995 and 1994 is
facilitated by segregating amounts into categories of interest income,
interest expense, provision for possible loan losses, other income,
other expense and income tax expense. To improve the comparability of
the interest income component, interest income, shown in the following
table, is expressed on a fully taxable equivalent (FTE) basis. For this
purpose, tax exempt interest earned has been adjusted as if it had been
subject to federal income taxes at a rate of 34%.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1995 1994
(dollars in thousands)
<S> <C> <C> <C>
Interest income $ 3,085 $ 3,074
Plus taxable equivalent adjustment 149 104
Interest income (FTE) 3,234 3,178
Less interest expense 1,098 1,085
Net interest income (FTE) $ 2,136 $ 2,093
</TABLE>
As shown above, net interest income, on an FTE basis, increased by
$43,000 for the nine months ended September 30, 1995 versus the same
period in 1994.
SSBI recorded no provision for loan losses during the first nine
months of 1995 and 1994 since charge-offs were only $4,300 and $6,300
during the respective periods and there were no nonaccrual or
nonperforming loans at September 30, 1995 and 1994.
Other income declined by $6,000 or 4.2% in 1995 compared to 1994.
Other expense increased by $28,000 or 2.2% in 1995 compared to the
same period in 1994. The largest components of this change were an
increase in certain employee benefits, offset by a reduction in the FDIC
insurance premium.
-54-
SSBI's provision for federal income tax decreased $30,000 for the
nine months ended September 30, 1995 versus the nine months ended
September 30, 1994. The effective tax rate was 23.2% in 1995 and 25.7%
in 1994. The drop in this rate is the result of increased amounts of
tax exempt income in 1995 compared to 1994.
CAPITAL RESOURCES. Shareholders' equity was $9,346,000 or 15.6% of
total assets at September 30, 1995. SSBI's capital ratios continue to
be well above the minimum levels required by banking regulators.
OTHER. There are currently no trends, events or uncertainties that
management believes may reasonably be expected to have a material adverse
effect on SSBI's liquidity, capital resources or financial performance.
SUMMARY OF RECENT FINANCIAL INFORMATION (UNAUDITED)
The following unaudited tables present summary results of
operations of SSBI for the three months and year ended December 31,
1995, and for the comparable periods in the preceding year, and selected
balance sheet data as of December 31, 1995 and December 31, 1994. In
the opinion of SSBI, the unaudited figures for such periods and as of
such dates contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial condition and
results of operations of SSBI as of such dates and for such periods.
This information should be read in conjunction with the historical
financial information included elsewhere in this Prospectus and Proxy
Statement.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE FOR THE
QUARTER YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest income $ 980 $ 1,026 $ 4,065 $ 4,100
Net interest income 596 685 2,584 2,674
Provision for loan losses 12 19 12 19
Income before income taxes 121 250 961 1,127
Net income 113 191 758 842
Earnings per share (based on
100,000 shares) 1.13 1.91 7.58 8.42
</TABLE>
-55-
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
Total assets $ 62,278 $ 64,606
Total deposits 52,529 54,977
Total loans (net) 21,654 20,487
Shareholders' equity 9,358 9,000
Book value per share 93.58 90.00
</TABLE>
RESULTS OF OPERATIONS. Net income for SSBI for the fourth quarter
of 1995 decreased $78,000 to $113,000 from $191,000 in the fourth
quarter of 1994. For the full year, net income for 1995 was $758,000, a
decrease of $84,000 or 10.0% from $842,000 for the year 1994. Net
interest income decreased $90,000 in 1995 versus 1994 with substantially
all of the decrease occurring in the fourth quarter compared to a year
ago. For the full year, interest income was down $35,000 in 1995 and
interest expense was up $55,000 in 1995 compared to 1994.
Other expenses increased $70,000 in 1995 compared to 1994.
Substantially all of the increase occurred in the fourth quarter and
resulted from the recording of a post-retirement benefit obligation of
$35,000 and approximately $100,000 in legal and professional fees in
connection with the merger, offset by a $58,000 reduction in FDIC
insurance premiums.
FINANCIAL CONDITION. Assets increased $2.3 million during the
fourth quarter to $62.3 million at December 31, 1995 compared to $64.6
million a year earlier. In comparing year end 1995 to year end 1994,
there was a $5.0 million decrease in investment securities that was used
to fund a $1.2 million or 5.7% increase in loans, a $1.8 million
increase in cash equivalents and a $2.4 million or 4.5% decrease in
deposits. Asset quality remained strong through the end of the year.
-56-
SSBI CONSOLIDATED FINANCIAL STATEMENTS
STATE SAVINGS BANCORP, INC.
Caro, Michigan
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . 58
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS. . . . . . . . . . . . . . . . . . . 59
CONSOLIDATED STATEMENTS OF INCOME. . . . . . . . . . . . . . . . 61
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . . 63
CONSOLIDATED STATEMENTS OF CASH FLOWS. . . . . . . . . . . . . . 64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . 66
-57-
REPORT OF INDEPENDENT AUDITORS
Board of Directors
State Savings Bancorp, Inc.
Caro, Michigan
We have audited the accompanying consolidated balance sheet of State
Savings Bancorp, Inc. and its wholly-owned subsidiary as of December 31,
1994, and the related consolidated statements of income and
shareholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
State Savings Bancorp, Inc. and its wholly-owned subsidiary as of
December 31, 1994, and results of their operations and their cash flows
for the year then ended, in conformity with generally accepted
accounting principles.
/S/ CROWE, CHIZEK AND COMPANY LLP
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
October 20, 1995
-58-<TABLE>
STATE SAVINGS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
__________________________________________________________________________
SEPTEMBER 30, DECEMBER 31,
1995 1994 1993
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 2,164,774 $ 3,155,332 $ 3,427,209
Federal funds sold 1,900,000 3,000,000 4,700,000
Cash and cash equivalents 4,064,774 6,155,332 8,127,209
Securities held to maturity (fair value -
1995 - $32,730,305 (unaudited); 1994
- $34,802,025; 1993 - $36,569,598
(unaudited) (Note 2) 33,237,538 36,536,776 35,704,177
Loans (Note 3) 21,357,516 20,686,710 18,585,648
Allowance for loan losses (Note 4) (195,692) (200,000) (200,000)
21,161,824 20,486,710 18,385,648
Premises and equipment - net (Note 5) 629,173 695,547 552,231
Accrued income and other assets 801,252 731,665 784,074
$ 59,894,561 $ 64,606,030 $ 63,553,339
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits
Noninterest-bearing $ 4,271,583 $ 6,926,707 $ 6,053,620
Interest-bearing savings and time
(Note 6) 45,806,441 48,049,993 48,365,293
50,078,024 54,976,700 54,418,913
Accrued expenses and other liabilities 470,941 629,323 476,846
Total liabilities 50,548,965 55,606,023 54,895,759
Commitments and contingencies (Note 9)
Shareholders' equity
Common stock - $20 par value; 200,000
shares authorized; 100,000 issued and
outstanding 2,000,000 2,000,000 2,000,000
Paid-in capital 2,000,000 2,000,000 2,000,000
Retained earnings 5,345,596 5,000,007 4,657,580
9,345,596 9,000,007 8,657,580
-59-
$ 59,894,561 $ 64,606,030 $ 63,553,339
</TABLE>
________________________________________________________________________________
See accompanying notes to consolidated financial statements
-60-
<TABLE>
STATE SAVINGS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
__________________________________________________________________________
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
1995 1994 1994 1993 1992
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Interest income
Interest and fees on loans $ 1,350,298 $ 1,243,006 $ 1,668,331 $ 1,765,592 $ 1,974,717
Interest on securities held to
maturity
Taxable 1,299,471 1,489,250 1,988,875 2,093,307 2,032,600
Tax-exempt 288,979 200,772 283,343 267,359 334,603
Interest on federal funds sold 146,703 140,618 159,448 103,894 172,491
Interest on time deposits with
banks - - - 46,907 174,662
3,085,451 3,073,646 4,099,997 4,277,059 4,689,073
Interest expense
Interest on deposits 1,098,203 1,084,595 1,426,356 1,637,012 1,992,835
Net interest income 1,987,248 1,989,051 2,673,641 2,640,047 2,696,238
Provision for loan losses (Note 4) - - 18,546 14,944 49,193
Net interest income after
provision for loan losses 1,987,248 1,989,051 2,655,095 2,625,103 2,647,045
Other income
Service charges on deposit
accounts 109,954 112,882 150,228 149,212 144,518
Other income 29,898 33,503 42,975 56,543 48,462
139,852 146,385 193,203 205,755 192,980
Other expenses
Salaries and employee benefits
(Note 7) 795,610 758,604 981,366 984,968 974,560
Occupancy expense 178,048 169,120 233,789 230,475 211,105
FDIC Insurance premium 47,228 89,854 120,415 117,946 115,964
Professional fees 43,234 33,431 51,622 42,438 38,882
Office supplies 34,792 29,897 43,284 47,041 42,970
Michigan taxes 39,435 39,011 52,021 51,712 52,600
Other expense 148,213 138,364 238,884 255,021 261,869
1,286,560 1,258,481 1,721,381 1,729,601 1,697,950
-61-
Income before federal income taxes 840,540 876,955 1,126,917 1,101,257 1,142,075
Federal income tax expense (Note 8) 194,951 226,000 284,490 204,175 198,850
Net income $ 645,589 $ 650,955 $ 842,427 $ 897,082 $ 943,225
Earnings per share (Note 1) $ 6.46 $ 6.51 $ 8.42 $ 8.97 $ 9.43
</TABLE>
________________________________________________________________________________
See accompanying notes to consolidated financial statements
-62-
<TABLE>
STATE SAVINGS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
__________________________________________________________________________
TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C>
Balance, January 1, 1992
(unaudited) $ 2,000,000 $ 2,000,000 $ 3,592,273 $ 7,592,273
Net income (unaudited) - - 943,225 943,225
Cash dividends ($3.75 per share)
(unaudited) - - (375,000) (375,000)
Balance, January 1, 1993
(unaudited) 2,000,000 2,000,000 4,160,498 8,160,498
Net income (unaudited) - - 897,082 897,082
Cash dividends ($4.00 per share)
(unaudited) - - (400,000) (400,000)
Balance, December 31, 1993 2,000,000 2,000,000 4,657,580 8,657,580
Net income - - 842,427 842,427
Cash dividends ($5.00 per share) - - (500,000) (500,000)
Balance, December 31, 1994 2,000,000 2,000,000 5,000,007 9,000,007
Net income (unaudited) - - 645,589 645,589
Cash dividends ($3.00 per share)
(unaudited) - - (300,000) (300,000)
Balance, September 30, 1995
(unaudited) $ 2,000,000 $ 2,000,000 $ 5,345,596 $ 9,345,596
</TABLE>
________________________________________________________________________________
See accompanying notes to consolidated financial statements
-63-
<TABLE>
STATE SAVINGS BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
__________________________________________________________________________
NINE MONTHS YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
1995 1994 1994 1993 1992
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income $ 645,589 $ 650,955 $ 842,427 $ 897,082 $ 943,225
Adjustments to reconcile net income
to net cash from operating activities
Depreciation and amortization 54,171 49,680 76,051 71,296 71,692
Provision for loan losses - - 18,546 14,944 49,193
Net amortization (accretion)
on securities 148,415 490,950 248,939 73,573 (62,758)
Change in deferred taxes 42,127 (38,032) (20,064) (42,425) (27,714)
Change in accrued income and
other assets (57,385) (267,274) 47,825 61,232 152,573
Change in accrued expenses and
other liabilities (200,509) 143,296 172,541 (148,089) 46,414
Net cash from operating
activities 632,408 1,029,575 1,386,265 927,613 1,172,625
Cash flows from investing activities
Proceeds from maturities of securities
held to maturity 10,150,000 5,450,000 8,075,000 3,500,791 4,409,843
Purchases of securities held to maturity (7,229,297) (8,079,618) (10,617,769) (7,461,259) (7,281,765)
Principal paydowns on securities held
to maturity 230,121 789,066 1,461,231 - -
Net change in time deposits - - - 1,000,000 2,835,109
Net change in loans (675,114) (1,288,906) (2,119,608) (242,105) 99,327
Premises and equipment expenditures - (195,583) (214,783) (98,651) (18,387)
Net cash from investing activities 2,475,710 (3,325,041) (3,415,929) (3,301,224) 44,127
Cash flows from financing activities
Net change in deposits (4,898,676) (1,322,809) 557,787 1,263,527 719,477
Dividends paid (300,000) (150,000) (500,000) (400,000) (375,000)
Net cash from financing activities (5,198,676) (1,472,809) 57,787 863,527 344,477
Net change in cash and cash equivalents (2,090,558) (3,768,275) (1,971,877) (1,510,084) 1,561,229
Cash and cash equivalents at beginning
of year 6,155,332 8,127,209 8,127,209 9,637,293 8,076,064
-64-
Cash and cash equivalents at end of year $ 4,064,774 $ 4,358,934 $ 6,155,332 $ 8,127,209 $ 9,637,293
Supplemental disclosures of cash flow
information
Cash paid during the year for
Interest $ 1,085,216 $ 1,107,792 $ 1,444,946 $ 1,661,051 $ 2,081,936
Income taxes 313,732 161,000 220,000 319,250 184,518
</TABLE>
________________________________________________________________________________
See accompanying notes to consolidated financial statements
-65-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include
the accounts of State Savings Bancorp, Inc. (Company) and its
wholly-owned subsidiary, State Savings Bank of Caro (Bank), after
elimination of all significant inter-company transactions and
accounts.
The financial statements of the Company as of and for the nine months
ended September 30, 1995 and 1994 reflect all adjustments, consisting
of normal recurring adjustments, which are, in the opinion of
management, necessary for the fair statement of results for the
interim periods. The results of the interim period ended September
30, 1995 are not necessarily indicative of the results expected for
the fiscal year ended December 31, 1995.
STATEMENT OF CASH FLOWS: For purposes of this statement, cash and
cash equivalents include cash on hand, demand deposits due from banks
and federal funds sold. Generally, federal funds are sold for one-day
periods. The Company reports net cash flows for customer loan
transactions and deposit transactions.
SECURITIES HELD TO MATURITY: Effective January 1, 1994, the Company
adopted Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (FAS
115). In adopting FAS 115, all securities have been identified as
held to maturity. Securities held to maturity are those securities
which the Company has the ability and intent to hold to maturity.
Securities held to maturity are stated at cost, adjusted for
amortization of premium and accretion of discount, both computed on
the level yield method.
INTEREST AND FEES ON LOANS: Income from real estate, commercial and
installment loans is accrued over the term of the loans based on the
amount of principal outstanding. The accrual of interest is
discontinued when management believes serious doubt exists as to the
collectibility of the interest or principal.
Loan origination fees and related costs are recognized over the life
of the loan as an adjustment of yield.
______________________________________________________________________
(Continued)
-66-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses and the
annual provision charged to expense are determined based upon numerous
factors affecting collectibility. These factors include the current
and future financial position of the borrower, the estimated market
value of any collateral, guarantees, the Bank's position versus other
creditors, general economic conditions and past loan loss experience.
Management periodically reviews the loan portfolio to identify
potential problem loans. Judgments as to the probability of loss and
the amount of loss are formed on individual loans and on various
aggregate bases. After considering these numerous factors, management
determines its estimate of an adequate allowance which will reasonably
provide for anticipated loan losses.
Statements of Financial Accounting Standards No. 114 and No. 118 were
adopted at January 1, 1995. Under these standards, loans considered
to be impaired are reduced to the present value of expected future
cash flows or to the fair value of collateral, by allocating a portion
of the allowance for loan losses to such loans. If these allocations
cause the allowance for loan losses to require an increase, such
increase is reported as part of the provision for loan losses. The
effect of adopting these standards was not material to the Company's
consolidated financial position.
Beginning in 1995, for impairment recognized in accordance with SFAS
114, the entire change in present value of expected cash flows or
current collateral value is reported as bad debt expense in the same
manner in which impairment initially was recognized or as a reduction
in the amount of bad debt expense that otherwise would be reported.
A loan is charged off when deemed uncollectible by management or, if
applicable, by the periodic reviews of the banking regulatory
agencies. Recoveries of previous charge-offs are added to the
allowance.
PREMISES AND EQUIPMENT: Premises and equipment are stated at cost,
less accumulated depreciation. Depreciation is computed on both the
straight-line and accelerated methods over the estimated useful lives
______________________________________________________________________
(Continued)
-67-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of the assets. Maintenance and repairs are expensed and major
improvements are capitalized.
INCOME TAXES: Beginning in 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes
(FAS 109). The Company records income tax expense based on the amount
of taxes due on its tax return plus deferred taxes computed based on
the expected future tax consequences of temporary differences between
the carrying amounts and tax bases of assets and liabilities, using
enacted tax rates. Previously, the Company computed deferred taxes
for the tax effects of timing differences between financial reporting
and tax return income. The effect of the adoption of FAS 109 as of
January 1, 1993 did not have a material impact on the financial
statements.
EARNINGS PER SHARE: Earnings per common share are computed based on
the weighted average shares outstanding. The number of shares used in
the computation of earnings per share was 100,000 for all periods
presented.
NOTE 2 - SECURITIES HELD TO MATURITY
The amortized cost and fair value of securities held to maturity as of
the balance sheet dates were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
SEPTEMBER 30, 1995 AMORTIZED UNREALIZED UNREALIZED FAIR
(UNAUDITED) COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 1,003,949 $ 9,488 $ - $ 1,013,437
U.S. Agency securities 22,291,201 59,285 (751,188) 21,599,298
Obligations of states and
political subdivisions 7,647,092 154,526 (22,096) 7,779,522
Corporate securities 919,189 17,798 (427) 936,560
Mortgage-backed securities 1,376,107 29,916 (4,535) 1,401,488
$ 33,237,538 $ 271,013 $ (778,246) $ 32,730,305
</TABLE>
______________________________________________________________________
(Continued)
-68-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 2 - SECURITIES HELD TO MATURITY (CONTINUED)
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1994 COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 2,006,741 $ - $ (31,429) $ 1,975,312
U.S. Agency securities 24,502,695 16,763 (1,473,384) 23,046,074
Obligations of states and
political subdivisions 6,785,712 33,614 (212,333) 6,606,993
Corporate securities 1,630,264 - (31,669) 1,598,595
Mortgage-backed securities 1,611,364 - (36,313) 1,575,051
$ 36,536,776 $ 50,377 $(1,785,128) $ 34,802,025
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
DECEMBER 31, 1993 AMORTIZED UNREALIZED UNREALIZED FAIR
(UNAUDITED) COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
U.S. Treasury securities $ 2,511,875 $ 81,874 $ - $ 2,593,749
U.S. Agency securities 25,776,357 492,736 (34,950) 26,234,143
Obligations of states and
political subdivisions 3,395,615 223,158 - 3,618,773
Corporate securities 1,547,362 62,546 - 1,609,908
Mortgage-backed securities 2,472,968 41,513 (1,456) 2,513,025
$ 35,704,177 $ 901,827 $ (36,406) $ 36,569,598
</TABLE>
There were no sales of securities for the nine months ended September
30, 1995 or during 1994, 1993 or 1992.
U.S. Agency securities includes the amortized cost and fair value of
structured notes as follows:
______________________________________________________________________
(Continued)
-69-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 2 - SECURITIES HELD TO MATURITY (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
<S> <C> <C>
September 30, 1995 (unaudited) $ 10,340,000 $ 9,653,000
December 31, 1994 11,397,000 10,376,000
December 31, 1993 11,000,000 11,022,000
</TABLE>
The interest on these securities is indexed based on formulas tied to
Treasury and LIBOR rates. The Company has the ability and intent to
hold these securities to maturity. Since full realization of
principal is expected, no ultimate loss is anticipated.
The amortized cost and fair value of securities held to maturity at
September 30, 1995 and December 31, 1994, by contractual maturity, are
shown below. Expected maturities may differ from contractual
maturities because borrowers may have the right to all or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995
(UNAUDITED)
AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less $ 2,316,381 $ 2,340,470
Due after one year through five years 19,372,728 18,960,133
Due after five years through ten years 9,829,299 9,673,581
Due after ten years 343,023 354,633
31,861,431 31,328,817
Mortgage-backed securities 1,376,107 1,401,488
$ 33,237,538 $ 32,730,305
</TABLE>
______________________________________________________________________
(Continued)
-70-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 2 - SECURITIES HELD TO MATURITY (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1994
AMORTIZED FAIR
COST VALUE
<S> <C> <C>
Due in one year or less $ 6,893,172 $ 6,910,843
Due after one year through five years 17,911,446 17,212,350
Due after five years through ten years 9,904,527 8,896,710
Due after ten years 216,267 207,071
34,925,412 33,226,974
Mortgage-backed securities 1,611,364 1,575,051
$ 36,536,776 $ 34,802,025
</TABLE>
Securities with a carrying value of $500,000 were pledged to secure
public deposits at September 30, 1995 and December 31, 1994.
NOTE 3 - LOANS
Loans are comprised of the following classifications:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994 1993
(unaudited) (unaudited)
<S> <C> <C> <C>
Commercial $ 1,248,071 $ 1,641,692 $ 1,484,896
Real estate 17,262,514 16,650,901 15,179,266
Consumer 2,846,931 2,394,117 1,921,486
$ 21,357,516 $ 20,686,710 $ 18,585,648
</TABLE>
Loans on which the accrual of interest has been discontinued, troubled
debt restructurings and those loans past due 90 days or more amounted
to $49,765, $71,978 and $83,173 as of September 30, 1995 and December
31, 1994 and 1993, respectively.
______________________________________________________________________
(Continued)
-71-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 3 - LOANS (CONTINUED)
Certain directors and executive officers, including their immediate
families and companies in which they have an interest, have engaged in
banking transactions with the Company. Loans to such borrowers
totaled approximately $73,000, $76,000 and $83,000 at September 30,
1995, December 31, 1994 and 1993, respectively.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses is as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
1995 1994 1994 1993 1992
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Balance - January 1 $ 200,000 $ 200,000 $ 200,000 $ 184,025 $ 200,764
Provision charged to expense - - 18,546 14,944 49,193
Loans charged off, net
of recoveries (4,308) (6,302) (18,546) 1,031 (65,932)
Balance - end of period $ 195,692 $ 193,698 $ 200,000 $ 200,000 $ 184,025
</TABLE>
There were no impaired loans during the nine months ended September 30, 1995
requiring recognition in conformity with SFAS 114.
______________________________________________________________________
(Continued)
-72-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment as presented in the consolidated balance sheet
is comprised of the following classifications:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994 1993
(unaudited) (unaudited)
<S> <C> <C> <C>
Land $ 12,500 $ 12,500 $ 12,500
Buildings and improvements 1,080,471 1,080,471 917,410
Furniture and equipment 863,383 875,586 823,878
1,956,354 1,968,557 1,753,788
Less accumulated depreciation (1,327,181) (1,273,010) (1,201,557)
$ 629,173 $ 695,547 $ 552,231
</TABLE>
NOTE 6 - DEPOSITS
The aggregate amount of time certificates of deposit of $100,000 or
more totaled $1,675,000 at September 30, 1995 and $2,230,460 at
December 31, 1994 and $1,782,000 at December 31, 1993.
NOTE 7 - PENSION PLAN
The Bank has a defined benefit, noncontributory pension plan which
provides retirement benefits for substantially all employees. The
funding policy is to contribute annually the amount sufficient to meet
the minimum funding requirements set forth in the Employee Retirement
Income Security Act of 1974. The plan assets are invested primarily
in common stock mutual funds, a bond mutual fund and a money market
fund.
The following table sets forth the plan's funded status and the amount
included in the consolidated balance sheet:
______________________________________________________________________
(Continued)
-73-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 7 - PENSION PLAN (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994 1993
(unaudited) (unaudited)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested $ 1,571,454 $ 1,431,648 $ 1,388,460
Non-vested 12,245 11,156 11,260
$ 1,583,699 $ 1,442,804 $ 1,399,720
</TABLE>
______________________________________________________________________
(Continued)
-74-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 7 - PENSION PLAN (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994 1993
(unaudited) (unaudited)
<S> <C> <C> <C>
Projected benefit obligation for service
rendered to date $ 2,067,447 $ 1,948,012 $ 1,925,909
Plan assets at fair value 2,700,506 2,306,657 2,448,701
Plan assets in excess of projected
benefit obligation 633,059 358,645 522,792
Unrecognized net loss (gain) (142,393) 161,543 34,543
Unrecognized prior service cost 13,448 14,055 14,865
Unrecognized transition asset (517,212) (540,565) (571,703)
(Accrued) prepaid pension cost $ (13,098) $ (6,322) $ 497
Net pension cost includes the following:
Service cost - benefits earned during
the year $ 63,590 $ 88,423 $ 73,026
Interest cost on projected benefit
obligation 114,495 41,795 132,921
Actual return on plan assets (136,133) 71,414 (291,377)
Net amortization and deferral (22,747) (294,813) 84,933
Net pension cost $ 19,205 $ 6,819 $ (497)
</TABLE>
The weighted average discount rate and rate of increase in future
compensation used in determining the actuarial present value of the
projected benefit obligation were 8% and 5% at September 30, 1995, and
December 31 1994 and 7.5% and 5% in 1993 and 1992. The expected
long-term rate of return on plan assets was 8% for all years
presented.
Pension expense for 1992 was $19,209.
______________________________________________________________________
(Continued)
-75-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 8 - INCOME TAXES
Income tax expense and related consolidated balance sheet accounts are
as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
1995 1994 1994 1993 1992
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Current expense $ 152,824 $ 223,458 $ 304,554 $ 246,609 $ 226,564
Deferred benefit 42,127 2,542 (20,064) (42,434) (27,714)
$ 194,951 $ 226,000 $ 284,490 $ 204,175 $ 198,850
Deferred tax liabilities $ 29,764 $ 31,570 $ 31,805 $ 49,315 $ 90,256
Deferred tax assets 46,630 24,277 6,544 3,990 2,496
</TABLE>
No valuation allowance was provided on deferred tax assets.
Temporary differences between financial statements and tax returns are
due to accretion on investments, depreciation, recognition of loan
fees, allowance for loan losses and accrual-to-cash adjustments.
