<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CITIZENS BANKING CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
MICHIGAN 6711 38-2378932
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
ONE CITIZENS BANKING CENTER
328 S. SAGINAW STREET
FLINT, MICHIGAN 48502
810-766-7500
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
THOMAS W. GALLAGHER
CITIZENS BANKING CORPORATION
ONE CITIZENS BANKING CENTER
328 S. SAGINAW STREET
FLINT, MICHIGAN 48502
810-766-7500
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------
Copies To:
<TABLE>
<S> <C>
GERALD T. LIEVOIS TIMOTHY E. KRAEPEL
DYKEMA GOSSETT PLLC HOWARD & HOWARD ATTORNEYS, P.C.
1577 NORTH WOODWARD AVENUE, SUITE 300 1400 NORTH WOODWARD AVENUE, SUITE 101
BLOOMFIELD HILLS, MI 48304-2820 BLOOMFIELD HILLS, MI 48304-2856
(810) 540-0700 (810) 645-1483
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after the effective date of this Registration
Statement and all other conditions to the merger described in the enclosed Joint
Proxy Statement-Prospectus have been satisfied or waived.
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. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE(2) REGISTRATION FEE(3)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Common Stock, no par value (including
the attached Preferred Stock Purchase
Rights).............................. 4,246,304 $133,677,328 $40,508.28
==================================================================================================================
</TABLE>
(1) This Registration Statement relates to (i) 4,246,304 shares of common stock,
no par value, of the Registrant, the maximum number of such shares issuable
in exchange for 2,851,783 shares of common stock, par value $7.50 per share
of CB Financial Corporation ("CB") (assuming the exercise of all outstanding
options to purchase shares of CB common stock), the maximum number of shares
of CB common stock to be converted pursuant to the merger described in the
enclosed Joint Proxy Statement-Prospectus (the "Merger") and (ii) the
Preferred Stock Purchase Rights that will be attached to and represented by
the certificates issued for the shares of CB common stock (which Preferred
Stock Purchase Rights have no market value independent of the shares of
common stock of the Registrant to which they are attached).
(2) Calculated pursuant to Rule 457(f) based on the number of shares of CB
common stock outstanding as of May 2, 1997 (assuming the exercise of all
outstanding options to purchase such shares), using a value of $46.875 per
share (the average of the bid and asked prices as reported on the OTC
Bulletin Board on May 16, 1997). In the Merger, each share of CB common
stock issued and outstanding immediately prior to the effective time of the
Merger will be converted into, exchanged for and represent the right to
receive 1.489 shares of the Registrant's common stock.
(3) A fee of $26,664.17 was paid on April 2, 1997 pursuant to Section
14(g)(1)(A) of the Securities Exchange Act of 1934 and Rules 0-11 and
14a-(6)(i) promulgated thereunder, in connection with the filing of
preliminary proxy materials relating to the Merger as described herein, and
pursuant to Rule 457(b), such fee has been credited against the registration
fee payable in connection with this Registration Statement.
------------------------
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 DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
CROSS-REFERENCE SHEET
FOR REGISTRATION STATEMENT ON FORM S-4
AND JOINT PROXY STATEMENT-PROSPECTUS.
<TABLE>
<CAPTION>
LOCATION IN
S-4 ITEM JOINT PROXY STATEMENT-PROSPECTUS
-------- --------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Facing Page of Registration Statement;
Cross-Reference Sheet; Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Available Information; Information
Incorporated by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Summary of Joint Proxy
Statement-Prospectus; Market Price Per
Share Data; Comparative Per Share Data;
Selected Consolidated Financial Data; Pro
Forma Selected Financial Data
4. Terms of the Transaction.................. Summary of Joint Proxy
Statement-Prospectus; The Merger;
Description of Citizens Capital Stock;
Comparison of Shareholders' Rights
5. Pro Forma Financial Information........... Unaudited Pro Forma Condensed Combined
Financial Statements (including the notes
thereto)
6. Material Contracts with the Company Being
Acquired.................................. The Merger; Interests of Certain Persons
in the Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Not Applicable
8. Interests of Named Experts and Counsel.... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants............................... Not Applicable
11. Incorporation of Certain Information by
Reference................................. Information Incorporated by Reference
12. Information with Respect to S-2 or S-3
Registrants............................... Not Applicable
13. Incorporation of Certain Information by
Reference................................. Not Applicable
14. Information with Respect to Registrants
Other Than S-2 or S-3 Registrants......... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3
Companies................................. Information Incorporated by Reference
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
LOCATION IN
S-4 ITEM JOINT PROXY STATEMENT-PROSPECTUS
-------- --------------------------------
<S> <C> <C>
16. Information with Respect to S-2 or S-3
Companies................................. Not Applicable
17. Information with Respect to Companies
Other Than S-2 or S-3 Companies........... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited........ Cover Page; Summary of Joint Proxy
Statement-Prospectus; Meeting of Citizens
Shareholders; Meeting of CB Shareholders;
Board of Directors and Operations
Following the Merger; Interests of Certain
Persons in the Merger; The Merger
19. Information if Proxies, Consents or
Authorizations are not to be Solicited, or
in an Exchange Offer...................... Not Applicable
</TABLE>
This Registration Statement contains the Joint Proxy Statement-Prospectus to be
delivered separately to shareholders of Citizens Banking Corporation.
("Citizens") and CB Financial Corporation ("CB") in connection with their
respective Special Meetings. The Joint Proxy Statement-Prospectus to be
delivered to Citizens shareholders in connection with the merger described
herein will contain a letter to Citizens shareholders and a Notice of the
Citizens Special Meeting. Similarly, the Joint Proxy Statement-Prospectus to be
delivered to CB shareholders in connection with the merger will contain a letter
to CB shareholders and a Notice of the CB Special Meeting. The Joint Proxy
Statement-Prospectus to be delivered to CB shareholders is otherwise identical
in all respects to the Joint Proxy Statement-Prospectus to be delivered to
Citizens shareholders.
<PAGE> 4
CITIZENS BANKING CORPORATION LOGO
May 23, 1997
To the Owners of Citizens Banking Corporation
You are cordially invited to attend a Special Meeting of the Shareholders
of Citizens Banking Corporation, to be held on June 24, 1997 at 10:00 a.m.,
local time, at One Citizens Banking Center, 328 South Saginaw Street, Flint,
Michigan.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the issuance (the "Share Issuance") of Citizens Common Stock
pursuant to the Agreement and Plan of Merger, dated as of January 27, 1997 (the
"Merger Agreement"), by and among Citizens Banking Corporation ("Citizens"),
Polaris Acquisition, Inc., a wholly-owned subsidiary of Citizens ("Merger Sub"),
and CB Financial Corporation ("CB"), pursuant to which Merger Sub will be merged
(the "Merger") with and into CB, with CB becoming a wholly-owned subsidiary of
Citizens. A copy of the Merger Agreement is attached to the accompanying Joint
Proxy Statement-Prospectus.
At the effective time of the Merger, each share of CB Common Stock will be
converted into 1.489 shares of Common Stock of Citizens. Each share of Citizens
Common Stock outstanding at the effective time of the Merger will remain
outstanding as a share of Common Stock of the combined company.
Enclosed are a Notice of Special Meeting of Shareholders and a Joint Proxy
Statement-Prospectus which describes the Merger and the background to the
transaction. You are urged to read all of these materials carefully. The Board
of Directors has fixed the close of business on May 2, 1997 as the record date
for the Special Meeting. Accordingly, only shareholders of record on that date
will be entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof. The affirmative vote of a majority of the
total votes cast by the holders of Citizens Common Stock is necessary to approve
the Share Issuance. In the event that proxies representing a sufficient number
of shares voting to approve the Share Issuance are not obtained prior to the
meeting, a proposal to adjourn the meeting to solicit additional proxies will be
put to a vote at the meeting.
THE BOARD OF DIRECTORS OF CITIZENS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ISSUANCE
OF SHARES PURSUANT TO THE TERMS OF THE MERGER AGREEMENT.
The accompanying Joint Proxy Statement-Prospectus sets forth the voting
rights of holders of Citizens Common Stock with respect to this matter, and
describes the matter to be acted upon at the Special Meeting. Shareholders are
urged to review carefully the accompanying Joint Proxy Statement-Prospectus,
which contains a detailed description of the Merger, its terms and conditions
and the transactions contemplated thereby.
BECAUSE OF THE SIGNIFICANCE OF THE PROPOSED MERGER TO CITIZENS, YOUR
PARTICIPATION IN THE SPECIAL MEETING, IN PERSON OR BY PROXY, IS ESPECIALLY
IMPORTANT. PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY IN THE
POSTAGE-PAID ENVELOPE THAT HAS BEEN PROVIDED TO YOU FOR YOUR CONVENIENCE. IF YOU
ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD.
We and the entire Board urge you to vote "FOR" the Share Issuance pursuant
to the terms of the Merger Agreement.
Thank you, and we look forward to seeing you at the Special Meeting.
Sincerely,
<TABLE>
<S> <C>
/s/ CHARLES R. WEEKS /s/ ROBERT J. VITITO
CHARLES R. WEEKS ROBERT J. VITITO
Chairman of the Board President and Chief Executive Officer
</TABLE>
<PAGE> 5
CITIZENS BANKING CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 24, 1997
To the Shareholders of Citizens Banking Corporation:
A Special Meeting of Shareholders (the "Special Meeting") of Citizens
Banking Corporation, a Michigan corporation ("Citizens"), will be held on June
24, 1997 at 10:00 a.m., local time, at One Citizens Banking Center, 328 South
Saginaw Street, Flint, Michigan, for the purpose of considering and voting upon
a proposal for the issuance (the "Share Issuance") of shares of common stock
("Citizens Common Stock") pursuant to an Agreement and Plan of Merger, dated as
of January 27, 1997, (the "Merger Agreement"), by and among Citizens, Polaris
Acquisition, Inc., a Michigan corporation and wholly-owned subsidiary of
Citizens ("Merger Sub") and CB Financial Corporation, a Michigan corporation
("CB"), pursuant to which Merger Sub will be merged (the "Merger") with and into
CB, with CB becoming a wholly-owned subsidiary of Citizens, upon the terms and
subject to the conditions set forth in the Merger Agreement, as are more fully
described in the accompanying Joint Proxy Statement-Prospectus. A copy of the
Merger Agreement is attached as Annex A to the accompanying Joint Proxy
Statement-Prospectus.
The Board of Directors has fixed the close of business on May 2, 1997 as
the record date (the "Record Date") for determining shareholders entitled to
notice of, and to vote at, the Special Meeting and any adjournments or
postponements thereof. The holders of record of Citizens Common Stock at the
Record Date are entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE SHARE ISSUANCE PURSUANT TO THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE SHARE ISSUANCE.
By Order of the Board of Directors,
THOMAS W. GALLAGHER
Secretary
Flint, Michigan
May 23, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 6
CB FINANCIAL CORPORATION LOGO
May 23, 1997
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders of CB
Financial Corporation ("CB") which will be held at The Town Club, One Jackson
Square, Jackson, Michigan, at 10:00 a.m., local time, on June 24, 1997 (the
"Special Meeting").
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the Agreement and Plan of Merger dated as of January 27,
1997 (the "Merger Agreement") pursuant to which CB will merge (the "Merger")
with and become a wholly-owned subsidiary of Citizens Banking Corporation
("Citizens") and each outstanding share of CB Common Stock will be converted
into 1.489 shares of the common stock of Citizens.
The combination of CB and Citizens will result in a $4.3 billion bank
holding company with offices in Michigan and Illinois. The Merger will create a
strong and profitable financial services company that will have enhanced
capabilities to compete with banks and non-banking financial service providers.
Enclosed are a Notice of Special Meeting and a Joint Proxy
Statement-Prospectus which describe the Merger and its background. A copy of the
Merger Agreement is attached to the Joint Proxy Statement-Prospectus. You are
urged to read all of these materials carefully. The affirmative vote of the
holders of a majority of the shares of CB Common Stock outstanding and entitled
to vote is necessary to approve the Merger. In the event that proxies
representing a sufficient number of shares voting to approve the Merger are not
obtained prior to the Special Meeting, a proposal to adjourn the Special Meeting
in order to solicit additional proxies will be put to a vote at the Special
Meeting.
THE BOARD OF DIRECTORS OF CB FINANCIAL CORPORATION HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
YOUR PROXY IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY AS
SOON AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE
SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD. DO NOT SEND YOUR STOCK CERTIFICATES WITH THE ENCLOSED
PROXY CARD.
The Board and I urge you to vote "FOR" the Merger Agreement.
Sincerely,
/s/ BRIAN BELL
BRIAN D. BELL
Chairman and Chief Executive Officer
<PAGE> 7
CB FINANCIAL CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 24, 1997
To the Shareholders of CB Financial Corporation:
A Special Meeting of Shareholders (the "Special Meeting") of CB Financial
Corporation, a Michigan corporation ("CB"), will be held on June 24, 1997 at
10:00 a.m., local time, at The Town Club, One Jackson Square, Jackson, Michigan.
The purpose of the Special Meeting is to consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger, dated as of January 27,
1997, (the "Merger Agreement"), by and among Citizens Banking Corporation
("Citizens"), Polaris Acquisition, Inc., a Michigan corporation and wholly-owned
subsidiary of Citizens ("Merger Sub") and CB, and the consummation of the
transactions contemplated thereby, pursuant to which Merger Sub will be merged
with and into CB upon the terms and subject to the conditions set forth in the
Merger Agreement, as are more fully described in the enclosed Joint Proxy
Statement-Prospectus. A copy of the Merger Agreement is attached as Annex A to
the accompanying Joint Proxy Statement-Prospectus.
The Board of Directors has fixed the close of business on May 2, 1997 as
the record date (the "Record Date") for determining shareholders entitled to
notice of, and to vote at, the Special Meeting and any adjournments or
postponements thereof. The holders of record of CB Common Stock at said Record
Date are entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof. In the event that proxies representing a
sufficient number of shares voting to approve the Merger Agreement are not
obtained prior to the meeting, a proposal to adjourn the meeting to solicit
additional proxies will be put to a vote at the meeting.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
By Order of the Board of Directors,
KAREN R. GAMIN
Secretary
Jackson, Michigan
May 23, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 8
CITIZENS BANKING CORPORATION
ONE CITIZENS BANKING CENTER
328 SOUTH SAGINAW STREET
FLINT, MICHIGAN 48502
CB FINANCIAL CORPORATION
ONE JACKSON SQUARE
JACKSON, MICHIGAN 49201
JOINT PROXY STATEMENT -- PROSPECTUS
This Joint Proxy Statement -- Prospectus is being furnished in connection
with the solicitation of proxies by the Board of Directors (the "Citizens
Board") of Citizens Banking Corporation ("Citizens") to be used at the Special
Meeting of Shareholders of Citizens to be held on June 24, 1997 (including any
adjournments or postponements thereof, the "Citizens Meeting"). At the Citizens
Meeting, holders of the common stock, of Citizens (the "Citizens Common Stock")
will consider and vote upon a proposal to approve the issuance (the "Share
Issuance") of Citizens Common Stock pursuant to an Agreement and Plan of Merger,
dated as of January 27, 1997 (the "Merger Agreement"), by and among Citizens,
Polaris Acquisition, Inc., a wholly-owned subsidiary of Citizens ("Merger Sub")
and CB Financial Corporation ("CB") providing for the merger of Merger Sub with
and into CB (the "Merger") whereby CB will become a wholly-owned subsidiary of
Citizens. The Merger Agreement is attached hereto as Annex A and is incorporated
herein by reference.
This Joint Proxy Statement -- Prospectus is a prospectus of Citizens
relating to its offering of up to 4,246,304 shares of Citizens Common Stock to
holders of the common stock, par value $7.50 per share, of CB (the "CB Common
Stock") in connection with the Merger.
This Joint Proxy Statement -- Prospectus is also furnished in connection
with the solicitation of proxies by the Board of Directors of CB (the "CB
Board") to be used at the CB Special Meeting of Shareholders to be held on June
24, 1997 (including any adjournments or postponements thereof, the "CB
Meeting"). At the CB Meeting, holders of CB Common Stock will consider and vote
upon a proposal to approve and adopt the Merger Agreement.
In the event that sufficient proxies are not obtained to approve the Share
Issuance and/or Merger Agreement, the persons named as proxies in the enclosed
forms of proxy intend to propose and vote for one or more adjournments or
postponements of the Citizens Meeting and/or the CB Meeting, as applicable, to
permit further solicitation of proxies voting in favor of the Share Issuance
and/or Merger Agreement. No proxy which is voted against the proposal to approve
and adopt the Share Issuance and/or Merger Agreement will be voted in favor of
any such adjournment or postponement.
This Joint Proxy Statement -- Prospectus and the respective forms of proxy
are first being mailed on or about May 23, 1997.
At the Effective Time (as defined herein): each share of CB Common Stock,
with certain exceptions described herein, will be converted into the right to
receive 1.489 shares (the "Exchange Ratio") of Citizens Common Stock (after the
Effective Time, the "Common Stock"). If at the Effective Time, the average of
the closing prices of Citizens Common Stock for the twenty consecutive trading
days ending on the seventh day immediately prior to the Effective Time (the
"Final Parent Stock Price") is less than $25.30, CB may elect to abandon the
Merger. If CB makes such election, Citizens has the right to prevent that
abandonment of the Merger by CB by increasing the Exchange Ratio to provide CB
shareholders with the amount of consideration that the CB shareholders would
have received had the Final Parent Stock Price been at least equal to $25.30.
Citizens cannot, however, prevent CB from abandoning the Merger if the Final
Parent Stock Price is less than $23.72. In the event the Final Parent Stock
Price is more than $37.96, Citizens will have the limited right to terminate the
Merger Agreement. See "Terms of the Merger -- Conversion of Shares." Unless the
context otherwise requires, all references to Citizens Common Stock or the
Common Stock in the Joint Proxy
(cover page continues)
<PAGE> 9
Statement -- Prospectus will include the associated Preferred Stock Purchase
Rights issued pursuant to the Rights Agreement, dated as of July 20, 1990
between Citizens and Citizens Bank.
Citizens Common Stock is traded on the Nasdaq Stock Market's National
Market (the "Nasdaq National Market") under the symbol "CBCF." CB Common Stock
is traded over-the-counter under the symbol "CBFC" with quotations reported on
the OTC Bulletin Board (the "OTCBB"). The closing sales price of Citizens Common
Stock and the average of the bid and asked prices for CB Common Stock were
$30.50 and $41.00, respectively, on January 27, 1997 (the last trading day prior
to the public announcement of the Merger), and were $32.50 and $46.94,
respectively, on May 20, 1997 (the latest practicable trading day before the
printing of this Joint Proxy Statement -- Prospectus).
Citizens has filed a Registration Statement (the "Registration Statement")
on Form S-4 under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") covering a
maximum of 4,246,304 shares of Citizens Common Stock to be issued or reserved
for issuance in connection with the Merger. This Joint Proxy Statement --
Prospectus does not cover any resales of Common Stock of Citizens to be received
by shareholders of CB upon consummation of the Merger, and no person is
authorized to make use of this Joint Proxy Statement -- Prospectus in connection
with any such resale.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY STATEMENT --
PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION. SHAREHOLDERS ARE
STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS JOINT PROXY STATEMENT --
PROSPECTUS IN ITS ENTIRETY.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE SAVINGS
ASSOCIATION INSURANCE FUND OR ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS JOINT PROXY STATEMENT -- PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
ALL INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT -- PROSPECTUS WITH
RESPECT TO CITIZENS HAS BEEN SUPPLIED BY CITIZENS AND ALL INFORMATION WITH
RESPECT TO CB HAS BEEN SUPPLIED BY CB.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE HEREIN
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY CITIZENS OR CB. THIS DOCUMENT DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT -- PROSPECTUS NOR ANY DISTRIBUTION OF THE SHARES OF CITIZENS COMMON
STOCK HEREUNDER WILL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF CITIZENS OR CB SINCE THE DATE HEREOF.