The difference between the financial statement tax provision and
amounts computed by applying the federal income tax rate to pretax
income is reconciled as follows:
______________________________________________________________________
(Continued)
-76-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 8 - INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
1995 1994 1994 1993 1992
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Income tax computed at the
federal tax rate (34%) $ 285,784 $ 299,334 $ 383,152 $ 374,427 $ 388,305
Tax effect of
Income from tax-exempt
securities and loans (89,719) (62,822) (88,861) (88,800) (106,878)
Alternative minimum tax credit - (8,815) (11,753) (97,423) (81,609)
Other (1,114) (1,697) 1,952 15,971 (968)
$ 194,951 $ 226,000 $ 284,490 $ 204,175 $ 198,850
</TABLE>
NOTE 9 - COMMITMENTS, CONTINGENT LIABILITIES AND CONCENTRATIONS
OF CREDIT
The Bank grants commercial, installment, and residential loans to
customers primarily in the Tuscola County, Michigan, area.
Substantially all loans are secured by specific items of collateral,
including real estate, business assets and consumer assets.
Noninterest-bearing deposits and federal funds sold which were held at
NBD Bank, N.A. totaled $3,352,000 at September 30, 1995, $5,361,000 at
December 31, 1994 and $5,404,000 at December 31, 1993.
The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet financing needs of
customers. Since many commitments to extend credit expire without
being used, the amounts below do not necessarily represent future cash
commitments. These financial instruments include commitments to
extend credit, and unused lines of credit and are summarized as
follows:
______________________________________________________________________
(Continued)
-77-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 9 - COMMITMENTS, CONTINGENT LIABILITIES AND CONCENTRATIONS
OF CREDIT (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994 1993
(unaudited) (unaudited)
<S> <C> <C> <C>
Financial instruments whose contract
amounts represent credit risk
Unused lines of credit $ 200,000 $ 147,000 $ 160,000
Commitments to extend credit 610,000 346,000 107,000
</TABLE>
All commitments to extend credit are fixed rate. These commitments
are due to expire within 30 - 60 days of issuance and have rates
ranging from 7.50% - 8.50%.
The credit risk amounts represent the maximum accounting loss that
would be recognized at the reporting date if counterparties failed
completely to perform as contracted and any collateral or security
proved to be of no value. State Savings Bancorp, Inc. has experienced
little difficulty in accessing collateral when necessary. The amounts
of credit shown, therefore, greatly exceed expected losses which are
included in the allowance for loan losses.
The Company is subject to litigation and claims arising in the normal
course of business. Management, after consultation with legal counsel,
believes that the liabilities, if any, arising from such litigation
and claims will not be material to the Company's financial position.
NOTE 10 - CAPITAL MATTERS
The Company is required to maintain minimum amounts of capital to
total "risk weighted" assets, as defined by the banking regulators.
At September 30, 1995 and December 31, 1994, the Company is required
to have minimum Tier I and total risk-based capital ratios of 4% and
8%, respectively. The Company's actual Tier 1 and total risk-based
credit ratios exceeded the required amounts as of September 30, 1995
______________________________________________________________________
(Continued)
-78-
STATE SAVINGS BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for September 30, 1995 and 1994 and December 31, 1993 and
1992 is unaudited)
______________________________________________________________________
NOTE 10 - CAPITAL MATTERS (CONTINUED)
and December 31, 1994. The Company's leverage ratio (Tier I capital
to total assets) as of these dates also exceeded minimum requirements.
The ability of the Company to pay dividends to its stockholders is
dependent upon dividends paid to the Company by its subsidiary Bank.
The Bank is subject to certain statutory and regulatory restrictions
on the amount they may pay as dividends. Certain of the Banks capital
is not available for the payment of dividends. Capital available for
the payment of dividends as of September 30, 1995 and December 31,
1994 approximated $5,331,000 and $4,994,000, respectively.
NOTE 11 - PENDING MERGER
In October 1995, State Savings Bancorp, Inc. signed a definitive
agreement for Chemical Financial Corporation (CFI) to acquire the
Company. The agreement calls for the shareholders to receive five (5)
shares of CFI common stock for each share of Company stock owned. The
transaction will be structured as a tax-free exchange and will be
accounted for under the pooling-of-interest method. The transaction
is expected to be consummated in 1996.
______________________________________________________________________
(Continued)
-79-
VOTING AND MANAGEMENT INFORMATION
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS OF SSBI
Holders of record of shares of SSBI Common Stock at the close of
business on February 13, 1996, will be entitled to vote at the
special meeting of shareholders on April 1, 1996, and any
adjournment of that meeting. As of January 1, 1996, there were
100,000 shares of SSBI Common Stock issued and outstanding. Each
share of SSBI Common Stock is entitled to one vote on each matter
presented for shareholder action.
The following table sets forth information concerning the number
of shares of SSBI Common Stock held as of January 1, 1996, by
each shareholder who is known to SSBI management to have been the
beneficial owner of more than 5% of the outstanding shares of SSBI
Common Stock, $20 par value, as of that date:
<TABLE>
<CAPTION>
CHEMICAL COMMON
STOCK TO BE RECEIVED
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP<F1> IN THE MERGER
SOLE SHARED
VOTING VOTING OR TOTAL TOTAL PERCENT
NAME AND ADDRESS OF AND DISPOSI- DISPOSITIVE BENEFICIAL PERCENT FOLLOWING OF
BENEFICIAL OWNER TIVE POWER POWER<F2> OWNERSHIP OF CLASS MERGER<F3> CLASS<F4>
<S> <C> <C> <C> <C> <C> <C>
F. Douglas Campbell
1924 Boulder Drive
Ann Arbor, Michigan 48104 9,671 3,443 13,114 13.11% 65,570 *
Carleton A. Palmer
4058 Mushroom Road
Deford, Michigan 48729 4,540 4,540 9,080 9.08% 45,400 *
Frances Hatch
1273 Circle Drive
Bad Axe, Michigan 48413 2,254 6,556 8,810 8.81% 44,050 *
_________________________
<FN>
* Less than 1%
</FN>
</TABLE>
(Footnotes begin on page 62.)
-80-
The following table shows certain information concerning the
number of shares of SSBI Common Stock held as of January 1,
1996, by each of SSBI's directors, each of the named executive
officers, and all of SSBI's directors and executive officers as a
group:
<TABLE>
<CAPTION>
CHEMICAL COMMON
STOCK TO BE RECEIVED
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP<F1> IN THE MERGER
SOLE SHARED
NAME OF VOTING VOTING OR TOTAL TOTAL PERCENT
BENEFICIAL AND DISPOSI- DISPOSITIVE BENEFICIAL PERCENT FOLLOWING OF
OWNER TIVE POWER POWER<F2> OWNERSHIP OF CLASS MERGER<F3> CLASS<F4>
<S> <C> <C> <C> <C> <C> <C>
Richard C. Biddinger 100 740 840 * 4,200 *
F. Douglas Campbell 9,671 3,443 13,114 13.11% 65,570 *
Gary J. Crews 370 - 370 * 1,850 *
Carl O. Holmes 1,981 - 1,981 1.98% 9,905 *
Michael Laethem 160 894 1,054 1.05% 5,270 *
Carleton A. Palmer 4,540 4,540 9,080 9.08% 45,400 *
All directors and
executive officers
as a group 16,822 9,617 26,439 26.44% 132,195 1.36%
________________________________
<FN>
* Less than 1%
<F1> The numbers of shares stated are based on information furnished
by each person listed and include shares personally owned of
record by that person and shares which under applicable
regulations are deemed to be otherwise beneficially owned by that
person. Under these regulations, a beneficial owner of a
security includes any person who, directly or indirectly, through
any contract, arrangement, understanding, relationship or
otherwise has or shares voting power or dispositive power with
respect to the security. Voting power includes the power to vote
or to direct the voting of the security. Dispositive power
includes the power to dispose or to direct the disposition of the
security. A person will also be considered the beneficial owner
of a security if the person has a right to acquire beneficial
ownership of the security within 60 days.
<F2> These numbers include shares over which the listed person is
legally entitled to share voting or dispositive power by reason
-81-
of joint ownership, trust, or other contract or property right,
and shares held by spouses and children over whom the listed
person may have substantial influence by reason of relationship.
<F3> This column reflects the number of shares of Chemical Common
Stock to be issued to the specified person in exchange for the
number of shares of SSBI Common Stock shown in the "Total
Beneficial Ownership" column for such person, based upon an
Exchange Rate of 5 shares of Chemical Common Stock for each share
of SSBI Common Stock.
<F4> This column reflects the percentage of the outstanding shares of
Chemical Common Stock which the specified person will hold
following consummation of the Merger. These percentages were
computed with reference to a total of 9,687,957 shares of
Chemical Common Stock outstanding, representing the sum of
9,187,957 shares outstanding as of December 1, 1995, and
500,000 shares to be issued in the Merger. This computation
does not take fractional shares into account.
</FN>
</TABLE>
INTERESTS OF CERTAIN PERSONS
As of January 1, 1996, executive officers and directors of
SSBI are or may be deemed to be the beneficial owners of a total of
26,439 shares, or 26.44%, of the outstanding shares of SSBI Common
Stock. (See "Voting and Management Information--Voting Securities and
Principal Shareholders of SSBI.")
In addition, each of the directors and certain other persons who
may be deemed to be Affiliates of SSBI have executed letter agreements
with Chemical whereby each such person has agreed to use his or her
best efforts to cause the Plan of Merger to be approved by SSBI's
shareholders and to cause the Merger to be consummated.
As of the date of this Prospectus and Proxy Statement, no director
or executive officer of SSBI owns shares of Chemical Common Stock.
Chemical Bank, as trustee for the Chemical Financial Corporation Pension
Plan, holds 454 shares of SSBI Common Stock. No director or executive
officer of Chemical has any personal interest in the Merger other than
by reason of his or her holdings of Chemical Common Stock. Except as
otherwise described in this Prospectus and Proxy Statement, there are
no material relationships among the directors, executive officers and
principal shareholders of SSBI and the directors, executive officers and
principal shareholders of Chemical.
-82-
VOTE REQUIRED FOR APPROVAL
An affirmative vote of the shareholders holding two-thirds of the
outstanding shares of SSBI Common Stock is required to approve the
Plan of Merger. For purposes of counting votes on approval of the
Plan of Merger, abstentions, broker non-votes and other shares not
voted will be counted as voted against approval of the Plan of Merger.
GENERAL INFORMATION
SHAREHOLDER PROPOSALS
If the shareholders of SSBI approve the Plan of Merger and
Chemical and SSBI consummate the Merger, SSBI shareholders will become
Chemical shareholders and there will be no annual meeting of SSBI
shareholders in 1997.
EXPERTS
Certain legal matters in connection with the proposed Merger will
be passed upon for Chemical by its counsel, Warner Norcross & Judd
LLP, of Grand Rapids, Michigan.
The financial statements of SSBI at and for the year ended
December 31, 1994, appearing in this Prospectus and Proxy Statement
have been audited by Crowe, Chizek and Company LLP, independent auditors,
as set forth in their report thereon appearing elsewhere herein and in
the Registration Statement with respect to the shares to be issued,
and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Chemical Financial
Corporation and its subsidiaries incorporated by reference from
Chemical Financial Corporation's Annual Report on Form 10-K for the
year ended December 31, 1994, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
In connection with its role as financial adviser to SSBI, Austin
has rendered a fairness opinion and will receive a fee of $30,000, plus
a contingent amount equal to .625% of the transaction value when the
Merger is consummated. SSBI estimates that total fees under this
arrangement will be approximately $155,000, plus reimbursement for all
-83-
reasonable expenses. SSBI has agreed to indemnify Austin against certain
liabilities, including certain liabilities which may arise under the
securities laws.
SOURCES OF INFORMATION
The information contained in this Prospectus and Proxy Statement
relating to Chemical and SSBI has been furnished by each of them for
inclusion herein. Chemical has relied upon SSBI with respect to the
accuracy and completeness of the information concerning SSBI. SSBI
has relied upon Chemical with respect to the accuracy and completeness
of the information concerning Chemical.
-84-
APPENDIX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
BETWEEN
STATE SAVINGS BANCORP INC.
AND
CHEMICAL FINANCIAL CORPORATION
Dated as of October 31, 1995
TABLE OF CONTENTS
PAGE
ARTICLE I - THE TRANSACTION. . . . . . . . . . . . . . . . . . . . . . .A-2
1.1 APPROVAL OF PLAN OF MERGER. . . . . . . . . . . . . . . . . .A-2
1.2 THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . .A-2
1.3 EFFECTIVE TIME OF THE MERGER. . . . . . . . . . . . . . . . .A-2
1.4 MERGER OF SSBI WITH AND INTO CHEMICAL . . . . . . . . . . . .A-2
1.5 EFFECT OF THE MERGER. . . . . . . . . . . . . . . . . . . . .A-3
1.6 ADDITIONAL ACTIONS. . . . . . . . . . . . . . . . . . . . . .A-3
1.7 SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . .A-3
ARTICLE II - CONVERSION AND EXCHANGE OF SHARES . . . . . . . . . . . . .A-4
2.1 CONVERSION OF SHARES. . . . . . . . . . . . . . . . . . . . .A-4
2.2 UPSET PROVISIONS. . . . . . . . . . . . . . . . . . . . . . .A-4
2.3 NO FRACTIONAL SECURITIES. . . . . . . . . . . . . . . . . . .A-6
2.4 ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . .A-6
2.5 EQUITY ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . .A-8
2.6 SURRENDER OF OLD CERTIFICATES AND DISTRIBUTION OF
CHEMICAL COMMON STOCK . . . . . . . . . . . . . . . . . . . A-10
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF CHEMICAL . . . . . . . A-11
3.1 AUTHORIZATION, NO CONFLICTS, ETC. . . . . . . . . . . . . . A-11
3.2 ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . A-12
3.3 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . A-13
3.4 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . A-13
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. . . . . . . . . . . . . A-14
3.6 ABSENCE OF MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . A-14
3.7 CHEMICAL COMMON STOCK . . . . . . . . . . . . . . . . . . . A-14
3.8 SEC AND OTHER FILINGS . . . . . . . . . . . . . . . . . . . A-14
3.9 REGISTRATION STATEMENT, ETC.. . . . . . . . . . . . . . . . A-14
3.10 TRUE AND COMPLETE INFORMATION . . . . . . . . . . . . . . . A-15
3.11 TRUTH AND COMPLETENESS OF REPRESENTATIONS AND WARRANTIES. . A-15
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SSBI. . . . . . . . . . A-16
4.1 AUTHORIZATION, NO CONFLICTS, ETC. . . . . . . . . . . . . . A-16
4.2 ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . A-17
4.3 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . A-17
4.4 CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . A-18
4.5 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . A-19
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. . . . . . . . . . . . . A-19
A-i
4.7 ABSENCE OF MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . A-19
4.8 ABSENCE OF LITIGATION . . . . . . . . . . . . . . . . . . . A-19
4.9 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . A-20
4.10 ABSENCE OF DEFAULTS UNDER CONTRACTS . . . . . . . . . . . . A-20
4.11 FILINGS . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
4.12 REGISTRATION STATEMENT, ETC.. . . . . . . . . . . . . . . . A-21
4.13 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . A-21
4.14 TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . . . A-22
4.16 CONDITION OF REAL PROPERTY. . . . . . . . . . . . . . . . . A-22
4.17 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
4.18 LICENSES, PERMITS, ETC. . . . . . . . . . . . . . . . . . . A-23
4.19 CERTAIN EMPLOYMENT MATTERS. . . . . . . . . . . . . . . . . A-23
4.20 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . A-24
4.21 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . A-26
4.22 INVESTMENT BANKERS AND BROKERS. . . . . . . . . . . . . . . A-27
4.23 RELATED PERSONS . . . . . . . . . . . . . . . . . . . . . . A-28
4.24 CHANGE IN BUSINESS RELATIONSHIPS. . . . . . . . . . . . . . A-28
4.25 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . A-28
4.26 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . A-28
4.27 LOAN GUARANTEES . . . . . . . . . . . . . . . . . . . . . . A-28
4.28 EVENTS SINCE DECEMBER 31, 1994. . . . . . . . . . . . . . . A-29
4.29 RESERVE FOR LOAN LOSSES . . . . . . . . . . . . . . . . . . A-29
4.30 LOAN ORIGINATION AND SERVICING. . . . . . . . . . . . . . . A-30
4.31 PUBLIC COMMUNICATIONS . . . . . . . . . . . . . . . . . . . A-30
4.32 NO INSIDER TRADING. . . . . . . . . . . . . . . . . . . . . A-30
4.33 CONTINUITY OF INTEREST. . . . . . . . . . . . . . . . . . . A-30
4.34 POOLING OF INTERESTS ACCOUNTING QUALIFICATION . . . . . . . A-30
4.35 TRUE AND COMPLETE INFORMATION . . . . . . . . . . . . . . . A-31
4.36 TRUTH AND COMPLETENESS OF REPRESENTATIONS AND WARRANTIES. . A-31
ARTICLE V - CERTAIN COVENANTS. . . . . . . . . . . . . . . . . . . . . A-31
5.1 SSBI DISCLOSURE STATEMENT . . . . . . . . . . . . . . . . . A-31
5.2 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME OF THE
MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
5.3 REGULAR DIVIDENDS . . . . . . . . . . . . . . . . . . . . . A-38
5.4 DATA PROCESSING ARRANGEMENTS. . . . . . . . . . . . . . . . A-39
5.5 AFFILIATES. . . . . . . . . . . . . . . . . . . . . . . . . A-39
5.6 MAINTENANCE OF INSURANCE. . . . . . . . . . . . . . . . . . A-39
5.7 COMPETING PROPOSALS . . . . . . . . . . . . . . . . . . . . A-40
5.8 LOAN LOSS RESERVE . . . . . . . . . . . . . . . . . . . . . A-40
5.9 AUDIT OF FINANCIAL STATEMENTS . . . . . . . . . . . . . . . A-40
ARTICLE VI - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . A-41
6.1 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . A-41
6.2 OTHER FILINGS . . . . . . . . . . . . . . . . . . . . . . . A-41
A-ii
6.3 PRESS RELEASES. . . . . . . . . . . . . . . . . . . . . . . A-41
6.4 MISCELLANEOUS AGREEMENTS AND CONSENTS . . . . . . . . . . . A-41
6.5 EXCHANGE OF FINANCIAL INFORMATION . . . . . . . . . . . . . A-41
6.6 INVESTIGATION . . . . . . . . . . . . . . . . . . . . . . . A-42
6.7 ENVIRONMENTAL INVESTIGATION . . . . . . . . . . . . . . . . A-44
6.8 POOLING QUALIFICATION . . . . . . . . . . . . . . . . . . . A-45
ARTICLE VII - CONDITIONS PRECEDENT TO CHEMICAL'S OBLIGATIONS . . . . . A-45
7.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . . . A-45
7.2 OPINION OF LEGAL COUNSEL. . . . . . . . . . . . . . . . . . A-46
7.3 REQUIRED APPROVALS. . . . . . . . . . . . . . . . . . . . . A-48
7.4 ORDER, DECREE, ETC. . . . . . . . . . . . . . . . . . . . . A-48
7.5 PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . A-48
7.6 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . A-48
7.7 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . A-49
7.8 CERTIFICATE AS TO OUTSTANDING SHARES. . . . . . . . . . . . A-49
7.9 ESTOPPEL CERTIFICATES . . . . . . . . . . . . . . . . . . . A-49
7.10 CHANGE OF CONTROL WAIVERS . . . . . . . . . . . . . . . . . A-49
7.11 POOLING OF INTERESTS ACCOUNTING . . . . . . . . . . . . . . A-49
ARTICLE VIII - CONDITIONS PRECEDENT TO SSBI'S OBLIGATIONS. . . . . . . A-49
8.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . . . A-49
8.2 OPINION OF LEGAL COUNSEL. . . . . . . . . . . . . . . . . . A-50
8.3 REQUIRED APPROVALS. . . . . . . . . . . . . . . . . . . . . A-52
8.4 ORDER, DECREE, ETC. . . . . . . . . . . . . . . . . . . . . A-52
8.5 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . A-52
8.6 REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . A-52
8.7 FAIRNESS OPINION. . . . . . . . . . . . . . . . . . . . . . A-52
ARTICLE IX - ABANDONMENT OF MERGER . . . . . . . . . . . . . . . . . . A-53
9.1 MUTUAL ABANDONMENT PRIOR TO EFFECTIVE TIME OF THE MERGER. . A-53
9.2 CHEMICAL'S RIGHTS TO TERMINATE. . . . . . . . . . . . . . . A-53
9.3 SSBI'S RIGHTS TO TERMINATE. . . . . . . . . . . . . . . . . A-55
ARTICLE X - AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . A-56
10.1 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . A-56
10.2 WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . A-56
ARTICLE XI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . A-56
11.1 SPECIFIC ENFORCEMENT. . . . . . . . . . . . . . . . . . . . A-56
11.2 LIABILITY FOR BREACH. . . . . . . . . . . . . . . . . . . . A-57
A-iii
11.3 OBLIGATIONS AFTER TERMINATION . . . . . . . . . . . . . . . A-57
11.4 TERMINATION OF REPRESENTATIONS AND WARRANTIES.. . . . . . . A-57
11.5 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . A-57
11.6 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . A-57
11.7 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . A-58
11.8 METHOD OF CONSENT OR WAIVER . . . . . . . . . . . . . . . . A-58
11.9 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . A-58
11.10 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . A-58
11.11 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . A-59
11.12 FURTHER ASSURANCES; PRIVILEGES. . . . . . . . . . . . . . . A-59
11.13 HEADINGS, ETC.. . . . . . . . . . . . . . . . . . . . . . . A-59
11.14 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . A-59
A-iv
DEFINITIONS
PAGE
Acceptance Period. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-6
Adjusted Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
Adjusted Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . .A-8
Adjustment Factor. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-8
Aggregate Price Per Share of the Comparison Stocks . . . . . . . . . . .A-5
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
BIF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
Business Combination . . . . . . . . . . . . . . . . . . . . . . . . . A-40
Call Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
CERCLA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
Certificate of Merger. . . . . . . . . . . . . . . . . . . . . . . . . .A-2
Chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
Chemical Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . .A-1
Chemical Disclosure Statement. . . . . . . . . . . . . . . . . . . . . A-11
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-2
Comparison Stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
Comparison Stocks Base Price Per Share . . . . . . . . . . . . . . . . .A-5
Constituent Corporation. . . . . . . . . . . . . . . . . . . . . . . . .A-2
Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . .A-2
Employee Benefit Plan. . . . . . . . . . . . . . . . . . . . . . . . . A-24
Employment-Related Payments. . . . . . . . . . . . . . . . . . . . . . A-24
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
Exchange Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Exercise Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
Federal Bank Holding Company Act . . . . . . . . . . . . . . . . . . . .A-1
Federal Reserve Board. . . . . . . . . . . . . . . . . . . . . . . . . .A-1
Final Statement Date . . . . . . . . . . . . . . . . . . . . . . . . . .A-9
First Floor Price. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Fixing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Hazardous Substance. . . . . . . . . . . . . . . . . . . . . . . . . . A-27
Increase Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-5
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Michigan Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
Old Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-6
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
Phase I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
Plan of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
A-v
Prospectus and Proxy Statement . . . . . . . . . . . . . . . . . . . . A-14
Reference Period . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Reference Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . A-14
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
Second Floor Price . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-39
Shareholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . . . .A-2
SSBI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
SSBI Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
SSBI Defined Benefit Plan. . . . . . . . . . . . . . . . . . . . . . . A-25
SSBI Disclosure Statement. . . . . . . . . . . . . . . . . . . . . . . A-16
SSBI Related Person. . . . . . . . . . . . . . . . . . . . . . . . . . A-28
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . .A-2
Upset Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
Upset Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-4
A-vi
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "PLAN OF MERGER") is made
as of October 31, 1995, between STATE SAVINGS BANCORP INC., a Michigan
corporation ("SSBI"), and CHEMICAL FINANCIAL CORPORATION, a Michigan
corporation ("CHEMICAL"), 333 East Main Street, Midland, Michigan.
Chemical and SSBI desire that SSBI become affiliated with
Chemical. The affiliation would be effected through the merger of SSBI
with and into Chemical in accordance with this Plan of Merger and in
accordance with the Business Corporation Act of the State of Michigan, as
amended (the "MICHIGAN ACT"). The transactions contemplated by and
described in this Plan of Merger are referred to as the "MERGER."
Chemical is a bank holding company registered as such with the
Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE
BOARD") under the Bank Holding Company Act of 1956, as amended (the
"FEDERAL BANK HOLDING COMPANY ACT"). Chemical has authorized capital stock
consisting of 15,000,000 shares of common stock, $10 par value ("CHEMICAL
COMMON STOCK"). Each share of Chemical Common Stock is entitled to one
vote on all matters submitted for a vote of the shareholders. As of
October 16, 1995, there were 9,173,873 shares of Chemical Common Stock
issued and outstanding, and 474,287 shares of Chemical Common Stock were
reserved for issuance in connection with employee stock option and benefit
plans. The number of issued and outstanding shares of Chemical Common
Stock is subject to change before the Effective Time of the Merger (as
defined in Section 1.3 (EFFECTIVE TIME OF THE MERGER)) by reason of the
issuance of additional shares of Chemical Common Stock upon the exercise of
employee stock options and the grant or sale of shares to, or for the
account of, directors and employees pursuant to other benefit plans, and
the issuance of additional shares if and as authorized by Chemical's Board
of Directors.
SSBI is a bank holding company registered as such with the
Federal Reserve Board under the Federal Bank Holding Company Act. SSBI
owns all of the issued and outstanding stock of State Savings Bank of Caro
(the "BANK"). SSBI has authorized capital stock consisting of 200,000
shares of common stock, $20 par value ("SSBI COMMON STOCK"). Each share of
SSBI Common Stock is entitled to one vote on all matters submitted for a
vote of the shareholders. As of the date of this Plan of Merger, there
were 100,000 shares of SSBI Common Stock issued and outstanding.
The respective Boards of Directors of SSBI and Chemical each deem
the Merger advisable and in the best interests of its corporation and its
respective shareholders. SSBI and Chemical have each adopted this Plan of
Merger and authorized the execution, delivery, and performance of this Plan
of Merger by resolutions duly adopted by their respective Boards of
Directors or duly authorized committees thereof. The Board of Directors of
SSBI has directed that this Plan of Merger be submitted to SSBI's
shareholders for approval.
In consideration of the premises and the representations,
warranties, and covenants contained in this Plan of Merger, the parties
agree:
ARTICLE I
THE TRANSACTION
Subject to the terms and conditions of this Plan of Merger, the
Merger of SSBI with and into Chemical shall be carried out in the following
manner:
1.1 APPROVAL OF PLAN OF MERGER. As soon as practicable after this
Plan of Merger has been executed and delivered and the Registration
Statement (as described in Section 3.9.1 (DOCUMENT)) has become effective,
SSBI shall submit this Plan of Merger to its shareholders at a meeting
properly called, noticed, and held for that purpose (the "SHAREHOLDERS'
MEETING"). At the Shareholders' Meeting, and in any proxy materials used
in connection with the meeting, the Board of Directors of SSBI shall
recommend that its shareholders vote for approval of this Plan of Merger.
No shares of Chemical Common Stock shall be entitled to vote on approval of
this Plan of Merger.
1.2 THE CLOSING. The Merger shall be consummated as promptly as
possible after a closing (the "CLOSING"). The Closing shall be held at the
offices of Chemical Financial Corporation, 333 East Main Street, Midland,
Michigan, on such date and at such time as may be mutually agreed by the
parties, or in the absence of such agreement, on a date specified by either
party upon 5 business days' written notice after the last to occur of the
following events: (i) the receipt of all consents and approvals of
government regulatory authorities as legally required to consummate the
Merger and the expiration of all statutory waiting periods; (ii) the
requisite approval of this Plan of Merger by the shareholders of SSBI; and
(iii) delivery of the Closing Report (defined below). Scheduling or
commencing the Closing shall not, however, constitute a waiver of the
conditions precedent of either Chemical or SSBI as set forth in Articles
VII and VIII of this Plan of Merger, respectively. Upon completion of the
Closing, SSBI and Chemical shall execute and deliver an appropriate
certificate of merger in the form and as required by the Michigan Act (the
"CERTIFICATE OF MERGER").
1.3 EFFECTIVE TIME OF THE MERGER. Subject to the terms and
conditions of this Plan of Merger, the Merger shall be consummated as
promptly as possible following the Closing by filing the Certificate of
Merger in the manner required by law. The "EFFECTIVE TIME OF THE MERGER"
shall be a date and time to be specified in the Certificate of Merger,
which shall be not later than 3 business days after the Closing.
A-2
1.4 MERGER OF SSBI WITH AND INTO CHEMICAL. SSBI shall be merged
with and into Chemical (each sometimes being referred to as a "CONSTITUENT
CORPORATION" prior to the Merger) at the Effective Time as provided by the
Michigan Act. At the Effective Time of the Merger, the Constituent
Corporations shall become a single corporation, which shall be Chemical
(the "SURVIVING CORPORATION"). The Surviving Corporation shall have all of
the rights, privileges, immunities, and powers, and shall be subject to all
of the duties and liabilities, of a corporation organized under the
Michigan Act.
1.5 EFFECT OF THE MERGER. From and after the Effective Time of the
Merger, the effect of the Merger upon each of the Constituent Corporations
and the Surviving Corporation shall be as provided in Chapter Seven of the
Michigan Act with respect to the merger of two domestic corporations where
the surviving corporation will be subject to the laws of the State of
Michigan.
1.6 ADDITIONAL ACTIONS. If, at any time after the Effective Time of
the Merger, the Surviving Corporation shall determine that any further
assignments or assurances or any other acts are necessary or desirable to
vest, perfect, or confirm, of record or otherwise, in the Surviving
Corporation its rights, title, or interest in, to, or under any of the
rights, properties, or assets of SSBI acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger, or
to otherwise carry out the purposes of this Plan of Merger, then SSBI and
its directors and officers shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all
such proper deeds, assignments, and assurances in law and to do all acts
necessary or proper to vest, perfect, or confirm title to and possession of
such rights, properties, or assets in the Surviving Corporation and to
otherwise carry out the purposes of this Plan of Merger. The directors and
officers of the Surviving Corporation are fully authorized in the name of
SSBI to take any and all such action as may be contemplated by this
Article.
1.7 SURVIVING CORPORATION. Immediately after the Effective Time of
the Merger, the Surviving Corporation shall have the following attributes
until they are subsequently changed in the manner provided by law:
1.7.1 NAME. The name of the Surviving Corporation shall be
"Chemical Financial Corporation."
1.7.2 ARTICLES OF INCORPORATION. The Articles of Incorporation
of the Surviving Corporation shall be the Restated Articles of
Incorporation of Chemical without change from the Restated Articles of
Incorporation in effect immediately prior to the Effective Time of the
Merger.
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1.7.3 BYLAWS. The Bylaws of the Surviving Corporation shall be
the Bylaws of Chemical as in effect immediately prior to the Effective
Time of the Merger.
1.7.4 DIRECTORS. The directors of the Surviving Corporation
shall be the persons who were directors of Chemical immediately prior
to the Effective Time of the Merger.
1.7.5 OFFICERS. The officers of the Surviving Corporation shall
be the persons who were officers of Chemical immediately prior to the
Effective Time of the Merger.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES
2.1 CONVERSION OF SHARES. At the Effective Time of the Merger, by
virtue of the Merger:
2.1.1 CONVERSION OF SSBI COMMON STOCK. Subject to the
provisions of Sections 2.2 (UPSET PROVISIONS), 2.3 (NO FRACTIONAL
SECURITIES), 2.4 (ADJUSTMENTS) and 2.5 (CONTINGENT ADJUSTMENTS), each
share of SSBI Common Stock outstanding immediately prior to the
Effective Time of the Merger shall be converted into 5 (the "EXCHANGE
RATE") validly issued, fully paid, and nonassessable shares of
Chemical Common Stock (the "MERGER CONSIDERATION").
2.1.2 CONVERSION OF CHEMICAL COMMON STOCK. Each share of
Chemical Common Stock outstanding immediately prior to the Effective
Time of the Merger shall continue to be outstanding without any
change.
2.1.3 SSBI COMMON STOCK NO LONGER OUTSTANDING. Each share of
SSBI Common Stock outstanding immediately prior to the Effective Time
of the Merger shall be deemed to be no longer outstanding and to
represent solely the right to receive shares of Chemical Common Stock
as provided in Section 2.1.1 (CONVERSION OF SSBI COMMON STOCK),
together with any dividends and other distributions payable as
provided in Section 2.4 (ADJUSTMENTS), but subject to the payment of
cash in lieu of fractional shares as provided in Section 2.3 (NO
FRACTIONAL SECURITIES).
2.2 UPSET PROVISIONS.
2.2.1 UPSET CONDITION. The "UPSET CONDITION" shall exist if, as
of a date (the "UPSET DATE") when the Closing could be convened
pursuant to Section 1.2 (THE CLOSING), either of the following
conditions exist:
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(a) The average of the means between the high and low
transactions prices of Chemical Common Stock reported on The
NASDAQ Stock Market (the "REFERENCE PRICE") during the 20
consecutive trading days immediately preceding the Upset Date
(the "REFERENCE PERIOD") as reported in THE WALL STREET JOURNAL,
MIDWEST EDITION, is less than $28.00 (the "SECOND FLOOR PRICE"),
subject to adjustment under Section 2.4 (ADJUSTMENTS); or
(b) (i) The Reference Price is less than $30.00 (the "FIRST
FLOOR PRICE"), subject to adjustment under Section 2.4
(ADJUSTMENTS), and (ii) the percentage determined by dividing the
Reference Price by $35.00 (the "FIXING PRICE") is more than 15
percentage points less than the percentage determined by dividing
the Aggregate Price Per Share of the Comparison Stocks (as
defined below) on the last day of the Reference Period by the
Aggregate Price Per Share of the Comparison Stocks on October 25,
1995 (the "COMPARISON STOCKS BASE PRICE PER SHARE"), subject to
adjustment under Section 2.4 (ADJUSTMENTS).
The "AGGREGATE PRICE PER SHARE OF THE COMPARISON STOCKS" means the sum
of the closing prices of all of the Comparison Stocks as reported in
THE WALL STREET JOURNAL, MIDWEST EDITION, for each day in question.
The "COMPARISON STOCKS" mean the most widely held class of common
stock of each of the following corporations (the closing price and
trading symbol of each stock on October 25, 1995, are listed below for
reference purposes only):
<TABLE>
<CAPTION>
TRADING CLOSING
CORPORATION SYMBOL PRICE
<S> <C> <C> <C>
Citizens Banking Corporation CBFC $ 30.75
First Michigan Bank Corporation FMBC 27.50
Michigan Financial Corporation MFCB 25.75
Republic Bancorp, Inc. RBCN 13.25
Shoreline Financial Corporation SLFC 19.125
Independent Bank Corporation IBCP 27.75
Aggregate Price Per Share of --------
Comparison Stocks (subject to
adjustment) $144.125
</TABLE>
provided, however, that any of these corporations shall be excluded
from this definition and from the comparison described in Section
2.2.1(b) if between October 25, 1995, and the end of the Reference
Period there is publicly announced a proposed merger, acquisition, or
business combination of that corporation, or a tender offer or
exchange offer for, or other transaction involving the acquisition of
a majority of, that corporation's common stock or assets.
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2.2.2 SSBI'S RIGHTS IN UPSET CONDITION. If the Upset
Condition shall then exist, SSBI shall have the right, exercisable at
any time prior to 5 p.m. Midland, Michigan time on the fifth business
day after the last day of the Reference Period (the "EXERCISE
PERIOD"), to either (i) abandon the Merger and terminate this Plan of
Merger (by delivering to Chemical within the Exercise Period written
notice of its decision to do so) and, upon the delivery of such notice
by SSBI, the Merger shall be abandoned and this Plan of Merger shall
immediately terminate; (ii) proceed with the Merger on the basis of
the Exchange Rate determined pursuant to Section 2.1.1 (CONVERSION OF
SSBI COMMON STOCK) (by delivering to Chemical within the Exercise
Period written notice of its decision to do so or by failing to
deliver any notice to Chemical pursuant to this Section 2.2.2 (SSBI'S
RIGHTS IN UPSET CONDITION) during the Exercise Period); or (iii)
request Chemical to increase the Exchange Rate (by delivering to
Chemical within the Exercise Period written notice to such effect (an
"INCREASE NOTICE")) to 5.8333 shares of Chemical Common Stock for each
share of SSBI Common Stock (the "ADJUSTED RATE").
2.2.3 CHEMICAL'S RIGHTS IN UPSET CONDITION. If the Upset
Condition occurs and Chemical receives an Increase Notice pursuant to
Section 2.2.2 (SSBI'S RIGHTS IN UPSET CONDITION), Chemical shall
either accept or decline the Adjusted Rate by delivering written
notice of its decision to SSBI at or before 5 p.m. Midland, Michigan
time on the fifth business day after receipt of the Increase Notice
(the "ACCEPTANCE PERIOD"). If Chemical accepts the Adjusted Rate
within the Acceptance Period, this Plan of Merger shall remain in
effect in accordance with its terms except that the Exchange Rate
shall be equal to the Adjusted Rate. If Chemical declines the
Adjusted Rate within the Acceptance Period or fails to deliver written
notice of its decision to accept or decline the Adjusted Rate within
the Acceptance Period, the Merger shall be abandoned and this
Agreement shall thereupon terminate without further action by SSBI or
Chemical effective as of 5 p.m. Midland, Michigan time on the second
business day following the expiration of the Acceptance Period;
provided, that if Chemical so declines the Adjusted Rate or so fails
to deliver written notice of its decision to accept or decline the
Adjusted Rate within the Acceptance Period, SSBI may, by written
notice delivered to Chemical at or before 5 p.m. Midland, Michigan
time on the fifth business day following the expiration of the
Acceptance Period, elect to proceed with the Merger and the
transactions contemplated by this Plan of Merger on the basis of the
Exchange Rate determined pursuant to Section 2.1.1 (CONVERSION OF SSBI
COMMON STOCK) and, upon such election, no abandonment of the Merger or
termination of this Plan of Merger shall be deemed to have occurred
and this Plan of Merger shall remain in effect in accordance with its
terms and the Closing shall thereafter occur in accordance with the
terms of this Plan of Merger.
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2.3 NO FRACTIONAL SECURITIES. Notwithstanding any other provision
of this Agreement, no certificates or scrip representing fractional shares
of Chemical Common Stock shall be issued upon the surrender for exchange of
certificates which represented shares of SSBI Common Stock outstanding
immediately prior to the Effective Time of the Merger ("OLD CERTIFICATES")
(taking into account all Old Certificates surrendered for exchange by a
particular SSBI shareholder) pursuant to Section 2.6 (SURRENDER OF OLD
CERTIFICATES AND DISTRIBUTION OF CHEMICAL COMMON STOCK) and no Chemical
dividend or other distribution or stock split shall relate to any
fractional shares of Chemical Common Stock, and such fractional interests
shall not entitle the owner thereof to vote or to any rights of a
shareholder of Chemical. In lieu of any such fractional shares, each
holder of an Old Certificate who would otherwise have been entitled to a
fraction of a share of Chemical Common Stock upon surrender of such Old
Certificates for exchange pursuant to Section 2.6 (SURRENDER OF OLD
CERTIFICATES AND DISTRIBUTION OF CHEMICAL COMMON STOCK) will be paid an
amount in cash (without interest) equal to such fraction of a share
multiplied by the mean between the high and low transaction prices of
Chemical Common Stock reported on The NASDAQ Stock Market for the last
trading date preceding the Effective Time of the Merger.
2.4 ADJUSTMENTS. The Exchange Rate and related amounts and related
computations described in Sections 2.1 (CONVERSION OF SHARES) and 2.2.1
(UPSET PROVISIONS) shall be adjusted in the manner provided in this Section
2.4 (ADJUSTMENTS) upon the occurrence of any of the following events:
2.4.1 STOCK DIVIDENDS AND DISTRIBUTIONS. If Chemical
declares a stock dividend, stock split, or other general distribution
of Chemical Common Stock to holders of Chemical Common Stock and the
record date for such stock dividend, stock split, or distribution
occurs prior to the Effective Time of the Merger, then (a) the
Exchange Rate shall be adjusted by multiplying it by that ratio (i)
the numerator of which shall be the total number of shares of Chemical
Common Stock outstanding immediately after such dividend, split or
distribution, and (ii) the denominator of which shall be the total
number of shares of Chemical Common Stock outstanding immediately
prior to such dividend, split or distribution; and (b) the Fixing
Price, First Floor Price, and Second Floor Price shall be adjusted by
multiplying them by that ratio (i) the numerator of which shall be the
total number of shares of Chemical Common Stock outstanding
immediately prior to such dividend, split, or distribution, and (ii)
the denominator of which shall be the total number of shares of
Chemical Common Stock outstanding immediately after such dividend,
split, or distribution.
2.4.2 OTHER ACTION AFFECTING CHEMICAL COMMON STOCK. If there
occurs, other than as described in the preceding subsection, any
merger, business combination, recapitalization, reclassification,
subdivision, or combination which would materially change the number
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and value of outstanding shares of Chemical Common Stock; a
distribution of warrants or rights with respect to Chemical Common
Stock; or any other transaction which would have a materially similar
effect; then the nature or amount of the consideration to be received
by the shareholders of SSBI in exchange for their shares of SSBI
Common Stock and the Exchange Rate shall be adjusted in such manner
and at such time as shall be equitable under the circumstances. It is
intended that in the event of a reclassification of outstanding shares
of Chemical Common Stock or a consolidation or merger of Chemical with
or into another corporation, other than a merger in which Chemical is
the surviving corporation and which merger does not result in any
reclassification of Chemical Common Stock, holders of SSBI Common
Stock would receive, in lieu of each share of Chemical Common Stock to
be issued in exchange for SSBI Common Stock, the kind and amount of
shares of Chemical stock, other securities, money, and/or property
receivable upon such reclassification, consolidation, or merger by
holders of Chemical Common Stock with respect to each share of
Chemical Common Stock outstanding immediately prior to such
reclassification, consolidation, or merger.
2.4.3 INTEGRITY OF REFERENCE PERIOD. If Chemical declares a
stock dividend, stock split, or other general distribution of Chemical
Common Stock to holders of Chemical Common Stock and the ex-dividend
or ex-distribution date for such stock dividend, stock split, or
distribution occurs during the Reference Period, then the price of
Chemical Common Stock for each day during the Reference Period prior
to such ex-dividend or ex-distribution date (determined as provided in
Section 2.2.1(a) (UPSET CONDITION) shall be adjusted by multiplying it
by that ratio (i) the numerator of which shall be the total number of
shares of Chemical Common Stock outstanding immediately prior to such
dividend, split, or distribution, and (ii) the denominator of which
shall be the total number of shares of Chemical Common Stock
outstanding immediately after such dividend, split, or distribution.
2.4.4 EMPLOYEE STOCK OPTIONS, ETC. Notwithstanding the
foregoing subsections of this Section 2.4 (ADJUSTMENTS), no adjustment
shall be made in the event of the issuance of additional shares of
Chemical Common Stock pursuant to Chemical's Dividend Reinvestment
Plan, pursuant to the exercise of stock options under existing stock
option plans of Chemical, or upon the grant or sale of shares to, or
for the account of, Chemical directors or employees pursuant to other
existing benefit plans of Chemical.
2.4.5 AUTHORIZED BUT UNISSUED SHARES. Notwithstanding the
other provisions of this Section 2.4 (ADJUSTMENTS), no adjustment
shall be made in the event of the issuance of additional shares of
Chemical Common Stock or other securities pursuant to a public
offering, private placement, or an acquisition of one or more banks,
corporations, or business assets for consideration which the Board of
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Directors of Chemical, or a duly authorized committee thereof,
determines to be fair and reasonable.
2.4.6 CHANGES IN CAPITAL. Subject only to making any
adjustment to the Exchange Rate and related computations prescribed by
this Section 2.4 (ADJUSTMENTS), nothing contained in this Plan of
Merger is intended to preclude Chemical from amending its articles of
incorporation to change its capital structure or from issuing
additional shares of Chemical Common Stock, preferred stock, shares of
other capital stock, or securities which are convertible into shares
of capital stock.
2.4.7 INCREASE IN OUTSTANDING SHARES OF SSBI COMMON STOCK.
In the event that the number of shares of SSBI Common Stock
outstanding is greater than 100,000 for any reason whatsoever (whether
or not such increase constitutes a breach of this Plan of Merger),
then the Exchange Rate shall be adjusted to that ratio determined by
multiplying the Exchange Rate by a fraction (i) the numerator of which
shall be 100,000 (the total number of shares of SSBI Common Stock
outstanding as of the date of this Plan of Merger); and (ii) the
denominator of which shall be the total number of shares of SSBI
Common Stock outstanding as of the Effective Time of the Merger.
2.5 EQUITY ADJUSTMENTS.
2.5.1 MINIMUM ADJUSTED SHAREHOLDERS' EQUITY. If SSBI's
Adjusted Shareholders' Equity (as defined below) is less than
$9,300,000, then the Exchange Rate shall be adjusted by multiplying it
by the Adjustment Factor. For purposes of this Plan of Merger, the
"ADJUSTMENT FACTOR" means that fraction equal to SSBI's Adjusted
Shareholders' Equity divided by $9,300,000.
2.5.2 ADJUSTED SHAREHOLDERS' EQUITY. SSBI's "ADJUSTED
SHAREHOLDERS' EQUITY" shall be the amount equal to SSBI's consolidated
shareholders' equity computed according to generally accepted
accounting principles as of the Final Statement Date (as defined
below), as set forth on a Closing Balance Sheet (as defined below),
adjusted by subtracting the following items, net of tax effects, if
and to the extent that they are not reflected in the Closing Balance
Sheet:
(a) All transaction-related expenses which SSBI has
incurred to date plus a reasonable estimate of the transaction-
related expenses SSBI will incur as a result of the Merger
(including, without limitation, its legal, accounting, actuarial,
tax preparation, and investment bankers fees and expenses);
(b) Any additional provision to SSBI's loan loss reserve
necessary to comply with Section 5.8 (LOAN LOSS RESERVE);
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(c) The amount of any cash dividends declared by SSBI
before the Effective Time of the Merger;
(d) The amount of any bonuses or other compensation
awarded or payable to directors and/or employees of either SSBI
or the Bank before the Effective Time of the Merger;
(e) The amount of fees and expenses incurred to date or
payable to accountants and other representatives in connection
with an audit (conducted pursuant to generally accepted auditing
principles) of SSBI's 1994 and 1995 consolidated financial
statements; and
(f) Any other amounts as may be mutually agreed.
2.5.3 CLOSING BALANCE SHEET. A consolidated balance sheet of
SSBI as of the Final Statement Date (the "Closing Balance Sheet") and
a computation of SSBI's Adjusted Shareholders' Equity as of the Final
Statement Date shall be the subject of an agreed-upon procedures
report (the "Closing Report") by Crowe Chizek & Co. The Closing
Balance Sheet shall be prepared in accordance with generally accepted
auditing standards in a manner consistent with the audited balance
sheet of SSBI as of December 31, 1995.
2.5.4 FINAL STATEMENT DATE. After the shareholders of SSBI
have approved the Merger as required by this Plan of Merger, and after
all regulatory approvals required by law to consummate the Merger have
been obtained, either party may specify a succeeding month-end as the
date of the Closing Balance Sheet (the "FINAL STATEMENT DATE") and
direct Crowe Chizek & Co. to prepare the Closing Report by written
notice to Crowe Chizek and Co. and the other party, delivered prior to
the Final Statement Date specified in such notice. The parties shall
use all reasonable best efforts to cause Crowe Chizek & Co. to prepare
and deliver to Chemical and SSBI the Closing Report not later than 21
days after the Final Statement Date. In the event the Closing does
not occur within one month after the designated Final Statement Date,
either party may specify a new Final Statement Date and direct Crowe
Chizek & Co. to prepare a Closing Report as of such date pursuant to
notice in accordance with the provisions set forth above applicable to
the initial designation of such date.
2.6 SURRENDER OF OLD CERTIFICATES AND DISTRIBUTION OF CHEMICAL
COMMON STOCK. After the Effective Time of the Merger, Old Certificates
shall be exchangeable by the holders thereof for new stock certificates
representing the number of shares of Chemical Common Stock to which such
holders shall be entitled in the following manner:
2.6.1 TRANSMITTAL MATERIALS. As soon as practicable after the
Effective Time of the Merger, Chemical shall send or cause to be sent
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to each record holder of SSBI Common Stock as of the Effective Time of
the Merger transmittal materials for use in exchanging that holder's
Old Certificates for Chemical Common Stock certificates. The
transmittal materials will contain instructions with respect to the
surrender of Old Certificates.
2.6.2 EXCHANGE AGENT. As soon as practicable after the
Effective Time of the Merger, Chemical will deliver to Chemical Bank
and Trust Company, or such other bank or trust company as Chemical may
designate (the "EXCHANGE AGENT"), the number of shares of Chemical
Common Stock issuable and the amount of cash payable for fractional
shares in the Merger. The Exchange Agent shall not be entitled to
vote or exercise any rights of ownership with respect to such shares
of Chemical Common Stock, except that it shall receive and hold all
dividends or other distributions paid or distributed with respect to
such shares for the account of the persons entitled to such shares.
2.6.3 DELIVERY OF NEW CERTIFICATES. Chemical shall cause the
Exchange Agent to promptly issue and deliver stock certificates in the
names and to the addresses that appear on SSBI's stock records as of
the Effective Time of the Merger, or in such other name or to such
other address as may be specified by the holder of record in
transmittal documents received by the Exchange Agent; provided, that:
(a) RECEIPT OF OLD CERTIFICATES. With respect to each SSBI
shareholder, the Exchange Agent shall have received all of the
Old Certificates held by that shareholder, or an affidavit of
loss and indemnity bond for such certificate or certificates,
together with properly executed transmittal materials; and
(b) SATISFACTORY FORM. Such certificates, transmittal
materials, affidavits, and bonds are in a form and condition
reasonably acceptable to Chemical and the Exchange Agent.
2.6.4 DIVIDENDS PENDING SURRENDER. Whenever a dividend is
declared by Chemical on Chemical Common Stock which is payable to
shareholders of record of Chemical as of a record date on or after the
Effective Time of the Merger, the declaration shall include dividends
on all shares issuable under this Plan of Merger. No former
shareholder of SSBI shall be entitled to receive a distribution of any
such dividend until the physical exchange of that shareholder's Old
Certificates for new Chemical Common Stock certificates shall have
been effected. Upon the physical exchange of that shareholder's Old
Certificates, that shareholder shall be entitled to receive from
Chemical an amount equal to all such dividends (without interest
thereon and less the amount of taxes, if any, which may have been
imposed or paid thereon) declared and paid with respect to the shares
of Chemical Common Stock represented thereby.
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2.6.5 STOCK TRANSFERS. On or after the Effective Time of the
Merger, there shall be no transfers on the stock transfer books of
SSBI of the shares of SSBI Common Stock which were issued and
outstanding immediately prior to the Effective Time of the Merger.
If, after the Effective Time of the Merger, Old Certificates are
properly presented for transfer, then they shall be canceled and
exchanged for stock certificates representing shares of Chemical
Common Stock as provided in this Plan of Merger. After the Effective
Time of the Merger, ownership of such shares as are represented by any
Old Certificates may be transferred only on the stock transfer records
of Chemical.
2.6.6 EXCHANGE AGENT'S DISCRETION. The Exchange Agent shall
have discretion to determine reasonable rules and procedures relating
to the issuance and delivery of certificates of Chemical Common Stock
into which shares of SSBI Common Stock are converted in the Merger and
governing the payment for fractional shares of SSBI Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CHEMICAL
Chemical represents and warrants to SSBI that, except as
otherwise set forth in a disclosure statement (the "CHEMICAL DISCLOSURE
STATEMENT"), which will be delivered to SSBI within 30 days after the date
of the execution of this Plan of Merger:
3.1 AUTHORIZATION, NO CONFLICTS, ETC.
3.1.1 AUTHORIZATION OF AGREEMENT. The execution, delivery, and
performance of this Plan of Merger by Chemical have been duly
authorized and approved by all necessary corporate action. This Plan
of Merger is legally binding on and enforceable against Chemical in
accordance with its terms.