The date of this Joint Proxy Statement -- Prospectus is May 21, 1997.
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION........................ 1
INFORMATION INCORPORATED BY REFERENCE........ 1
SUMMARY OF JOINT PROXY STATEMENT-
PROSPECTUS................................. 3
The Parties.............................. 3
Date, Time and Place of Meetings......... 3
Purposes of Meetings..................... 3
Record Date.............................. 3
Vote Required............................ 4
The Merger............................... 4
Recommendations of the Boards of
Directors and Reasons for the Merger... 5
Fairness Opinions of Financial
Advisors............................... 6
Conditions to the Consummation of the
Merger................................. 6
Board of Directors and Operations
Following the Merger................... 7
Regulatory Approvals..................... 7
Certain Federal Income Tax
Consequences........................... 7
Accounting Treatment..................... 8
Termination of the Merger Agreement...... 8
Stock Option Agreement................... 8
Interests of Certain Persons in the
Merger................................. 9
No Appraisal Rights...................... 9
Certain Differences in the Rights of
Shareholders........................... 9
MARKET PRICE PER SHARE DATA.................. 10
COMPARATIVE PER SHARE DATA................... 10
PRO FORMA SELECTED FINANCIAL DATA............ 15
CITIZENS BANKING CORPORATION................. 16
CB FINANCIAL CORPORATION..................... 16
MEETING OF CITIZENS SHAREHOLDERS............. 16
Date, Time and Place; Purpose of
Meeting................................ 16
Record Date.............................. 16
Proxies; Voting and Revocation........... 17
Vote Required to Approve the Share
Issuance; Principal Shareholders....... 17
Absence of Appraisal Rights.............. 18
MEETING OF CB SHAREHOLDERS................... 18
Date, Time and Place; Purpose of
Meeting................................ 18
Record Date.............................. 18
Proxies; Voting and Revocation........... 18
Vote Required to Approve the Merger
Agreement; Principal Shareholders...... 19
Absence of Appraisal Rights.............. 20
THE MERGER................................... 20
General.................................. 20
Background of the Merger................. 20
Recommendation of the Citizens Board and
Reasons for the Merger................. 22
Recommendation of the CB Board and
Reasons for the Merger................. 23
Fairness Opinions of Financial
Advisors............................... 25
Terms of the Merger; Effective Time...... 31
Conversion of Shares..................... 31
Treatment of Options..................... 32
Exchange of Certificates; Fractional
Shares................................. 32
Articles and Bylaws of CB................ 33
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Directors and Officers of CB............. 33
Representations and Warranties........... 33
Conduct Pending the Merger............... 33
Other Acquisition Proposals.............. 35
Indemnification.......................... 36
Conditions to the Consummation of the
Merger................................. 36
Regulatory Approvals Required for the
Merger................................. 38
Certain Federal Income Tax
Consequences........................... 39
Accounting Treatment..................... 40
Termination of the Merger Agreement...... 41
Waiver and Amendment of the Merger
Agreement.............................. 42
Stock Option Agreement................... 42
Employee Benefits and Plans.............. 45
Nasdaq Listing........................... 45
Expenses................................. 45
Dividends................................ 46
Restrictions on Sales by Affiliates...... 46
No Appraisal Rights...................... 46
BOARD OF DIRECTORS AND OPERATIONS FOLLOWING
THE MERGER................................. 46
Board of Directors....................... 46
Operations............................... 47
Certain Forward-Looking Information...... 47
INTERESTS OF CERTAIN PERSONS IN THE MERGER... 47
New Directors............................ 48
Directors' and Officers'
Indemnification........................ 48
Retirement Plans......................... 48
Employment and Other Agreements.......... 48
Director Deferral Plan................... 49
CB Options............................... 49
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS....................... 51
DESCRIPTION OF CITIZENS CAPITAL STOCK........ 58
General.................................. 58
Citizens Common Stock.................... 58
Citizens Preferred Stock................. 59
Anti-Takeover Effects of Provisions of
Citizens' Bylaws....................... 59
COMPARISON OF SHAREHOLDERS' RIGHTS........... 59
General.................................. 59
Shareholder Meetings..................... 60
Action by Written Consent of
Shareholders........................... 60
Certain Business Combinations............ 60
Amendment of Articles of Incorporation
and Bylaws............................. 61
Provisions Relating to Directors......... 61
Anti-Takeover Laws....................... 62
Citizens Rights Agreement................ 62
EXPERTS...................................... 64
LEGAL OPINION................................ 64
SOLICITATION OF PROXIES...................... 64
OTHER MATTERS................................ 64
SHAREHOLDER PROPOSALS........................ 65
</TABLE>
ANNEXES
ANNEX A -- AGREEMENT AND PLAN OF MERGER
ANNEX B -- OPINION OF RONEY & CO.
ANNEX C -- OPINION OF ABN AMRO CHICAGO CORPORATION
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<PAGE> 11
AVAILABLE INFORMATION
Citizens has filed the Registration Statement with the Commission covering
the shares of Citizens Common Stock to be issued in connection with the Merger.
As permitted by the rules and regulations of the Commission, this Joint Proxy
Statement-Prospectus omits certain information, Exhibits and undertakings
contained in the Registration Statement. For further information pertaining to
the securities offered hereby, reference is made to the Registration Statement,
including the Exhibits filed as a part thereof. Such additional information may
be inspected and copied as set forth below.
Each of Citizens and CB 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 Commission. Reports, proxy statements and other information concerning
either Citizens or CB can be inspected and copied at the Commission's office at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
the Commission's Regional Offices in New York (Suite 1300, Seven World Trade
Center, New York, New York 10048) and Chicago (500 West Madison Street, Suite
1400, Chicago, Illinois 60661), and copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web at http://www.sec.gov that contains reports, proxy
statements and other information regarding registrants that file electronically
within the Commission. Citizens Common Stock is listed on the Nasdaq National
Market. Reports, proxy materials and other information concerning Citizens also
may be inspected at the offices of the National Association of Securities
Dealers, Inc., Market Listing Section, 1735 K Street, N.W., Washington, D.C.
20006. This Joint Proxy Statement-Prospectus does not contain all the
information set forth in the Registration Statement and Exhibits thereto which
Citizens has filed with the Commission under the Securities Act, which may be
obtained from the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the
prescribed fees, and to which reference is hereby made.
INFORMATION INCORPORATED BY REFERENCE
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT-
PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST. REQUESTS FOR SUCH
DOCUMENTS RELATING TO CITIZENS SHOULD BE DIRECTED TO THOMAS W. GALLAGHER,
CITIZENS BANKING CORPORATION, ONE CITIZENS BANKING CENTER, 328 S. SAGINAW
STREET, FLINT, MICHIGAN 48502, TELEPHONE NUMBER (810) 766-7500, AND REQUESTS FOR
SUCH DOCUMENTS RELATING TO CB SHOULD BE DIRECTED TO A. WAYNE KLUMP, CB FINANCIAL
CORPORATION, ONE JACKSON SQUARE, JACKSON, MICHIGAN 49201, TELEPHONE NUMBER (517)
788-2800.
IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE
RECEIVED NO LATER THAN FIVE (5) BUSINESS DAYS PRIOR TO THE DATE OF THE CITIZENS
MEETING AND THE CB MEETING.
The following Citizens documents are incorporated by reference herein (File
No. 0-10535):
(1) Citizens' Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
(2) Citizens' Annual Report on Form 10-K for the year ended December 31,
1996 (the "1996 Citizens 10-K").
(3) The portion of Citizens Proxy Statement for the Annual Meeting of
Shareholders of Citizens held April 15, 1997, that have been
incorporated by reference in the 1996 Citizens 10-K.
(4) Citizens' Current Report on Form 8-K dated February 3, 1997.
(5) The description of Citizens Common Stock set forth in Citizens'
Registration Statement on Form 8-A filed pursuant to the Exchange Act
on June 30, 1982 and any amendment or report filed with the Commission
for the purpose of updating such description.
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<PAGE> 12
(6) Citizens Registration Statement on Form 8-A dated July 20, 1990
relating to Preferred Stock Purchase Rights.
The following CB documents are incorporated by reference herein (File No.
0-11011):
(1) CB's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997.
(2) CB's Annual Report on Form 10-K for the year ended December 31, 1996.
(3) CB's Current Report on Form 8-K dated February 3, 1997.
All documents filed with the Commission by Citizens and CB pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
effectiveness of the Registration Statement of which this Joint Proxy
Statement-Prospectus forms a part and prior to the date of the Citizens Meeting
and the CB Meeting are incorporated herein by reference and such documents will
be deemed to be a part hereof from the date of filing of such documents. Any
statement contained in this Joint Proxy Statement-Prospectus or in a document
incorporated or deemed to be incorporated by reference herein will be deemed to
be modified or superseded for purposes of this Joint Proxy Statement-Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this Joint Proxy Statement-Prospectus.
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<PAGE> 13
SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS
The following is a summary, which is necessarily incomplete, of certain
information contained elsewhere in this Joint Proxy Statement-Prospectus or in
documents incorporated herein by reference. Reference is made to, and this
Summary is qualified in its entirety by, the more detailed information contained
herein, the Annexes hereto and the documents incorporated by reference herein.
Each shareholder is urged to read the Joint Proxy Statement-Prospectus and the
Annexes hereto in their entirety and with care.
THE PARTIES
Citizens and CB are registered bank holding companies under the Bank
Holding Company Act of 1956, as amended (the "BHC Act"), which, through their
respective banking and non-banking subsidiaries, provide banking and financial
services in Michigan and Illinois to individuals, corporations, governments, and
other institutions. Citizens is headquartered at One Citizens Banking Center,
328 S. Saginaw Street, Flint, Michigan 48502, and its telephone number is (810)
766-7500. Polaris Acquisition, Inc. ("Merger Sub") was incorporated on January
24, 1997 solely for the purpose of consummating the Merger and the other
transactions contemplated by the Merger Agreement. Merger Sub has no assets and
no business and has carried on no activities not directly related to its
formation and its execution of the Merger Agreement. Merger Sub is headquartered
at One Citizens Banking Center, 328 S. Saginaw Street, Flint, Michigan 48502,
and its telephone number is (810) 766-7500. CB is headquartered at One Jackson
Square, Jackson, Michigan 49201, and its telephone number is (517) 788-2706. See
"Citizens Banking Corporation" and "CB Financial Corporation."
DATE, TIME AND PLACE OF MEETINGS
The Citizens Meeting will be held at One Citizens Banking Center, 328 South
Saginaw Street, Flint, Michigan, at 10:00 a.m., local time, on June 24, 1997.
The CB Meeting will be held at The Town Club, One Jackson Square, Jackson,
Michigan, at 10:00 a.m., local time, on June 24, 1997.
PURPOSES OF MEETINGS
The Citizens Meeting will be held for the purpose of considering and voting
upon the Share Issuance pursuant to the terms of the Merger Agreement and the
consummation of the transactions contemplated thereby. See "Meeting of Citizens
Shareholders -- Date, Time and Place; Purpose of Meeting."
The CB Meeting will be held for the purpose of considering and voting upon
a proposal to approve and adopt the Merger Agreement and the consummation of the
transactions contemplated thereby, including the Merger. See "Meeting of CB
Shareholders -- Date, Time and Place; Purpose of Meeting."
As described herein under "Board of Directors and Operations Following the
Merger," Citizens has agreed to create an additional seat on the Citizens Board
and two additional seats on the Board of its principal banking subsidiary,
Citizens Bank, subsequent to the Effective Time and to cause one person selected
by CB and acceptable to Citizens to be elected to the Citizens Board and two
persons selected by CB and acceptable to Citizens to be elected to the Citizens
Bank Board.
RECORD DATE
The Citizens Board and the CB Board have each fixed the close of business
on May 2, 1997 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Citizens Meeting and the
CB Meeting, respectively. Only the holders of record of the outstanding shares
of Citizens Common Stock and CB Common Stock on the Record Date will be entitled
to notice of, and to vote at, the Citizens Meeting and the CB Meeting,
respectively. The presence, in person or by proxy, of a majority of the
aggregate number of shares of Citizens Common Stock and CB Common Stock issued,
outstanding and entitled to vote on the Record Date is necessary to constitute a
quorum at the Citizens Meeting and the CB Meeting, respectively.
3
<PAGE> 14
VOTE REQUIRED
Citizens. The affirmative vote of a majority of the total votes cast by the
holders of shares of Citizens Common Stock is necessary to approve the Share
Issuance. Approval of the Share Issuance pursuant to the terms of the Merger
Agreement by the requisite vote of the holders of Citizens Common Stock is a
condition to, and is required for, consummation of the Merger.
As of the Record Date, 14,377,411 shares of Citizens Common Stock were
issued, outstanding and entitled to vote, of which approximately 1,266,841
shares, or approximately 8.8%, were held by directors and executive officers of
Citizens and their respective affiliates. Each such director and officer of
Citizens has indicated his or her intention to vote the Citizens Common Stock
beneficially owned by him or her for approval of the Share Issuance pursuant to
the terms of the Merger Agreement and the consummation of the transactions
contemplated thereby. As of the Record Date, the banking subsidiaries of
Citizens, as fiduciaries, custodians or agents, held a total of 2,338,192
shares, or 16.3%, of the outstanding shares of Citizens Common Stock under trust
agreements and other instruments and agreements. These entities maintained sole
or shared voting power with respect to 2,274,934 of such shares. In addition,
CB's directors and executive officers as a group beneficially owned 1,000
shares, or less than 1% of the outstanding shares of Citizens Common Stock, all
of which they intend to vote for approval of the Share Issuance pursuant to the
terms of the Merger Agreement. As of the Record Date, the banking subsidiaries
of CB, as fiduciaries, custodians or agents, held a total of 300 shares, or less
than 1%, of the outstanding shares of Citizens Common Stock under trust
agreements and other instruments and agreements. These entities maintained no
voting power with respect to such shares. See "Meeting of Citizens
Shareholders -- Vote Required to Approve the Share Issuance; Principal
Shareholders."
CB. The affirmative vote of the holders of a majority of the shares of CB
Common Stock issued, outstanding and entitled to vote at the CB Meeting will be
required to approve the Merger Agreement and the consummation of the
transactions contemplated thereby. Approval of the Merger Agreement by the
requisite vote of the holders of CB Common Stock is a condition to, and required
for, consummation of the Merger.
As of the Record Date, 2,801,053 shares of CB Common Stock were issued,
outstanding and entitled to vote, of which approximately 193,392 shares, or
approximately 6.9%, were held by directors and executive officers of CB, its
subsidiaries and their respective affiliates. Each such director and executive
officer of CB has indicated his or her intention to vote the CB Common Stock
beneficially owned by him or her for approval of the Merger Agreement and the
consummation of the transactions contemplated thereby. As of the Record Date,
the banking subsidiaries of CB, as fiduciaries, custodians or agents, held a
total of 332,159 shares, or 11.9%, of the outstanding shares of CB Common Stock
under trust agreements and other instruments and agreements. These entities
maintained sole or shared voting power with respect to 86,528 of such shares. As
of the Record Date, the banking subsidiaries of Citizens, as fiduciaries,
custodians or agents, held a total of 210 shares (which shares were beneficially
owned by Citizens), or less than 1%, of the outstanding shares of CB Common
Stock under trust agreements and other instruments and agreements. The Citizens
banking subsidiaries did not maintain sole or shared voting power with respect
to such shares. See "Meeting of CB Shareholders -- Vote Required to Approve the
Merger Agreement; Principal Shareholders."
THE MERGER
Terms of the Merger; Effective Time. Upon the terms and subject to the
conditions of the Merger Agreement, Merger Sub will be merged with and into CB,
and CB will become a wholly owned subsidiary of Citizens. See "The
Merger -- Terms of the Merger; Effective Time."
The Merger will become effective upon the execution and filing of a
certificate of merger with the Michigan Department of Consumer and Industry
Services or as set forth in such certificate (the "Effective Time"). The date
the Merger is effective (the "Effective Date") will be the date Citizens
selects, which shall be within 30 days after the last to occur of the expiration
of all applicable waiting periods in connection with approvals of governmental
authorities occurs and the receipt of all approvals of governmental authorities
and all conditions to the consummation of the Merger are satisfied or waived, or
on such earlier or later date as may be agreed in writing by the parties to the
Merger Agreement.
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<PAGE> 15
Conversion of Shares. In the Merger, each share of CB Common Stock issued
and outstanding at the Effective Time (except as otherwise provided in the
Merger Agreement), will be converted, subject to certain provisions in the
Merger Agreement, into the right to receive 1.489 shares (the "Exchange Ratio")
of Citizens Common Stock.
CB has the right to elect to terminate the Merger Agreement, if the CB
Board so determines, whether before or after approval of the Merger by the CB
shareholders or the Citizens shareholders, if the Final Parent Stock Price
(defined in the Merger Agreement as the average of the closing prices of
Citizens Common Stock for the 20 consecutive trading days ending on the seventh
day immediately prior to the Effective Time) shall be less than $25.30 (the
"Floor Price") subject, however, to the right of Citizens to adjust the Exchange
Ratio. If CB elects to terminate the Merger Agreement as described above, and if
the Final Parent Stock Price is not less than $23.72, Citizens will have the
right, but not the obligation to elect to increase the Exchange Ratio by
multiplying (A) the Exchange Ratio by (B) the number of shares of Citizens
Common Stock, which when multiplied by the Final Parent Stock Price will equal
the Floor Price so that the per share value of Citizens Common Stock received
(valued at the Final Parent Stock Price) is at least equal to the per share
consideration that would have been received by CB shareholders if the Final
Parent Stock Price had been equal to the Floor Price.
Notwithstanding any other provision of the Merger Agreement, in the event
that the Final Parent Stock Price shall be more than $37.96 (the "Ceiling
Price"), Citizens will have the right to elect to terminate the Merger
Agreement; provided, however, that this termination right will not apply if the
Final Parent Stock Price exceeds the Ceiling Price and prior to or during the
Valuation Period (as defined in the Merger Agreement) certain events relating to
a business combination of Citizens and a third party have commenced.
Treatment of Options. Each stock option or right to acquire CB Common Stock
granted pursuant to the CB Financial Corporation 1992 Employee Stock Option Plan
and the CB Financial Corporation Nonqualified and Deferred Compensation Plan for
Independent Directors (together, the "Option Plans") which is outstanding and
unexercised immediately prior to the Effective Time will be converted
automatically, immediately prior to or at the Effective Time, into the right to
receive shares of Citizens Common Stock at a ratio determined by dividing the
difference of the product of the Exchange Ratio and the Final Parent Stock Price
less the exercise price of each option under the Option Plans by the Final
Parent Stock Price.
Exchange of Certificates; Fractional Interests. As soon as reasonably
practicable after the Effective Time, Citizens will instruct the Exchange Agent
(as hereinafter defined) to mail to each holder of record of certificates of CB
Common Stock a letter of transmittal with instructions as to the exchange of
such certificates for shares of Citizens Common Stock. CB STOCK CERTIFICATES
SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY.
No fractional shares of Citizens Common Stock will be issued in the Merger.
In lieu thereof, each holder of CB Common Stock who otherwise would have been
entitled to a fractional share of Citizens Common Stock will receive cash
(without interest) in an amount equal to such fraction multiplied by the Final
Parent Stock Price.
See "The Merger -- Terms of the Merger; Effective Time," "-- Conversion of
Shares," "-- Treatment of Options," "-- Exchange of Certificates; Fractional
Shares."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS AND REASONS FOR THE MERGER
The Boards of Directors of Citizens (with 15 directors present and 1
absent) and CB (with all directors present) have unanimously approved the Merger
Agreement. EACH BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF CITIZENS AND
CB, RESPECTIVELY, VOTE "FOR" APPROVAL OF THE SHARE ISSUANCE AND APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
The Citizens Board and the CB Board each believes that the Merger is in the
best interests of Citizens and its shareholders and CB and its shareholders,
respectively. The terms of the Merger Agreement were reached on the basis of
arm's-length negotiations between Citizens and CB. In the course of reaching
their
5
<PAGE> 16
respective decisions to approve the Merger Agreement, the Citizens Board and the
CB Board consulted with their respective legal advisors regarding the legal
terms of the Merger Agreement and the Citizens Board's and the CB Board's
obligations in consideration thereof, and the CB Board consulted with its
financial advisor, ABN AMRO Chicago Corporation ("AACC"), as to the fairness,
from a financial point of view, of the consideration to be received by the CB
shareholders pursuant to the terms of the Merger Agreement. Citizens consulted
with Roney & Co. ("Roney") as to the fairness, from a financial point of view to
the holders of Citizens Common Stock, of the consideration to be paid by
Citizens pursuant to the terms of the Merger Agreement. See "The
Merger -- Background of the Merger," "-- Recommendation of the Citizens Board
and Reasons for the Merger," "-- Recommendation of the CB Board and Reasons for
the Merger," and "-- Fairness Opinions of Financial Advisors."
Two of CB's directors, in making their recommendations that CB's
shareholders vote in favor of the proposed Merger, might be viewed as having a
conflict of interest in light of the personal benefits they may derive in
connection with the Merger. CB's Chairman and Chief Executive Officer and
Director, Brian D. Bell, and CB's President and Chief Operating Officer and
Director, Steven W. Seely, have agreements with CB under which certain payments
and benefits may be triggered by a change in control such as the Merger. Messrs.
Bell and Seely disclaim having such a conflict of interest. Moreover, the Merger
Agreement was unanimously approved and recommended for approval by CB
shareholders by the full CB Board. The CB Board consists of ten directors, eight
of whom (all directors other than Messrs. Bell and Seely) are outside,
independent directors, and were aware of the personal benefits Messrs. Bell and
Seely would derive from the Merger. See "Interests of Certain Persons in the
Merger -- Employment and Other Agreements."
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
Roney, Citizens' financial advisor, rendered its written opinion, dated
March 20, 1997, to the Citizens Board that the consideration to be paid by
Citizens pursuant to the terms of the Merger Agreement was fair, from a
financial point of view, to the holders of Citizens Common Stock.
AACC, CB's financial advisor, has rendered its written opinion to the CB
Board, that the consideration to be received by the CB shareholders pursuant to
the terms of the Merger Agreement is fair, from a financial point of view, to
the holders of CB Common Stock.
The opinions of the financial advisors, which are attached hereto as
Annexes B and C, should be read in their entirety with respect to the
assumptions made, matters considered and limits of the reviews undertaken by
Roney and AACC in rendering their respective opinions. Citizens and CB have
agreed to pay fees to Roney and AACC, respectively. A portion of the AACC fee is
contingent upon consummation of the Merger. See "The Merger -- Fairness Opinions
of Financial Advisors" for a further description of the opinions of Roney and
AACC and of the fees payable to Roney and AACC by Citizens and CB, respectively.
See "The Merger -- Background of the Merger," "-- Fairness Opinions of Financial
Advisors" and Annexes B and C to this Joint Proxy Statement-Prospectus.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to certain conditions, including the
approval of the Share Issuance and the Merger Agreement and the transactions
contemplated thereby, by the separate requisite votes of the holders of Citizens
Common Stock and of CB Common Stock, respectively; the effectiveness of the
Registration Statement of which this Joint Proxy Statement-Prospectus forms a
part; approval of the Merger by certain Federal and state regulatory
authorities; receipt by Citizens and CB of an opinion of counsel dated as of the
Effective Time as to the tax-free nature of the Merger for Federal income tax
purposes; receipt by Citizens and CB of a letter from their independent
accountants, each to the effect that, based on information provided and
representations made to them, the Merger should be treated as a "pooling-of-
interests" in conformity with generally accepted accounting principles; the
receipt by Citizens of a fairness opinion from Roney, the fairness opinion of
AACC rendered to CB shall not have been withdrawn; the absence of any injunction
or legal restraint prohibiting consummation of the Merger and certain other
customary closing conditions. Citizens and CB have each received a letter from
their independent
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<PAGE> 17
accountants, each to the effect that, based on information provided and
representations made to them, the Merger should be treated as a
"pooling-of-interests" in conformity with generally accepted accounting
principles. Citizens has received the fairness opinion from Roney and the
fairness opinion of AACC has not been withdrawn. There can be no assurance as to
when and if the remaining conditions will be satisfied (or, where permissible,
waived) or that the Merger will be consummated. See "The Merger -- Conditions to
the Consummation of the Merger" and "-- Regulatory Approvals Required for the
Merger."
BOARD OF DIRECTORS AND OPERATIONS FOLLOWING THE MERGER
From and after the Effective Time, the Board of Directors of Citizens will
consist of 18 persons, divided into three classes of directors, including one
person designated by the CB Board and acceptable to Citizens. As of the date of
this Joint Proxy Statement-Prospectus, the director designated by the CB Board
to be appointed to the Citizens Board has not been determined.
Following the Merger, Citizens intends to combine the operations of and,
subject to required regulatory approvals, to merge certain of the subsidiary
banks of Citizens and CB. The receipt of such required regulatory approvals is
not a condition to, or required for, consummation of the Merger. See "Board of
Directors and Operations Following the Merger."
REGULATORY APPROVALS
The Merger is subject to the approval of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") pursuant to Section 3 of
the BHC Act. Citizens filed an application with the Federal Reserve Board on
April 3, 1997 for prior approval of the Merger. Citizens was advised by the
Federal Reserve Board on May 19, 1997 that such application was approved on May
16, 1997.
It is a further condition to the consummation of the Merger that no
regulatory agency, in connection with their approval of or consent to the
Merger, impose any requirement upon Citizens, CB, or any of their respective
subsidiaries, to, among other things, dispose of any material asset or raise
capital. The Federal Reserve Board has imposed no such requirements in
connection with the approval granted on May 16, 1997.
In addition, under federal law, a period of 30 days must expire following
approval by the Federal Reserve Board within which period the United States
Department of Justice (the "Department of Justice") may file objections to the
Merger under the federal antitrust laws. With the approval of the Federal
Reserve Board and the Department of Justice, the waiting period may be reduced
to no less than 15 days. The May 16, 1997 Federal Reserve Board approval granted
to Citizens provides for a 15-day waiting period. The Department of Justice
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the Merger unless
divestiture of an acceptable number of branches to a competitively suitable
purchaser could be made. While Citizens believes that the likelihood of such
action by the Department of Justice is remote in this case, there can be no
assurance that the Department of Justice will not initiate such a proceeding.
See "The Merger -- Regulatory Approvals Required for the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), and it is a condition to the consummation of the Merger that Citizens
receive an opinion from Dykema Gossett PLLC and that CB receive an opinion from
Howard & Howard Attorneys, P.C., each based upon certain customary
representations and assumptions set forth therein, substantially to the effect
that, as applicable, the Merger will constitute a tax-free reorganization under
Section 368(a) of the Code. In addition, based upon such opinions, the material
federal income tax consequences of the Merger for CB shareholders are the
following: (i) no gain or loss will be recognized by the shareholders of CB who
exchange their CB Common Stock solely for Citizens Common Stock pursuant to the
Merger (except with respect to cash received in lieu of a fractional share
interest in Citizens Common Stock); (ii) the tax basis of the Citizens Common
Stock received by shareholders who exchange all of their CB Common Stock solely
for Citizens Common Stock in the Merger will be the same as the tax basis of the
CB Common Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share
7
<PAGE> 18
interest for which cash is received); and (iii) the holding period of Citizens
Common Stock received by shareholders of CB in the Merger will include the
period during which the shares of CB Common Stock surrendered in exchange
therefor were held; provided that such CB Common Stock was held as a capital
asset by the holder of such CB Common Stock at the Effective Time. See "The
Merger -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The Merger is intended to be accounted for as a "pooling of interests"
under generally accepted accounting principles. Citizens and CB have received
letters from their independent accountants to the effect that
pooling-of-interest accounting is appropriate for the Merger under Accounting
Principles Board Opinion No. 16, assuming the Merger is consummated in
accordance with the Merger Agreement. See "The Merger -- Accounting Treatment."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time (i) by the mutual consent of the Boards of Directors of Citizens and CB;
(ii) by either Citizens or CB if any of the conditions to such party's
obligation to consummate the transactions contemplated in the Merger Agreement
shall have become impossible to satisfy if, but only if, such party has used its
best efforts and acted in good faith in attempting to satisfy all such
conditions and if such party is not then in breach or default in any material
respect of the Merger Agreement; (iii) by Citizens if there has been a material
breach or default by CB of any representation or warranty or in the observance
of its covenants and agreements contained in the Merger Agreement which has not
been cured, the Effective Time has not occurred prior to September 30, 1997
without fault on the part of Citizens, or a public announcement with respect to
an Acquisition Proposal (as defined in the Merger Agreement) is made by a third
party and the CB Board fails to publicly reject or oppose such Acquisition
Proposal or the CB Board modifies, amends or withdraws its recommended approval
of the Merger Agreement and the Merger to the CB shareholders; (iv) by CB if
there has been a material breach or default by Citizens of any representation or
warranty or in the observance of its covenants and agreements contained in the
Merger Agreement which has not been cured, or the Effective Time has not
occurred prior to September 30, 1997 without fault on the part of CB; (v) by
Citizens or CB if any required shareholder approvals or if any Regulatory Agency
(as defined in the Merger Agreement) has denied approval for the Merger; (vi) by
Citizens if certain disclosure updates provided by CB indicate that a Material
Adverse Effect (as defined in the Merger Agreement) has occurred with respect to
CB; or (vii) by Citizens or CB as described under "The Merger -- Conversion of
Shares." See "The Merger -- Termination of the Merger Agreement."
STOCK OPTION AGREEMENT
As an inducement to and condition of Citizens entering into the Merger
Agreement, Citizens and CB entered into a Stock Option Agreement, dated January
27, 1997 (the "Stock Option Agreement"), pursuant to which CB granted Citizens
an option to purchase from CB 557,409 shares of CB Common Stock (subject to
adjustment) at a price of $37.66 per share (the "Option"). Citizens may exercise
the Option only upon the occurrence of certain events described therein (none of
which has occurred as of the date hereof). At the request of the holder of the
Option, under certain circumstances, CB will repurchase, pursuant to a price set
forth in the Stock Option Agreement, the Option and any shares of CB Common
Stock purchased upon the exercise of the Option and beneficially owned by such
holder at that time.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms set forth in the Merger
Agreement. Consequently, certain aspects of the Stock Option Agreement may have
the effect of discouraging persons who might now or prior to the Effective Time
be interested in acquiring all of or a significant interest in CB from
considering or proposing such an acquisition. See "The Merger -- Stock Option
Agreement" and "Information Incorporated by Reference."
8
<PAGE> 19
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Citizens' management and the Citizens Board, and CB's
management and the CB Board, may be deemed to have certain interests in the
Merger that are in addition to their interests generally as shareholders of
Citizens or CB, as the case may be. Citizens has agreed to take certain actions
regarding the existing employment and severance arrangements of certain officers
of CB and to indemnify the CB directors and officers following the Merger.
CB's Chairman and Chief Executive Officer and Director, Brian D. Bell, and
CB's President and Chief Operating Officer and Director, Steven W. Seely, have
agreements with CB under which they have the right to receive certain severance
payments and employee benefits upon the termination of their employment
following a change in control. The Merger constitutes a change in control for
purposes of their agreements. Assuming Mr. Bell resigned his employment as a
result of a material change in his employment or was terminated from his
employment without cause on July 1, 1997, following an assumed consummation of
the Merger, the value of salary, compensation and benefit payments under Mr.
Bell's employment agreement is estimated to be approximately $564,109. Based on
Mr. Seely's current annual base salary, if Mr. Seely is terminated without cause
or certain changes are made with respect to his employment following a change in
control of CB, the value of the severance benefits payable under his agreement
is estimated to be approximately $361,250 (which includes costs associated with
the continuation of medical and dental insurance coverage for 24 months).
In addition, the Merger Agreement provides that after consummation of the
Merger, Citizens will appoint to the Citizens Board one individual selected by
the CB Board and acceptable to Citizens. The Merger Agreement also provides that
after consummation of the Merger, Citizens will appoint to the Citizens Bank
board of directors two individuals selected by the CB Board and acceptable to
Citizens. As of the date of this Joint Proxy Statement-Prospectus, the director
to be appointed to the Citizens Board and the directors to be appointed to the
Citizens Bank board have not been determined.
The Citizens Board and the CB Board were aware of these interests and
considered them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby. See "Interests of Certain Persons in the
Merger" and "Board of Directors and Operations Following the Merger."
NO APPRAISAL RIGHTS
Under the Michigan Business Corporation Act ("MBCA"), holders of Citizens
Common Stock and CB Common Stock will have no appraisal rights in connection
with the Share Issuance, the Merger Agreement and the consummation of the
transactions contemplated thereby. See "The Merger -- No Appraisal Rights."
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
The rights of shareholders of CB are currently governed by the MBCA, the CB
Amended Articles of Incorporation (the "CB Articles") and the CB bylaws (the "CB
Bylaws"). Upon consummation of the Merger, CB shareholders who receive Citizens
Common Stock (as defined herein) in the Merger will become shareholders of
Citizens, and their rights will be governed by the Citizens Articles of
Incorporation (the "Citizens Articles") and the Citizens bylaws (the "Citizens
Bylaws"), and will continue to be governed by the MBCA. See "Comparison of
Shareholders' Rights."
9
<PAGE> 20
MARKET PRICE PER SHARE DATA
The shares of Citizens Common Stock are listed and traded on the Nasdaq
National Market under the symbol "CBCF." CB Common Stock is currently traded
over-the-counter under the symbol "CBFC" with market maker quotations reported
on the OTCBB. The table below sets forth the high and low sales prices for
Citizens Common Stock as reported on the Nasdaq National Market and the high and
low bid prices for CB Common Stock, as obtained from the National Quotation
Bureau, Inc. for 1997, 1996 and 1995 and as reported in the Jackson Citizen
Patriot for 1994, for the periods indicated.
<TABLE>
<CAPTION>
CITIZENS CB
------------------------ ------------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C> <C>
1997................. First Quarter $33.50 $30.00 $47.00 $36.00
1996................. First Quarter 31.50 28.50 33.50 29.50
Second Quarter 31.50 27.50 32.00 29.50
Third Quarter 29.50 27.25 30.50 29.50
Fourth Quarter 32.25 28.75 36.00 30.50
1995................. First Quarter 27.00 24.94 31.00 27.00
Second Quarter 31.00 25.25 32.50 32.00
Third Quarter 33.25 29.25 36.50 31.25
Fourth Quarter 32.50 29.00 35.75 33.50
1994................. First Quarter 26.00 22.75 33.00 33.00
Second Quarter 26.00 22.75 33.00 32.00
Third Quarter 26.75 22.00 33.00 31.50
Fourth Quarter 29.00 25.25 30.00 29.50
</TABLE>
The following table sets forth the closing sale price of Citizens Common
Stock and the average of the bid and asked prices for CB Common Stock and the
equivalent per share price of CB Common Stock giving effect to the Merger on
January 27, 1997 (the last trading day prior to the public announcement of the
proposed Merger) and May 20, 1997 (the latest practicable trading day before the
printing of this Joint Proxy Statement-Prospectus).
<TABLE>
<CAPTION>
CITIZENS CB PRO FORMA
COMMON STOCK COMMON STOCK EQUIVALENT PER SHARE(1)
------------ ------------ -----------------------
<S> <C> <C> <C>
Market Value Per Share:
January 27, 1997.............. $30.50 $41.00 $45.41
May 20, 1997.................. 32.50 46.94 48.39
</TABLE>
- -------------------------
(1) Represents the equivalent market value per share of CB Common Stock,
calculated by multiplying the closing sales prices of Citizens Common Stock,
on each specified date, by the Exchange Ratio, which is 1.489.
Shareholders are advised to obtain current market quotations for Citizens
Common Stock and CB Common Stock. No assurance can be given as to the market
price of Citizens Common Stock or CB Common Stock at the Effective Time, or the
Citizens Common Stock after the Effective Time. Because the Exchange Ratio is
fixed, except with respect to Citizens' limited right to increase the Exchange
Ratio, and because the market price of the Citizens Common Stock is subject to
fluctuation, the value of the shares of Citizens Common Stock that holders of CB
Common Stock will receive in the Merger may increase or decrease, subject to the
Floor Price and the Ceiling Price, prior to and following the Merger. See "The
Merger -- Conversion of Shares."
COMPARATIVE PER SHARE DATA
Based upon the conversion rate of 1.489 shares of Citizens Common Stock for
each share of CB Common Stock outstanding immediately prior to the Merger, the
following table sets forth certain historical,
10
<PAGE> 21
pro forma and pro forma equivalent per share financial data for Citizens and CB.
The pro forma data does not purport to be indicative of the results of future
operations or the results that would have occurred had the Merger been
consummated at the beginning of the period presented. The information presented
herein should be read in conjunction with the historical consolidated financial
statements including the notes thereto, of Citizens and CB incorporated by
reference in this Joint Proxy Statement-Prospectus and the unaudited pro forma
combined financial statements, including the notes thereto, appearing elsewhere
herein. See "Unaudited Pro Forma Condensed Combined Financial Statements."
<TABLE>
<CAPTION>
CITIZENS CB
---------------------- -------------------------
EQUIVALENT
HISTORICAL PRO FORMA HISTORICAL PRO FORMA(2)
---------- --------- ---------- ------------
<S> <C> <C> <C> <C>
PER COMMON SHARE
BOOK VALUE:
March 31, 1997.................................... $22.15 $21.26 $27.37 $31.66
December 31, 1996................................. 21.98 21.14 27.41 31.48
MARKET VALUE:(1)
March 31, 1997.................................... $33.00 $33.00 $46.75 $49.14
December 31, 1996................................. 31.50 31.50 37.38 46.90
December 31, 1995................................. 29.75 29.75 33.88 44.30
December 31, 1994................................. 27.75 27.75 29.50 41.32
CASH DIVIDENDS:(1)
First quarter 1997................................ $ 0.26 $ 0.26 $ 0.30 $ 0.39
First quarter 1996................................ 0.23 0.23 0.30 0.34
Year ended:
December 31, 1996................................. 1.01 1.01 1.20 1.50
December 31, 1995................................. 0.90 0.90 1.20 1.34
December 31, 1994................................. 0.82 0.82 1.20 1.22
PRIMARY NET INCOME:
First quarter 1997................................ $ 0.63 $ 0.58 $ 0.60 $ 0.86
First quarter 1996................................ 0.60 0.56 0.68 0.83
Year ended:
December 31, 1996................................. 2.55 2.25 1.79 3.35
December 31, 1995................................. 2.31 2.04 1.65 3.04
December 31, 1994................................. 2.03 1.93 2.35 2.87
FULLY DILUTED NET INCOME:
First quarter 1997................................ $ 0.63 $ 0.57 $ 0.60 $ 0.85
First quarter 1996................................ 0.60 0.56 0.68 0.83
Year ended:
December 31, 1996................................. 2.55 2.24 1.79 3.34
December 31, 1995................................. 2.30 2.03 1.65 3.02
December 31, 1994................................. 2.03 1.93 2.35 2.87
</TABLE>
.