3.1.2 NO CONFLICT, BREACH, VIOLATION, ETC. The execution,
delivery, and performance of this Plan of Merger by Chemical, and the
consummation of the Merger, do not and will not violate, conflict
with, or result in a breach of:
(a) ARTICLES OR BYLAWS. Any provision of Chemical's
Restated Articles of Incorporation or Bylaws; or
(b) STATUTES, JUDGMENTS, ETC. Any statute, code,
ordinance, rule, regulation, judgment, order, writ, arbitral
award, decree, or injunction applicable to Chemical or Chemical's
subsidiaries, assuming the timely receipt of each of the
approvals referred to in Section 3.1.4 (REQUIRED APPROVALS).
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3.1.3 NO CONTRACTUAL BREACH, DEFAULT, LIABILITY, ETC. The
execution, delivery, and performance of this Plan of Merger by
Chemical, and the consummation of the Merger, do not and will not:
(a) AGREEMENTS, ETC. Violate, conflict with, result in a
breach of, constitute a default under, require any consent,
approval, waiver, extension, amendment, authorization, notice or
filing under, or extinguish any material contract right of
Chemical or any of Chemical's subsidiaries under any agreement,
mortgage, lease, commitment, indenture, other instrument, or
obligation to which Chemical or any of Chemical's subsidiaries is
a party or by which they are bound or affected:
(1) Which is material to the business, income, or
financial condition of Chemical and its subsidiaries on a
consolidated basis; or
(2) The violation or breach of which could prevent
Chemical from consummating the Merger;
(b) REGULATORY RESTRICTIONS. Violate, conflict with,
result in a breach of, constitute a default under, require any
consent, approval, waiver, extension, amendment, authorization,
notice, or filing under any memorandum of understanding or
similar regulatory consent agreement to which Chemical is a party
or subject, or by which it is bound or affected; or
(c) TORTIOUS INTERFERENCE. Subject SSBI or the Bank to
liability for tortious interference with contractual rights.
3.1.4 REQUIRED APPROVALS. No notice to, filing with,
authorization of, exemption by, or consent or approval of, any public
body or authority is necessary for the consummation of the Merger by
Chemical other than in connection or compliance with the provisions of
the Michigan Act, compliance with federal and state securities laws,
bylaws and rules of the National Association of Securities Dealers,
Inc., and the consents, authorizations, or approvals required under
the Federal Bank Holding Company Act.
3.2 ORGANIZATION AND GOOD STANDING. Chemical is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Michigan. Chemical possesses all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its
business as it is now being conducted in all material respects. Chemical
is a bank holding company duly registered and in good standing with the
Federal Reserve Board under the Federal Bank Holding Company Act. Chemical
is not required to be qualified or admitted to conduct business as a
foreign corporation in any state in which such qualification or admission
is material to its business.
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3.3 CAPITAL STOCK.
3.3.1 CLASSES AND SHARES. The authorized capital stock of
Chemical consists of 15,000,000 shares of common stock, $10 par value,
of which, as of October 16, 1995, a total of 9,173,873 shares were
legally issued and outstanding.
3.3.2 NO OTHER CAPITAL STOCK. As of the execution of this Plan
of Merger:
(a) Other than Chemical Common Stock, there is no security
or class of securities issued and outstanding which represents or
is convertible into capital stock of Chemical; and
(b) There are no outstanding subscriptions, options,
warrants, or rights to acquire any capital stock of Chemical, or
agreements to which Chemical is a party or by which it is bound
to issue capital stock, except as set forth in, or as
contemplated by, this Plan of Merger, and except (i) stock
options awarded pursuant to stock option plans; and (ii)
provisions for the grant or sale of shares to, or for the account
of, directors and employees pursuant to other benefit plans.
3.3.3 ISSUANCE OF SHARES. Between September 1, 1995, and the
execution of this Plan of Merger, no additional shares of capital
stock have been issued by Chemical, except as set forth in, or as
contemplated by, this Plan of Merger, except pursuant to the exercise
of employee stock options under employee stock option plans, and
except upon the grant or sale of shares to, or for the account of,
directors and employees pursuant to other benefit plans.
3.3.4 VOTING RIGHTS. Neither Chemical nor any of Chemical's
subsidiaries has outstanding any security or issue of securities:
(a) The holder or holders of which have the right to vote
on the approval of the Merger or this Plan of Merger; or
(b) Which entitle the holder or holders to consent to, or
withhold consent on, the Merger or this Plan of Merger.
3.4 FINANCIAL STATEMENTS. The consolidated financial statements of
Chemical and Chemical's subsidiaries as of and for the year ended December
31, 1994, as reported on by Chemical's independent accountants, Ernst &
Young LLP, and the unaudited consolidated financial statements of Chemical
and Chemical's subsidiaries as of and for the quarter ended June 30, 1995,
including all schedules and notes relating to such statements, as
previously delivered to SSBI, are correct and complete in all material
respects. These statements fairly present Chemical's and Chemical's
subsidiaries' financial condition and results of operations on a
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consolidated basis on the dates and for the periods indicated, and have
been prepared in conformity with generally accepted accounting principles
applied consistently throughout the periods indicated (except as otherwise
noted in such financial statements or the notes thereto).
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in the consolidated balance sheet of Chemical
as of December 31, 1994, and the notes thereto neither Chemical nor any of
its subsidiaries had, as of that date, liabilities or obligations, secured
or unsecured (whether accrued, absolute, or contingent) which were, or as
to which there is a reasonable probability that they could be, materially
adverse to the business, income or financial condition of Chemical and its
subsidiaries on a consolidated basis.
3.6 ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31, 1994,
there has been no material adverse change in the business, income, or
financial condition of Chemical and its subsidiaries on a consolidated
basis. No facts or circumstances have been discovered from which it
reasonably appears that there is a significant risk and reasonable
probability that there will occur a material adverse change in the
business, income, or financial condition of Chemical and Chemical's
subsidiaries on a consolidated basis.
3.7 CHEMICAL COMMON STOCK. The shares of Chemical Common Stock to be
issued in the Merger in accordance with this Plan of Merger have been duly
authorized and, when issued as contemplated by this Plan of Merger, will be
legally issued, fully paid, and nonassessable shares.
3.8 SEC AND OTHER FILINGS. In the last five years, to Chemical's
knowledge, Chemical has filed in a timely manner all required filings with
the Securities and Exchange Commission (the "SEC"), including without
limitation all reports on Form 10-K and Form 10-Q. All such filings, as
amended, were complete and accurate in all material respects as of the
dates of such filings, and there were no misstatements or omissions therein
which, as of the making of this representation and warranty, would be
material to the business, income, or financial condition of Chemical and
its subsidiaries on a consolidated basis.
3.9 REGISTRATION STATEMENT, ETC.
3.9.1 "DOCUMENT." The term "DOCUMENT," when capitalized in this
Plan of Merger, shall collectively mean: (i) the registration
statement to be filed by Chemical with the SEC (the "REGISTRATION
STATEMENT") in connection with the Chemical Common Stock to be issued
in the Merger; (ii) the prospectus and proxy statement (the
"PROSPECTUS AND PROXY STATEMENT") to be mailed to SSBI shareholders in
connection with the Shareholders' Meeting; and (iii) any other
documents to be filed with the SEC or the Federal Reserve Board in
connection with the transactions contemplated by this Plan of Merger.
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3.9.2 ACCURATE INFORMATION. None of the information to be
supplied by Chemical for inclusion, or included, in any Document will:
(a) Be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the
statements therein not misleading (i) at the respective times
such Documents are filed; (ii) with respect to the Registration
Statement, when it becomes effective; and (iii) with respect to
the Prospectus and Proxy Statement, when it is mailed.
(b) With respect to the Registration Statement and the
Prospectus and Proxy Statement, as either may be amended or
supplemented, at the time of the Shareholders' Meeting, be false
or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meeting.
3.9.3 COMPLIANCE OF FILINGS. All documents that Chemical is
responsible for filing with the SEC and any regulatory agency in
connection with the Merger will comply as to form in all material
respects with the provisions of applicable law.
3.10 TRUE AND COMPLETE INFORMATION. No schedule, statement, list,
certificate, or other information furnished or to be furnished by Chemical
in connection with this Plan of Merger, including the Chemical Disclosure
Statement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they
are made, not misleading.
3.11 TRUTH AND COMPLETENESS OF REPRESENTATIONS AND WARRANTIES.
3.11.1 TRUE AT THE CLOSING. Chemical further warrants that its
representations and warranties in this Plan of Merger will be true in
all material respects at the Closing. All of such representations and
warranties made with respect to specified dates or events shall still
be true at the Closing in all material respects with respect to such
dates or events.
3.11.2 UNTRUE REPRESENTATIONS AND WARRANTIES. During the term
of this Plan of Merger, if Chemical becomes aware of any facts or of
the occurrence or impending occurrence of any event which would cause
one or more of Chemical's representations and warranties contained in
this Plan of Merger to become untrue, or would have caused one or more
of such representations and warranties (except in the case of
representations and warranties expressly made only as of the execution
of this Plan of Merger) to be untrue had such facts been known or had
such event occurred prior to the execution of this Plan of Merger,
then:
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(a) NOTICE. Chemical shall immediately give detailed
written notice thereof to SSBI; and
(b) REMEDY UNLESS WAIVED. Chemical shall use all
reasonable efforts to change such facts or events to make such
representations and warranties true, unless the same shall have
been waived in writing by SSBI.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SSBI
SSBI represents and warrants to Chemical that, except as
otherwise set forth in a disclosure statement (the "SSBI DISCLOSURE
STATEMENT"), which will be delivered to Chemical within 30 days after the
date of the execution of this Plan of Merger:
4.1 AUTHORIZATION, NO CONFLICTS, ETC.
4.1.1 AUTHORIZATION OF AGREEMENT. The execution, delivery, and
performance of this Plan of Merger by SSBI have been duly authorized
and approved by all necessary corporate action. When executed and
delivered, this Plan of Merger will be legally binding on and
enforceable against SSBI in accordance with its terms, except that the
consummation of the Merger is subject to the approval of SSBI's
shareholders as described in Section 1.1 (APPROVAL OF PLAN OF MERGER).
4.1.2 NO CONFLICT, BREACH, VIOLATION, ETC. The execution,
delivery, and performance of this Plan of Merger by SSBI, and the
consummation of the Merger, do not and will not violate, conflict
with, or result in a breach of:
(a) ARTICLES OR BYLAWS. Any provision of SSBI's Articles
of Incorporation or Bylaws; or
(b) STATUTES, JUDGMENTS, ETC. Any statute, code,
ordinance, rule, regulation, judgment, order, writ, arbitral
award, decree, or injunction applicable to SSBI or the Bank as
defined in Section 4.3.1 (OWNERSHIP OF SUBSIDIARIES), assuming
the timely receipt of each of the approvals referred to in
Section 4.1.4 (REQUIRED APPROVALS).
4.1.3 NO CONTRACTUAL BREACH, DEFAULT, LIABILITY, ETC. The
execution, delivery, and performance of this Plan of Merger by SSBI,
and the consummation of the Merger, do not and will not:
(a) AGREEMENTS, ETC. Violate, conflict with, result in a
breach of, constitute a default under, require any consent,
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approval, waiver, extension, amendment, authorization, notice or
filing under, or extinguish any material contract right of SSBI
or the Bank under any agreement, mortgage, lease, commitment,
indenture, other instrument, or obligation to which SSBI or the
Bank is a party or by which they are bound or affected:
(1) Which is material to the business, income, or
financial condition of SSBI or the Bank; or
(2) The violation or breach of which could prevent
SSBI from consummating the Merger;
(b) REGULATORY RESTRICTIONS. Violate, conflict with,
result in a breach of, constitute a default under, require any
consent, approval, waiver, extension, amendment, authorization,
notice, or filing under any memorandum of understanding or
similar regulatory consent agreement to which SSBI or the Bank is
a party or subject, or by which it is bound or affected; or
(c) TORTIOUS INTERFERENCE. Subject Chemical to liability
for tortious interference with contractual rights.
4.1.4 REQUIRED APPROVALS. No notice to, filing with,
authorization of, exemption by, or consent or approval of, any public
body or authority is necessary for the consummation of the Merger by
SSBI other than in connection or compliance with the provisions of the
Michigan Act, compliance with federal and state securities laws, and
the consents, authorizations, approvals, or exemptions required under
the Federal Bank Holding Company Act.
4.2 ORGANIZATION AND GOOD STANDING. SSBI is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Michigan. SSBI possesses all requisite corporate power and
authority to own, operate, and lease its properties and to carry on its
business as it is now being conducted in all material respects. SSBI is a
bank holding company duly registered and in good standing with the Federal
Reserve Board under the Federal Bank Holding Company Act. SSBI is not
required to be qualified or admitted to conduct business as a foreign
corporation in any state other than the State of Michigan.
4.3 SUBSIDIARIES.
4.3.1 OWNERSHIP OF SUBSIDIARIES. SSBI owns all of the issued
and outstanding shares of capital stock of the Bank free and clear of
all claims, security interests, pledges, or liens of any kind. The
Bank is duly organized, validly existing, and in good standing under
the laws of the State of Michigan. SSBI does not have "CONTROL" (as
defined in Section 2(a)(2) of the Federal Bank Holding Company Act,
using 5 percent rather than 25 percent), either directly or
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indirectly, of any corporation engaged in an active trade or business
or which holds any significant assets other than as stated in this
Section 4.3 (SUBSIDIARIES).
4.3.2 RIGHTS TO CAPITAL STOCK. There are no outstanding
subscriptions, options, warrants, rights to acquire, or any other
similar agreements pertaining to the capital stock of the Bank.
4.3.3 QUALIFICATION AND POWER. The Bank:
(a) FOREIGN QUALIFICATION. Is not required to be qualified
or admitted to conduct business in any state other than the State
of Michigan; and
(b) CORPORATE POWER. Has full corporate power and
authority to carry on its business as and where now being
conducted.
4.3.4 FDIC; INSURANCE ASSESSMENTS. The Bank maintains in full
force and effect deposit insurance through the Federal Deposit
Insurance Corporation ("FDIC") Bank Insurance Fund ("BIF"). The Bank
has fully paid to the FDIC as and when due all assessments with
respect to its deposits. The Bank's deposit insurance assessment rate
is the lowest rate applied by the FDIC to BIF insured banks.
4.3.5 REGULATORY FEES AND CHARGES. The Bank has paid as and
when due all material fees, charges, assessments, and the like to each
and every governmental or regulatory agency having jurisdiction as
required by law, regulation, or rule.
4.4 CAPITAL STOCK.
4.4.1 CLASSES AND SHARES. The authorized capital stock of SSBI
consists of 200,000 shares of common stock, $20 par value, of which,
as of the date and time of the execution of this Plan of Merger,
100,000 shares were issued and outstanding.
4.4.2 NO OTHER CAPITAL STOCK. There is no security or class of
securities authorized or issued which represents or is convertible
into capital stock of SSBI. As of the execution of this Plan of
Merger, there are no outstanding subscriptions, options, warrants, or
rights to acquire any capital stock of SSBI, or agreements to which
SSBI is a party or by which it is bound to issue capital stock.
4.4.3 ISSUANCE OF SHARES. The number of issued and outstanding
shares of SSBI Common Stock is not subject to change before the
Effective Time of the Merger.
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4.4.4 VOTING RIGHTS. Other than the shares of SSBI Common Stock
described in Section 4.4.1 (CLASSES AND SHARES), neither SSBI nor the
Bank has outstanding any security or issue of securities:
(a) The holder or holders of which have the right to vote
on the approval of the Merger or this Plan of Merger; or
(b) Which entitle the holder or holders to consent to, or
withhold consent on, the Merger or this Plan of Merger.
4.5 FINANCIAL STATEMENTS.
4.5.1 FINANCIAL STATEMENTS. The unaudited consolidated
financial statements of SSBI and the Bank as of and for the each of
three years ended December 31, 1992, 1993, and 1994, the audited
consolidated financial statements of SSBI and the Bank as of and for
the years ended and ending December 31, 1994 and 1995, and the
unaudited consolidated financial statements of SSBI and the Bank as of
and for each of the quarters ended March 31, 1995, June 30, 1995, and
September 30, 1995, including all schedules and notes relating to such
statements, as previously delivered or to be delivered to Chemical,
are and will be correct and complete in all material respects. These
statements fairly present and will fairly present SSBI's and the
Bank's financial condition and results of operations on a consolidated
basis on the dates and for the periods indicated, and have been and
will be prepared in conformity with generally accepted accounting
principles applied consistently throughout the periods indicated
(except as otherwise noted in such financial statements or the notes
thereto).
4.5.2 CALL REPORTS. The consolidated reports of condition and
income of the Bank as of and for each of the years ended December 31,
1992, 1993, and 1994, and as of and for the each of the quarters ended
March 31, 1995, June 30, 1995, and September 30, 1995, as filed with
the FDIC, and the consolidated reports of condition and income of SSBI
and the Bank to be filed with the FDIC prior to the Effective Date of
the Merger, including all schedules and notes relating to such reports
(collectively, the "CALL REPORTS"), are correct and complete and will
be correct and complete in all material respects. The Call Reports
which have been filed were prepared, and the Call Reports to be filed
will be prepared, in conformity with applicable regulatory accounting
principles applied consistently throughout the periods indicated
(except as otherwise noted in such reports).
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in the consolidated balance sheet of SSBI and
the Bank as of December 31, 1994, and the notes thereto, neither SSBI nor
the Bank had, as of such date, liabilities or obligations, secured or
unsecured (whether accrued, absolute, or contingent) which are, or as to
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which there is a reasonable probability that they could be, materially
adverse to the business, income, or financial condition of SSBI or the
Bank.
4.7 ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31, 1994,
there has been no material adverse change in the business, income, or
financial condition of SSBI or the Bank. No facts or circumstances have
been discovered from which it reasonably appears that there is a
significant risk and reasonable probability that there will occur a
material adverse change in the business, income, or financial condition of
SSBI or the Bank.
4.8 ABSENCE OF LITIGATION. There is no action, suit, proceeding,
claim, arbitration, or investigation pending or threatened against or
relating to:
4.8.1 MATERIAL ACTIONS. SSBI, the Bank, or its properties or
business which could have a material adverse effect on the financial
condition, net income, business, properties, operations, or prospects
of SSBI or the Bank;
4.8.2 DIRECTORS AND OFFICERS. The directors or officers of SSBI
or the Bank in their capacities as such; or
4.8.3 CHALLENGES TO CONSOLIDATION. SSBI, the Bank, or any of
their directors or officers which challenges the Consolidation, this
Agreement, or the Consolidation Agreement.
There is no factual basis known to SSBI for any such action, suit,
proceeding, claim, arbitration, or investigation.
4.9 CONDUCT OF BUSINESS. SSBI and the Bank have conducted their
respective businesses and used their respective properties substantially in
compliance with all federal, state, and local laws, civil or common,
ordinances and regulations, including without limitation applicable (i)
federal and state laws and regulations concerning banking, securities,
truth-in-lending, truth-in-savings, mortgage origination and servicing,
usury, fair credit reporting, consumer protection, occupational safety,
civil rights, employee protection, fair employment practices, fair labor
standards, and insurance; and (ii) Environmental Laws (as defined in
Section 4.21.3(b) (ENVIRONMENTAL LAWS)).
4.10 ABSENCE OF DEFAULTS UNDER CONTRACTS. There is no existing
default by SSBI or the Bank, or any other party, under any contract or
agreement to which SSBI or the Bank is a party, or by which they are bound,
which could have a material adverse effect on the business, income, or
financial condition of SSBI or the Bank.
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4.11 FILINGS. In the last five years:
4.11.1 REGULATORY FILINGS. SSBI has filed in a timely manner
all filings with regulatory bodies for which filings are required;
4.11.2 COMPLETE AND ACCURATE. All such filings, as amended,
were complete and accurate in all material respects as of the dates of
such filings, and there were no misstatements or omissions therein
which, as of the making of this representation and warranty, would be
material to the business, income, or financial condition of SSBI and
the Bank on a consolidated basis; and
4.11.3 COMPLIANCE WITH REGULATIONS. All such filings complied
in all material respects with all regulations, forms, and guidelines
applicable to such filings.
4.12 REGISTRATION STATEMENT, ETC.
4.12.1 ACCURATE INFORMATION. None of the information to be
supplied by SSBI for inclusion, or included, in any Document will:
(a) Be false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the
statements therein not misleading (i) at the respective times
such Documents are filed; (ii) with respect to the Registration
Statement, when it becomes effective; and (iii) with respect to
the Prospectus and Proxy Statement, when it is mailed.
(b) With respect to the Registration Statement and the
Prospectus and Proxy Statement, as either may be amended or
supplemented, at the time of the Shareholders' Meeting, be false
or misleading with respect to any material fact, or omit to state
any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any
proxy for the Shareholders' Meeting.
4.12.2 COMPLIANCE OF FILINGS. All documents which SSBI is
responsible for filing with any regulatory agency in connection with
the Merger will comply as to form in all material respects with the
provisions of applicable law.
4.13 TAX MATTERS.
4.13.1 TAX RETURNS. SSBI and the Bank have duly and timely
filed all material federal, state, county, and local tax returns which
they have by law been required to file, including without limitation
those with respect to income, withholding, social security,
unemployment, franchise, real property, personal property, and
intangibles taxes. Each such tax returns, reports, and statements, as
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amended, is correct and in compliance with all applicable laws and
regulations.
4.13.2 TAX ASSESSMENTS AND PAYMENTS. All taxes and assessments,
including any penalties, interest, and deficiencies relating to those
taxes and assessments, due and payable by SSBI and the Bank have been
paid in full as and when due.
4.13.3 TAX PROVISION. The provisions made for taxes on the
balance sheet of SSBI as of December 31, 1994, are, and on the balance
sheet of SSBI as of December 31, 1995, will be, sufficient for the
payment of all federal, state, county, and local taxes of SSBI accrued
but unpaid as of the dates indicated, whether or not disputed, with
respect to all periods through those dates. The provisions made for
taxes on the Closing Balance Sheet will be sufficient for the payment
of all federal, state, county, and local taxes of SSBI accrued but
unpaid as of the Final Statement Date, whether or not disputed,
including all accruals and adjustments which may be necessary as of
the Final Statement Date.
4.13.4 TAX AUDITS. The federal consolidated income tax returns
of SSBI and the Bank have not been audited by the Internal Revenue
Service ("IRS") during any of the last five years. There is no tax
audit or legal or administrative proceeding for assessment or
collection of taxes pending or, to SSBI's knowledge, threatened with
respect to SSBI or the Bank. No claim for assessment or collection of
taxes has been asserted with respect to SSBI or the Bank. No waiver
of any limitations statute or extension of any assessment or
collection period has been executed by or on behalf of SSBI or the
Bank.
4.14 TITLE TO PROPERTIES. SSBI and the Bank have or will have good,
sufficient, and marketable title to all of their properties and assets,
whether real, personal, or a combination thereof, reflected in their books
and records as being owned (including those reflected in the consolidated
balance sheet of SSBI and the Bank as of December 31, 1994, and the Closing
Balance Sheet except as since disposed of in the ordinary course of
business), free and clear of all liens and encumbrances, except:
4.14.1 REFLECTED ON BALANCE SHEET. As reflected on the
consolidated balance sheet of SSBI and the Bank as of December 31,
1994, or the Closing Balance Sheet (as the case may be) and the notes
thereto;
4.14.2 NORMAL TO BUSINESS. Liens for current taxes not yet
delinquent, and liens or encumbrances which are normal to the business
of SSBI and the Bank and which are not material in relation to the
business, income, or financial condition of SSBI or the Bank; and
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4.14.3 IMMATERIAL IMPERFECTIONS. Such imperfections of title,
easements, and encumbrances, if any, as are not material in character,
amount, or extent, and do not materially detract from the value, or
materially interfere with the present use, of the properties subject
thereto or affected thereby, or which would not otherwise be material
to the business, income, or financial condition of SSBI or the Bank.
4.15 PHYSICAL ASSETS USED IN BUSINESS. The physical assets owned or
leased by SSBI and the Bank constitute all of the physical assets held for
use or used in connection with the business of SSBI and the Bank and are
adequate to carry on such business as presently conducted. All of SSBI's
and the Bank's physical assets and properties are in good operating
condition, in a good state of maintenance and repair, and in the possession
of SSBI or the Bank.
4.16 CONDITION OF REAL PROPERTY. No building or improvement on any
real property owned, leased, or used by SSBI or the Bank encroaches on any
easement or property owned by another, and no building or property owned by
another encroaches on any real property owned, leased, or used by SSBI or
the Bank or on any easement the benefit of which runs to real property
owned, leased, or used by SSBI or the Bank. None of the boundaries of any
parcel of real property owned, leased, or used by SSBI or the Bank deviates
substantially from those shown on the survey of such parcel, if any,
attached to the SSBI Disclosure Statement or from what they appear to be
through visual inspection. Neither SSBI nor the Bank is in violation of
any zoning regulation, building restriction, restrictive covenant,
ordinance, or other law, order, regulation, or requirement relating to any
real property that SSBI or the Bank owns, leases, or uses. All buildings
and improvements that SSBI or the Bank owns, leases, or uses are in good
condition (normal wear and tear excepted), are structurally sound and not
in need of repairs, are fit for their intended purposes, and are adequately
serviced by all utilities necessary for the effective operation of SSBI's
and the Bank's business as presently conducted. None of the real property
owned, leased, or used by SSBI or the Bank is the subject of any
condemnation action and there is, to the best of SSBI's knowledge, no
proposal under consideration by any public or governmental authority or
entity to use any of the real property owned, leased, or used by SSBI or
the Bank for some other purpose.
4.17 LEASES. All leases pursuant to which SSBI or the Bank, as
lessee, lease real or personal property which is material to the business
of SSBI or the Bank are valid, effective, and enforceable against the
lessor in accordance with their respective terms. There is no existing
default under any such lease, or any event which with notice or lapse of
time, or both, would constitute a default with respect to SSBI or the Bank
or, to the best knowledge of SSBI, any other party. No such lease contains
a prohibition against assignment by SSBI or the Bank, by operation of law
or otherwise, or any other provision which would preclude SSBI or any of
its direct or indirect subsidiaries from possessing and using the leased
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premises for the same purposes and upon the same rental and other terms
upon consummation of the Merger as are applicable to the possession and use
by SSBI or the Bank as of the date of this Plan of Merger.
4.18 LICENSES, PERMITS, ETC.
4.18.1 ALL LICENSES, PERMITS, ETC. SSBI and the Bank hold all
licenses, certificates, permits, franchises, and rights from all
appropriate federal, state, and other public authorities necessary for
the conduct of their businesses as presently conducted, the lack of
which would have a material adverse effect on the business, income, or
financial condition of SSBI or the Bank.