- -------------------------
(1) The Citizens pro forma market value and combined dividends per share amounts
represent historical per share market value and dividends on Citizens Common
Stock only. No assurance can be given that equivalent dividends will be
declared in the future. The amount of future dividends payable by Citizens
will depend upon the earnings and financial condition of Citizens and other
factors, including, without limitation, applicable governmental regulations
and policies.
(2) The CB pro forma equivalent per share amounts are calculated by multiplying
the Citizens pro forma per share amounts by the Exchange Ratio of 1.489
shares of Citizens Common Stock for each share of CB Common Stock.
11
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected historical financial data for
Citizens and CB for the three-month periods ended March 31, 1996 and 1997, and
for each of the five years in the period ended December 31, 1996. This data is
derived from the historical consolidated financial statements of Citizens and
CB, including the respective notes thereto, which are incorporated by reference
in this Joint Proxy Statement -- Prospectus and should be read in conjunction
therewith. See "Information Incorporated by Reference." Interim unaudited data
for the three-month periods ended March 31, 1996 and 1997 reflect, in the
opinion of management of Citizens and CB, all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of such data.
Results for the three months ended March 31, 1997 are not necessarily indicative
of results that may be expected for any other interim period or for the year as
a whole.
CITIZENS BANKING CORPORATION AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------------------- --------------------------------------------------------------
1997 1996 1996 1995(3) 1994 1993(2) 1992(1)
---- ---- ---- ------- ---- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income............ $ 65,084 $ 62,969 $ 255,914 $ 240,600 $ 179,989 $ 166,452 $ 178,776
Interest expense........... 27,637 27,724 109,798 103,105 61,589 62,118 78,801
Net interest income........ 37,447 35,245 146,116 137,495 118,400 104,334 99,975
Provision for loan
losses................... 2,145 1,771 8,334 6,441 5,303 5,597 6,251
Investment security gains
(losses)................. (14) 52 101 198 157 763 (17)
Noninterest income......... 9,710 9,488 40,429 36,236 33,697 30,452 27,082
Noninterest expense........ 32,062 30,824 125,986 121,087 107,245 97,268 92,555
Income taxes............... 3,728 3,449 14,905 12,805 10,292 6,914 4,765
Net income................. 9,208 8,741 37,421 33,596 29,414 25,770 23,469(4)
Cash dividends............. 3,727 3,293 14,528 12,770 11,557 9,937 9,027
PER SHARE DATA
Net income:
Primary.................. $ 0.63 $ 0.60 $ 2.55 $ 2.31 $ 2.03 $ 1.88 $ 1.77(4)
Fully diluted............ 0.63 0.60 2.55 2.30 2.03 1.87 1.75(4)
Cash dividends............. 0.260 0.230 1.010 0.900 0.820 0.745 0.690
Book value, end of period
close.................... 22.15 20.85 21.98 20.73 18.31 18.08 16.73
Market value, end of
period close............. 33.00 30.50 31.50 29.75 27.75 25.00 19.25
AT PERIOD END
Assets..................... $3,519,792 $3,508,223 $3,483,850 $3,463,922 $2,703,823 $2,714,112 $2,498,934
Loans...................... 2,643,670 2,487,431 2,620,731 2,428,513 1,816,221 1,780,180 1,557,423
Deposits................... 2,922,679 2,916,478 2,864,807 2,864,701 2,252,318 2,246,750 2,086,144
Long-term debt............. 71,662 85,432 84,133 105,411 5,249 10,865 15,093
Shareholders' equity....... 318,082 300,147 315,242 297,186 258,730 255,163 219,276
AVERAGE FOR THE PERIOD
Assets..................... $3,486,045 $3,446,859 $3,455,290 $3,279,646 $2,710,747 $2,535,068 $2,472,245
Earning assets............. 3,239,248 3,163,201 3,186,631 3,002,753 2,500,215 2,348,691 2,290,884
Loans...................... 2,636,256 2,447,763 2,532,639 2,302,414 1,797,153 1,643,327 1,539,332
Deposits................... 2,874,128 2,848,356 2,856,567 2,702,346 2,262,182 2,109,269 2,061,613
Interest-bearing
deposits................. 2,436,193 2,398,667 2,395,818 2,250,711 1,882,451 1,783,718 1,769,078
Repurchase agreements and
other short-term
borrowings............... 171,106 147,209 161,964 146,000 141,230 138,375 135,624
Long-term debt............. 80,397 99,306 83,308 102,813 8,667 13,112 16,965
Shareholders' equity....... 316,086 298,477 304,022 277,597 256,607 231,160 210,193
</TABLE>
12
<PAGE> 23
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
----------------------- --------------------------------------------------------------
1997 1996 1996 1995(3) 1994 1993(2) 1992(1)
---- ---- ---- ------- ---- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL RATIOS (ANNUALIZED)
Net interest margin
(FTE).................... 4.82% 4.65% 4.77% 4.77% 4.99% 4.74% 4.71%
Return on average:
Shareholders' equity..... 11.82 11.78 12.31 12.10 11.46 11.15 11.17(4)
Earning assets........... 1.15 1.11 1.17 1.12 1.18 1.10 1.02(4)
Assets................... 1.07 1.02 1.08 1.02 1.09 1.02 0.95(4)
Average shareholders'
equity/avg. assets....... 9.07 8.66 8.80 8.46 9.47 9.12 8.50
Average loans to average
deposits................. 91.72 85.94 88.66 85.20 79.44 77.91 74.67
Dividend payout ratio...... 40.48 37.67 38.83 38.01 39.29 38.56 38.46(4)
Tier I leverage............ 7.49 6.83 7.33 6.65 9.52 8.90 8.57
Risk-based capital:
Tier 1 capital........... 9.51 8.84 9.39 8.79 13.44 13.12 12.73
Total capital............ 10.76 10.09 10.64 10.04 14.69 14.36 13.90
MISCELLANEOUS DATA
Average number of shares
outstanding:
Primary.................. 14,634,949 14,675,356 14,666,146 14,574,871 14,463,068 13,724,319 13,292,150
Fully diluted............ 14,652,835 14,677,184 14,696,805 14,611,736 14,511,706 13,789,302 13,377,176
Number of Shareholders
(approximate)............ 6,700 6,700 6,700 6,700 6,700 6,500 6,500
</TABLE>
- -------------------------
(1) Noninterest expense for the year is reduced by a net $1.746 million
non-recurring gain. The after-tax effect of this gain on net income is an
increase of $1.152 million. Non-recurring items included restructuring
expenses related to the leasing subsidiary, employee benefit costs related
to adopting the accrual method of accounting for retiree benefits and a
curtailment gain resulting from modification of retiree benefit plans.
(2) The year 1993 reflects the acquisition of National Bank of Royal Oak,
accounted for as a purchase, and includes the related operating results
subsequent to its October 1, 1993 acquisition date.
(3) The year 1995 reflects the acquisition of the Michigan affiliates of Banc
One Corporation, accounted for as a purchase, and includes the related
operating results subsequent to the February 28, 1995 acquisition date.
(4) Before cumulative effect of change in accounting principle (SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" was
adopted effective January 1, 1992).
13
<PAGE> 24
CB FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------------- -------------------------------------------------------------
1997 1996 1996 1995 1994(3) 1993(2) 1992(1)
---- ---- ---- ---- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income................. $ 15,155 $ 13,087 $ 56,446 $ 50,492 $ 45,485 $ 46,778 $ 47,124
Interest expense................ 6,714 5,386 23,938 19,984 15,879 16,469 18,994
Net interest income............. 8,441 7,701 32,508 30,508 29,606 30,309 28,130
Provision for loan losses....... 1,065 265 3,792 672 534 392 595
Investment security gains
(losses)...................... (10) 365 510 82 942 1,787 2,030
Noninterest income.............. 1,682 1,713 7,067 6,233 6,089 6,126 4,859
Noninterest expense............. 6,585 6,722 29,152(4) 29,383(4) 26,522 25,765 22,051
Income taxes.................... 782 876 2,137 2,152 2,987 3,646 3,661
Net income...................... 1,681 1,916 5,004 4,616 6,594 8,419(5) 8,712
Cash Dividends.................. 840 840 3,362 3,361 3,361 3,306 3,193
PER SHARE DATA
Net income...................... $0.60 $0.68 $1.79 $1.65 $2.35 $3.00(5) $3.11
Cash dividends.................. 0.30 0.30 1.20 1.20 1.20 1.18 1.14
Book value, end of period
close......................... 27.37 27.29 27.41 27.65 26.42 25.46 24.02
Market value at year end (Avg.
Bid/Ask)...................... 46.75 31.50 37.38 33.88 29.50 34.00 28.50
AT PERIOD END
Assets.......................... $809,594 $738,587 $825,037 $719,883 $720,264 $670,891 $645,089
Loans........................... 619,807 484,742 609,021 438,883 393,119 335,498 310,229
Deposits........................ 709,305 644,335 735,804 622,460 620,649 583,546 560,781
Long-term debt and capital
leases........................ 2,214 4,132 2,694 4,611 6,526 8,529 571
Shareholders' equity............ 76,667 76,438 76,779 77,458 74,009 71,323 67,291
AVERAGE FOR THE PERIOD
Assets.......................... $807,932 $735,537 $760,525 $697,286 $672,656 $677,348 $614,603
Earning assets.................. 752,281 655,001 696,926 630,685 605,521 609,337 564,338
Loans........................... 618,519 456,799 527,838 404,379 344,952 333,682 295,697
Deposits........................ 701,705 624,825 660,573 600,389 578,712 584,873 531,393
Interest-bearing deposits....... 598,325 521,607 554,359 499,421 477,107 485,132 448,669
Short-term borrowings........... 17,764 4,752 8,951 7,009 4,362 8,454 14,164
Long-term debt and capital
leases........................ 2,365 4,224 3,479 5,396 7,403 8,999 625
Shareholders' equity............ 77,725 78,462 77,415 76,627 75,067 69,322 64,410
FINANCIAL RATIOS (ANNUALIZED)
Net interest margin (FTE)....... 4.62% 4.84% 4.75% 4.94% 4.99% 5.12% 5.15%
Return on average:
Shareholders' equity.......... 8.77 9.82 6.46 6.02 8.78 12.14(5) 13.53
Earning assets................ 0.91 1.18 0.72 0.73 1.09 1.38(5) 1.54
Assets........................ 0.84 1.05 0.66 0.66 0.98 1.24(5) 1.42
Average shareholders'
equity/avg. assets............ 9.62 10.67 10.18 10.99 11.16 10.23 10.48
Average loans to average
deposits...................... 88.15 73.11 79.91 67.35 59.61 57.05 55.65
Dividend payout ratio........... 49.97 43.84 67.17 72.82 50.97 39.27(5) 36.65
Tier I leverage................. 8.73 9.47 8.32 9.44 9.37 9.33 10.95
Risk-based capital:
Tier 1 capital................ 12.41 14.31 11.86 15.66 15.12 18.40 19.91
Total capital................. 13.61 15.09 12.91 16.59 16.05 19.46 20.94
MISCELLANEOUS DATA
Average number of shares
outstanding................... 2,815,042 2,803,746 2,803,364 2,803,437 2,803,158 2,803,300 2,801,053
Number of Shareholders.......... 2,048 2,072 2,082 2,094 2,157 2,137 2,124
</TABLE>
- -------------------------
(1) The year 1992 reflects the acquisition of Charlevoix County State Bank,
accounted for as a purchase, and includes the related operating results
subsequent to its February 28, 1992 acquisition date.
(2) The year 1993 reflects the acquisition of First of Charlevoix Corporation,
accounted for as a purchase, and includes the related operating results
subsequent to its January 15, 1993 acquisition date.
(3) The year 1994 reflects the acquisition of three banking offices of Republic
Bank, accounted for as a purchase, and includes the related operating
results subsequent to the December 17, 1994 acquisition date.
(4) Includes pre-tax restructuring charge of $1,102,000 in 1996 and $2,278,000
in 1995.
(5) Before cumulative effect of change in accounting principle (Effective
January 1, 1993, CB adopted SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and recognized a one-time
charge of $1,081,000, net of tax effect, as "Cumulative Effective of Change
in Accounting Principle").
14
<PAGE> 25
PRO FORMA SELECTED FINANCIAL DATA
The following table sets forth unaudited pro forma combined selected
financial data for Citizens for the three-month periods ended March 31, 1996 and
1997, and for each of the three years in the period ended December 31, 1996,
giving effect to the Merger, accounted for as a pooling-of-interests. The
pooling-of-interests method of accounting combines assets and liabilities at
their historical costs and restates the results of operations as if Citizens and
CB had been combined at the beginning of all reported periods. The pro forma
combined selected financial data is based on the historical consolidated
financial statements of Citizens and CB and their subsidiaries after giving
effect to the pro forma adjustments described in the notes to the "Unaudited Pro
Forma Condensed Combined Financial Statements." For a description of
pooling-of-interest accounting with respect to the Merger, see "The Merger --
Accounting Treatment."
The pro forma combined selected financial data should be read in
conjunction with the historical consolidated statements of Citizens and CB,
including the respective notes thereto, which are incorporated by reference in
this Joint Proxy Statement-Prospectus, and in conjunction with the consolidated
historical financial data and pro forma combined financial information,
including the notes thereto, appearing elsewhere in this Joint Proxy Statement-
Prospectus. See "Information Incorporated by Reference" and "Unaudited Pro Forma
Condensed Combined Financial Statements."
The pro forma financial data are not necessarily indicative of the results
that would have occurred had the Merger been consummated in the past or that may
be obtained in the future. In addition, the pro forma data and ratios set forth
in the following tables do not reflect merger expenses and restructuring charges
anticipated to be incurred by Citizens and CB or the anticipated cost savings.
As a result of these and other factors that may occur, the combined financial
condition and results of operations of Citizens as of and after the Effective
Date may be materially different from that reflected herein. See "Board of
Directors and Operations Following the Merger."
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------ --------------------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income.......................................... $ 80,239 $ 76,056 $ 312,360 $ 291,092 $ 225,474
Interest expense......................................... 34,351 33,110 133,736 123,089 77,468
Net interest income...................................... 45,888 42,946 178,624 168,003 148,006
Provision for loan losses................................ 3,210 2,036 12,126 7,113 5,837
Investment security gains (losses)....................... (24) 417 611 280 1,099
Noninterest income....................................... 11,392 11,201 47,496 42,469 39,786
Noninterest expense...................................... 38,647 37,546 155,138 150,470 133,767
Income taxes............................................. 4,510 4,325 17,042 14,957 13,279
Net income............................................... 10,889 10,657 42,425 38,212 36,008
Cash Dividends........................................... 4,820 4,259 18,773 16,548 14,993
PER SHARE DATA
Net income:
Primary................................................ $ 0.58 $ 0.56 $ 2.25 $ 2.04 $ 1.93
Fully diluted.......................................... 0.57 0.56 2.24 2.03 1.93
Cash dividends (Citizens only)........................... 0.26 0.23 1.01 0.90 0.82
Book value, end of period close.......................... 21.26 20.25 21.14 20.21 18.16
Market value (Citizens end of period close).............. 33.00 30.50 31.50 29.75 27.75
AT PERIOD END
Assets................................................... $4,329,386 $4,246,810 $4,308,887 $4,183,805 $3,424,087
Loans.................................................... 3,263,477 2,972,173 3,229,752 2,867,396 2,209,340
Deposits................................................. 3,631,984 3,560,813 3,600,611 3,487,161 2,872,967
Long-term debt........................................... 73,876 89,564 86,827 110,022 11,775
Shareholders' equity..................................... 394,749 376,585 392,021 374,644 332,739
AVERAGE FOR THE PERIOD
Assets................................................... $4,293,977 $4,182,396 $4,215,815 $3,976,932 $3,383,403
Earning assets........................................... 3,991,529 3,818,202 3,883,557 3,633,438 3,105,736
Loans.................................................... 3,254,775 2,904,562 3,060,477 2,706,793 2,142,105
Deposits................................................. 3,575,833 3,473,181 3,517,140 3,302,735 2,840,894
Interest-bearing deposits................................ 3,034,518 2,920,274 2,950,177 2,750,132 2,359,558
Short-term borrowings.................................... 188,870 151,961 170,915 153,009 145,592
Long-term debt and capital leases........................ 82,762 103,530 86,787 108,209 16,070
Shareholders' equity..................................... 393,811 376,939 381,437 354,224 331,674
FINANCIAL RATIOS (ANNUALIZED)
Return on average:
Shareholders' equity................................... 11.21% 11.37% 11.12% 10.79% 10.86%
Earning assets......................................... 1.11 1.12 1.09 1.05 1.16
Assets................................................. 1.03 1.02 1.01 0.96 1.06
Average shareholders' equity/average assets.............. 9.17 9.01 9.05 8.91 9.80
Average loans to average deposits........................ 91.02 83.63 87.02 81.96 75.40
Dividend payout ratio.................................... 44.27 39.96 44.25 43.31 41.64
Tier I leverage.......................................... 7.73 7.29 7.52 7.13 9.49
Risk-based capital:
Tier 1 capital......................................... 10.01 9.67 9.83 9.76 13.74
Total capital.......................................... 11.26 10.92 11.08 11.01 14.98
</TABLE>
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<PAGE> 26
CITIZENS BANKING CORPORATION
Citizens is a multi-bank holding company incorporated in Michigan in 1982.
As of December 31, 1996, Citizens directly or indirectly owned two banking
subsidiaries and two non-banking subsidiaries and had 1,825 full-time equivalent
employees. Citizens' two banking subsidiaries, Citizens Bank and Citizens Bank-
Illinois, N.A., are its principal subsidiaries. Citizens' subsidiary banks are
full service commercial banks offering a variety of financial services to
corporate, commercial, correspondent and individual bank customers. These
services include commercial, mortgage and consumer lending, demand and time
deposits, trust services, investment services, safe deposit facilities and other
financial products and services. Citizens principal offices are located at One
Citizens Banking Center, 328 South Saginaw Street, Flint, Michigan 48502-9985,
and its telephone number is (810) 766-7500.
As a holding company registered under the BHC Act, Citizens is subject to
supervision and regulation by the Federal Reserve Board. See "The Merger --
Regulatory Approvals Required for the Merger."
CB FINANCIAL CORPORATION
CB is a bank holding company incorporated in Michigan in 1981. The
principal assets of CB are its stock ownership in its subsidiaries, City Bank
and Trust Company, City Bank, and CB North (collectively, the "CB Banks"). The
CB Banks offer a full range of banking and other financial services to
individuals, corporations and other institutions. Banking services include
commercial, mortgage, and consumer lending, checking, savings, NOW accounts,
money market deposit accounts and time deposit accounts, trust services, and
other financial products and services, including safe deposit facilities, money
transfers and corporate cash management. CB's principal offices are located at
One Jackson Square, Jackson, Michigan 49201-1446 and its telephone number is
(517) 788-2706.
As a holding company registered under the BHC Act, CB is subject to
supervision and regulation by the Federal Reserve Board. See "The Merger --
Regulatory Approvals Required for the Merger."
MEETING OF CITIZENS SHAREHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
This Joint Proxy Statement-Prospectus is being furnished in connection with
the solicitation of proxies by the Citizens Board for use at the Citizens
Meeting. The Citizens Meeting will be held at One Citizens Banking Center, 328
South Saginaw Street, Flint, Michigan, at 10:00 a.m., local time, on June 24,
1997.
The Citizens Meeting will be held for the purpose of considering and voting
upon a proposal to approve the Share Issuance pursuant to the Merger Agreement
and the consummation of the transactions contemplated thereby. Because the
number of shares of Citizens Common Stock to be issued in the Merger will exceed
20% of the number of shares of Citizens Common Stock outstanding immediately
prior to the consummation of the Merger, the rules of The Nasdaq National Market
require that Citizens shareholders approve the Share Issuance.
Management of Citizens knows of no matters to be brought before the meeting
other than those referred to herein. If any other business should properly come
before the Citizens Meeting, the persons named in the proxy will vote in
accordance with their best judgment.
THE CITIZENS BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE SHARE
ISSUANCE PURSUANT TO THE MERGER AGREEMENT.
RECORD DATE
The Citizens Board has fixed the close of business on May 2, 1997 as the
Record Date. Only the holders of record of the outstanding shares of Citizens
Common Stock on the Record Date will be entitled to notice of,
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<PAGE> 27
and to vote at, the Citizens Meeting. At the Record Date, 14,377,411 shares of
Citizens Common Stock were outstanding and entitled to vote. The presence, in
person or by proxy, of a majority of the aggregate number of shares of Citizens
Common Stock outstanding and entitled to vote on the Record Date is necessary to
constitute a quorum at the Citizens Meeting.
PROXIES; VOTING AND REVOCATION
Shares of Citizens Common Stock represented by a properly executed proxy
received prior to the vote at the Citizens Meeting and not revoked will be voted
at the Citizens Meeting as directed in the proxy. IF A PROXY IS SUBMITTED AND NO
DIRECTIONS ARE GIVEN, THE PROXY WILL BE VOTED "FOR" APPROVAL OF THE SHARE
ISSUANCE PURSUANT TO THE MERGER AGREEMENT. Citizens intends to count shares of
Citizens Common Stock present in person at the Citizens Meeting but not voting,
and shares of Citizens Common Stock for which it has received proxies but with
respect to which holders of shares have abstained, as present at the Citizens
Meeting for purposes of determining the presence or absence of a quorum for the
transaction of business. The affirmative vote of a majority of the total votes
cast by the holders of shares of Citizens Common Stock is necessary to approve
the Share Issuance. Therefore, abstentions and non-voting shares will not affect
the outcome of the vote with respect to the proposal to approve the Share
Issuance. In addition, brokers who hold shares in street name for customers who
are the beneficial owners of such shares are prohibited from giving a proxy to
vote shares held for such customers with respect to the approval of the Share
Issuance without specific instructions from such customers. The failure of such
customers to provide specific instructions with respect to their shares of
Citizens Common Stock to their broker will have the effect of a non-vote.
Each share of Citizens Common Stock is entitled to one vote on each matter
voted upon at the Citizens Meeting. The persons named as proxies by a
shareholder may propose and vote for one or more adjournments or postponements
of the Citizens Meeting to permit further solicitation of proxies in favor of
such proposal. A shareholder of record may revoke a proxy by filing a written
notice of revocation bearing a later date than the proxy with Thomas W.
Gallagher, Secretary of Citizens (328 South Saginaw Street, Flint, Michigan
48502), by filing a duly executed proxy bearing a later date, or by appearing at
the Citizens Meeting in person, notifying the Secretary, and voting by ballot at
the Citizens Meeting. Any shareholder of record attending the Citizens Meeting
may vote in person whether or not a proxy has been previously given, but the
mere presence (without notifying the Secretary) of a shareholder at the Citizens
Meeting will not constitute revocation of a previously given proxy. In addition,
shareholders whose shares of Citizens Common Stock are not registered in their
own name will need additional documentation from the record holder of such
shares to vote personally at the Citizens Meeting.
In the event that sufficient proxies are not obtained to approve the Share
Issuance, the persons named as proxies in the enclosed form of proxy intend to
propose and vote for one or more adjournments or postponements of the Citizens
Meeting to permit further solicitation of proxies voting in favor of the Share
Issuance. No proxy which is voted against the proposal to approve and adopt the
Share Issuance will be voted in favor of any such adjournment or postponement.
VOTE REQUIRED TO APPROVE THE SHARE ISSUANCE; PRINCIPAL SHAREHOLDERS
The affirmative vote of a majority of the total votes cast by the holders
of shares of Citizens Common Stock is necessary to approve the Share Issuance.
The approval of the Share Issuance pursuant to the terms of the Merger Agreement
by holders of Citizens Common Stock is a condition to the consummation of the
Merger.
As of the Record Date, 14,377,411 shares of Citizens Common Stock were
outstanding and entitled to vote, of which approximately 1,266,841 shares, or
approximately 8.8%, were held by directors and executive officers of Citizens,
its subsidiaries and their respective affiliates. Each such director and
executive officer of Citizens has indicated his or her intention to vote the
Citizens Common Stock beneficially owned by him or her for approval of the Share
Issuance pursuant to the Merger Agreement and the consummation of the
transactions contemplated thereby. As of the Record Date, the banking
subsidiaries of Citizens, as fiduciaries,
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<PAGE> 28
custodians or agents, held a total of 2,338,192 shares, or 16.3%, of the
outstanding shares of Citizens Common Stock under trust agreements and other
instruments and agreements. These entities maintained sole or shared voting
power with respect to 2,274,934 of such shares. In addition, CB's directors and
executive officers as a group beneficially owned 1,000 shares, or less than 1%
of the outstanding shares of Citizens Common Stock, all of which they intend to
vote for approval of the Share Issuance pursuant to the terms of the Merger
Agreement. As of the Record Date, the banking subsidiaries of CB, as
fiduciaries, custodians or agents, held a total of 300 shares, or less than 1%,
of the outstanding shares of Citizens Common Stock under trust agreements and
other instruments and agreements. These entities maintained no voting power with
respect to such shares.
Information with respect to beneficial ownership of Citizens Common Stock
by entities owning more than 5% of such stock and more detailed information with
respect to beneficial ownership of Citizens Common Stock by Citizens directors
and executive officers is incorporated by reference to Citizens' 1996 Annual
Report on Form 10-K which is incorporated herein by reference. See "Information
Incorporated by Reference."
ABSENCE OF APPRAISAL RIGHTS
Under the MBCA, Citizens shareholders will not be entitled to any appraisal
rights in connection with the Share Issuance.
MEETING OF CB SHAREHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
This Joint Proxy Statement-Prospectus is being furnished in connection with
the solicitation of proxies by the CB Board for use at the CB Meeting. The CB
Meeting will be held at The Town Club, One Jackson Square, Jackson, Michigan, at
10:00 a.m., local time, on June 24, 1997.
The CB Meeting will be held for the purpose of considering and voting upon
a proposal to approve and adopt the Merger Agreement and the consummation of the
transactions contemplated thereby. Any action may be taken with respect to the
foregoing at the CB Meeting or at any adjournments or postponements thereof.
Management of CB knows of no matters to be brought before the meeting other
than those referred to herein. If any other business should properly come before
the CB Meeting, the persons named in the proxy will vote in accordance with
their best judgment.
THE CB BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
RECORD DATE
The CB Board has fixed the close of business on May 2, 1997 as the Record
Date. Only the holders of record of the outstanding shares of CB Common Stock on
the Record Date will be entitled to notice of, and to vote at, the CB Meeting.
At the Record Date, 2,801,053 shares of CB Common Stock were outstanding and
entitled to vote. The presence, in person or by proxy, of a majority of the
aggregate number of shares of CB Common Stock outstanding and entitled to vote
on the Record Date is necessary to constitute a quorum at the CB Meeting.
PROXIES; VOTING AND REVOCATION
Shares represented by a properly executed proxy received prior to the vote
at the CB Meeting and not revoked will be voted at the CB Meeting as directed in
the proxy. IF A PROXY IS SUBMITTED AND NO DIRECTIONS ARE GIVEN, THE PROXY WILL
BE VOTED "FOR" APPROVAL AND ADOPTION
18
<PAGE> 29
OF THE MERGER AGREEMENT. CB intends to count shares of CB Common Stock present
in person at the CB Meeting but not voting, and shares of CB Common Stock for
which it has received proxies but with respect to which holders of shares have
abstained, as present at the CB Meeting for purposes of determining the presence
or absence of a quorum for the transaction of business. Since the affirmative
vote of the holders of a majority of the outstanding shares of CB Common Stock
entitled to vote on the Merger is required to approve and adopt the Merger
Agreement and the transactions contemplated thereby, such nonvoting shares and
abstentions will have the effect of a vote "against" the approval of the Merger
Agreement. In addition, brokers who hold shares in street name for customers who
are the beneficial owners of such shares are prohibited from giving a proxy to
vote shares held for such customers on the approval and adoption of the Merger
Agreement without specific instructions from such customers. The failure of such
customers to provide specific instructions with respect to their shares of CB
Common Stock to their broker will have the effect of a vote "against" the
approval of the Merger Agreement.
Each share of CB Common Stock is entitled to one vote on each matter voted
upon at the CB Meeting. The persons named as proxies by a shareholder may
propose and vote for one or more adjournments or postponements of the CB Meeting
to permit further solicitation of proxies in favor of such proposal.
The giving of a proxy does not affect the rights of a holder of CB Common
Stock who attends the CB Meeting to vote at such meeting, since a shareholder
may revoke his or her proxy at any time before it is voted at the CB Meeting. A
shareholder of record may revoke a proxy by filing a written notice of
revocation bearing a later date than the proxy with Karen R. Gamin, Secretary of
CB (One Jackson Square, Jackson, Michigan 48201), by filing a duly executed
proxy bearing a later date, or by appearing at the CB Meeting in person,
notifying the Secretary, and voting by ballot at the CB Meeting. Any shareholder
of record attending the CB Meeting may vote in person whether or not a proxy has
been previously given, but the mere presence (without notifying the Secretary)
of a shareholder at the CB Meeting will not constitute revocation of a
previously given proxy. In addition, shareholders whose shares of CB Common
Stock are not registered in their own name will need additional documentation
from the record holder of such shares to vote personally at the CB Meeting.
In the event that sufficient proxies are not obtained to approve the Merger
Agreement, the persons named as proxies in the enclosed form of proxy intend to
propose and vote for one or more adjournments or postponements of the CB Meeting
to permit further solicitation of proxies voting in favor of the Merger
Agreement. No proxy which is voted against the proposal to approve and adopt the
Merger Agreement will be voted in favor of any such adjournment or postponement.
VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT; PRINCIPAL SHAREHOLDERS
The affirmative vote of the holders of a majority of the shares of CB
Common Stock outstanding and entitled to vote at the CB Meeting is necessary to
approve and adopt the Merger Agreement and the transactions contemplated
thereby. The approval of the Merger Agreement by CB's shareholders is a
condition to the consummation of the Merger.
As of the Record Date, 2,801,053 shares of CB Common Stock were outstanding
and entitled to vote, of which approximately 193,392 shares, or approximately
6.9%, were held by directors and executive officers of CB, its subsidiaries and
their respective affiliates. Each such director and executive officer of CB has
indicated his or her intention to vote the CB Common Stock beneficially owned by
him or her for approval of the Merger Agreement and the consummation of the
transactions contemplated thereby. As of the Record Date, the banking
subsidiaries of CB, as fiduciaries, custodians or agents, held a total of
332,159 shares, or 11.9%, of the outstanding shares of CB Common Stock under
trust agreements and other instruments and agreements. These entities maintained
sole or shared voting power with respect to 86,528 of such shares. As of the
Record Date, the banking subsidiaries of Citizens, as fiduciaries, custodians or
agents, held a total of 210 shares (which shares were beneficially owned by
Citizens), or less than 1%, of the outstanding shares of CB Common Stock under
trust agreements and other instruments and agreements. The Citizens banking
subsidiaries did not maintain sole or shared voting power with respect to such
shares.
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<PAGE> 30
Information with respect to beneficial ownership of CB Common Stock by
entities owning more than 5% of such stock and more detailed information with
respect to beneficial ownership of CB Common Stock by CB directors and executive
officers is incorporated by reference to CB's 1996 Annual Report on Form 10-K
which is incorporated herein by reference. See "Information Incorporated by
Reference."
ABSENCE OF APPRAISAL RIGHTS
Under the MBCA, CB shareholders will not be entitled to any appraisal
rights in connection with the Merger and the transactions contemplated thereby.
THE MERGER
GENERAL
The Boards of Directors of Citizens (with 15 directors present and 1
director absent) and CB (with all directors present) have unanimously approved
the Merger Agreement, which provides for the Merger, at the Effective Time, of
Merger Sub with and into CB, with CB, as the surviving corporation, becoming a
wholly-owned subsidiary of Citizens. With certain limited exceptions described
below, each share of CB Common Stock outstanding at the Effective Time shall be
converted into the right to receive 1.489 shares of Citizens Common Stock.
Shares of Citizens Common Stock issued and outstanding immediately prior to the
Effective Time will remain issued and outstanding after the Merger. See "The
Merger -- Conversion of Shares; Treatment of Options."
The Board of Directors of each of Citizens and CB believes that the Merger
is in the best interests of the parties and their respective shareholders and
unanimously recommends that the shareholders of each of Citizens and CB vote to
approve and adopt the Share Issuance and the Merger Agreement, respectively, and
the consummation of the transactions contemplated thereby and the other
proposals set forth herein.
This section of the Joint Proxy Statement-Prospectus describes certain
aspects of the proposed Merger, including the principal provisions of the Merger
Agreement and the Stock Option Agreement. The Merger Agreement is attached to
this Joint Proxy Statement-Prospectus as Annex A and is incorporated by
reference herein in its entirety. All shareholders of Citizens and CB are urged
to read the Merger Agreement in their entirety.
BACKGROUND OF THE MERGER
The CB Board periodically reviews CB's strategy in light of general
conditions in the banking industry, local competitive and economic conditions,
the results of its operations and its future prospects, legislative changes, and
other developments affecting the banking industry generally and CB specifically.
In June, 1996, the CB Board determined that it would be appropriate to undertake
a detailed review of CB's strategic alternatives. The CB Board concluded that CB
should retain an independent financial advisor to assist it in exploring
alternative means of maximizing shareholder value. Accordingly, in June, 1996,
the CB Board authorized the engagement of AACC as financial advisor.
In August, 1996, AACC presented an analysis to the CB Board encompassing,
among other things, (1) CB's financial condition relative to its peers, (2) CB's
prospects as an independent financial institution under various growth
scenarios, (3) the effect on CB of various alternatives for enhancing
shareholder value, including a stock split or stock dividend, an increase in the
cash dividend, or a share repurchase program, (4) CB's prospects for growth
through acquisitions of other financial institutions, (5) the effect on CB of a
merger of equals, (6) an analysis of prospective merger of equals and
acquisition candidates, (7) an indication as to the reasonable range of values
that could be expected in the event CB were acquired, and (8) an analysis of
prospective acquirors. After consideration by the CB Board of the various
alternatives for enhancing shareholder value presented by AACC, the CB Board
decided to explore further the possibility of a strategic business combination.
20
<PAGE> 31
In September, 1996, the CB Board established a Strategic Planning Committee
(the "Committee") to review strategic options available to CB, including
possible affiliation with another financial institution, and to negotiate and
implement an agreement with AACC for the provision of investment banking and
advisory services to the Committee and the CB Board. On September 24, 1996, CB
and AACC entered into an agreement whereby AACC agreed to provide such services.
On October 4, 1996, AACC presented the Committee with a detailed analysis
of institutions identified by AACC as having the ability to consummate a
transaction with particular emphasis on institutions which were the most likely
to offer CB shareholders the greatest value in an acquisition. The Committee
authorized AACC to explore the interest of certain financial institutions in
engaging in discussions concerning a possible business combination, and in
conjunction therewith to provide appropriate evaluation materials to such
institutions. AACC contacted the institutions during the month of October, 1996
and a representative of AACC contacted John W. Ennest, Vice Chairman, Chief
Financial Officer and Treasurer of Citizens. Confidentiality agreements were
entered into with and evaluation materials were sent to the various financial
institutions, including Citizens in October and early November of 1996. After
receiving the evaluation materials and meeting with Mr. Bell and a
representative of AACC, and after conducting an initial analysis of CB, Citizens
submitted a non-binding expression of interest to AACC.
On December 4, 1996, the Committee met to consider the responses received
to the inquiries made to various organizations concerning their interests in
exploring a possible business combination with CB. Of the financial institutions
receiving the evaluation materials, three financial institutions, including
Citizens, expressed an interest in a possible business combination. AACC then
summarized terms of each institution's expression of interest. Following AACC's
presentation on the terms of each financial institution's expression of
interest, a discussion took place concerning the strategic planning alternatives
available to CB. The Committee determined that further discussions with Citizens
and with the other two interested parties were in order.
A representative of AACC contacted Thomas W. Gallagher, Senior Vice
President, General Counsel and Secretary of Citizens, and notified him that
Citizens would be invited to conduct preliminary offsite due diligence with
respect to CB. The representative of AACC explained to Mr. Gallagher that it
would be CB's desire that Citizens focus upon "valuation issues" during the
preliminary due diligence so that subsequent to the due diligence, Citizens
could be in a position to come forward with a "final and best" expression of
interest concerning an acquisition of CB at such time. Citizens then reviewed
the acquisition opportunity with the Executive Committee of the Citizens Board
in mid-December of 1996 and based upon that committee's concurrence thereafter
conducted such preliminary due diligence with respect to CB. The preliminary due
diligence consisted principally of document review and a further meeting between
Messrs. Ennest and Gallagher on behalf of Citizens and Messrs. Bell and a
representative of AACC on behalf of CB. Citizens then submitted a revised
expression of interest at the beginning of January, 1997, setting forth, among
other things, the "best price" Citizens believed it could pay in a business
combination transaction with CB. Such expression of interest outlined a tax-free
share exchange qualifying as a pooling of interests.
On January 7, 1997, the Committee met to consider the results of AACC's
follow-up communications with Citizens and the other two interested parties.
AACC indicated that the other two interested parties were unwilling to modify
their expressions of interest, but that Citizen's had favorably revised its
expression of interest. Following a lengthy discussion concerning the revised
expression of interest by Citizens and other issues associated therewith, the
Committee concluded that it would be in the best interest of CB and its
shareholders to engage in further discussions concerning a possible business
combination with Citizens. The Committee also authorized representatives of CB
to conduct appropriate due diligence on the financial condition of Citizens.
Following the January 7, 1997 meeting, representatives of CB, AACC and CB's
legal counsel and accountants conducted a detailed due diligence investigation
of Citizens. On January 23, 1997, a meeting of the Committee was held at which
the status of discussions with Citizens and the results of due diligence
conducted with respect to Citizens were reviewed. AACC and CB's legal counsel
conducted a detailed
21
<PAGE> 32
presentation concerning the terms of Citizens' expression of interest and
discussed terms of an agreement and plan of merger received by CB from Citizens
and answered questions concerning the terms of the proposal.
The CB Board then met to receive the report and recommendations of the
Committee. The Committee conducted a detailed presentation concerning the
Committee's activities and the status of discussions with Citizens. AACC and
CB's legal counsel presented information concerning the results of the due
diligence investigation of Citizens and reviewed in detail the terms of the
proposed expression of interest received from Citizens. After a lengthy
discussion concerning the terms of Citizens' expression of interest and its
relationship to the long term strategic plan of CB, the CB Board authorized its
representatives to engage in negotiations on behalf of CB with Citizens
concerning the terms of a proposed business combination agreement.