4.18.2 REGULATORY ACTION. Neither SSBI nor the Bank:
(a) Has been charged with, or to the best of SSBI's
knowledge is under governmental investigation with respect to,
any actual or alleged violation of any statute, ordinance, rule,
regulation, guideline, or standard; or
(b) Is the subject of any pending or, to SSBI's knowledge,
threatened proceeding by any regulatory authority having
jurisdiction over its business, properties, or operations.
4.19 CERTAIN EMPLOYMENT MATTERS.
4.19.1 EMPLOYMENT POLICIES, PROGRAMS, AND PROCEDURES. The
policies, programs and practices of SSBI and the Bank relating to
wages, hours of work, and other terms and conditions of employment are
in compliance in all material respects with applicable laws, orders,
regulations, public policies and ordinances governing employment and
terms and conditions of employment.
4.19.2 RECORD OF PAYMENTS. There are no existing or outstanding
obligations of SSBI or the Bank, whether arising by operation of law,
civil or common, by contract, or by past custom, for Employment-Related
Payments (as defined in Section 4.19.3 (EMPLOYMENT-RELATED
PAYMENTS)) to trusts or other funds or to any governmental agency or
to any present or former director, officer, employee, or agent (or his
or her heirs, survivors, legatees, or legal representatives) which
have not been duly recorded on the books and records of SSBI or the
Bank and paid when due or duly accrued as a liability.
4.19.3 "EMPLOYMENT-RELATED PAYMENTS." For purposes of this
Plan of Merger, "EMPLOYMENT-RELATED PAYMENTS" include any payment to
be made with respect to any contract for employment, unemployment
compensation benefits, profit sharing, pension or retirement benefits
or social security benefits, or for fringe benefits, including
vacation or holiday pay, sick pay, bonuses and other forms of
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compensation, or for medical insurance or medical expenses, which are
payable to present or former directors, officers, employees, or
agents, or their survivors, heirs, legatees, or legal representatives.
4.19.4 EMPLOYMENT CLAIMS. There are no disputes, claims, or
charges, pending or threatened alleging breach of any express or
implied employment contract or commitment, or breach of any applicable
law, order, regulation, public policy or ordinance relating to
employment or terms and conditions of employment, and there is no
basis for any valid claim or charge with regard to such matters.
4.20 EMPLOYEE BENEFIT PLANS. With respect to any "employee welfare
benefit plan," any "employee pension benefit plan," or any "employee
benefit plan" within the respective meanings of Sections 3(1), 3(2), and
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (each referred to as an "EMPLOYEE BENEFIT PLAN"), maintained by
or for the benefit of SSBI or the Bank or to which SSBI or the Bank has
made payments or contributions on behalf of its employees:
4.20.1 ERISA COMPLIANCE. SSBI and the Bank, each Employee
Benefit Plan, and all trusts created thereunder are in substantial
compliance with ERISA and all other applicable laws and regulations
insofar as such laws and regulations apply to such plans and trusts.
4.20.2 INTERNAL REVENUE CODE COMPLIANCE. SSBI and the Bank,
each Employee Benefit Plan which is intended to be a qualified plan
under Section 401(a) of the Internal Revenue Code, and all trusts
created thereunder are in compliance with the applicable provisions of
the Internal Revenue Code.
4.20.3 PROHIBITED TRANSACTIONS. No Employee Benefit Plan and no
trust created thereunder has been involved in any nonexempt
"prohibited transaction" as defined in Section 4975 of the Internal
Revenue Code and in Sections 406, 407, and 408 of ERISA.
4.20.4 PLAN TERMINATION. No Employee Benefit Plan which is a
qualified plan under Section 401(a) of the Internal Revenue Code and
no trust created thereunder has been terminated, partially terminated,
curtailed, discontinued, or merged into another plan or trust, except
in compliance with notice and disclosure to the Internal Revenue
Service (the "IRS") and the Pension Benefit Guaranty Corporation (the
"PBGC"), where applicable, as required by the Internal Revenue Code
and ERISA. With respect to each such termination, all termination
procedures have been completed and there are no pending or potential
liabilities to the PBGC, to the plans, or to participants under such
terminated plans. Each such termination, partial termination,
curtailment, discontinuance, or consolidation has been accompanied by
the issuance of a current favorable determination letter by the IRS
and, where applicable, has been accompanied by plan termination
proceedings with and through the PBGC.
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4.20.5 MULTIEMPLOYER PLAN. No Employee Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37)(A) of ERISA.
4.20.6 DEFINED BENEFIT PLAN. Except for the Retirement Plan for
the State Savings Bank of Caro (the "SSBI DEFINED BENEFIT PLAN"), no
Employee Benefit Plan in effect as of December 31, 1994, is a "defined
benefit plan" within the meaning of Section 3(35) of ERISA.
4.20.7 PAYMENT OF CONTRIBUTIONS. SSBI and the Bank have made
when due all contributions required under any Employee Benefit Plan
and under applicable laws and regulations.
4.20.8 PAYMENT OF BENEFITS. There are no payments which have
become due from any Employee Benefit Plan, the trusts created
thereunder, or from SSBI or the Bank which have not been paid through
normal administrative procedures to the plan participants or
beneficiaries entitled thereto, except for claims for benefits for
which administrative claims procedures under such plan have not been
exhausted.
4.20.9 ACCUMULATED FUNDING DEFICIENCY. No Employee Benefit Plan
which is intended to be a qualified plan under Section 401(a) of the
Internal Revenue Code and no trust created thereunder has incurred an
"accumulated funding deficiency" as defined in Section 412(a) of the
Internal Revenue Code and Section 302 of ERISA (whether or not
waived).
4.20.10 FILING OF REPORTS. SSBI has filed or caused to be
filed, and will continue to file or cause to be filed, in a timely
manner all filings pertaining to each Employee Benefit Plan with the
IRS, the United States Department of Labor, and the PBGC as prescribed
by the Internal Revenue Code or ERISA, or regulations issued
thereunder. All such filings, as amended, were complete and accurate
in all material respects as of the dates of such filings, and there
were no misstatements or omissions in any such filing which, as of the
making of this representation and warranty, would be material to the
financial condition, net income, business, properties, operations, or
prospects of SSBI or the Bank.
4.21 ENVIRONMENTAL MATTERS.
4.21.1 OWNED OR OPERATED PROPERTY. With respect to real estate
now or previously owned or leased by SSBI or the Bank or now or
previously used in the conduct of their businesses (for purposes of
this Section, those properties are collectively referred to as
"PREMISES"):
(a) RELEASES, ETC. There have been no releases of Hazardous
Substances (as defined below) at or from the Premises and there
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are no Hazardous Substances (beyond natural background levels) on
or in the Premises, including groundwater and surface water,
except those substances incorporated into structural materials in
good condition in buildings on the Premises.
(b) USES OF PREMISES. During their ownership or operation
of the Premises, SSBI and the Bank have not used or allowed any
other person to use the Premises for the purpose of disposing of,
refining, generating, manufacturing, producing, storing,
handling, treating, transferring, releasing, processing or
transporting any Hazardous Substance.
(c) UNDERGROUND STORAGE TANKS. The Premises do not
contain, and have never contained, any underground storage tanks.
With respect to any underground storage tank listed in the SSBI
Disclosure Statement as an exception to the foregoing, each such
underground storage tank presently or previously located on
Premises is or has been maintained or removed, as applicable, in
compliance with all applicable Environmental Laws (as defined
below).
(d) ABSENCE OF NOTICE, ETC. Neither SSBI nor the Bank has
ever received any notice or communication from, nor ever been
required to file any notice or application with, any governmental
agency concerning any Hazardous Substances on the Premises.
(e) ENVIRONMENTAL SUITS AND PROCEEDINGS. There have not
been and are not now any violations of any Environmental Laws (as
defined below) affecting the Premises, nor has SSBI or the Bank
received any notice of any of the foregoing or of any existing or
threatened legal action relating to the environmental condition
of the Premises or damages or injury related to the environmental
condition of the Premises, nor have the Premises been designated
in any manner by any government agency as a Hazardous Substance
disposal, release, removal or remediation site or candidate for
removal or remediation, nor has any lien arising under or in
connection with any Environmental Law attached to any of the
Premises, nor has any property off the Premises released
Hazardous Substances that have migrated to or under the Premises.
4.21.2 LOAN PORTFOLIO. With respect to any real estate securing
any outstanding loan or related security interest and any owned real
estate acquired in full or partial satisfaction of a debt previously
contracted, to SSBI's and the Bank's knowledge, no such property
contains or is contaminated by any quantity of any Hazardous Substance
from any source.
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4.21.3 DEFINITIONS.
(a) HAZARDOUS SUBSTANCES. For purposes of this Plan of
Merger, "Hazardous Substance" has the meaning set forth in Section
9601 of the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, 42 U.S.C.A. <Section> 9601 et seq.
("CERCLA"), and Section 2101(1)(q) of the Michigan Natural Resources
and Environmental Protection Act, Act 451 of 1994, as amended, M.C.L.
<Section> 324.20101(1)(q), including, without limitation, radon,
polychlorinated biphenyls, asbestos and radioactive material.
(b) ENVIRONMENTAL LAWS. For purposes of this Plan of
Merger, "ENVIRONMENTAL LAWS" means all laws (civil or common),
ordinances, rules, regulations, guidelines, and orders that:
(i) Regulate air, water, soil, or waste management,
including but not limited to the generation, release,
containment, storage, handling, transportation, disposal, or
management of Hazardous Substances; or
(ii) Regulate or prescribe requirements for air, water,
or soil quality; or
(iii) Are intended to protect public health or the
environment; or
(iv) Establish liability for the investigation,
removal, or remediation of, or damage caused by, any Hazardous
Substance.
4.22 INVESTMENT BANKERS AND BROKERS. SSBI has employed the
investment banking firm of Austin Associates, Inc. SSBI's only financial
obligation with respect to investment banking firms is the payment of fees
and expenses as described in the SSBI Disclosure Statement. SSBI has not
employed any other broker, finder, or investment banker in connection with
the Merger. SSBI has no express or implied agreement with any other person
or company relative to any commission or finder's fee payable with respect
to the Merger.
4.23 RELATED PERSONS. For purposes of this Plan of Merger, the term
"SSBI RELATED PERSON" shall mean any director or executive officer of SSBI
or the Bank, their spouses and children, any person who is a member of the
same household as such persons, and any corporation, partnership,
proprietorship, trust, or other entity of which any such persons, alone or
together, have Control.
4.23.1 CONTROL OF MATERIAL ASSETS. Other than in a capacity as
a shareholder, director, or executive officer of SSBI or the Bank, no
SSBI Related Person owns or controls any material assets or properties
which are used in the business of SSBI or the Bank.
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4.23.2 CONTRACTUAL RELATIONSHIPS. Other than ordinary and
customary banking relationships, no SSBI Related Person has any
contractual relationship with SSBI or the Bank.
4.23.3 LOAN RELATIONSHIPS. No SSBI Related Person has any
outstanding loan or loan commitment from, or on whose behalf an
irrevocable letter of credit has been issued by, SSBI or the Bank in a
principal amount of $25,000 or more.
4.24 CHANGE IN BUSINESS RELATIONSHIPS. Neither SSBI nor the Bank has
notice, whether on account of the Merger or otherwise, that (i) any
customer, agent, representative, or supplier of SSBI or the Bank intends to
discontinue, diminish, or change its relationship with SSBI or the Bank,
the effect of which would be material to the business of SSBI or the Bank;
or (ii) any executive officer of SSBI or the Bank intends to terminate his
or her employment.
4.25 INSURANCE. SSBI and the Bank each maintains in full force and
effect insurance on its assets, properties, premises, operations, and
personnel in such amounts and against such risks and losses as are
customary and adequate for comparable entities engaged in the same business
and industry. There is no unsatisfied claim of $5,000 or more under such
insurance as to which the insurance carrier has denied liability. During
the last five years, no insurance company has canceled or refused to renew
a policy of insurance covering SSBI's or the Bank's assets, properties,
premises, operations, or personnel.
4.26 BOOKS AND RECORDS. The minutes contained in corporate minute
books and files of SSBI and the Bank (since it was acquired by SSBI)
properly and accurately record in all material respects all actions
actually taken by its shareholders, directors, and committees of directors.
The books, accounts, and records of SSBI and the Bank reflect only actual
transactions and have been maintained in all material respects in the usual
and regular manner, in accordance with generally accepted accounting
principles consistently applied, and in compliance with applicable laws and
regulations in all material respects.
4.27 LOAN GUARANTEES. All guarantees of indebtedness owed to the
Bank, including but not limited to those of the Federal Housing
Administration, the Small Business Administration, and other state and
federal agencies, are valid and enforceable, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting creditors' rights, and by the exercise of judicial
discretion in accordance with general principles applicable to equitable
and similar remedies, and except as would not be material to SSBI or the
Bank.
4.28 EVENTS SINCE DECEMBER 31, 1994. Neither SSBI nor the Bank has,
since December 31, 1994:
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4.28.1 BUSINESS IN ORDINARY COURSE. Conducted its business
other than in the ordinary course, or incurred or become subject to
any liability or obligation, except liabilities incurred in the
ordinary course of business, and except for any single liability or
for the aggregate of any group of related liabilities which do not
exceed $10,000.
4.28.2 STRIKES OR LABOR TROUBLE. Experienced or, to the best
knowledge of SSBI, been threatened by any strike, work stoppage,
organizational effort, or other labor trouble, or any other event or
condition of any similar character which has been or could reasonably
be expected to be materially adverse to the business, income, or
financial condition of SSBI or the Bank.
4.28.3 DISCHARGE OF OBLIGATIONS. Discharged or satisfied any
lien or encumbrance, or paid any obligation or liability other than
those shown on SSBI's December 31, 1994, consolidated financial
statements or incurred after that date, other than in the ordinary
course of business, except for such liens, encumbrances, liabilities,
and obligations that do not in the aggregate exceed $10,000.
4.28.4 MORTGAGE OF ASSETS. Mortgaged, pledged, or subjected to
lien, charge, or other encumbrance any of its assets, or sold or
transferred any such assets, except in the ordinary course of
business, except for such mortgages, pledges, liens, charges, and
encumbrances for indebtedness that do not in the aggregate exceed
$10,000.
4.28.5 EXTRAORDINARY TRANSACTIONS. Entered into any transaction
involving more than $10,000 in the aggregate, other than in the
ordinary course of business, or incurred any other liabilities,
obligations, liens, or encumbrances for indebtedness that in the
aggregate exceed $10,000.
4.28.6 CONTRACT AMENDMENT OR TERMINATION. Made or permitted any
amendment or termination of any contract to which it is a party and
which is material to the business, income, or financial condition of
SSBI or the Bank, except as expressly provided in this Plan of Merger.
4.29 RESERVE FOR LOAN LOSSES. The reserve for loan losses reflected
in SSBI's and the Bank's consolidated financial statements for the period
ended December 31, 1994, and Call Reports for the quarters ended March 31,
1995, June 30, 1995, and September 30, 1995, was adequate to meet all
reasonably anticipated loan losses, net of recoveries related to loans
previously charged off.
4.30 LOAN ORIGINATION AND SERVICING. In originating, underwriting,
servicing, and discharging loans, mortgages, land contracts, and other
contractual obligations, either for its own account or for the account of
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others, the Bank has complied with applicable terms and conditions of such
obligations and with all applicable laws, regulations, rules, contractual
requirements, and procedures with respect to such servicing in all material
respects.
4.31 PUBLIC COMMUNICATIONS. No annual report, quarterly report,
proxy material, press release, or other communication previously sent or
released by SSBI or the Bank to SSBI's shareholders or the public, and no
notice, filing, prospectus, offering memorandum, or other communication
filed by SSBI or the Bank with any regulatory agency, was false or
misleading with respect to any material fact, or omitted to state any
material fact necessary to make the statements therein not misleading.
4.32 NO INSIDER TRADING. SSBI has reviewed its stock transfer
records since December 31, 1994, and has questioned its directors and
executive officers concerning known stock transfers since that date. Based
upon that investigation, to the best of SSBI's knowledge, no director or
officer of SSBI or the Bank and no person related to any such director or
officer by blood or marriage and residing in the same household has since
December 31, 1994, purchased or sold, or caused to be purchased or sold,
any shares of SSBI Common Stock of which such director, officer, or related
person is or was the record or beneficial owner during any period when SSBI
was in possession of material nonpublic information.
4.33 CONTINUITY OF INTEREST. There is no plan or intention by any
shareholder of SSBI who owns beneficially or of record 5 percent or more of
SSBI Common Stock, and, to the best knowledge of SSBI, there is no plan or
intention on the part of the remaining shareholders of SSBI who own SSBI
Common Stock to sell, exchange, or otherwise dispose of a number of shares
of Chemical Common Stock received in the transaction that would reduce the
SSBI shareholders' ownership of Chemical Common Stock to a number of shares
having a value, as of the Effective Time of the Merger, of less than 50
percent of the value of all of the formerly outstanding SSBI Common Stock
as of the same time. For purposes of this representation, shares of SSBI
Common Stock exchanged for cash in lieu of fractional shares will be
treated as outstanding SSBI Common Stock at the Effective Time of the
Merger. Shares of SSBI Common Stock and shares of Chemical Common Stock
held by SSBI shareholders and otherwise sold, redeemed, or disposed of
before or after the transaction will be considered in making this
representation.
4.34 POOLING OF INTERESTS ACCOUNTING QUALIFICATION. Neither SSBI nor
the Bank owns any shares of Chemical Common Stock, any securities
convertible into such stock, or any rights to acquire such stock, except
for any which may be held in a fiduciary capacity for a customer as to
which SSBI or the Bank has no beneficial interest. Neither SSBI nor the
Bank has during the past 2 years acquired any shares of SSBI Common Stock,
any securities convertible into such stock, or any other rights to acquire
such stock, except for any which may be held in a fiduciary capacity for a
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customer as to which SSBI or the Bank has no beneficial interest, and
except as permitted for purposes other than a business combination under
the pooling of interests method of accounting, and no more than a normal
number of shares have been acquired for such permissible purposes.
4.35 TRUE AND COMPLETE INFORMATION. No schedule, statement, list,
certificate, or other information furnished or to be furnished by SSBI in
connection with this Plan of Merger, including the SSBI Disclosure
Statement, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they
are made, not misleading.
4.36 TRUTH AND COMPLETENESS OF REPRESENTATIONS AND WARRANTIES.
4.36.1 TRUE AT THE CLOSING. SSBI further warrants that its
representations and warranties in this Plan of Merger will be true in
all material respects at the Closing. All of such representations and
warranties made with respect to specified dates or events shall still
be true at the Closing in all material respects with respect to such
dates or events.
4.36.2 UNTRUE REPRESENTATIONS AND WARRANTIES. During the term
of this Plan of Merger, if SSBI becomes aware of any facts or of the
occurrence or impending occurrence of any event which would cause one
or more of SSBI's representations and warranties contained in this
Plan of Merger to become untrue, or would have caused one or more of
such representations and warranties (except in the case of
representations and warranties expressly made only as of the execution
of this Plan of Merger) to be untrue had such facts been known or had
such event occurred prior to the execution of this Plan of Merger,
then:
(a) NOTICE. SSBI shall immediately give detailed written
notice thereof to Chemical; and
(b) REMEDY UNLESS WAIVED. SSBI shall use all reasonable
efforts to change such facts or events to make such
representations and warranties true, unless the same shall have
been waived in writing by Chemical.
ARTICLE V
CERTAIN COVENANTS
5.1 SSBI DISCLOSURE STATEMENT. SSBI shall prepare the SSBI
Disclosure Statement, which shall be certified with respect to Section 4.35
(TRUE AND COMPLETE INFORMATION) on behalf of SSBI by its chief executive
officer and its chief financial officer, and shall deliver two copies of
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the SSBI Disclosure Statement to Chemical not later than 30 days after the
execution of this Plan of Merger. The SSBI Disclosure Statement shall
contain appropriate references and cross-references with respect to
disclosures, and appropriate identifying markings with respect to
documents, which pertain to one or more sections or articles of this Plan
of Merger. In addition to any exceptions to SSBI's representations set
forth in Article IV, the SSBI Disclosure Statement shall contain true and
correct copies of each and every document specified below. Not less than 5
days prior to the Closing, SSBI shall deliver to Chemical an update to the
SSBI Disclosure Statement describing any material changes and containing
any new or amended documents, as specified below, which are not contained
in the SSBI Disclosure Statement as initially delivered. The update to the
SSBI Disclosure Statement shall be certified with respect to Section 4.35
(TRUE AND COMPLETE INFORMATION) on behalf of SSBI by its chief executive
officer and its chief financial officer. A breach of this Plan of Merger
for failure to include information in the SSBI Disclosure Statement shall
not be cured by including such information in the update; failure to
include such omitted information in the update shall, however, be
considered a separate breach of this Plan of Merger. The SSBI Disclosure
Statement and the update, as of the dates they are delivered, shall
contain:
5.1.1 LABOR AGREEMENTS. All collective bargaining or other
contracts or agreements with any labor union or employee group
concerning employees of SSBI or the Bank.
5.1.2 EMPLOYMENT AGREEMENTS. All employment agreements not
terminable by SSBI or the Bank upon 60 days' or less notice without
penalty or obligation.
5.1.3 AFFIRMATIVE ACTION PROGRAMS. All affirmative action plans
or programs covering employees of SSBI or the Bank.
5.1.4 EMPLOYMENT POLICIES. All employee handbooks, policy
manuals, rules and standards of employment implemented by SSBI or the
Bank with regard to their employees and presently in effect.
5.1.5 RETIRED EMPLOYEE EXPENSES. All plans, agreements,
arrangements, or understandings concerning payment of medical
expenses, insurance, or other benefits with respect to any former or
disabled employee of SSBI or the Bank, or any spouse or child, member
of the same household, estate, or survivor of such a former employee.
5.1.6 EMPLOYEE BENEFIT PLANS. All Employee Benefit Plans,
plans, policies or contracts providing for bonuses, pensions, all
sales commission schedules, options, stock purchases, deferred
compensation, severance or termination pay, retirement payments,
profit sharing, or retirement savings, including amendments, any
summary plan description relating thereto, and, to the extent
A-34
applicable, the last two annual reports on Form 5500 for each such
plan or contract, the latest determination letter issued by the IRS
with respect to each Employee Benefit Plan which is a qualified plan
under Section 401(a) of the Internal Revenue Code and any
determination letter issued with respect to each amendment to each
such Employee Benefit Plan, and all administrative forms for each
Employee Benefit Plan.
5.1.7 EXECUTIVE EMPLOYMENT AND COMPENSATION. Definitive
statements identifying and describing in a summary manner each and
every written or oral, express or implied contract, agreement, or
arrangement pertaining to the employment or compensation of SSBI's and
the Bank's directors, officers, or employees who in 1994 received, or
in 1995 are contractually entitled to receive, aggregate compensation
of $50,000 or more. Each definitive statement shall be separately
signed and acknowledged as being true, correct, and complete by each
such person.
5.1.8 JUDGMENTS, ORDERS OR SETTLEMENT AGREEMENTS. All
judgments, orders, injunctions, court decrees or settlement agreements
arising out of or relating to the labor and employment practices or
decisions of SSBI or the Bank which, by their terms, continue to bind
or affect SSBI or the Bank.
5.1.9 DEFAULTED CONTRACTS. Excepting any ordinary and customary
banking relationship, all agreements, contracts, mortgages, deeds of
trust, leases, commitments, indentures, notes, or other instruments:
(a) Under which SSBI or the Bank is in default or as to
which material provisions, or rights thereunder, have been waived
or materially amended or modified; or
(b) Under which, to the best of SSBI's knowledge, another
party is in default under its obligations to SSBI or the Bank, or
as to which material provisions, or rights thereunder, have been
waived or materially amended or modified.
5.1.10 LOAN DELINQUENCIES. A list of loans or extensions of
credit on the books of the Bank with a principal balance of $25,000 or
more and which are more than 60 days contractually delinquent.
5.1.11 LETTERS OF CREDIT AND LOAN CONTINGENCIES. A listing of
all letters of credit and obligations to make loans or extend credit
which the Bank cannot reject or terminate without advance notice or
penalty in its sole discretion, and upon which the Bank may be or may
become liable without action or omission of the Bank after the
Closing, identifying and describing such letters of credit and
obligations in reasonable detail and excepting (if SSBI chooses to
except them) any such letter of credit or obligation with respect to
which the Bank's obligation does not exceed $25,000.
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5.1.12 RELATED PERSON CONTRACTS. All agreements, contracts,
mortgages, deeds of trust, leases, commitments, indentures, notes, or
other instruments, which are, to the best of SSBI's knowledge, with
any SSBI Related Person, excepting any ordinary and customary banking
relationship.
5.1.13 RELATED PERSON LOANS. A list of all outstanding loans or
loan commitments from, and all irrevocable letters of credit issued
by, SSBI or the Bank in a principal amount of $25,000 or more to any
SSBI Related Person.
5.1.14 DEEDS AND TITLES. All deeds, titles, or other evidences
of title to real estate, as well as copies of all surveys, abstracts,
and environmental assessments thereof and title insurance policies
relating thereto (if any), and complete and correct lists of all items
of personal property which had a book value in excess of $10,000 as of
December 31, 1994, reflected in the books and records of SSBI or the
Bank as being owned (including those reflected in the consolidated
balance sheet of SSBI and the Bank as of December 31, 1994), except as
since disposed of in the ordinary course of business.
5.1.15 LEASE AGREEMENTS. All leases or other agreements
pursuant to which SSBI or the Bank, as lessee or lessor, lease real or
personal property, excepting any lease as to personal property under
which the aggregate lease payments with respect to that lease do not
exceed $10,000 .
5.1.16 OTHER AGREEMENTS.
(a) All contracts or agreements to which SSBI or the Bank
is a party or subject which call for aggregate payments in excess
of $10,000 with respect to individual items or individual
agreements, excepting any ordinary and customary banking
relationship.
(b) All data processing agreements, service agreements,
consulting agreements, or any similar arrangements not terminable
by SSBI or the Bank upon 60 days' or less notice without penalty,
excepting any agreement which does not require aggregate payments
in excess of $10,000.