Between January 23, 1997, and January 27, 1997, representatives of CB and
of Citizens engaged in extensive negotiations concerning terms of an agreement
and plan of merger. On January 27, 1997, the Committee met to consider the
proposed Merger Agreement. AACC presented detailed information concerning the
financial terms of the proposed Merger. CB's legal counsel conducted a
presentation concerning terms of the proposed Merger Agreement. AACC advised the
Committee that AACC was prepared to issue an opinion that the consideration to
be received by the shareholders of CB in the proposed Merger is fair, from a
financial point of view. After discussion, the Committee resolved to recommend
to the CB Board that it approve the proposed Merger Agreement and the
transactions contemplated thereby and that the CB Board unanimously recommend a
vote for approval of the proposed transactions by CB's shareholders. Following
the meeting of the Committee, the CB Board met to consider the terms of the
proposed Merger Agreement and the Committee's report with respect thereto. The
Committee then made its report to the CB Board concerning the Committee's review
and analysis of the proposal and its recommendation with respect thereto. AACC
then delivered its written opinion to the CB Board dated January 27, 1997, that,
based upon and subject to the considerations set forth in its opinion, the
consideration to be received by the shareholders of CB in the proposed Merger is
fair, from a financial point of view. CB's legal counsel then provided an
overview of the proposed Merger and discussed in detail the terms of the
proposed Merger Agreement. After a discussion including questions and answers
concerning the terms of the proposed Merger Agreement and certain procedural
aspects of the proposed Merger, the CB Board unanimously approved the Merger
Agreement.
On January 27, 1997, a special meeting of the Citizens Board was held. The
Executive Committee of the Citizens Board reported on their review and analysis
of the proposed transaction and their recommendation with respect thereto. Mr.
Gallagher then provided an overview of the proposed Merger and discussed the
terms of the proposed Merger Agreement. After discussion and analysis by the
Citizens Board, including questions and answers concerning the proposed Merger
and Merger Agreement, the Citizens Board unanimously approved the Merger
Agreement and the transactions contemplated thereby.
Citizens, CB and Merger Sub subsequently executed and delivered the Merger
Agreement and, on January 28, 1997, Citizens and CB issued a joint press release
announcing the execution of the Merger Agreement.
RECOMMENDATION OF THE CITIZENS BOARD AND REASONS FOR THE MERGER
THE CITIZENS BOARD BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF
CITIZENS AND ITS SHAREHOLDERS. THE CITIZENS BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE APPROVAL OF THE SHARE ISSUANCE PURSUANT TO THE
MERGER AGREEMENT AND THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED THEREBY.
In reaching its conclusion to approve the Merger Agreement and the Stock
Option Agreement, the Citizens Board consulted with Citizens management, as well
as with its financial and legal advisors, and considered a number of factors,
including the following:
(i) the shared emphasis of Citizens and CB on community banking and
the resulting complimentary business lines of Citizens and CB;
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<PAGE> 33
(ii) the results of Citizens due diligence and pro forma analysis,
which indicate that the combined entity would continue to have high asset
quality, solid core funding and a strong capital base;
(iii) the analysis of Citizens' management, which indicated
significant opportunities for economies of scale in the transaction and the
fact that management identified several areas that presented significant
opportunities for cost savings in the combined entity;
(iv) the fact that the acquisition of CB provides Citizens with
enhanced access to west Michigan markets, providing more flexibility for
future growth and acquisitions;
(v) the beneficial effect of the larger combined entity on stock
trading volume and volatility and access to the debt and capital markets
and the fact that these factors taken together would position the combined
entity for higher valuation in the financial markets;
(vi) the increased presence of the combined entity on a state-wide
basis with major market shares in key geographic regions;
(vii) the similarity in the markets served by Citizens and CB; and
(viii) the fact that the demographic similarities, coupled with the
geographic fit of Citizens and CB, present a great opportunity for Citizens
to strengthen its franchise recognition and marketing power.
The Citizens Board also reviewed certain potential disadvantages in
connection with its approval of the Merger Agreement and related transactions
including the projected earnings dilution for the first full year following
consummation of the Merger, certain credit quality issues present in the
indirect lending portfolios at CB's St. Johns and Charlevoix Banks and the fact
that operating performance at the Charlevoix Bank has not been achieved to the
level necessary to offset the goodwill that was incurred when CB acquired the
bank. Such potential disadvantages were taken into account by the Citizens Board
in determining the final consideration for the transaction and the Citizens
Board also concluded that any such identified disadvantages were outweighed by
the material benefits described above.
The foregoing discussion of the information and factors considered by the
Citizens Board is not intended to be exhaustive but is believed to include all
material factors considered by the Citizens Board. In reaching its determination
to approve and recommend the Merger, the Citizens Board did not assign any
relative or specific weights to the foregoing factors, and individual directors
may have given differing weights to different factors. After deliberating with
respect to the Merger and the other transactions contemplated by the Merger
Agreement, considering, among other things, the matters discussed above, the
Citizens Board unanimously (with 15 directors present and 1 director absent)
approved and adopted the Merger Agreement and the transactions contemplated
thereby, including the Stock Option Agreement, as being in the best interests of
Citizens and its shareholders. On March 20, 1997, the Citizens Board received
the opinion of Roney that, as of March 20, 1997, the consideration to be paid by
Citizens pursuant to the terms of the Merger Agreement was fair to the holders
of Citizens Common Stock from a financial point of view. See "The Merger --
Fairness Opinions of Financial Advisors -- Citizens." The Citizens Board is
unanimous in its recommendation that holders of Citizens Common Stock vote "FOR"
approval and adoption of the Share Issuance pursuant to the Merger Agreement.
RECOMMENDATION OF THE CB BOARD AND REASONS FOR THE MERGER
THE CB BOARD BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF CB AND
ITS SHAREHOLDERS. THE CB BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER.
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In reaching its conclusion to approve the Merger Agreement and the Stock
Option Agreement, the CB Board consulted with CB management, as well as with its
financial and legal advisors, and considered the following factors:
(i) the lag in CB's financial performance relative to its peers;
(ii) CB's challenging prospects for increasing shareholder value as an
independent financial institution;
(iii) CB's various other alternatives for enhancing shareholder value,
including a stock split or stock dividend, an increase in the cash
dividend, or a share repurchase program, none of which were found to equal
the benefits offered by pursuing affiliation with another financial
institution;
(iv) CB's limited prospects for growth by acquisition itself, and the
dilution of shareholder value that would likely accompany such growth;
(v) the dilutive effect of a merger of equals on book value and the
substantial risks in achieving future value enhancement through such a
merger;
(vi) the significant benefits to CB and its shareholders of a business
combination with Citizens, including, among others, the immediate premium
to be received by CB shareholders;
(vii) the similarity of the community banking philosophies of Citizens
and CB, which are expected to ease integration of the two companies'
operations;
(viii) the enhanced marketing ability of the combined organization
resulting from its greater resources and larger customer base;
(ix) the technological superiority of Citizens relative to CB,
especially in light of the cost of necessary data processing system
upgrades CB would otherwise be required to make;
(x) the enhanced value to CB shareholders that the Merger Agreement
offers over the value projected by CB's long term strategic plan; and
(xi) the financial superiority of the transaction proposed by Citizens
in comparison to the expressions of interest made by other institutions.
The foregoing discussion of the information and factors considered by the
CB Board is not intended to be exhaustive, but is believed to include all
material factors considered by the CB Board. In reaching its determination to
approve and recommend the Merger, the CB Board did not assign any relative or
specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors.
The CB Board identified and considered certain risks inherent in the Merger
Agreement that, if borne out, could, to some extent, offset the benefits and
advantages of the Merger Agreement described above. Primary among these risks
were (1) a possible future decline in the market price of the Citizens Common
Stock to be received by CB shareholders in the Merger; and (2) the possibility
that CB's restructuring during 1995 and 1996 could have produced future
operating results that could have increased the acquisition price for CB in the
future. The CB Board concluded, however, that these risks were typical of
transactions such as the Merger and that they were far outweighed by the
benefits and advantages of the Merger Agreement described above.
After deliberating with respect to the Merger and other transactions
contemplated by the Merger Agreement, considering, among other things, the
matters discussed above and the opinion of AACC, the CB Board unanimously (with
all of the directors present) approved and adopted the Merger Agreement and the
transactions contemplated thereby, including the Stock Option Agreement, as
being in the best interest of CB and its shareholders. The CB Board is unanimous
in its recommendation that holders of CB stock vote "FOR" approval and adoption
of the Merger Agreement and the consummation of the transactions contemplated
thereby, including the Merger.
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FAIRNESS OPINIONS OF FINANCIAL ADVISORS
Opinion of Financial Advisor to Citizens. Pursuant to an engagement letter
dated February 19, 1997 (the "Engagement Letter") between Citizens and Roney,
Citizens retained Roney to render an opinion with respect to the fairness from a
financial point of view to the shareholders of Citizens of the consideration to
be paid, as determined by the Citizens Board, by Citizens in the Merger.
Roney is a regional investment banking firm of recognized standing. As part
of its investment banking services, it is regularly engaged in the valuation of
banks, savings banks and other corporate entities in connection with public
offerings, mergers and acquisition transactions. Its research analysts publish
regular reports on individual banks, savings and loan associations as well as
other financial institutions. Roney makes principal markets in various financial
institution stocks, and has managed public offerings for banks and thrifts as
well as other financial institutions. The Citizens Board selected Roney based in
part on the recommendation of management after presentations by and interviews
with several qualified investment banking firms. Roney was chosen on the basis
of its familiarity with the financial services industry generally and in the
relevant area, and its qualifications, ability, previous experience, and
reputation. No limitations were imposed by Citizens on Roney with respect to the
investigations made or procedures followed by Roney in rendering its opinion.
Roney has rendered a written opinion to the Citizens Board dated March 20,
1997 to the effect that the consideration as proposed under the Merger Agreement
is fair, from a financial point of view, to the shareholders of Citizens. The
consideration as proposed under the Merger Agreement was determined through
negotiation between Citizens and CB. Roney did not recommend the amount of
consideration to be paid.
In arriving at its opinion, Roney has, among other things:
(i) reviewed the Annual Reports on Form 10-K and related financial
information for the fiscal years ended 1993 to 1995 and unaudited summary
results of operations for the three months and year ended December 31, 1996
of both Citizens and CB;
(ii) reviewed the historical stock price and trading activity for the
common stock for both Citizens and CB and compared them with those of
certain publicly traded companies which it deemed to be relevant;
(iii) reviewed the Merger Agreement;
(iv) compared certain financial characteristics of Citizens and CB
with other Michigan and Midwestern financial institutions it deemed to be
relevant;
(v) compared the proposed terms contemplated in the Merger Agreement
with the financial terms, to the extent publicly available, of certain
other mergers and acquisitions in the financial services industry which it
deemed to be relevant;
(vi) conducted limited discussions with members of senior management
of Citizens and CB concerning their respective business and prospects and
the benefits of the Merger Agreement;
(vii) considered, based on information provided to them (including
financial forecasts) by Citizens' senior management, the pro forma effects
of the Merger Agreement on Citizens' future earnings;
(viii) reviewed such other financial data and performed such other
analysis and took into account such other matters as it deemed appropriate.
The full text of Roney's written opinion to the Citizens Board, dated March
20, 1997, which sets forth the assumptions made, matters considered and
limitations of review by Roney, is attached hereto as Annex B and is
incorporated herein by reference and should be read carefully and in its
entirety in connection with this Joint Proxy Statement-Prospectus. Roney's
opinion addresses the consideration to be paid pursuant to the Merger Agreement,
but does not constitute a recommendation to any Citizens shareholder as to how
such shareholders should vote at the Citizens Meeting.
In preparing its opinion Roney assumed and relied upon the accuracy and
completeness of all financial and other information supplied or otherwise made
available to it for purposes of its opinion and Roney did not
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assume any responsibility for independently verifying such information or
undertaking an independent evaluation or appraisal of the assets or liabilities
of Citizens or CB, nor was it furnished any such evaluation or appraisal. Roney
also assumed and relied upon the senior management of Citizens as to the
reasonableness and achievability of the financial and operating forecasts (and
the assumptions and bases therefore) provided to Roney. In that regard, Roney
assumed, with Citizens' consent, that such forecasts, including, without
limitation, financial forecasts and projections regarding the amount and timing
of cost savings that could result after the Merger is consummated,
underperforming and nonperforming assets, net charge-offs and adequacy of
reserves, reflect the best currently available estimates and judgments of
management as to the future financial performance of Citizens and CB. Roney is
not an expert in the evaluation of allowances for loan losses, and it did not
make an independent evaluation of the adequacy of the allowance for loan losses
of Citizens or CB nor did it review any individual credit files and it assumed
that the aggregate allowance for loan losses of Citizens or CB is adequate to
cover such losses. Roney's opinion was necessarily based on economic, market and
other conditions as in effect on, and the information made available to it as
of, the date of its opinion.
In connection with rendering its opinion on March 20, 1997, Roney performed
a variety of financial analyses, including those summarized below. The summary
set forth below, which has been provided by Roney, does not purport to be a
complete description of the analyses performed by Roney in this regard. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to a partial analysis or summary description.
Accordingly, notwithstanding the separate factors summarized below, Roney
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors considered by it, without considering all
analyses and factors, or attempting to ascribe relative weights to some or all
such analyses and factors, could create an incomplete view of the evaluation
process underlying Roney's opinion.
In its analyses, Roney made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of Citizens and CB. Any estimates contained in Roney's
analyses are not necessarily indicative of future results or value, which may be
significantly more or less favorable than such estimates. The estimated values
of both Citizens and CB do not purport to be appraisals or necessarily reflect
the price at which companies or their securities actually may be sold. No
company or transaction utilized in Roney's analyses was identical to Citizens or
CB or the Merger Agreement. Accordingly, such analyses are not based solely on
arithmetic calculations; rather, they involve complex considerations and
judgments concerning differences in financial and operating characteristics of
the relevant companies, the timing of the relevant transactions and prospective
buyer interests, as well as other factors that could affect the public trading
markets of Citizens or companies to which they are being compared. None of the
analyses performed by Roney was assigned a greater significance than any other.
The following is a summary of the material terms of the analyses presented
by Roney to the Citizens Board on March 20, 1997 in connection with its fairness
opinion.
Summary of Proposal. Roney reviewed the terms of the proposed transaction,
including the consideration to be paid by Citizens pursuant to the Merger
Agreement and the aggregate transaction value. Based on an assumed transaction
value per CB share of $49.13, Roney calculated the price to book, price to
tangible book and price to earnings multiples for CB, in the contemplated
transaction. This analysis yielded a price to book value multiple of 1.79x, a
price to tangible book value multiple of 2.02x, and a price to earnings multiple
of 27.5x. Roney advised the Citizens Board that the price to earnings multiple
was impacted by the inclusion of non-recurring extraordinary charges for the
twelve months ended December 31, 1996.
Analysis of Selected Comparable Companies. Roney compared selected
financial ratios for CB to the corresponding ratios for a peer group of
comparable Michigan banks and a peer group of comparable Midwest banks. Each of
these banks had total assets between approximately $400 million and $1.7 billion
as of September 30, 1996. The comparable Michigan banks peer group consisted of
Capital Bancorp, Ltd.; Chemical Financial Corporation; Franklin Bank, N.A.;
Independent Bank Corporation; Michigan Financial Corporation; Pinnacle Financial
Services; Republic Bancorp, Incorporated; and Shoreline Financial Corporation.
This analysis showed that the average price to book value for the comparable
Michigan banks was 1.81x
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as of September 30, 1996, the average price to tangible book value was 1.97x as
of September 30, 1996 and the average price to last twelve months earnings as of
September 30, 1996 was 15.0x.
The comparable Midwest banks peer group consisted of Ambanc Corp.; ANB
Corporation; Citizens Bancshares, Inc.; CoBancorp, Inc.; F&M Bancorporation,
Inc.; First Financial Corporation; First-Knox Banc Corp.; First Merchants
Corporation; First Oak Brook Bancshares, Inc.; Heritage Financial Services,
Inc.; Irwin Financial Corporation; Merchants Bancorp, Inc.; National City
Bancshares; Old Second Bancorp, Inc.; Park National Corporation; Peoples
Bancorp, Inc.; Peoples Bank Corporation of Indianapolis; Pinnacle Banc Group,
Inc.; and Second Bancorp, Incorporated. This analysis showed that the average
price to book value for the group was 1.87x as of September 30, 1996, the
average price to tangible book value was 2.01x as of September 30, 1996 and the
average price to last twelve months earnings as of September 30, 1996 was 15.1x.
Analysis of Recent Michigan Bank Mergers and Acquisitions. Roney analyzed
certain other bank merger and acquisition transactions involving a sample of 23
transactions within the State of Michigan between January 1993 and March 1997.
The buyers/sellers were: Shoreline Financial Corporation/SJS Bancorp; First
Financial Bancorp, Inc./Hastings Financial Corporation; Old Kent Financial
Corporation/Seaway Financial Corporation; Independent Bank Corporation/North
Bank Corporation; First Michigan Bank Corporation/Arcadia Financial Corporation;
Valley Ridge Financial Corp./Community Bank Corporation; Chemical Financial
Corporation/State Savings Bancorp, Inc.; First Chicago Corporation/NBD Bancorp,
Inc.; Independent Bank Corporation/Thumb National B&T Co.; Citizens Banking
Corporation/four Banc One Banks; First Michigan Bank Corporation/Superior
Financial Corporation; Old Kent Financial Corporation/First National Bank
Corporation; Mid Am Inc./ASB Bankcorp, Inc; Keweenaw Financial Corporation/CNB
of L'anse; First Michigan Bank Corporation/Old State Bank Corporation; Capital
Bancorp Ltd./Financial Center Corp.; Independent Bank Corporation/KSB Financial;
Michigan Financial Corporation/Houghton Financial Inc.; First Manistique
Corporation/Bank of Stephenson; Chemical Financial Corporation/Key State Bank;
Independent Bank Corporation/Pioneer Bank; Independent Bank Corporation/American
Home Bank; and Citizens Banking Corporation/Royal Bank Group, Inc. For the
compared transactions, the purchase price to last twelve months earnings ranged
from a low of 9.13x to a high of 38.59x with a median of 16.03x and an average
of 17.84x; the purchase price to book value ranged from a low of 1.12x to a high
of 2.76x with a median of 1.71x and an average of 1.70x; the purchase price to
tangible book value ranged from a low of 1.12x to a high of 2.76x with a median
of 1.71x and an average of 1.72x.
Analysis of Recent Midwest Bank Mergers and Acquisitions. Roney analyzed
certain other bank merger and acquisition transactions involving a sample of 15
transactions within the Midwest between January 1993 and March 1997 in which the
selling banks had total assets between approximately $300 million and $1.8
billion. The buyers/sellers were: Park National Corporation/First-Knox Banc
Corporation; ABN-AMRO Holding N.A./CNBC Bancorp, Inc.; Taylor Investment
Group/Cole Taylor Bank; Old Kent Financial Corporation/Seaway Financial
Corporation; Mercantile Bancorporation, Inc./Today's Bancorp, Inc.; ABN-AMRO
Holding N.A./Comerica Bank-IL; Northern Illinois Bancorp, Inc./Premier Financial
Services; Fort Wayne National Corporation/Valley Financial Services; Commerce
Bancshares, Inc./Peoples Mid-Illinois; Citizens Banking Corporation/four Banc
One Banks; Old Kent Financial Corporation/First National Bank Corporation;
Keycorp/First Citizens Bancorp; First of America Bank Corporation/First Park
Ridge Corporation; Firstar Corporation/First Southeast Banking; and Old Kent
Financial Corporation/EdgeMark Financial. For the compared transactions, the
purchase price to last twelve months earnings ranged from a low of 12.99x to a
high of 17.90x with a median of 16.64x and an average of 15.66x; the purchase
price to book value ranged from a low of 1.20x to a high of 2.33x with a median
of 1.92x and an average of 1.90x; the purchase price to tangible book value
ranged from a low of 1.37x to a high of 4.09x with a median of 2.04x and an
average of 2.19x.
Discounted Cash Flow Analysis. Roney prepared a discounted cash flow
analysis which estimated the future after-tax cash flows ("dividendable net
income") that CB might produce over the period from January 1, 1997 through
December 31, 2001. These cash flows were then discounted to a present value
using different discount rates (ranging from 13% to 15%) chosen to reflect
different required rates of return of holders or prospective buyers of CB Common
Stock. Roney also estimated the terminal value of CB by applying a price to
earnings multiple to 2001 net income and a price to book value multiple to 2001
book
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value. The multiples were chosen based on past and current trading multiples of
CB and comparable institutions and past and current multiples of comparable
merger and acquisition transactions. The discounted cash flow analysis indicated
a reference range of between $46.97 and $51.03 per share for CB Common Stock.
The analysis was based upon Citizens' senior management's projections of CB's
future performance, which were based upon many factors and assumptions including
cost savings expected as a result of the acquisition of CB by Citizens, many of
which were beyond the control of Citizens. This analysis did not purport to be
indicative of actual values or actual future results and did not purport to
reflect the prices at which any securities may trade at the present or at any
time in the future. Roney included this analysis because it is a widely used
valuation methodology, but noted that the results of such methodology are highly
dependent upon the numerous assumptions that must be made, including earnings
growth rates, dividend payout rates, terminal values and discount rates.
Pursuant to the terms of an engagement letter dated February 19, 1997,
Citizens agreed to pay Roney a fee of $50,000 in connection with the delivery of
the written opinion. Citizens has also agreed to reimburse Roney for certain of
its out-of-pocket expenses (including expenses of legal counsel) incurred in
connection with its engagement, and to indemnify Roney and certain related
persons against certain liabilities in connection with its engagement. The terms
of the fee arrangement with Roney were negotiated at arm's length between
Citizens and Roney.
Opinion of Financial Advisor to CB. On September 24, 1996, the CB Board
entered into an agreement with AACC pursuant to which AACC agreed to provide
financial advisory and investment banking services to CB and the CB Board in
connection with the possible sale of CB. As part of AACC's engagement, AACC
agreed, if requested by the CB Board, to render an opinion as to the fairness,
from a financial point of view, of the consideration to be received by the
shareholders of CB in connection with any such sale.
AACC delivered a written opinion to the CB Board dated January 27, 1997,
that, based upon and subject to the considerations set forth in its opinion, the
consideration to be received by the shareholders of CB in the Merger is fair,
from a financial point of view (the "Opinion"). AACC has also delivered an
updated Opinion to the CB Board dated as of the date of this Joint Proxy
Statement -- Prospectus. The updated Opinion is based upon a review of the
financial and other information reviewed by AACC in rendering its opinion of
January 27, 1997, along with a review of the information set forth in this Joint
Proxy Statement -- Prospectus and the financial results for CB and Citizens
since January 27, 1997. The full text of the Opinion, which sets forth
assumptions made, matters considered, and limitations on the review undertaken,
is attached as Annex C to this Joint Proxy Statement -- Prospectus. The CB
shareholders are urged to read the Opinion in its entirety.
During the course of its engagement, and as a basis for arriving at the
Opinion, AACC reviewed and analyzed material bearing upon the financial and
operating condition of CB and Citizens and material prepared in connection with
the Merger, including, among other things, the following: (i) the Merger
Agreement and related documents; (ii) certain publicly-available information
concerning CB and Citizens, including financial statements and reports of
condition and income for each of the three fiscal years ended December 31, 1995,
1994, and 1993 and the interim periods ended September 30, 1996; (iii) the
operating characteristics of certain other financial institutions deemed
relevant to the contemplated Merger; (iv) the nature and terms of recent sale
and merger transactions involving banks and bank holding companies and the other
financial institutions that AACC considered relevant; and (v) historical and
current market data for CB Common Stock and Citizens Common Stock and financial
and other information provided to AACC by management of CB and Citizens. In
addition, AACC conducted meetings with members of senior management of CB and
Citizens for the purpose of reviewing the future prospects of CB and Citizens.
AACC evaluated the pro forma ownership of Citizens Common Stock by CB
shareholders, relative to the pro forma contribution of the assets, liabilities,
equity, and earnings of CB to the pro forma company. AACC also took into account
its experience in other transactions, as well as its knowledge of the banking
industry and its general experience in securities valuation.
In preparing the Opinion, AACC assumed and relied upon the accuracy and
completeness of all financial and other information reviewed by it for purposes
of the Opinion, and did not independently verify such
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information or undertake an independent evaluation or appraisal of the assets or
liabilities of CB or Citizens, nor was it furnished with any such evaluation or
appraisal. AACC is not an expert in the evaluation of allowances for loan losses
and has not made an independent evaluation of the adequacy of the allowance for
loan losses of CB or Citizens; it assumed that the aggregate allowances for loan
losses is adequate to cover such losses. AACC assumed and relied upon the senior
management of each of CB and Citizens as to the reasonableness and achievability
of the financial and operating forecasts and the assumptions utilized by AACC in
its analyses. The Opinion is necessarily based on economic, market, and other
conditions as in effect on, and the information made available to AACC as of the
date of this Joint Proxy Statement -- Prospectus.
THE OPINION IS DIRECTED ONLY TO THE FINANCIAL CONSIDERATION TO BE PAID TO
THE CB SHAREHOLDERS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY CB
SHAREHOLDER AS TO HOW EACH SHAREHOLDER SHOULD VOTE AT THE CB SPECIAL MEETING OR
AS TO THE ADVISABILITY OF RETAINING OR DISPOSING OF SHARES OF CITIZENS COMMON
STOCK RECEIVED PURSUANT TO THE MERGER.
Comparable Company Analysis. AACC compared financial ratios for the twelve
months ended September 30, 1996 and trading multiples as of January 22, 1997 of
CB to those of selected comparable companies which AACC deemed to be reasonably
similar to CB in size, financial and operating character, and/or geographic
market. The comparable companies, which consist of selected publicly-traded
commercial bank holding companies headquartered in the Midwest with total assets
ranging from $500 million to $1.0 billion, included: Ambanc Corporation,
Vincennes, IN; Beverly Bancorporation, Inc., Chicago, IL; CBT Corporation,
Paducah, KY; Cardinal Bancshares, Inc., Lexington, KY; Citizens Bancshares,
Salineville, OH; CoBancorp, Inc., Elyria, OH; Farmers Capital Bank Corporation,
Frankfort, KY; First Merchants Corporation, Muncie, IN; First Oak Brook
Bancshares, Inc., Oak Brook, IL; Independent Bank Corporation, Ionia, MI;
Merchants Bancorp, Inc., Aurora, IL; Michigan Financial Corporation, Marquette,
MI; National City Bancorporation, Minneapolis, MN; Old Second Bancorp, Inc.,
Aurora, IL; Peoples Bancorp, Inc., Marietta, OH; Second Bancorp, Inc., Warren,
OH; Shoreline Financial Corporation, Benton Harbor, MI, and Southside Bancshares
Corporation, St. Louis, MO.
The analysis indicated that, as of January 22, 1997, CB Common Stock sold
at price of: (i) 22.38x trailing twelve months earnings per share, or EPS,
through September 30, 1996, compared to a median of 13.02x and an average of
13.26x for the comparable companies; (ii) 15.83x estimated 1997 EPS, compared to
a median of 12.69x and an average of 12.91x for the comparable companies; (iii)
1.55x September 30, 1996 book value, compared to a median of 1.57x and an
average of 1.62x for the comparable companies; (iv) 1.77x September 30, 1996
tangible book value, compared to a median of 1.68x and an average of 1.73x for
the comparable companies.
AACC also compared financial ratios for the twelve months ended December
31, 1996 and trading multiples as of January 22, 1997, of Citizens to those of
selected comparable companies which AACC deemed to be reasonably similar to
Citizens in size, financial and operating character, and/or geographic market.
The comparable companies, which consist of selected publicly-traded commercial
bank holding companies headquartered in the Midwest with total assets ranging
from $2.0 billion to $20.0 billion, included: AMCORE Financial, Inc., Rockford,
IL; Associated Banc-Corporation, Green Bay, WI; CNB Bancshares, Inc.,
Evansville, IN; Commerce Bancshares, Inc., Kansas City, MO; Community First
Bankshares, Inc., Fargo, ND; Corus Bankshares, Inc., Chicago, IL; First
Financial Bancorporation, Inc., Hamilton, OH; First Michigan Bank Corporation,
Holland, MI; First Midwest Bancorp, Inc., Itasca, IL; Firstar Corporation,
Milwaukee, WI; FirstMerit Corporation, Akron, OH; Fort Wayne National
Corporation, Fort Wayne, IN; Magna Group, Inc., St. Louis, MO; Marshall & Ilsley
Corporation, Milwaukee, WI; Mercantile Bancorporation, Inc., St. Louis, MO; Mid
Am, Inc., Bowling Green, OH; Old Kent Financial Corporation, Grand Rapids, MI;
Old National Bancorp, Evansville, IN; Provident Bancorp, Inc., Cincinnati, OH;
Star Banc Corporation, Cincinnati, OH, and UMB Financial Corporation, Kansas
City, MO.
The analysis indicated that, as of January 22, 1997, Citizens Common Stock
sold at price of: (i) 12.11x trailing twelve months EPS through December 31,
1996, compared to a median of 16.90x and an average of 15.96x for the comparable
companies; (ii) 11.23x estimated 1997 EPS, compared to a median of 12.98x and an
average of 13.41x for the comparable companies; (iii) 1.41x December 31, 1996
book value, compared to a
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median of 2.15x and an average of 2.21x for the comparable companies; (iv) 1.77x
December 31, 1996 tangible book value, compared to a median of 2.25x and an
average of 2.28x for the comparable companies.
Comparable Transaction Analysis. AACC reviewed comparable merger and
acquisition transactions based on publicly-available data for selected mergers
and acquisitions of commercial banks and bank holding companies in which the
acquired company was headquartered in the Midwest and had total assets ranging
from $500 million to $1.0 billion. The twelve comparable transactions included
(the acquiror is the first name and is in italics followed by the seller): Park
National Corporation, First Knox Banc Corporation; Mercantile Bancorporation
Inc., Today's Bancorp, Inc.; ABN AMRO Holding N.A., CNBC Bancorp, Inc.; Fort
Wayne National Corporation, Valley Financial Services; Union Planters
Corporation, Capital Bancorporation; Mercantile Bancorporation Inc., Central
Mortgage Bancshares, Inc.; Commerce Bancshares, Inc., Union Bancshares; Citizens
Banking Corporation, four Banc One Banks; Old Kent Financial Corporation, First
National Bankcorp; Old Kent Financial, EdgeMark Financial Corporation; Banc One
Corporation, First Community Bancorp; Mercantile Bancorporation Inc.,
MidAmerican Corporation.
For the comparable transactions, the offer value to last twelve months EPS
ranged from a low of 13.0x to a high of 17.7x with a median of 15.8x and an
average of 15.8x; the offer value to book value ranged from a low of 1.57x to a
high of 2.33x with a median of 1.92x and an average of 1.93x; the offer value to
tangible book value ranged from a low of 1.80x to a high of 4.09x with a median
of 2.09x and an average of 2.24x. The implied value of the consideration to be
received in the Merger (the "Merger Consideration") represented a multiple of
24.2x CB's trailing twelve months EPS through September 30, 1996, including
reorganization charges, or 16.7x normalized trailing twelve months EPS; the
value of the Merger Consideration to CB's September 30, 1996 book value
represented a multiple of 1.68x; the value of the Merger Consideration to CB's
September 30, 1996 tangible book value represented a multiple of 1.91x.
Contribution Analysis. AACC prepared a contribution analysis displaying the
percentages of assets, deposits, loans, total equity, tangible equity, 1995 net
income, estimated 1996 net income, estimated 1997 net income, and current market
value contributed to the combined company on a pro forma basis by both CB and
Citizens. This analysis showed that CB, at September 30, 1996, would contribute
18.44% of pro forma consolidated total assets, 19.27% of deposits, 18.05% of
gross loans, 19.88% of total equity, 22.07% of tangible equity, 12.08% of 1995
net income, 16.01% of estimated 1996 net income, 17.19% of estimated 1997 net
income, and 21.22% of current market value. Based on the Exchange Ratio as
indicated in the Merger Agreement, CB shareholders would own 22.55% of the new
company.
Net Present Value Analysis. AACC prepared a net present value analysis
which estimated future cash flows that CB might produce over the period from
January 1, 1997 through December 31, 2000. These cash flows were then discounted
to a present value. AACC also estimated the terminal value of CB common equity
at December 31, 2000 by applying a range of multiples to projected calendar year
2000 earnings. The range of terminal multiples was chosen based on past and
current trading multiples of CB and comparable institutions and past and current
multiples of comparable merger and acquisition transactions. The results of
these analyses indicated a range of theoretical values per share of CB between
$27.31 and $37.37. The market value of Merger Consideration was $129.5 million,
or $45.97 per share of CB Common Stock, based on the January 22, 1997 closing
price of Citizens Common Stock of $30.88 per share.
Comparative Shareholder Return. AACC analyzed the theoretical returns to a
CB shareholder through a number of scenarios. The scenarios evaluated included:
(i) CB remaining independent; (ii) CB being acquired in 2000; (iii) CB being
acquired by Citizens in the proposed transaction; and (iv) CB being acquired by
Citizens in the proposed transaction with the merged company then being acquired
in 2000. The analysis indicated a compound annual return to shareholders of
approximately 22% per annum for scenarios (iii) and (iv) above, assuming the
Merger, versus a range of approximately 6% to 11% under the other two scenarios.
The summary of AACC analyses set forth above is a fair summary thereof, but
does not purport to be a complete description of the presentations by AACC to
the CB Board. AACC believes that its analyses and the summary set forth above
must be considered as a whole and that selecting portions of the analyses,
without considering all factors, could create an incomplete view of the process
by which a fairness opinion is rendered. In connection with its analyses, AACC
assumed that there would not be any material adverse change in
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general economic, business, market, and/or regulatory conditions, all of which
are beyond the control of CB and Citizens. The analyses performed by AACC are
not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
The CB Board retained AACC based upon its experience and expertise with
regard to the banking industry and merger and acquisition transactions. AACC is
an investment banking and securities firm with membership on all principal U.S.
security exchanges. As part of its investment banking services, AACC is
regularly engaged in the independent valuation of securities in connection with
negotiated underwritings, private placements, merger and acquisition
transactions, and recapitalizations.
Prior to its present engagement, AACC received a fee of $50,000 from CB for
investment banking services rendered. Pursuant to this engagement of AACC to
provide financial advisory and investment banking services, CB agreed to pay
AACC a cash fee of approximately 1.00% of the transaction value at Closing. AACC
will also receive reimbursement for certain out-of-pocket expenses, and CB has
agreed to indemnify AACC against certain liabilities, including liabilities
which may arise under the securities laws.
TERMS OF THE MERGER; EFFECTIVE TIME
Upon the terms and subject to the conditions of the Merger Agreement; at
the Effective Time, Merger Sub will merge with and into CB. CB will be the
surviving corporation in the Merger, and will continue its corporate existence
under the MBCA under the same name as a wholly owned subsidiary of Citizens. At
the Effective Time, the separate corporate existence of Merger Sub will
terminate. The Articles of Incorporation and Bylaws of CB as in effect
immediately prior to the Effective Time will be the initial Articles of
Incorporation and Bylaws of CB, as the corporation surviving the Merger (the
"Surviving Corporation").
The Merger will become effective upon the execution and filing of a
certificate of merger with the Michigan Department of Consumer and Industry
Services or as set forth in such certificate (the "Effective Time"). The date
the Merger is effective (the "Effective Date") will be the date Citizens
selects, which shall be within 30 days after the last to occur of the expiration
of all applicable waiting periods in connection with approvals of governmental
authorities occurs and the receipt of all approvals of governmental authorities
and all conditions to the consummation of the Merger are satisfied or waived, or
on such earlier or later date as may be agreed in writing by the parties to the
Merger Agreement.
CONVERSION OF SHARES
Upon the terms and subject to the conditions of the Merger Agreement, at
the Effective Time each share of CB Common Stock issued and outstanding at the
Effective Time (other than shares held directly or indirectly by Citizens, other
than shares held in a fiduciary or agency capacity or in satisfaction of a debt
previously contracted), will be converted, subject to certain rights of CB and
Citizens described below, into the right to receive 1.489 shares (the "Exchange
Ratio") of validly issued, fully paid and nonassessable shares of Citizens
Common Stock.
CB has the right to elect to terminate the Merger Agreement, if its Board
of Directors so determines, whether before or after approval of the Merger by
the CB shareholders or the Citizens shareholders, if the Final Parent Stock
Price (as defined below) shall be less than $25.30 (the "Floor Price") subject,
however, to the right of Citizens to adjust the Exchange Ratio. If CB elects to
terminate the Merger Agreement as described above, it shall give written notice
thereof to Citizens within 2 calendar days after the end of the Valuation Period
(as defined below) or such right shall be deemed waived. If CB has the right to
terminate the Merger Agreement as described above but shall not have done so
within such period, or at any time within 2 calendar days of CB having done so,
and if the Final Parent Stock Price is not less than $23.72, Citizens shall have
the right but not the obligation to elect to increase the Exchange Ratio by
multiplying (A) the Exchange Ratio by (B) the number of shares of Citizens
Common Stock, carried to three decimal places, which when multiplied by the
Final Parent Stock Price will equal the Floor Price; and increasing the
aggregate number of shares of Citizens Common Stock to be issued in the Merger
(the "Stock Amount") such that (A) the per share value of the Citizens Common
Stock received (valued at the Final Parent Stock Price) is at least equal to the
per share consideration that would have been received if the Final Parent Stock
Price had
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been equal to the Floor Price and (B) the Merger continues to qualify as a
reorganization within the meaning of Section 368 of the Code and as a pooling of
interests for accounting purposes.
Notwithstanding any other provision of the Merger Agreement, in the event
that the Final Parent Stock Price shall be more than $37.96 (the "Ceiling
Price"), Citizens shall have the right to terminate the Merger Agreement,
whether before or after approval of the Merger by the shareholders of CB or of
Citizens; provided, however, that this provision shall not apply if the Final
Parent Stock Price exceeds the Ceiling Price and prior to or during the
Valuation Period (A) Citizens has signed a letter of intent or a definitive
agreement providing for, or (B) any person other than CB, its officers and
directors or any of their affiliates shall have made a bona fide proposal to
Citizens, by public announcement or written communication that is the subject of
public disclosure to engage in (including any situation in which such person
shall have commenced, as such term is defined in Rule 14d-2 under the Exchange
Act, or shall have filed a registration statement with respect to a tender offer
to purchase Citizens Common Stock), or (C) Citizens has publicly announced that
it is engaged in discussions, in each case above, involving a reorganization,
merger, consolidation or similar transaction between Citizens and an
unaffiliated third party, if as a result of such transaction, shareholders of
Citizens (immediately prior to the date such transaction is announced or such
agreement is executed) will not own a majority of the voting stock of the
corporation surviving the transaction and a majority in value of the total
outstanding stock of such surviving corporation after the transaction.
"Final Parent Stock Price" is defined in the Merger Agreement as the
average of the Closing Prices of Citizens Common Stock for the Valuation Period.
"Closing Prices" is defined as the last sale price for shares of Citizens Common
Stock listed on The Nasdaq Stock Market for each trading day during the
Valuation Period. "Valuation Period" is defined as the twenty (20) consecutive
days on which shares of Citizens Common Stock are traded on The Nasdaq Stock
Market ending on the seventh (7th) calendar day immediately prior to the
anticipated Effective Time.
Each share of CB Common Stock held directly or indirectly by Citizens,
other than shares held in a fiduciary or agency capacity or in satisfaction of a
debt previously contracted, and shares held as treasury stock of CB, shall be
canceled and retired and shall cease to exist, and no exchange or payment will
be made with respect to such shares.