(c) All contracts or agreements, whether existing or
proposed, for the purchase of equipment, supplies, other personal
or real property, or services which call for aggregate payments
in excess of $10,000.
(d) All loan servicing agreements pursuant to which SSBI or
the Bank services loans for others.
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(e) All mortgage forward commitments and similar agreements
pursuant to which SSBI or the Bank sells to others mortgages
which it originates.
(f) All interest rate swap agreements and other agreements
relating to hedging interest rate risks.
5.1.17 INSURANCE POLICIES. All policies of insurance maintained
by SSBI or the Bank with respect to assets, properties, premises,
operations, and personnel, and copies of the most recent insurance
audit, review, or report (if any).
5.1.18 CHARTER DOCUMENTS AND BYLAWS. The articles of
incorporation and bylaws of SSBI and the Bank, including all
amendments to date.
5.1.19 SHAREHOLDER LIST. A shareholder list as of the most
recent date available identifying each shareholder, indicating the
number of shares held, and providing the shareholder's record address.
5.1.20 MANAGEMENT LETTERS. Copies of any letters or memoranda
to management or special reports received during each of the last
three years by SSBI or the Bank from SSBI's independent public
accountants which set forth criticisms of, or advice, suggestions, or
recommendations for improvements in, any aspect of the accounting for
or operation of SSBI or the Bank.
5.1.21 CHANGE OF CONTROL. Copies of agreements, contracts,
loans, mortgages, deeds of trust, leases, commitments, indentures,
notes, or other instruments which may be accelerated, terminated, or
otherwise materially affected by virtue of the change of control of
SSBI upon consummation of the Merger.
5.1.22 LONG-TERM DEBT. Copies of any loan agreements, notes,
indentures, security agreements, mortgages, pledge receipts,
guaranties, and related documents with respect to all such long-term
indebtedness of SSBI or the Bank.
5.1.23 REGULATORY ORDERS. Copies of any order, decree,
memorandum, agreement, or understanding with regulatory agencies
binding upon or affecting the operations of SSBI or the Bank or their
respective directors or officers in their capacities as such.
5.1.24 PATENTS, TRADEMARKS, AND COPYRIGHTS. All trademarks,
trade names, service marks, patents, or copyrights, whether or not
registered or the subject of an application for registration, which
are owned by SSBI or the Bank or licensed from a third party.
5.1.25 ENVIRONMENTAL POLICIES. Copies of all policies formally
adopted by the Board of Directors of SSBI and the Bank as currently in
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effect and, with respect to environmental matters, copies of all
policies that have been in effect during the last 10 years regarding
the performance of environmental investigations of properties accepted
as collateral for loans or accepted in trust, including the effective
dates of all such policies.
5.1.26 LITIGATION. A list of all suits, actions, and
proceedings (legal, administrative, arbitral, or otherwise), and all
claims, investigations, and inquiries (by an administrative agency,
governmental body, or otherwise) to which SSBI or the Bank, any of
their respective businesses or properties, is a party as plaintiff or
defendant or is subject, or any director or officer of SSBI in his
capacity as such, together with copies of the complaint, answer, and
all material motions and orders filed or entered in connection
therewith.
5.1.27 MESC FORM 1027. A completed and executed copy of MESC
Form 1027, Business Transferor's Notice of Unemployment Tax Liability
and Rate.
5.2 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME OF THE MERGER.
From the execution of this Plan of Merger until the Effective Time of the
Merger, SSBI agrees that, except as consented to in writing by Chemical or
as otherwise provided in this Plan of Merger, SSBI shall, and it shall
cause the Bank to:
5.2.1 ORDINARY COURSE. Conduct its business and manage its
property only in the usual, regular, and ordinary course and not
otherwise, in substantially the same manner as prior to the execution
of this Plan of Merger, and not make any substantial change to its
methods of management or operation in respect of such business or
property.
5.2.2 NO INCONSISTENT ACTIONS. Take no action which would be
inconsistent with or contrary to the representations, warranties, and
covenants made by SSBI in this Plan of Merger, and take no action
which would cause SSBI's representations and warranties to become
untrue except as and to the extent required by applicable laws and
regulations or regulatory agencies having jurisdiction.
5.2.3 COMPLIANCE. Comply in all material respects with all
laws, regulations, agreements, court orders, and administrative orders
applicable to the conduct of its business unless the application of
such laws, regulations, or orders is being contested in good faith and
Chemical has been notified of such contest.
5.2.4 NO AMENDMENTS. Make no change in its articles of
incorporation or charter, as the case may be, or its bylaws.
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5.2.5 BOOKS AND RECORDS. Maintain its books, accounts, and
records in the usual and regular manner, and in material compliance
with all applicable laws and accounting standards.
5.2.6 NO CHANGE IN STOCK. Make no change in the number of
shares of its capital stock issued and outstanding; grant no warrant,
option, or commitment relating to its capital stock; enter into no
agreement relating to its capital stock; and issue no securities
convertible into its capital stock.
5.2.7 MAINTENANCE. Use all reasonable efforts to maintain its
property and assets in their present state of repair, order and
condition, reasonable wear and tear and damage by fire or other
casualty excepted.
5.2.8 PRESERVATION OF GOODWILL. Use all reasonable efforts to
preserve its business organization intact, to keep available the
services of its present officers and employees, and to preserve the
goodwill of its customers and others having business relations with
it.
5.2.9 INSURANCE POLICIES. Use all reasonable efforts to
maintain and keep in full force and effect insurance coverage, so long
as such insurance is reasonably available, on its assets, properties,
premises, operations and personnel in such amounts, against such risks
and losses, and with such self-insurance requirements as are presently
in force.
5.2.10 POLICIES AND PROCEDURES. Make no material change in any
policies and procedures applicable to the conduct of its business,
including without limitation any loan and underwriting policies, loan
loss and charge-off policies, investment policies, and employment
policies, except as and to the extent required by law or regulatory
agencies having jurisdiction.
5.2.11 NEW DIRECTORS OR OFFICERS. Except to reelect persons who
are then incumbent directors and officers at annual meetings, not,
without first consulting Chemical:
(a) Increase the number of directors or fill any vacancy on
the board of directors; or
(b) Elect or appoint any person to an executive office.
5.2.12 COMPENSATION AND BENEFITS.
(a) Not increase, or agree to increase, the salary or other
compensation payable to, or fringe benefits of, or pay or agree
to pay any bonus to, any director or officer, or any other class
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or group of employees as a class or group, except for increases,
agreements or payments which are reasonable in amount and
consistent with the prior year, which are announced and made only
after first consulting with Chemical, and bonuses which are paid
or accrued before the Final Statement Date and reflected on the
Closing Balance Sheet; and
(b) Not introduce, change, or agree to introduce or change,
any pension, profit-sharing, or employee benefit plan, fringe
benefit program, or other plan or program of any kind for the
benefit of its employees unless required by law or this Plan of
Merger, or necessary or advisable, in the opinion of counsel, to
maintain any tax qualified status, except that SSBI may terminate
the SSBI Defined Benefit Plan.
5.2.13 NEW EMPLOYMENT AGREEMENTS. Not enter into any employment
agreement which is not terminable by SSBI or the Bank without cost or
penalty upon 60 days' or less notice.
5.2.14 DIVIDENDS. With respect to SSBI only, not declare or pay
any dividends, nor make any other distribution, in respect of any
shares of its capital stock except as permitted by Section 5.3
(REGULAR DIVIDENDS AND COMPENSATION ADJUSTMENTS).
5.2.15 BORROWING. Not borrow money except in the ordinary
course of business.
5.2.16 MORTGAGING ASSETS. Not sell, mortgage, pledge, encumber,
or otherwise dispose of, or agree to sell, mortgage, pledge, encumber,
or otherwise dispose of, any of its property or assets, except in the
ordinary course of business, except for property or assets, or any
group of related properties or assets, which have a fair market value
of less than $25,000.
5.2.17 NOTICE OF ACTIONS. Notify Chemical of the threat or
commencement of any action, suit, proceeding, claim, arbitration, or
investigation against or relating to: (i) SSBI or the Bank; (ii)
SSBI's or the Bank's directors, officers, or employees in their
capacities as such; (iii) SSBI's or the Bank's assets, liabilities,
businesses, or operations; or (iv) the Merger or this Plan of Merger.
5.2.18 LARGE EXPENDITURES. Not pay, agree to pay, or incur any
liability, except such liabilities which have been accrued on its
books as of the execution of this Plan of Merger, for the purchase or
lease of any item of real property, fixtures, equipment, or other
capital asset in excess of $10,000 individually or in excess of
$25,000 in the aggregate with respect to SSBI and the Bank, except
pursuant to prior commitments made by SSBI or the Bank that are
disclosed in the SSBI Disclosure Statement.
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5.2.19 NEW SERVICE ARRANGEMENTS. Not enter into, or commit to
enter into, any agreement for trust, consulting, professional, data
processing, or other services to SSBI or the Bank which is not
terminable by SSBI or the Bank without penalty upon 60 days' or less
notice.
5.2.20 CAPITAL IMPROVEMENTS. Not open, enlarge, or materially
remodel any bank or other facility, and not lease, purchase, or
otherwise acquire any real property for use as a branch bank, or apply
for regulatory approval of any new branch bank, except pursuant to
prior commitments made by SSBI or the Bank that are disclosed in the
SSBI Disclosure Statement.
5.3 REGULAR DIVIDENDS. SSBI shall not declare, pay or agree to
declare or pay any dividend or distribution of any kind upon SSBI Common
Stock after the Final Statement Date, except as fully accrued in the
Closing Balance Sheet. SSBI shall adjust the record date for its regularly
scheduled quarterly dividend, if any (otherwise permissible under this
Section 5.3 (REGULAR DIVIDENDS AND COMPENSATION ADJUSTMENTS)), with respect
to the period in which the Effective Time of the Merger occurs, if
necessary, to assure that SSBI shareholders receive one and only one
dividend payable in, or with a record date occurring in, the quarter in
which the Effective Time of the Merger occurs, whether with respect to SSBI
Common Stock or Chemical Common Stock received in the Merger. In order to
assure the availability of pooling of interest accounting treatment for the
Merger, SSBI shall declare and pay quarterly cash dividends which are
consistent with SSBI's historical practice; without limiting the foregoing:
5.3.1 SSBI shall notify Chemical of the proposed amount,
record date and payment date of each proposed dividend not less than 5
business days prior to its declaration.
5.3.2 Caro shall not, during any fiscal period, declare or
pay cash dividends which exceed the cash dividends declared or paid,
as the case may be, during the comparable period of the prior year.
5.3.3 SSBI shall not, during any fiscal period, declare or
pay cash dividends which are less than the cash dividends declared or
paid, as the case may be, during the comparable period of the prior
year without Chemical's prior written consent. Chemical shall not
withhold consent to any proposed reduction in SSBI's dividend unless
Chemical determines, in Chemical's reasonable judgment, after
consultation with SSBI and Chemical's accountants, that the proposed
dividend reduction could be inconsistent with pooling of interests
accounting treatment for the Merger.
5.4 DATA PROCESSING ARRANGEMENTS. Until the Effective Time of the
Merger, SSBI shall advise Chemical of all anticipated renewals or
extensions of existing data processing services agreements with independent
vendors. SSBI agrees to cooperate with Chemical in negotiating with those
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vendors the length of any extension or renewal term of those agreements,
which, unless otherwise agreed with Chemical, shall not exceed one year
from the date of renewal. SSBI agrees to send to each vendor, as and when
due, such notices of nonrenewal as may be necessary or appropriate to
prevent those agreements from automatically renewing for a term of more
than one year from the date of renewal, except as otherwise agreed between
SSBI and Chemical.
5.5 AFFILIATES. The SSBI Disclosure Statement and the update to the
SSBI Disclosure Statement shall identify every person who may, to SSBI's
knowledge, be deemed to be an "affiliate" of SSBI for purposes of Rule 145
under the Securities Act of 1933, as amended (the "SECURITIES ACT"). SSBI
shall cause its counsel to deliver to each person who is identified as an
affiliate, on or prior to the Effective Time of the Merger, advice with
respect to such person's obligations under the Securities Act and the
regulations issued thereunder with respect to disposition of securities of
Chemical. Further, SSBI shall use all reasonable efforts to cause each
person who is identified as an affiliate to deliver to Chemical on or prior
to the Effective Time of the Merger a written agreement, satisfactory to
Chemical, that such person shall not offer to sell or otherwise dispose of
any shares of Chemical Common Stock issued to such person pursuant to the
Merger in violation of the Securities Act or the regulations thereunder, or
prior to publication of financial results of the post-Merger combined
operations of Chemical covering a period of at least 30 days.
5.6 MAINTENANCE OF INSURANCE. SSBI shall use all reasonable efforts
to obtain renewal of the directors' and officers' liability and corporation
reimbursement insurance in effect on the execution of this Plan of Merger
on terms and conditions reasonably agreeable to SSBI. SSBI shall consult
with Chemical regarding any renewals of, and the premiums to be paid for,
such insurance prior to taking any action to renew or terminate such
insurance. If SSBI's directors and officers liability insurance policy is
canceled or not renewed by the issuer during the term of this Plan of
Merger, SSBI shall, at Chemical's option, purchase the discovery period
coverage offered under the policy.
5.7 COMPETING PROPOSALS. Neither SSBI nor the Bank, nor any of
their respective directors, officers, employees, investment bankers,
representatives, or agents, shall take any action inconsistent with the
intent to consummate the Merger upon the terms and conditions of this Plan
of Merger. Without limiting the foregoing:
5.7.1 NO SOLICITATION. Neither SSBI nor the Bank, nor any of
their respective directors, officers, employees, investment bankers,
representatives, or agents, shall solicit, encourage, negotiate,
accept, approve or discuss with any other party, any proposals,
offers, or expressions of interest concerning any tender offer,
exchange offer, merger, consolidation, sale of shares, sale of assets,
or assumption of liabilities not in the ordinary course, or other
business combination involving SSBI or the Bank, or any of their
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respective assets or properties, other than the Merger (a "BUSINESS
COMBINATION").
5.7.2 COMMUNICATION OF OTHER PROPOSALS. SSBI shall cause
written notice to be delivered to Chemical promptly upon receipt of
any solicitation, offer, proposal, or expression of interest (a
"PROPOSAL") concerning a Business Combination. Such notice shall
contain the material terms and conditions of the Proposal to which
such notice relates or shall contain a copy of SSBI's unequivocal
rejection of the Proposal in the form actually delivered to the person
from whom the Proposal was received. Thereafter, SSBI shall promptly
notify Chemical of any material changes in the terms, conditions, and
status of any Proposal.
5.7.3 FURNISHING INFORMATION. Neither SSBI nor the Bank, nor
any of their respective directors, officers, employees, investment
bankers, representatives, or agents, shall furnish any nonpublic
information concerning SSBI or the Bank to any person who is not
affiliated or under contract with SSBI or Chemical, except as required
by applicable law or regulations.
5.8 LOAN LOSS RESERVE. SSBI's provision for loan losses as reflected
on the Closing Balance Sheet shall not be less than 0.97% of total loans
reflected on the Closing Balance Sheet. Between the date of execution of
this Plan of Merger and the Effective Time of the Merger, SSBI agrees to
cause the Bank to make loans consistent with the Bank's current lending
policies and past practice, to make additional provisions for new problem
loans that arise during such period consistent with the Bank's current
policies and past practice, and to charge off nonperforming loans in
accordance with regulatory requirements and the Bank's past charge-off
practices.
5.9 AUDIT OF FINANCIAL STATEMENTS. SSBI agrees to engage and pay
for Crowe Chizek & Co. to conduct an audit of its 1995 and 1994 financial
statements and to prepare the Closing Report in accordance with generally
accepted auditing principles.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 REGISTRATION STATEMENT. As soon as is reasonably practical,
Chemical agrees to prepare and file with the SEC under the Securities Act
the Registration Statement and the related Prospectus and Proxy Statement
included as a part thereof covering the issuance by Chemical of the shares
of Chemical Common Stock as contemplated by this Plan of Merger, together
with such amendments as may reasonably be required for the Registration
Statement to become effective. Chemical agrees to provide SSBI with the
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opportunity to review and comment upon the Registration Statement, each
amendment to the Registration Statement, and each form of the Prospectus
and Proxy Statement before filing. Chemical agrees to provide SSBI with
copies of all correspondence received from the SEC with respect to the
Registration Statement and its amendments and with all responsive
correspondence to the SEC. Chemical agrees to notify SSBI of any stop
orders or threatened stop orders with respect to the Registration
Statement. SSBI agrees to provide all necessary information pertaining to
SSBI and the Bank promptly upon request, and to use its best efforts to
obtain the cooperation of SSBI's independent accountants and attorneys, in
connection with the preparation of the Registration Statement.
6.2 OTHER FILINGS. Chemical agrees to prepare and file, as soon as
is reasonably practical, with the Federal Reserve Board, all Documents
required in connection with the transactions contemplated by this Plan of
Merger. Chemical agrees to provide SSBI with the opportunity to review and
comment upon such documents before filing and to provide SSBI with copies
of all correspondence received from these agencies and all responsive
correspondence sent to these agencies.
6.3 PRESS RELEASES. SSBI and Chemical shall consult with each other
with respect to the form and substance of any press release or other public
disclosure of matters related to this Plan of Merger.
6.4 MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms and
conditions of this Plan of Merger, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper, or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Plan of Merger. Chemical and SSBI will
use reasonable efforts to obtain consents of all third parties and
governmental bodies necessary or desirable for the consummation of the
Merger.
6.5 EXCHANGE OF FINANCIAL INFORMATION. Subject to Section 6.6
(INVESTIGATION):
6.5.1 QUARTERLY INFORMATION. SSBI and Chemical shall each, as
promptly as practicable, deliver to the other copies of each quarterly
consolidated financial statement prepared for distribution to
shareholders after the date of this Plan of Merger.
6.5.2 SSBI INFORMATION. After the execution of this Plan of
Merger until the Effective Time of the Merger, SSBI shall promptly
deliver to Chemical copies of:
(a) Each monthly internal financial report prepared with
respect to SSBI and the Bank on a consolidated or unconsolidated
basis. SSBI represents and warrants that such information shall
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be consistent with the fundamental information as used for
internal purposes by SSBI in the management of its consolidated
business; and
(b) Each financial report or statement submitted to
regulatory authorities for SSBI and the Bank.
6.5.3 SEC FILINGS. After the execution of this Plan of Merger
until the Effective Time of the Merger, Chemical shall promptly
deliver to SSBI copies of all reports on Form 10-K and Form 10-Q, and
all other reports filed with the SEC.
6.6 INVESTIGATION.
6.6.1 CHEMICAL'S ACCESS TO INFORMATION. For the purpose of
permitting an examination of SSBI and the Bank by such of Chemical's
officers, attorneys, accountants, and representatives as have a "need
to know" for the purposes of Chemical's evaluation of the Merger,
provided that Chemical shall cause such parties to agree to maintain
the confidentiality of the information as provided in this Plan of
Merger, while this Plan of Merger is in effect, SSBI shall:
(a) Permit, and shall cause the Bank to permit, full access
to their respective properties, books, and records at reasonable
times;
(b) Use reasonable efforts to cause its and the Bank's
directors, officers, employees, accountants, and attorneys to
cooperate fully, for the purpose of permitting a complete and
detailed examination of such matters by Chemical's directors,
officers, attorneys, accountants, and representatives; and
(c) Furnish to Chemical, upon request, any information
reasonably requested respecting its and the Bank's properties,
assets, business, and affairs.
6.6.2 SSBI'S ACCESS TO INFORMATION. For the purpose of
permitting an examination of Chemical by such of SSBI's officers,
attorneys, accountants, and representatives as have a "need to know"
for the purposes of SSBI's evaluation of the Merger, provided that
SSBI shall cause such parties to agree to maintain the confidentiality
of the information as provided in this Plan of Merger, while this Plan
of Merger is in effect, Chemical shall:
(a) Permit reasonable access to its properties, books, and
records at reasonable times;
(b) Use reasonable efforts to cause its directors,
officers, employees, accountants, and attorneys to cooperate
fully; and
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(c) Furnish to SSBI, upon request, any information
reasonably requested respecting its properties, assets, business,
and affairs.
6.6.3 CONSENT TO DISCLOSE. Chemical and SSBI each acknowledge
that certain information may not be disclosed without the prior
written consent of persons not affiliated with SSBI or Chemical. If
such information is requested, then the party of whom it is requested
shall use reasonable efforts to obtain such prior consent and shall
not be required to disclose such information unless and until such
prior consent has been obtained.
6.6.4 CONFIDENTIALITY. Except as provided in Section 6.6.6
(OTHER INFORMATION), while this Plan of Merger is in effect and at all
times thereafter, Chemical and SSBI each agree to treat as strictly
confidential and agree not to divulge to any other person, natural or
corporate (other than employees of, and attorneys, accountants, and
financial advisers for, such party who are reasonably believed to have
a need for such information in connection with the Merger), and not to
make any business use not related to the Merger of, any financial
statements, schedules, contracts, agreements, instruments, papers,
documents, or other information relating to the other party and the
other party's subsidiaries which it may come to know as a direct
result of a disclosure by the other party or the other party's
subsidiaries, or which may come into its possession directly as a
result of and during the course of such investigation.
6.6.5 RETURN OF MATERIALS. Upon the termination of this Plan of
Merger, Chemical and SSBI each agree to promptly return to the other
party or to destroy all written materials furnished to it by the other
party and the other party's subsidiaries, and all notes and summaries
of such written materials, in connection with such investigation,
including any and all copies of any of the foregoing. Chemical and
SSBI each agree to preserve intact all such materials which are
returned to them and to make such materials reasonably available upon
request or subpoena for a period of not less than five years from the
termination of this Plan of Merger or such longer or shorter period of
time as they may mutually agree.
6.6.6 OTHER INFORMATION. The provisions of this Section 6.6
(INVESTIGATION) shall not preclude Chemical or SSBI, or their
respective subsidiaries, from using or disclosing information which
is: (i) readily ascertainable from public information or trade
sources; (ii) known by it before the commencement of discussions
between the parties or subsequently developed by it or its
subsidiaries independent of any investigation under this Plan of
Merger or received from a third party not under any obligation to SSBI
or Chemical, or their respective subsidiaries, to keep such
information confidential; or (iii) reasonably required to be included
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in any filing or application required by any governmental or
regulatory agency. Chemical shall permit SSBI to review Chemical's
application or applications to the Federal Reserve Board prior to
filing and SSBI may reasonably request that sensitive or competitive
information be separately filed as confidential in accordance with
instructions, rules, and regulations issued by such agencies.
6.6.7 INSIDER TRADING. Chemical and SSBI shall take responsible
steps to assure that any person who receives nonpublic information
concerning the other party pursuant to this Section 6.6
(INVESTIGATION) will not buy or sell, or advise other persons to buy
or sell, the other party's stock until such information is disclosed
by the other party to the public.
6.7 ENVIRONMENTAL INVESTIGATION. Chemical may engage an
environmental consultant to conduct a preliminary environmental assessment,
including soil and water sampling, ("PHASE I") of each of the parcels of
real estate used in the operation of SSBI's or the Bank's businesses and,
at Chemical's option, any other real estate owned. SSBI and the Bank shall
provide reasonable assistance, including site access, to the consultant for
purposes of conducting the Phase I assessments. If any environmental
conditions are found, suspected, or would tend to be indicated by the
report of the consultant which may be contrary to the representations and
warranties set forth in Section 4.21 (ENVIRONMENTAL MATTERS), without
regard to any exceptions that may be contained in the SSBI Disclosure
Statement, then Chemical may obtain from one or more mutually acceptable
consultants or contractors, as appropriate, an estimate of the cost of any
further environmental investigation, sampling, analysis, remediation, or
other follow-up work that may be necessary to address those conditions in
accordance with applicable Environmental Laws. Chemical shall forward
copies of any such estimates to SSBI upon receipt.
6.7.1 MUTUAL AGREEMENT. Upon receipt of the estimate of the
costs of all follow-up work to the Phase I assessments or any
subsequent investigation phases that may be conducted, the parties
shall attempt to agree upon a course of action for further
investigation and remediation of any environmental condition
suspected, found to exist, or that would tend to be indicated by the
report of the consultant. All work plans for any post-Phase I
assessment activities, or any removal or remediation actions that may
be performed, shall be mutually satisfactory to Chemical and SSBI. If
the work plans or removal or remediation actions would entail a
material cost to complete, Chemical and SSBI shall discuss a mutually
acceptable modification to this Plan of Merger. Chemical and SSBI
shall cooperate in the review, approval, and implementation of all
work plans.
6.7.2 CHEMICAL'S RIGHT TO ABANDON. If the parties are unable
to agree upon a course of action for further investigation and
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remediation of an environmental condition or issue raised by an
environmental assessment and/or a mutually acceptable modification to
this Plan of Merger, and the condition or issue is not one for which
it can be determined to a reasonable degree of certainty that the risk
and expense to which Chemical and its subsidiaries would be subject as
owner or operator of the property involved can be quantified and
limited to an immaterial amount, then Chemical may abandon this Plan
of Merger pursuant to Section 9.2.10 (ENVIRONMENTAL CONDITIONS).
6.8 POOLING QUALIFICATION. Chemical and SSBI each agree that, except
as expressly provided in this Plan of Merger, while this Plan of Merger is
in effect, it shall not take or fail to take, or cause to be taken or fail
to cause to be taken, any action if the result would be or present a
material risk that the Merger would become disqualified for the pooling of
interests method of accounting by Chemical, including without limitation:
6.8.1 NO STOCK PURCHASES. Neither Chemical nor any of
Chemical's subsidiaries, nor SSBI nor the Bank, respectively, shall
acquire any shares of Chemical Common Stock, SSBI Common Stock, any
securities convertible into such stock or any other rights to acquire
such stock, except in a fiduciary capacity for a customer as to which
it has no beneficial interest, and except as permitted for purposes
other than a business combination under the pooling of interests
method of accounting and provided that no more than a permitted number
of shares have been acquired for such permissible purposes; and
6.8.2 NO CHANGE OF EQUITY INTEREST. Neither Chemical nor SSBI,
respectively, shall in any manner change the equity interest of
Chemical Common Stock or SSBI Common Stock, respectively, between the
date of this Plan of Merger and the consummation of the Merger,
including without limitation distributions (other than ordinary and
customary cash dividends) to shareholders and additional issuances,
exchanges, and retirements of securities.
ARTICLE VII
CONDITIONS PRECEDENT TO CHEMICAL'S OBLIGATIONS
All obligations of Chemical under this Plan of Merger are subject
to the fulfillment (or waiver in writing by a duly authorized officer of
Chemical), prior to or at the Closing, of each of the following conditions:
7.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC.
7.1.1 REPRESENTATIONS AND WARRANTIES. SSBI's representations
and warranties shall then be true in all material respects or, if one
or more representations or warranties shall then be untrue, the
cumulative effect of all untrue representations and warranties shall
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not then be material relative to the business, income, or financial
condition of SSBI and the Bank on a consolidated basis. For purposes
of this Section 7.1.1 (REPRESENTATIONS AND WARRANTIES),
representations and warranties made with respect to specified dates or
events need only to have been true in all material respects as of such
dates or events. Any representation or warranty which becomes untrue
because of any change intended by this Plan of Merger shall not be
considered to be a breach of this Plan of Merger because of such
change.
7.1.2 COMPLIANCE WITH AGREEMENTS. SSBI and the Bank shall have
performed and complied with all agreements, conditions, and covenants
required by this Plan of Merger to be performed or complied with by
SSBI and the Bank prior to or at the Closing in all material respects.
7.1.3 CERTIFICATES. Compliance with Sections 7.1.1
(REPRESENTATIONS AND WARRANTIES) and 7.1.2 (COMPLIANCE WITH
AGREEMENTS) shall be evidenced by one or more certificates signed by
appropriate officers of SSBI and, with respect to agreements,
conditions, and covenants pertaining to the Bank, by appropriate
officers of the Bank, dated as of the date of the Closing, certifying
the foregoing in such detail as Chemical may reasonably request,
describing any exceptions to such compliance in such certificates.
7.2 OPINION OF LEGAL COUNSEL. SSBI shall have delivered to Chemical
an opinion of Bodman, Longley & Dahling, counsel for SSBI, dated as of the
date of the Closing and reasonably satisfactory to counsel for Chemical, to
the effect that:
7.2.1 DUE AUTHORIZATION. This Plan of Merger, the execution,
delivery, and performance of this Plan of Merger, and the consummation
of the Merger as provided herein by SSBI have been duly authorized,
approved, and adopted by all requisite action of SSBI's Board of
Directors and its shareholders.
7.2.2 ORGANIZATION. SSBI is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Michigan. SSBI has the corporate power to carry on its business
substantially as and where it is now being conducted.
7.2.3 CAPITAL STOCK. The authorized capital stock of SSBI as of
the close of business on the day preceding the Closing consists of
200,000 shares of common stock, $20 par value, of which 100,000 shares
are then legally issued and outstanding, fully paid and non-assessable.
7.2.4 ISSUANCE OF SHARES. Except as disclosed in such opinion:
(a) Since the date and time of the execution of this Plan
of Merger, no additional shares of capital stock have been
authorized for issuance or issued by SSBI.
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(b) To counsel's knowledge after reasonable investigation,
there are no other outstanding subscriptions, options, warrants,
rights to acquire any capital stock of SSBI, or agreements to
which SSBI is a party or by which it is bound to issue capital
stock, except as set forth in the SSBI Disclosure Statement or in
such opinion.
7.2.5 ORGANIZATION OF SUBSIDIARIES. State Savings Bank of Caro
is duly organized, validly existing, and in good standing under the
laws of the State of Michigan. The Bank possesses all requisite
authority to conduct and carry on its business, substantially where
and as it conducts it, under all applicable federal and state laws.
The Bank is not required to be qualified or admitted to conduct
business in any state other than the State of Michigan.
7.2.6 OWNERSHIP OF SUBSIDIARIES. SSBI owns all of the issued
and outstanding shares of capital stock of State Savings Bank of Caro,
free and clear of all claims, security interests, pledges, or liens of
any kind. To the best of counsel's knowledge, SSBI does not have
Control, either directly or indirectly, of any corporation engaged in
an active trade or business or which holds any significant assets
other than as stated in this Section 7.2.6. There are no outstanding
subscriptions, options, warrants, or rights to acquire any capital
stock of the Bank, or agreements to which SSBI or the Bank is a party
or by which it is bound to issue capital stock of the Bank.
7.2.7 VALID AND BINDING. This Plan of Merger constitutes the
valid and binding obligation of SSBI, enforceable in accordance with
its terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
affecting creditors' rights, and by the exercise of judicial
discretion in accordance with general principles applicable to
equitable and similar remedies.
7.2.8 ALL ACTIONS TAKEN. All other actions and proceedings
required by law or, to the best of counsel's knowledge, this Plan of
Merger to be taken by SSBI and by the Bank at or prior to the Closing
in connection with this Plan of Merger have been duly and validly
taken.
7.2.9 NO CONFLICT, BREACH, OR VIOLATION. The execution,
delivery, and performance of this Plan of Merger by SSBI, and the
consummation by SSBI of the transactions contemplated by this Plan of
Merger, did not, do not and will not, except as disclosed in such
opinion, conflict with or result in any breach or violation of, or
default under (i) any provision of the Articles of Incorporation or
Bylaws of SSBI; (ii) any statute, code, ordinance, rule, regulation,
judgment, order, writ, arbitral award, decree, or injunction
applicable to SSBI or the Bank; or (iii) to the best of counsel's
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knowledge, any mortgage, agreement, lease, commitment, indenture, or
other instrument applicable to SSBI or the Bank. All consents and
approvals of the transactions contemplated by this Plan of Merger
which, to counsel's knowledge, are required from any person pursuant
to any contract or agreement to which SSBI or the Bank is a party or
subject, or by which SSBI or the Bank is bound, have been obtained,
except as disclosed in the SSBI Disclosure Statement or in such
opinion.
7.2.10 NO LITIGATION. Except as disclosed in the SSBI
Disclosure Statement or in such opinion, counsel does not know of any
action, suit, proceeding, claim, counterclaim, arbitration, or
investigation pending or threatened against or relating to (i) the
directors or officers of SSBI or the Bank in their capacities as such;
or (ii) SSBI or the Bank, or its or their respective properties or
businesses, which challenges the Merger, or which may result in any
liability to SSBI or the Bank which would have a material adverse
effect on the business, income, or financial condition of SSBI or the
Bank.
In rendering its opinion, Bodman, Longley & Dahling may
reasonably rely on certificates of governmental officials and officers of
SSBI or the Bank. Any certificates or legal opinions upon which SSBI's
counsel may rely shall also be addressed to Chemical and Chemical shall be
entitled to rely thereon. As to any matter with respect to which SSBI's
counsel relies upon a legal opinion rendered by other counsel, SSBI's
counsel shall state that SSBI's counsel has no knowledge of any fact or
circumstance that would render such other counsel's opinion incorrect or
misleading.
7.3 REQUIRED APPROVALS. Chemical shall have received:
7.3.1 REGULATORY. All such approvals, consents, authorizations,
and licenses of all regulatory and other governmental authorities
having jurisdiction as may be required to permit the performance by
SSBI and Chemical of their respective obligations under this Plan of
Merger and the consummation of the Merger.
7.3.2 SHAREHOLDER. Evidence reasonably satisfactory to Chemical
of the requisite approval of the shareholders of SSBI of this Plan of
Merger and the Merger.
7.4 ORDER, DECREE, ETC. Neither Chemical nor SSBI shall be subject
to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the Merger.
7.5 PROCEEDINGS. There shall not be any action, suit, proceeding,
claim, arbitration, or investigation pending or threatened: (i) against
or relating to SSBI or the Bank or its or their respective properties or
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businesses which may result in any liability to SSBI or the Bank which
could have a material adverse effect on the financial condition, net
income, business, properties, operations, or prospects of SSBI and the Bank
on a consolidated basis; (ii) against directors or officers of SSBI in
their capacity as such; or (iii) which challenges the Merger or this Plan
of Merger.
7.6 TAX MATTERS. Chemical shall have received an opinion of its
counsel, reasonably satisfactory in form and substance, substantially to
the effect that:
7.6.1 The Merger of SSBI with and into Chemical will
constitute a reorganization within the meaning of Section 368(a)(1)(A)
of the Internal Revenue Code, and Chemical and SSBI will each be a
"party to a reorganization" within the meaning of Section 368(b) of
the Internal Revenue Code.
7.6.2 The basis of the SSBI assets in the hands of Chemical
will be the same as the basis of those assets in the hands of SSBI
immediately prior to the Merger.
7.6.3 No gain or loss will be recognized to Chemical on the
receipt by Chemical of the assets of SSBI in exchange for Chemical
Common Stock and the assumption by Chemical of the liabilities of
SSBI.
7.6.4 The holding period of the assets of SSBI in the hands
of Chemical will include the holding period during which such assets
were held by SSBI.
7.7 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC and shall not be subject to a stop order
or any threatened stop order.
7.8 CERTIFICATE AS TO OUTSTANDING SHARES. Chemical shall have
received one or more certificates signed by the secretary of SSBI on behalf
of SSBI, certifying the total number of shares of capital stock of SSBI
issued and outstanding as of the close of business on the day immediately
preceding the Closing, all in such form as Chemical may reasonably request.
7.9 ESTOPPEL CERTIFICATES. SSBI shall have obtained and delivered to
Chemical, in form and substance reasonably satisfactory to Chemical,
estoppel certificates from all landlords under leases pursuant to which
SSBI or the Bank leases real property as lessee.
7.10 CHANGE OF CONTROL WAIVERS. Chemical shall have received
evidence of the waiver of any material rights and the waiver of the loss of
any material rights which may be triggered by the change of control of SSBI
upon consummation of the Merger under any agreements, contracts, mortgages,
deeds of trust, leases, commitments, indentures, notes, or other
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instruments described in Section 5.1.21 (CHANGE OF CONTROL), all in form
and substance reasonably satisfactory to Chemical.
7.11 POOLING OF INTERESTS ACCOUNTING. Chemical shall have received
such assurance from Ernst & Young LLP, satisfactory in form and substance,
that the Merger will be treated as a pooling of interests for accounting
purposes, subject to satisfaction of post-Merger conditions.
ARTICLE VIII
CONDITIONS PRECEDENT TO SSBI'S OBLIGATIONS
All obligations of SSBI under this Plan of Merger are subject to
the fulfillment (or waiver in writing by a duly authorized officer of
SSBI), prior to or at the Closing, of each of the following conditions:
8.1 RENEWAL OF REPRESENTATIONS AND WARRANTIES, ETC.
8.1.1 REPRESENTATIONS AND WARRANTIES. Chemical's
representations and warranties shall then be true in all material
respects or, if one or more representations or warranties shall then
be untrue, the cumulative effect of all untrue representations and
warranties shall not then be material to Chemical and its subsidiaries
on a consolidated basis. For purposes of this Section 8.1.1
(REPRESENTATIONS AND WARRANTIES), representations and warranties made
with respect to specified dates or events need only to have been true
in all material respects as of such dates or events. Any
representation or warranty which becomes untrue because of any change
intended by this Plan of Merger shall not be considered to be a breach
of this Plan of Merger because of such change.
8.1.2 COMPLIANCE WITH AGREEMENTS. Chemical shall have performed
and complied with all agreements, conditions, and covenants required
by this Plan of Merger to be performed or complied with by Chemical
prior to or at the Closing in all material respects.
8.1.3 CERTIFICATES. Compliance with Sections 8.1.1
(REPRESENTATIONS AND WARRANTIES) and 8.1.2 (COMPLIANCE WITH
AGREEMENTS) shall be evidenced by one or more certificates signed by
appropriate officers of Chemical, dated as of the date of the Closing,
certifying the foregoing in such detail as SSBI may reasonably
request, describing any exceptions to such compliance in such
certificates.
8.2 OPINION OF LEGAL COUNSEL. Chemical shall have delivered to SSBI
an opinion of Warner Norcross & Judd LLP, counsel for Chemical, dated as of
the date of the Closing and reasonably satisfactory to counsel for SSBI, to
the effect that:
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8.2.1 DUE AUTHORIZATION. This Plan of Merger, the execution,
delivery, and performance of this Plan of Merger, and the issuance of
shares of Chemical Common Stock pursuant to this Plan of Merger have
been duly authorized, approved, and adopted by all requisite action of
Chemical's Board of Directors.
8.2.2 ORGANIZATION. Chemical is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Michigan.
8.2.3 CAPITAL STOCK. The authorized capital stock of Chemical
as of October 16, 1995, consists of 15,000,000 shares of common stock,
$10 par value, of which a total of 9,173,873 shares were legally
issued and outstanding.
8.2.4 ISSUANCE OF SHARES. Since October 16, 1995, except as set
forth in such opinion, to counsel's knowledge:
(a) No additional shares of capital stock have been issued
by Chemical, except for shares issued pursuant to the exercise of
employee stock options under employee stock option plans, and
except for shares issued in connection with the grant or sale of
shares to, or for the account of, directors and employees
pursuant to other benefit plans.
(b) There are no outstanding subscriptions, options,
warrants, or rights to acquire any capital stock of Chemical, or
agreements to which Chemical is a party or by which it is bound
to issue capital stock, except as set forth in, or as
contemplated by, this Plan of Merger, and except (i) stock
options awarded pursuant to employee stock option plans; (ii)
provisions for the grant or sale of shares to, or for the account
of, directors and employees pursuant to other benefit plans; and
(iii) as set forth in the Chemical Disclosure Statement or in
such opinion.
8.2.5 VALID AND BINDING. This Plan of Merger constitutes the
valid and binding obligation of Chemical in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditors'
rights, and by the exercise of judicial discretion in accordance with
general principles applicable to equitable and similar remedies.
8.2.6 ALL ACTIONS TAKEN. All actions and proceedings required
by law or, to the best of counsel's knowledge, this Plan of Merger to
be taken by Chemical and Chemical's subsidiaries at or prior to the
Closing in connection with this Plan of Merger have been duly and
validly taken.
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8.2.7 NO CONFLICT, BREACH, OR VIOLATION. The execution,
delivery and performance of this Plan of Merger by Chemical, and the
consummation by Chemical of the transactions contemplated by this Plan
of Merger, did not, do not and will not, except as disclosed in such
opinion, conflict with or result in any breach or violation of, or
default under (i) any provision of the Restated Articles of
Incorporation or Bylaws of Chemical; or (ii) any statute, code,
ordinance, rule, regulation, judgment, order, writ, arbitral award,
decree, or injunction applicable to Chemical. All consents and
approvals of the transactions contemplated by this Plan of Merger
which, to counsel's knowledge, are required from any person pursuant
to any contract or agreement to which Chemical or any of Chemical's
subsidiaries is a party or subject, or by which Chemical or any of
Chemical's subsidiaries is bound, have been obtained, except as
disclosed in the Chemical Disclosure Statement or in such opinion.
8.2.8 NO LITIGATION. Except as disclosed in the Chemical
Disclosure Statement or in such opinion, counsel does not know of any
action, suit, proceeding, claim, arbitration, or investigation pending
or threatened against or relating to Chemical, or its properties or
businesses, which challenges the Merger, or which may result in any
liability to Chemical which would have a material adverse effect on
the business, income, or financial condition of Chemical and its
subsidiaries on a consolidated basis.
8.2.9 ISSUANCE OF SHARES AUTHORIZED. The shares of Chemical
Common Stock to be issued by Chemical as contemplated by this Plan of
Merger are duly authorized, and, when issued as provided in this Plan
of Merger, will be legally issued, fully paid, and nonassessable.
In rendering its opinion, Warner Norcross & Judd LLP may
reasonably rely on certificates of governmental officials and officers of
Chemical and Chemical's subsidiaries, and certificates of Chemical's
transfer agent. Any certificates or legal opinions upon which Warner
Norcross & Judd LLP may rely shall also be addressed to SSBI and SSBI shall
be entitled to rely on them. As to each matter with respect to which Warner
Norcross & Judd LLP relies upon a legal opinion rendered by other counsel,
Warner Norcross & Judd LLP shall state that Warner Norcross & Judd LLP has
no knowledge of any fact or circumstance that would render such other
counsel's opinion incorrect or misleading.
8.3 REQUIRED APPROVALS. SSBI or Chemical shall have received:
8.3.1 REGULATORY APPROVALS. All such approvals, consents,
authorizations, and licenses of all regulatory and other governmental
authorities having jurisdiction as may be required to permit the
performance by SSBI and Chemical of their respective obligations under
this Plan of Merger and the consummation of the Merger.
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8.3.2 SSBI SHAREHOLDERS. The requisite approval of the
shareholders of SSBI of this Plan of Merger and the Merger.
8.4 ORDER, DECREE, ETC. Neither Chemical nor SSBI shall be subject
to any applicable order, decree, or injunction of a court or agency of
competent jurisdiction which enjoins or prohibits the consummation of the
Merger.
8.5 TAX MATTERS. SSBI shall have received an opinion of counsel for
Chemical, reasonably satisfactory in form and substance to SSBI's counsel,
substantially to the effect that:
8.5.1 No gain or loss will be recognized by the shareholders of
SSBI who receive shares of Chemical Common Stock in exchange for all
of their shares of SSBI Common Stock, except to the extent of any cash
received in lieu of a fractional share of Chemical Common Stock.
8.5.2 The basis of the Chemical Common Stock to be received by
shareholders of SSBI will, in each instance, be the same as the basis
of the respective shares of SSBI Common Stock surrendered in exchange
therefor.
8.5.3 The holding period of the Chemical Common Stock received
by shareholders of SSBI will, in each instance, include the period
during which the SSBI Common Stock surrendered in exchange therefor
was held, provided that the SSBI Common Stock was, in each instance,
held as a capital asset in the hands of the shareholder of SSBI at the
Effective Time of the Merger.
8.6 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC and shall not be subject to a stop order
or any threatened stop order.
8.7 FAIRNESS OPINION. SSBI shall have received opinions from Austin
Associates, Inc., or another financial expert reasonably acceptable to
SSBI, dated approximately the date of the Prospectus and Proxy Statement,
to the effect that the terms of the Merger are fair to SSBI's shareholders
from a financial point of view as of that date and such opinion or opinions
shall not have been subsequently withdrawn.
ARTICLE IX
ABANDONMENT OF MERGER
This Plan of Merger may be terminated and the Merger abandoned at
any time prior to the Effective Time of the Merger (notwithstanding that
approval of this Plan of Merger by the shareholders of SSBI may have
previously been obtained) as follows:
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9.1 MUTUAL ABANDONMENT PRIOR TO EFFECTIVE TIME OF THE MERGER. This
Plan of Merger may be terminated and the Merger abandoned by mutual consent
of the Boards of Directors, or duly authorized committees thereof, of
Chemical and SSBI.
9.2 CHEMICAL'S RIGHTS TO TERMINATE. This Plan of Merger may be
terminated and the Merger abandoned by Chemical under any of the following
circumstances:
9.2.1 SSBI DISCLOSURE STATEMENT; PRECLOSING INVESTIGATION, ETC.
Chemical shall have reasonably determined that:
(a) Any exception to SSBI's representations and warranties
or any other information set forth in the SSBI Disclosure
Statement is unacceptable to Chemical;
(b) Based upon Chemical's preclosing investigation of SSBI,
there exists any set of facts or circumstances materially adverse
to the financial condition, net income, business, properties,
operations, or prospects of SSBI or the Bank; or
(c) SSBI or the Bank is exposed to risks or the Merger
would expose Chemical to risks that in the reasonable judgment of
Chemical are not acceptable economic and business risks;
provided that Chemical notifies SSBI of such abandonment and
termination not later than the last to occur of (i) 21 days after
Chemical receives the SSBI Disclosure Statement, and (ii) 30 days
after the date of the execution of this Plan of Merger.
9.2.2 BREACH OF WARRANTY. One or more of the representations
and warranties made by SSBI in this Plan of Merger shall have been
discovered to be or to have become untrue and the cumulative effect of
all such untrue representations and warranties is material relative to
the business, income, or financial condition of SSBI and the Bank on a
consolidated basis.
9.2.3 BREACH OF COVENANT. SSBI shall have committed one or more
breaches of any provision of this Plan of Merger which would in the
aggregate be material; provided, that, if such breach or breaches can
be cured, Chemical shall have given SSBI specific notice of the breach
or breaches in writing and SSBI shall have not cured such breach or
breaches to the reasonable satisfaction of Chemical within 30 days of
receipt of such notice.
9.2.4 UPSET DATE. The Merger has not yet become effective on or
before September 30, 1996.
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9.2.5 INJUNCTION. A final unappealable injunction or other
judgment shall have been issued by a court of competent jurisdiction
restraining or prohibiting consummation of the Merger.
9.2.6 NO SHAREHOLDER APPROVAL. The shareholders of SSBI have
failed to ultimately adopt this Plan of Merger at an annual or special
meeting or adjournments thereof, called and held for that purpose, and
such meeting has been finally adjourned.
9.2.7 NO REGULATORY APPROVAL. The Federal Reserve Board or its
delegate shall have refused to approve the Merger.
9.2.8 ADVERSE CHANGE. There has occurred any change from that
which existed on December 31, 1994, in the financial condition of SSBI
or the Bank which is materially adverse to the business, income, or
financial condition of SSBI and the Bank on a consolidated basis.
9.2.9 AFFILIATE AGREEMENTS. SSBI has failed to obtain from each
person who is or becomes an affiliate of SSBI on or after the date of
this Plan of Merger a duly authorized and executed Affiliate
Agreement, substantially in the form attached as Exhibit A to this
Plan of Merger, to be delivered to Chemical (i) within 30 days of the
date of this Plan of Merger with respect to all persons who are
affiliates of SSBI on the date of this Plan of Merger; and (ii) within
30 days of the date on which a person becomes an affiliate of SSBI
with respect to all persons who become affiliates after the date of
this Plan of Merger.
9.2.10 ENVIRONMENTAL CONDITIONS. If any environmental
conditions are found, suspected, or indicated by any environmental
assessments obtained pursuant to the investigation permitted under
Section 6.7 (ENVIRONMENTAL INVESTIGATION) which are contrary to SSBI's
representations and warranties set forth in Section 4.21
(ENVIRONMENTAL MATTERS), without regard to exceptions contained in
SSBI Disclosure Statement, and the parties are unable to agree upon a
course of action for further investigation and remediation of an
environmental condition or issue raised by an environmental assessment
and/or a mutually acceptable modification to this Plan of Merger;
provided, that Chemical gives SSBI 5 days' written notice of its
intent to terminate this Plan of Merger pursuant to this Section
9.2.10 (ENVIRONMENTAL CONDITIONS).
9.2.11 POOLING QUALIFICATION. At any time after Ernst & Young
LLP shall have advised Chemical that the Merger is unlikely to qualify
for treatment as a pooling of interests for accounting purposes.
9.3 SSBI'S RIGHTS TO TERMINATE. This Plan of Merger may be
terminated and the Merger abandoned by the Board of Directors, or a duly
authorized committee thereof, of SSBI under any of the following
circumstances:
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9.3.1 BREACH OF WARRANTY. One or more of the representations
and warranties made by Chemical in this Plan of Merger shall have been
discovered to be or to have become untrue and the cumulative effect of
all such untrue representations and warranties is material to the
business, income, or financial condition of Chemical and its
subsidiaries on a consolidated basis.
9.3.2 BREACH OF COVENANT. Chemical shall have committed one or
more breaches of any provision of this Plan of Merger which would in
the aggregate be material; provided, that, if such breach or breaches
can be cured, SSBI shall have given Chemical specific notice of the
breach or breaches in writing and Chemical shall have not cured such
breach or breaches to the reasonable satisfaction of SSBI within 30
days of receipt of such notice.
9.3.3 UPSET DATE. The Merger has not yet become effective on or
before September 30, 1996.
9.3.4 INJUNCTION. A final unappealable injunction or other
judgment shall have been issued by a court of competent jurisdiction
restraining or prohibiting consummation of the Merger.
9.3.5 NO SHAREHOLDER APPROVAL. The shareholders of SSBI have
failed to ultimately adopt this Plan of Merger at an annual or special
meeting or adjournments thereof, called and held for that purpose at
which the holders of not less than 90 percent of the outstanding
shares of SSBI Common Stock are present in person or represented by
proxy, and such meeting has been finally adjourned.
9.3.6 NO REGULATORY APPROVAL. The Federal Reserve Board or its
delegate shall have refused to approve the Merger; provided, that
Chemical shall have first had the opportunity to initiate and fully
pursue its rights to appeal from, or seek judicial review of, any such
refusal. In the event of such appeal or review, and if such appeal or
review results in a substantial affirmance of such refusal, then for
purposes of this Section 9.3.6 such refusal shall be deemed not to
have been made until the termination of such appeal or review.
9.3.7 ADVERSE CHANGE. There has occurred any change from that
which existed on December 31, 1994, in the financial condition of
Chemical which is materially adverse to the business, income, or
financial condition of Chemical and its subsidiaries on a consolidated
basis.
9.3.8 CHEMICAL DISCLOSURE STATEMENT. The cumulative effect of
any exceptions to Chemical's representations and warranties or any
other information set forth in the Chemical Disclosure Statement shall
be materially adverse to the business, income, or financial condition
of Chemical and its subsidiaries on a consolidated basis; provided
that SSBI notifies Chemical of such abandonment and termination not
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later than the last to occur of (i) 21 days after SSBI receives the
Chemical Disclosure Statement, and (ii) 30 days after the date of the
execution of this Plan of Merger.
ARTICLE X
AMENDMENT AND WAIVER
10.1 AMENDMENT. Subject to applicable law, this Plan of Merger may
be amended, modified, or supplemented by, and only by, written agreement of
Chemical and SSBI, or by their respective duly authorized officers, at any
time prior to the Effective Time of the Merger.
10.2 WAIVER. Any of the terms or conditions of this Plan of Merger
may be waived at any time by whichever of the parties is, or the
shareholders of which are, entitled to the benefit thereof. The failure of
any party at any time or times to require performance of any provision of
this Plan of Merger shall in no manner affect such party's right at a later
time to enforce the same. No waiver by any party of any condition, or of
the breach of any term, covenant, representation, or warranty contained in
this Plan of Merger, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing
waiver of any such condition or breach, or as a waiver of any other
condition or of the breach of any other term, covenant, representation, or
warranty.
ARTICLE XI
MISCELLANEOUS
11.1 SPECIFIC ENFORCEMENT. The parties each agree that, in the
event of a breach by either party to this Agreement, money damages will be
inadequate and not susceptible of computation because of the unique nature
of SSBI. Therefore, the parties each agree that a court of competent
jurisdiction shall have authority, subject to the rules of law and equity,
to specifically enforce the provisions of this Agreement by injunctive
order or such other equitable means as may be determined in the court's
discretion.
11.2 LIABILITY FOR BREACH.
11.2.1 EXPENSES PAID BY SSBI. In the event that this Agreement
shall be terminated prior to the Effective Time by Chemical pursuant
to Section 9.2.2 (BREACH OF WARRANTY), or pursuant to Section 9.2.3
(BREACH OF COVENANT), then, in addition to any other remedies that may
be available in law or in equity, SSBI shall pay all of Chemical's
reasonable out-of-pocket expenses incurred in connection with the
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Merger or this Agreement (not including any investment bankers' fees)
and shall indemnify and hold Chemical harmless from and against any
actions, assessments, losses, costs, damages, or expenses (including
reasonable attorneys' fees).
11.2.2 EXPENSES PAID BY CHEMICAL. In the event this Agreement
shall be terminated prior to the Effective Time by SSBI pursuant to
Section 9.3.1 (BREACH OF WARRANTY), or pursuant to Section 9.3.2
(BREACH OF COVENANT), then, in addition to any other remedies that may
be available in law or in equity, Chemical shall pay all of SSBI's
reasonable out-of-pocket expenses incurred in connection with the
Merger or this Agreement (not including any investment bankers' fees)
and shall indemnify and hold SSBI harmless from and against any
actions, assessments, losses, costs, damages, or expenses (including
reasonable attorneys' fees).
11.3 OBLIGATIONS AFTER TERMINATION. In the event the Merger is not
consummated and this Plan of Merger is terminated and the Merger is
abandoned pursuant to Article IX the obligations of Chemical and SSBI under
Sections 6.6.4 (CONFIDENTIALITY), 6.6.5 (RETURN OF MATERIALS), 11.2
(Liability for Breach) and 11.5 (EXPENSES) shall continue.
11.4 TERMINATION OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Plan of Merger shall
expire with, and be terminated and extinguished by the consummation of the
Merger at the Effective Time of the Merger.
11.5 EXPENSES. Except as otherwise provided in this Plan of Merger,
SSBI and Chemical shall each pay its own expenses incident to preparing
for, entering into, and carrying out this Plan of Merger, and incident to
the consummation of the Merger. Each party shall pay the fees and expenses
of any investment banker engaged by that party. The costs of printing and
all filing fees pertaining to the Registration Statement shall be paid by
Chemical. The costs of printing and mailing the Prospectus and Proxy
Statement shall be paid by SSBI.
11.6 NOTICES. Except as otherwise provided in this Plan of Merger,
all notices, requests, demands, and other communications under this Plan of
Merger shall be in writing and shall be deemed to have been duly given if
delivered or sent and received by facsimile transmission or express
delivery service (all fees prepaid) as follows:
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If to Chemical: With a copy to:
Chemical Financial Corporation Warner Norcross & Judd LLP
Attention: Alan W. Ott, Attention: Gordon R. Lewis
Chairman, President 900 Old Kent Building
and Chief Executive 111 Lyon Street, N.W.
Officer Grand Rapids, Michigan 49503-2489
333 East Main Street Fax: (616) 752-2500
Midland, Michigan 48640-0569
Fax: (517) 839-5337
If to SSBI: With a copy to:
State Savings Bancorp Inc. Bodman, Longley & Dahling
Attention: Carl O. Holmes, Attention: Lloyd C. Fell
Secretary and Treasurer 229 Court Street
240 North State Street P.O. Box 405
Caro, Michigan 48723-0146 Cheboygan, Michigan 49721-0405
Fax: (517) 673-2731 Fax: (616) 627-2802
11.7 GOVERNING LAW. This Plan of Merger shall be governed,
construed, and enforced in accordance with the laws of the State of
Michigan.
11.8 METHOD OF CONSENT OR WAIVER. Any consent under this Plan of
Merger or any waiver of conditions or covenants as may be provided for in
this Plan of Merger, subject to all of the other requirements contained in
this Plan of Merger, shall be evidenced in writing, properly executed by
the Chairman, the President, or one of the Vice Presidents of the party so
electing under this Plan of Merger.
11.9 ENTIRE AGREEMENT. Except as otherwise expressly provided in
this Plan of Merger, this Plan of Merger and the related agreements
referred to in this Plan of Merger (including without limitation the SSBI
Disclosure Schedule and the Chemical Disclosure Schedule, and the
respective updates thereto) contains the entire agreement between the
parties with respect to the transactions contemplated under this Plan of
Merger, and such agreements supersede all prior arrangements or
understandings with respect thereto, written or oral. The parties have not
relied upon any statements or representations pertaining to the other,
whether oral or written, other than as provided for in this Plan of Merger,
the SSBI Disclosure Statement, or the Chemical Disclosure Statement (and
the respective updates thereto). The terms and conditions of this Plan of
Merger shall inure to the benefit of and be binding upon the parties to
this Plan of Merger and their respective successors. Nothing in this Plan
of Merger, express or implied, is intended to confer upon any person other
than the parties to this Plan of Merger any rights, remedies, obligations,
or liabilities under or by reason of this Plan of Merger.
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11.10 NO ASSIGNMENT. Neither party may assign any of its rights or
obligations under this Plan of Merger to any other person.
11.11 COUNTERPARTS. This Plan of Merger may be executed in one or
more counterparts, each of which together shall constitute one and the same
instrument.
11.12 FURTHER ASSURANCES; PRIVILEGES. Either party to this Plan of
Merger shall, at the request of the other party, execute and deliver such
additional documents and instruments and take such other actions as may be
reasonably requested to carry out the terms and provisions of this Plan of
Merger. Each party shall use reasonable efforts to preserve for itself and
the other party each available legal privilege with respect to
confidentiality of their negotiations and related communications, including
the attorney-client privilege.
11.13 HEADINGS, ETC. The article headings and section headings
contained in this Plan of Merger are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this Plan of
Merger.
11.14 SEVERABILITY. If any term, provision, covenant, or restriction
contained in this Plan of Merger is held by a final and unappealable order
of a court of competent jurisdiction to be invalid, void, or unenforceable,
then the remainder of the terms, provisions, covenants, and restrictions
contained in this Plan of Merger shall remain in full force and effect, and
shall in no way be affected, impaired, or invalidated unless the effect
would be to cause this Plan of Merger to not achieve its essential
purposes.
IN WITNESS WHEREOF, the undersigned parties have duly executed
this Plan of Merger as of the date first written above.
CHEMICAL FINANCIAL CORPORATION
By /S/ ALAN W. OTT
Alan W. Ott, Chairman, President and
Chief Executive Officer
STATE SAVINGS BANCORP INC.
By /S/ F. DOUGLAS CAMPBELL
F. Douglas Campbell, President
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APPENDIX B
OPINION OF AUSTIN ASSOCIATES, INC.
[LOGO] AUSTIN ASSOCIATES, INC. 7205 WEST CENTRAL AVENUE
FINANCIAL INSTITUTION CONSULTANTS TOLEDO OH 43617
(419) 841-8521
FAX: (419) 841-8380
February 26, 1996
Board of Directors
State Savings Bancorp, Inc.
240 North State Street
Caro, Michigan 48723
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to State Savings Bancorp, Inc. ("SSBI") and its
shareholders of the terms of the Agreement and Plan of Merger dated
October 31, 1995 ("Agreement") between SSBI and Chemical
Financial Corporation ("Chemical"). The terms of the Agreement
provide for the merger of SSBI with and into Chemical.
The terms of the Agreement provide for each outstanding share of
SSBI common stock to be converted into 5 shares of Chemical common stock
(the "Exchange Rate"), subject to adjustment, as fully described in the
Agreement. Chemical will pay cash for fractional shares. The Exchange
Rate will be reduced proportionately to the extent that SSBI's "Adjusted
Shareholders' Equity" (as defined in the Plan of Merger) is less than
$9,300,000 as of a date not more than one month before the closing of
the transaction contemplated by the Plan of Merger. SSBI and Chemical
each has the right to abandon the Merger under certain conditions.
In carrying out our engagement, we have reviewed and analyzed
material bearing upon the financial and operating condition of SSBI
and Chemical, including but not limited to the following: (i) the
Proxy Statement; (ii) the financial statements of SSBI and Chemical
for the period 1990 through September 30, 1995; (iii) certain
other publicly available information on SSBI and Chemical;
(iv) publicly available information regarding the performance of
certain other companies whose business activities were believed by
us to be generally comparable to those of SSBI and Chemical; (v) the
financial terms, to the extent publicly available, of certain comparable
transactions; and (vi) such other analysis and information as we deemed
relevant.
In our review and analysis, we relied upon and assumed the accuracy
and completeness of the financial and other information provided to us
or publicly available, and have not attempted to verify the same. We
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have made no independent verification as to the status of individual
loans made by SSBI or Chemical, and have instead relied upon
representations and information concerning loans of SSBI and Chemical
in the aggregate. In rendering our opinion, we have assumed that the
transaction will be a tax-free reorganization with no material adverse
tax consequences to SSBI or Chemical, or to SSBI shareholders
receiving Chemical stock. In addition, we have assumed in the course
of obtaining the necessary regulatory approvals for the transaction,
no condition will be imposed that will have a material adverse effect
on the contemplated benefits of the transaction to SSBI and its
shareholders.
Based upon our analysis and subject to the qualifications described
herein, we believe that, as of the date of this letter, the terms of
the Agreement are fair, from a financial point of view, to SSBI and
its shareholders.
For our services in rendering this opinion, SSBI will pay us a fee
and indemnify us against certain liabilities, including liabilities under
the securities laws.
We consent to the use of this opinion in the Prospectus and Proxy
Statement which is part of Chemical's Registration Statement on Form S-4
and to the references to us under the heading "Experts" and elsewhere in
the Prospectus and Proxy Statement.
/s Austin Associates, Inc.
Austin Associates, Inc.
B-2
TABLE OF CONTENTS
PAGE
INTRODUCTION AND SUMMARY . . . . . . . . . . . . . . . . . . . . . . .1
Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . .1
Chemical Financial Corporation. . . . . . . . . . . . . . . . . .2
State Savings Bancorp, Inc. . . . . . . . . . . . . . . . . . . .2
Summary of Certain Aspects of the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Market Value of Shares. . . . . . . . . . . . . . . . . . . . . .6
Selected Financial Data . . . . . . . . . . . . . . . . . . . . .7
Comparative Per Share Data. . . . . . . . . . . . . . . . . . . 10
Chemical Financial Corporation
Summary of Recent Financial Information. . . . . . . . . . . . 11
GENERAL MEETING INFORMATION. . . . . . . . . . . . . . . . . . . . . 14
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Voting by Proxy . . . . . . . . . . . . . . . . . . . . . . . . 14
Proxy Solicitation. . . . . . . . . . . . . . . . . . . . . . . 14
Voting Rights and Record Date . . . . . . . . . . . . . . . . . 15
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Background of the Merger. . . . . . . . . . . . . . . . . . . . 16
Reasons for the Transaction . . . . . . . . . . . . . . . . . . 16
Opinion of Financial Adviser. . . . . . . . . . . . . . . . . . 17
Conversion of SSBI Shares . . . . . . . . . . . . . . . . . . . 20
Stock Price Condition . . . . . . . . . . . . . . . . . . . . . 21
Minimum Adjusted Shareholders'
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Distribution of Chemical Common
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Effective Time of the Merger. . . . . . . . . . . . . . . . . . 25
Business of SSBI Pending the
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Management After the Merger . . . . . . . . . . . . . . . . . . 26
Conditions to the Merger and
Abandonment. . . . . . . . . . . . . . . . . . . . . . . . . . 29
Description of Chemical Capital
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Comparison of Rights of Chemical
Shareholders
and SSBI Shareholders. . . . . . . . . . . . . . . . . . . . . 29
Provisions Affecting Control of
Chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Indemnification and Limitation of
Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Agreements of Affiliates. . . . . . . . . . . . . . . . . . . . 33
Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . 34
Federal Income Tax Consequences . . . . . . . . . . . . . . . . 34
STATE SAVINGS BANCORP, INC.. . . . . . . . . . . . . . . . . . . . . 36
Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Market Price and Dividends. . . . . . . . . . . . . . . . . . . 37
SSBI's Management's Discussion and Analysis
of Financial Condition and Results of Operations
as of and for the Years Ended December 31,
1994 and 1993. . . . . . . . . . . . . . . . . . . . . . . . . 37
SSBI's Management's Discussion and Analysis of
Financial Condition and Results of Operations for
Periods Ended September 30, 1995 and 1994. . . . . . . . . . . 53
Summary of Recent Financial Information
(Unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . 55
SSBI Consolidated Financial Statements. . . . . . . . . . . . . 57
VOTING AND MANAGEMENT INFORMATION. . . . . . . . . . . . . . . . . . 80
Voting Securities and
Principal Shareholders
of SSBI. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Interests of Certain Persons. . . . . . . . . . . . . . . . . . 82
Vote Required for Approval. . . . . . . . . . . . . . . . . . . 83
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 83
Shareholder Proposals . . . . . . . . . . . . . . . . . . . . . 83
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Sources of Information. . . . . . . . . . . . . . . . . . . . . 84
Appendix A--Agreement and Plan of Merger
Appendix B--Opinion of Austin Associates, Inc.
NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN
THIS PROSPECTUS AND PROXY STATEMENT
IN CONNECTION WITH THE OFFERING AND
SOLICITATION MADE HEREBY. IF GIVEN
OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED.
NEITHER THE DELIVERY OF THIS
PROSPECTUS AND PROXY STATEMENT NOR
ANY DISTRIBUTION OF THE SECURITIES
THIS PROSPECTUS AND PROXY STATEMENT
OFFERS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION CONTAINED
HEREIN OR IN THE AFFAIRS OF
CHEMICAL OR SSBI SINCE THE DATE
HEREOF.
_________________
PROSPECTUS AND
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
STATE SAVINGS BANCORP, INC.
IN CONNECTION WITH AN OFFERING OF UP TO
584,000 SHARES
CHEMICAL
FINANCIAL CORPORATION
COMMON STOCK, $10 PAR VALUE
[CHEMICAL FINANCIAL CORPORATION LOGO]
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Chemical is obligated under its Restated Articles of
Incorporation to indemnify its directors, officers, employees and
agents and persons who serve or have served at the request of Chemical
as directors, officers, employees, agents or partners of another
corporation or other enterprise to the fullest extent permitted under
the MBCA.
Sections 561 through 571 of the MBCA contain provisions governing
the indemnification of directors and officers by Michigan
corporations. That statute provides that a corporation has the power
to indemnify a person who was or is a party or is threatened to be
made a party to a threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
and whether formal or informal (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or
was a director, 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, against expenses (including
attorneys' fees), judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him or her in
connection with the action, suit or proceeding, if the person acted in
good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation or its
shareholders, and with respect to a criminal action or proceeding, if
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 or 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
which he or she reasonably believed to be in or not opposed to the
best interests of the corporation or its shareholders, and, with
respect to a criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
Indemnification of expenses (including attorneys' fees) and
amounts paid in settlement is permitted in derivative actions, except
that indemnification is not allowed for any claim, issue or matter in
which such person has been found liable to the corporation unless and
to the extent that a court decides indemnification is proper. To the
extent that any such person has been successful on the merits or
otherwise in defense of an action, suit or proceeding, or in defense
of a claim, issue or matter in the action, suit or proceeding, he or
she shall be indemnified against actual and reasonable expenses
II - 1
(including attorneys' fees) incurred by him or her in connection with
the action, suit or proceeding, and any action, suit or proceeding
brought to enforce the mandatory indemnification provided under the
MBCA. The MBCA permits partial indemnification for a portion of
expenses (including reasonable attorneys' fees), judgments, penalties,
fines and amounts paid in settlement to the extent the person is
entitled to indemnification for less than the total amount.
A determination that the person to be indemnified meets the
applicable standard of conduct and an evaluation of the reasonableness
of the expenses incurred and amounts paid in settlement shall be made
by a majority vote of a quorum of the board of directors who are not
parties or threatened to be made parties to the action, suit or
proceeding, by a majority vote of a committee of not less than 2
disinterested directors, by independent legal counsel, by all
"independent directors" not parties or threatened to be made parties
to the action, suit or proceeding, or by the shareholders.
Under the MBCA, a 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 in advance of final disposition of the proceeding if (1)
the person furnishes the corporation a written affirmation of his or
her good faith belief that he or she has met the applicable standard
of conduct, and (2) the person furnishes the corporation a written
undertaking to repay the advance if it is ultimately determined that
he or she did not meet the standard of conduct, which undertaking need
not be secured.
The indemnification provisions of the MBCA are not exclusive of
the rights to indemnification under a corporation's articles of
incorporation or bylaws or by agreement. However, 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 for under the MBCA continues as to a person who ceases to be
a director, officer, employee or agent.
The MBCA permits Chemical to purchase insurance on behalf of its
directors, officers, employees and agents against liabilities arising
out of their positions with Chemical, whether or not such liabilities
would be within the above indemnification provisions. Pursuant to
this authority, Chemical maintains such insurance on behalf of its
directors, officers, employees and agents.
II - 2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS. The following exhibits are filed as part of this
Registration Statement:
NUMBER EXHIBIT
2 AGREEMENT AND PLAN OF MERGER. Attached as Appendix A
to the Prospectus and Proxy Statement.
3(a) RESTATED ARTICLES OF INCORPORATION AND AMENDMENTS.
Previously filed as Exhibit 3 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995. Here incorporated by reference.
3(b) BYLAWS AND AMENDMENTS. Previously filed as Exhibit
4(b) to the registrant's Form S-8 Registration
Statement No. 33-47356 filed with the Commission on
April 28, 1992. Here incorporated by reference.
4 LONG-TERM DEBT. The registrant is a party to several
long-term debt agreements which at the time of this
Registration Statement do not exceed 10% of the
registrant's total consolidated assets. The registrant
agrees to furnish copies of the agreements defining the
rights of the other parties thereto to the Securities
and Exchange Commission upon request.
5* OPINION OF COUNSEL REGARDING THE LEGALITY OF THE
SECURITIES BEING REGISTERED.
8* OPINION OF COUNSEL REGARDING CERTAIN TAX MATTERS.
10(a) AMENDED AWARD AND STOCK OPTION PLAN OF 1987.
Previously filed as an exhibit to the registrant's Form
S-8 Registration Statements Nos. 33-15064 and 33-47356,
filed with the Commission on June 17, 1987, and April
28, 1992, respectively. Here incorporated by
reference.
10(b) AMENDED STOCK OPTION PLAN OF 1983. Previously filed as
an exhibit to the registrant's Form S-8 Registration
Statement No. 2-84987 filed with the Commission on
March 28, 1984. Here incorporated by reference.
10(c) PLAN FOR DEFERRAL OF DIRECTORS' FEES. Previously filed
as Exhibit 10(c) to the registrant's Form S-4
Registration Statement No. 33-64944 filed with the
Commission on June 24, 1993. Here incorporated by
reference.
II - 3
NUMBER EXHIBIT
10(d) CHEMICAL FINANCIAL CORPORATION SUPPLEMENTAL PENSION
PLAN. Previously filed as Exhibit 10(c) to the
registrant's Annual Report to Shareholders and Form
10-K for the fiscal year ended December 31, 1992,
filed with the Commission on March 12, 1993. Here
incorporated by reference.
11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS.
Previously filed as an exhibit to the registrant's
Annual Report to Shareholders and Form 10-K for the
fiscal year ended December 31, 1994, and as an exhibit
to the registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995. Here
incorporated by reference.
21 SUBSIDIARIES OF THE REGISTRANT. Previously filed as an
exhibit to the registrant's Annual Report to
Shareholders and Form 10-K for the fiscal year ended
December 31, 1994. Here incorporated by reference.
23(a)* CONSENT OF COUNSEL. Included in Exhibit 5 to this
Registration Statement.
23(b)* CONSENT OF ERNST & YOUNG LLP (CHEMICAL FINANCIAL
STATEMENTS).
23(c)* CONSENT OF CROWE, CHIZEK AND COMPANY LLP (SSBI
FINANCIAL STATEMENTS).
23(d)* CONSENT OF AUSTIN ASSOCIATES, INC. Included in Appendix B
to the Prospectus and Proxy Statement.
24* POWERS OF ATTORNEY
99(a) FORM 8-A OF CHEMICAL FINANCIAL CORPORATION. Previously
filed with the Commission on January 2, 1976. Here
incorporated by reference.
99(b)* FORM OF AFFILIATES AGREEMENT.
99(c)* FORM OF PROXY.
99(d)* PRESIDENT'S LETTER.
____________________
*Previously filed.
II - 4
(b) FINANCIAL STATEMENT SCHEDULES. Financial statement
schedules have been omitted because they are not applicable.
(c) OPINION OF FINANCIAL ADVISER. The opinion of Austin
Associates, Inc. appears as Appendix B to the Prospectus and Proxy
Statement.
II - 5
ITEM 22. UNDERTAKINGS.
(1) "The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar vlaue of securities
offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statmeent or any material change to such
information in the registration statement;"
(b) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial BONA FIDE offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(2) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement
II - 6
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial BONA FIDE offering thereof.
(3) (a) The undersigned Registrant hereby undertakes as
follows: that prior to any public reoffering of the
securities registered hereunder through use of a prospectus
which is a part of this Registration Statement by any person
or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for
by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of
the applicable form.
(b) The Registrant undertakes that every prospectus:
(i) that is filed pursuant to the immediately preceding
paragraph, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule
415, will be filed as a part of an amendment to the
Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
(5) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
II - 7
Prospectus and Proxy Statement pursuant to Item 4, 10(b), 11 or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(6) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was
not the subject of and included in the Registration Statement when it
became effective.
II - 8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City
of Midland, State of Michigan, on February 26, 1996.
CHEMICAL FINANCIAL CORPORATION
(Registrant)
By /S/ ALAN W. OTT
Alan W. Ott
Chairman of the Board, Chief Executive
Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
February __, 1996 __________________________________
James A. Currie
Director
February __, 1996 ___________________________________
Michael L. Dow
Director
February 26, 1996 /S/ ALAN W. OTT
Alan W. Ott
Chairman of the Board, Chief Executive
Officer and President (Principal
Executive Officer)
February 26, 1996 */S/ FRANK P. POPOFF
Frank P. Popoff
Director
February 26, 1996 */S/ LAWRENCE A. REED
Lawrence A. Reed
Director
February 26, 1996 */S/ WILLIAM S. STAVROPOULOS
William S. Stavropoulos
Director
February 26, 1996 /S/ LORI A. GWIZDALA
Lori A. Gwizdala
Senior Vice President, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer)
*By /S/ LORI A. GWIZDALA
Lori A. Gwizdala
Attorney-in-Fact
EXHIBIT INDEX
NUMBER EXHIBIT
2 AGREEMENT AND PLAN OF MERGER. Attached as
Appendix A to the Prospectus and Proxy Statement.
3(a) RESTATED ARTICLES OF INCORPORATION AND AMENDMENTS.
Previously filed as Exhibit 3 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995. Here incorporated by reference.
3(b) BYLAWS AND AMENDMENTS. Previously filed as Exhibit
4(b) to the registrant's Form S-8 Registration
Statement No. 33-47356 filed with the Commission on
April 28, 1992. Here incorporated by reference.
4 LONG-TERM DEBT. The registrant is a party to several
long-term debt agreements which at the time of this
Registration Statement do not exceed 10% of the
registrant's total consolidated assets. The
registrant agrees to furnish copies of the
agreements defining the rights of the other parties
thereto to the Securities and Exchange Commission
upon request.
5* OPINION OF COUNSEL REGARDING THE LEGALITY OF THE
SECURITIES BEING REGISTERED.
8* OPINION OF COUNSEL REGARDING CERTAIN TAX MATTERS.
10(a) AMENDED AWARD AND STOCK OPTION PLAN OF 1987.
Previously filed as an exhibit to the registrant's
Form S-8 Registration Statements Nos. 33-15064 and
33-47356, filed with the Commission on June 17,
1987, and April 28, 1992, respectively. Here
incorporated by reference.
10(b) AMENDED STOCK OPTION PLAN OF 1983. Previously
filed as an exhibit to the registrant's Form S-8
Registration Statement No. 2-84987 filed with the
Commission on March 28, 1984. Here incorporated
by reference.
10(c) PLAN FOR DEFERRAL OF DIRECTORS' FEES. Previously
filed as Exhibit 10(c) to the registrant's Form S-4
Registration Statement No. 33-64944 filed with the
Commission on June 24, 1993. Here incorporated by
reference.
NUMBER EXHIBIT
10(d) CHEMICAL FINANCIAL CORPORATION SUPPLEMENTAL PENSION
PLAN. Previously filed as Exhibit 10(c) to the
registrant's Annual Report to Shareholders and Form
10-K for the fiscal year ended December 31, 1992,
filed with the Commission on March 12, 1993. Here
incorporated by reference.
11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS.
Previously filed as an exhibit to the registrant's
Annual Report to Shareholders and Form 10-K for the
fiscal year ended December 31, 1994, and as an exhibit
to the registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995. Here
incorporated by reference.
21 SUBSIDIARIES OF THE REGISTRANT. Previously filed as
an exhibit to the registrant's Annual Report to
Shareholders and Form 10-K for the fiscal year ended
December 31, 1994. Here incorporated by reference.
23(a)* CONSENT OF COUNSEL. Included in Exhibit 5 to this
Registration Statement.
23(b)* CONSENT OF ERNST & YOUNG LLP (CHEMICAL FINANCIAL
STATEMENTS).
23(c)* CONSENT OF CROWE, CHIZEK AND COMPANY LLP (SSBI
FINANCIAL STATEMENTS).
23(d) CONSENT OF AUSTIN ASSOCIATES, INC. Included in
the Opinion of Austin Associates, Inc. included as
Appendix B to the Prospectus and Proxy Statement
24* POWERS OF ATTORNEY
99(a) FORM 8-A OF CHEMICAL FINANCIAL CORPORATION. Previously
filed with the Commission on January 2, 1976. Here
incorporated by reference.
99(b)* FORM OF AFFILIATES AGREEMENT.
99(c)* FORM OF PROXY.
99(d)* PRESIDENT'S LETTER.
__________________
*Previously filed.