TREATMENT OF OPTIONS
Each stock option or right to acquire CB Common Stock granted pursuant to
the CB Financial Corporation 1992 Employee Stock Option Plan and the CB
Financial Corporation Nonqualified and Deferred Compensation Plan for
Independent Directors (together, the "Option Plans") which is outstanding and
unexercised immediately prior to the Effective Time will be converted
automatically, immediately prior to or at the Effective Time, into the right to
receive shares of Citizens Common Stock at a ratio determined by dividing the
difference of the product of the Exchange Ratio and the Final Parent Stock Price
less the exercise price of each option under the Option Plans by the Final
Parent Stock Price. CB will use all reasonable efforts to effectuate the
foregoing, including without limitation amending the Option Plans and obtaining
any necessary consents from option holders, in such form as is reasonably
acceptable to Citizens and which shall include an acknowledgment that such
transaction may be subject to applicable withholding taxes, which CB shall
withhold as required by law; provided, however, that prior to the Effective
Time, the CB Board shall adopt such resolutions or take such other actions as
are permitted and required to adjust, effective immediately prior to the
Effective Time, the terms of each outstanding option under the Option Plans as
to which any such consent is not obtained prior to the Effective Time to provide
that such option shall be converted into the right, upon exercise of such option
at any time after the Effective Time, to receive shares of Citizens Common Stock
as provided for in the Merger Agreement.
EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
At or prior to the Effective Time, Citizens will deposit, or cause to be
supplied, to or for the account of ChaseMellon Shareholder Services, L.L.C., or
such other bank (which may be a subsidiary of Citizens) or trust company as
shall be designated by Citizens and reasonably satisfactory to CB (the "Exchange
Agent"),
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in trust for the benefit of the holders of CB Common Stock, for exchange in
accordance with the terms of the Merger Agreement, through the Exchange Agent,
certificates evidencing the shares of Citizens Common Stock issuable pursuant to
the Merger in exchange for outstanding shares of CB Common Stock.
As soon as reasonably practicable after the Effective Time, Citizens will
instruct the Exchange Agent to mail to each holder of record of certificates
which immediately prior to the Effective Time represented outstanding shares of
CB Common Stock (the "Certificates") (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Citizens and CB may reasonably specify), and (ii) instructions to effect the
surrender of the Certificates in exchange for the certificates evidencing shares
of Citizens Common Stock.
CB STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE ENCLOSED PROXY AND
SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT UNLESS AND UNTIL THE CB
SHAREHOLDER RECEIVES A LETTER OF TRANSMITTAL FOLLOWING THE EFFECTIVE TIME.
No dividends or other distributions declared or made after the Effective
Time with respect to shares of Citizens Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Citizens Common Stock they are entitled to receive
until the holder of such Certificate shall surrender such Certificate.
No fractional shares of Citizens Common Stock will be issued in the Merger.
In lieu thereof, each holder of CB Common Stock who otherwise would have been
entitled to a fractional share of Citizens Common Stock will receive cash
(without interest) in an amount equal to such fraction multiplied by the Final
Parent Stock Price.
ARTICLES AND BYLAWS OF CB
Pursuant to the Merger Agreement, the CB Articles and CB Bylaws, as in
effect immediately prior to the Effective time, shall be the initial articles of
incorporation and bylaws of the Surviving Corporation following the Merger.
DIRECTORS AND OFFICERS OF CB
Pursuant to the Merger Agreement, the directors and officers of Merger Sub
immediately prior to the Effective time will be the initial directors and
officers of CB following the Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Citizens, Merger Sub and CB regarding among other things: corporate
organization, corporate power and authority, capitalization, subsidiaries,
conflicts, consents and approvals, absence of certain changes, taxes, compliance
with applicable laws, litigation, brokerage and finder's fees, accounting
matters, tax-free reorganization, employee benefit plans, contracts, labor
relations, permits, and environmental matters.
The Merger Agreement contains certain additional representations and
warranties of CB relating to state takeover laws.
The representations and warranties of each of Citizens, Merger Sub and CB
will not survive the Merger.
CONDUCT PENDING THE MERGER
Pursuant to the Merger Agreement, prior to the Effective Time CB has agreed
to, and to cause its subsidiaries to, (i) conduct its business in the usual,
regular and ordinary course of business consistent with past practice, (ii) use
its best efforts to maintain and preserve intact its business organization,
properties, leases, employees and advantageous business relationships and retain
the services of its officers and key employees, (iii) take no action which would
adversely affect or delay the ability of CB, Citizens, Merger Sub
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or any subsidiary thereof to obtain any necessary approvals, consents or waivers
of any governmental authority required for the transactions contemplated by the
Merger Agreement or to perform its covenants and agreements on a timely basis
under the Merger Agreement and (iv) take no action that is reasonably likely to
have a Material Adverse Effect (as defined in the Merger Agreement) on CB.
In addition CB has agreed not to, and to not permit its subsidiaries,
without the prior written consent of Citizens, to:
(a) other than in the ordinary course of business consistent with past
practice, make any loan or advance or incur any indebtedness for borrowed money,
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other person;
(b) adjust any capital stock; make, declare or pay any dividend or make any
other distribution on, or acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of its
capital stock, or grant any stock appreciation rights or grant, sell or issue to
any individual, corporation or other person any right or option to acquire, or
securities evidencing a right to convert into or acquire, any shares of its
capital stock, except for regular quarterly cash dividends both (i) at a rate
per share of CB Common Stock not in excess of $0.30 per share and (ii) having
record dates and payment dates consistent with past practice, provided, however,
that CB may not declare regular quarterly cash dividends after receipt of all
regulatory approvals necessary for consummation (excluding any applicable
waiting periods) of the Merger to the extent that the CB shareholders would,
after giving effect to the Merger, be eligible to receive a dividend from
Citizens for the same quarter for which CB did not declare a dividend as a
result of this provision of the Merger Agreement and may not declare any regular
quarterly cash dividends in any quarter if with respect to such quarter the
amount of the dividend exceeds the amount of net income for such quarter; or
issue any additional shares of capital stock except pursuant to the exercise of
CB options outstanding as of the date of the Merger Agreement;
(c) other than in the ordinary course of business consistent with past
practice and pursuant to policies currently in effect, sell, transfer, mortgage,
encumber or otherwise dispose of any of its properties, leases or assets to any
person, or cancel, release or assign any indebtedness of any such person, except
pursuant to contracts or agreements in force as of the date of the Merger
Agreement;
(d) make any capital expenditures, other than capital expenditures made in
the ordinary course of business consistent with past practice in amounts not
exceeding $50,000, individually, or $200,000 in the aggregate;
(e) increase in any manner the compensation or fringe benefits of any of
its employees or directors, or create or institute, or make any payments
pursuant to, any severance plan or package, or pay any pension or retirement
allowance not required by any existing plan or agreement to any such employees
or directors, or become a party to, amend or commit itself to or fund or
otherwise establish any trust or account related to any Employee Plan (as
defined in the Merger Agreement), with or for the benefit of any employee, other
than general increases in compensation in the ordinary course of business
consistent with past practice not in excess of an average of 3% in any 12-month
period or any amendment required by applicable law (provided that any such
amendment shall provide the least increase to cost permitted under such
applicable law), or voluntarily accelerate the vesting of any stock options or
other compensation or benefit;
(f) (i) other than in the ordinary course of business consistent with past
practice in individual amounts not to exceed $50,000 or $200,000 in the
aggregate or in securities transactions as provided in (f)(ii) below, make any
investment either by contributions to capital, property transfers, or purchase
of any property or assets of any person, provided that CB shall make no
acquisition of business operations without Citizens' prior consent; or (ii)
other than purchases of direct obligations of the United States of America with
a remaining maturity at the time of purchase of 3 years or less, purchase or
acquire securities of any type; provided, however, that, in the case of
investment securities, CB may purchase (or permit any subsidiary of CB to
purchase) investment securities if, within two business days after CB requests
in writing (which notice shall describe in detail the investment securities to
be purchased and the price thereof) that Citizens consent to the making of any
such purchase, Citizens has approved such request in writing or has not
responded in writing to such request;
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(g) enter into or terminate any contract or agreement, or make any change
in any of its leases or contracts, other than with respect to those involving
aggregate payments of less than, or the provision of goods or services with a
market value of less than, $50,000;
(h) settle any claim, action or proceeding involving any liability of CB or
any of its subsidiaries for money damages in excess of $50,000 or material
restrictions upon the operations of CB or any of its subsidiaries;
(i) except in the ordinary course of business and in amounts less than
$250,000 in the aggregate waive or release any material right or collateral or
cancel or compromise any extension of credit or other debt or claim;
(j) make, renegotiate, renew, increase, extend or purchase any loan, lease
(credit equivalent), advance, credit enhancement or other extension of credit,
or make any commitment in respect of any of the foregoing, except (i) unsecured
loans, advances or commitments in amounts less than $250,000 made in the
ordinary course of business consistent with past practice and made in conformity
with all applicable policies and procedures, (ii) secured loans, advances or
commitments in an amount less than $1,000,000 made in the ordinary course of
business consistent with past practice and made in conformity with all
applicable policies and procedures and (iii) loans or advances as to which CB
has a legally binding obligation to make such loan or advance as of the date
hereof and a description of which has been provided by CB in writing to Citizens
prior to the execution of the Merger Agreement;
(k) except as contemplated by the Merger Agreement, change its fiscal year
or its method of accounting as in effect at December 31, 1996, except as
required by changes in generally accepted accounting principles as concurred in
by CB's independent auditors;
(l) knowingly take any action that would prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; provided, however,
that nothing contained herein shall limit the ability of Citizens to exercise
its rights under the Stock Option Agreement;
(m) enter into any new activities or lines of business, or cease to conduct
any activities or lines of business that it conducts on the date hereof, or
conduct any business activity not consistent with past practice;
(n) amend its articles of incorporation or its bylaws; or
(o) agree to, or make any commitment to, take any of the actions prohibited
by the foregoing provisions or any action which would make any of the
representations or warranties of CB contained in the Merger Agreement incorrect
or prevent CB from performing or cause CB not to perform its covenants under the
Merger Agreement.
Pursuant to the Merger Agreement, prior to the Effective Time Citizens has
agreed to, and to cause its subsidiaries to, (i) conduct its business in the
usual, regular and ordinary course of business consistent with past practice,
(ii) take no action outside of the ordinary course of business (mergers and
acquisitions by Citizens are deemed to be in the ordinary course of its
business) which would adversely affect or delay the ability of the CB, Citizens,
Merger Sub or any subsidiary thereof to obtain any necessary approvals, consents
or waivers of any governmental authority required for the transactions
contemplated by the Merger Agreement or to perform its covenants and agreements
on a timely basis under the Merger Agreement and (iii) take no action that is
reasonably likely to have a Material Adverse Effect on Citizens. Citizens has
also agreed not to knowingly take any action that would prevent or impede the
Merger from qualifying for "pooling of interests" accounting treatment or as a
reorganization within the meaning of Section 368 of the Code; provided, however,
that nothing contained in the Merger Agreement will limit the ability of
Citizens to exercise its rights under the Stock Option Agreement.
OTHER ACQUISITION PROPOSALS
CB has agreed that neither it nor any of its subsidiaries nor any of the
respective officers and directors of CB or its subsidiaries shall, and CB has
agreed to direct and use its best efforts to cause its employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by
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it or any of its subsidiaries) not to, initiate, solicit or encourage, directly
or indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to shareholders of CB) with respect to
a merger, consolidation or similar transaction involving, or any purchase of all
or any significant portion of the assets or any equity securities of, CB or any
of its subsidiaries (any such proposal or offer being referred to as an
"Acquisition Proposal") or, unless the CB Board determines, upon receipt of a
written opinion of its outside counsel, that it is required to take the
following action in order to fulfill their fiduciary duties to CB's shareholders
under the MBCA, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. CB also agreed to
immediately cease any existing activities, discussions or negotiations with any
parties conducted prior to the execution of the Merger Agreement with respect to
any of the foregoing and to enforce any confidentiality agreements to which it
or any of its subsidiaries is a party. CB also agreed to notify Citizens
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, CB.
INDEMNIFICATION
From and after the Effective Time through the sixth anniversary of the
Effective Date, Citizens has agreed to indemnify and hold harmless each present
and former director and officer of CB and its subsidiaries determined as of the
Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the extent to which such Indemnified Parties were entitled under the
MBCA and the CB Articles or Bylaws in effect on the date of the Merger
Agreement, and Citizens has also agreed to advance expenses as incurred to the
extent permitted under the MBCA and the CB Articles and Bylaws.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Citizens and CB. Each party's obligation to effect the Merger is subject to
the satisfaction or waiver, where permissible, of the following conditions at or
prior to the Effective Time: (a) the Merger Agreement and the transactions
contemplated thereby shall have been approved by the requisite vote of the
shareholders of CB and Citizens; (b) Citizens, Merger Sub, CB and each of their
respective subsidiaries shall have procured, if required in the opinion of
counsel for Citizens, certain regulatory approvals, consents or waivers with
respect to the Merger Agreement and the transactions contemplated hereby by (i)
the Reserve Bank of Chicago, (ii) the appropriate State Regulators (as defined
in the Merger Agreement), and (iii) the Federal Reserve Board, and all
applicable statutory waiting periods shall have expired; and the parties shall
have procured all other regulatory approvals, consents or waivers of
governmental authorities or other persons that, in the opinion of counsel for
Citizens, are necessary or appropriate for the consummation of the transactions
contemplated by the Merger Agreement (see "Regulatory Approvals Required for the
Merger" below); provided, however, that no approval, consent or waiver referred
to in this section of the Merger Agreement shall be deemed to have been received
if it shall include any condition or requirement that, individually or in the
aggregate, (i) would result in a Material Adverse Effect on Citizens, (ii)
imposes any requirement upon Citizens, CB or their respective subsidiaries to
(x) dispose of any asset which is material to Citizens or CB, (y) materially
restrict or curtail the current business operations or activities of Citizens or
CB or (z) raise an amount of capital, the issuance and sale of which, in the
absence of the Merger and the other transactions contemplated by the Merger
Agreement, would in Citizens' judgment be materially burdensome in light of
Citizens' capital raising policies or (iii) would reduce the benefits of the
transactions contemplated by the Merger Agreement to Citizens in so significant
a manner that Citizens, in its judgment, would not have entered into the Merger
Agreement had such condition or requirement been known; (c) the registration
statement on Form S-4 shall have become effective under the Securities Act and
no stop order suspending the effectiveness of the registration statement on Form
S-4 shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the Commission; (d) Citizens and CB shall each have
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received a letter from their respective independent accountants addressed to
Citizens or CB, as the case may be, to the effect that the Merger will qualify
for "pooling-of-interests" accounting treatment (see "Accounting Treatment"
below); (e) all other requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by the Merger Agreement shall have
been satisfied; (f) no party to the Merger Agreement 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 or any other transaction
contemplated by the Merger Agreement, and no litigation or proceeding shall be
pending against Citizens or CB or any of their subsidiaries brought by any
governmental agency seeking to prevent consummation of the transactions
contemplated hereby; and (g) no statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated, interpreted, applied or
enforced by any governmental authority which prohibits, restricts or makes
illegal consummation of the Merger or any other transaction contemplated by the
Merger Agreement.
Citizens. In addition, the obligations of Citizens and Merger Sub to effect
the Merger shall be subject to the satisfaction or waiver prior to the Effective
Time of the following additional conditions: (a) each of the representations and
warranties of CB contained in the Merger Agreement shall have been true on the
date of the Merger Agreement and shall be true in all material respects on the
Effective Date as if made on such date (or on the date when made in the case of
any representation or warranty which specifically relates to an earlier date),
CB shall have performed, in all material respects, each of its covenants and
agreements contained in the Merger Agreement, and Citizens shall have received a
certificate signed by the Chief Executive Officer and the Chief Financial
Officer of CB, dated the Effective Date, to the foregoing effect; (b) Citizens
shall have received a written opinion, dated the Effective Date, from Howard &
Howard Attorneys, P.C., counsel to CB, in form and substance satisfactory to
Citizens; (c) Citizens shall have received a written opinion from Dykema Gossett
PLLC, in form and substance satisfactory to Citizens, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368 of the
Code; (d) Citizens shall have received the fairness opinion of its financial
advisor prior to the date of the Citizens shareholder meeting and such fairness
opinion shall not have been withdrawn; and (e) CB shall not have experienced any
event, change or occurrence that has had a material adverse effect upon the
financial condition of CB and its subsidiaries taken as a whole.
CB. The obligation of CB to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the following additional
conditions: (a) each of the representations and warranties of Citizens and
Merger Sub contained in the Merger Agreement shall have been true on the date of
the Merger Agreement and shall be true in all material respects on the Effective
Date as if made on such date (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date),
Citizens and Merger Sub shall have performed, in all material respects, each of
its covenants and agreements contained in the Merger Agreement, and CB shall
have received certificates signed by the Chief Financial Officer of Citizens,
dated the Effective Date, to the foregoing effect; (b) CB shall have received a
written opinion from Howard & Howard Attorneys, P.C. in form and substance
satisfactory to CB, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (see "Certain
Federal Income Tax Consequences" below); (c) the fairness opinion of CB's
financial advisor shall not have been withdrawn; (d) CB shall have received a
written opinion, dated the Effective Date, from Dykema Gossett PLLC, in form and
substance satisfactory to CB; and (e) Citizens shall not have experienced any
event, change or occurrence that has had a material adverse effect upon the
financial condition of Citizens and its subsidiaries taken as a whole.
No assurance can be provided as to if or when the requisite regulatory
approvals necessary to consummate the Merger will be obtained or whether all of
the other conditions precedent to the Merger will be satisfied or waived by the
party permitted to do so. If the Merger is not effected on or before September
30, 1997, the Merger Agreement may be terminated by either Citizens or CB,
unless the failure to effect the Merger by such date is due to the failure of
the party seeking to terminate the Merger Agreement to perform or observe
covenants and agreements of such party set forth therein.
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REGULATORY APPROVALS REQUIRED FOR THE MERGER
General. Citizens and CB have agreed to use their best efforts to obtain
all permits, consents, approvals and authorizations of all third parties and
governmental entities which are necessary to consummate the transactions
contemplated by the Merger Agreement (the "Required Regulatory Approvals"),
which includes approval of the Federal Reserve Board. Citizens has completed the
filing of all application materials and notifications necessary to obtain such
Required Regulatory Approvals. The Merger cannot be consummated in the absence
of the Required Regulatory Approvals. Citizens was advised by the Federal
Reserve Board on May 19, 1997 that its application for approval of the Merger
submitted on April 3, 1997 was approved on May 16, 1997. There can be no
assurance that all Required Regulatory Approvals will be obtained, and, if
obtained, there can be no assurance as to the date of any such approvals, the
absence of conditions in such approvals, or the absence of any litigation
challenging such approvals. There can likewise be no assurance that the United
States Department of Justice or any state attorney general will not attempt to
challenge the Merger on antitrust grounds or, if such a challenge is made, as to
the result thereof.
Citizens and CB are not aware of any other material governmental approvals
or actions that are required prior to the parties' consummation of the Merger
other than those described below. It is presently contemplated that if any such
additional governmental approvals or actions are required, such approvals or
actions will be sought. There can be no assurance, however, that any such
additional approvals or actions will be obtained.
Federal Reserve Board. The Merger is subject to approval by the Federal
Reserve Board pursuant to Section 3 of the BHC Act. Citizens has filed the
required application and notification with the Federal Reserve Board for
approval of the Merger on April 3, 1997 and was advised by the Federal Reserve
Board on May 19, 1997 that such approval was granted on May 16, 1997.
The Federal Reserve Board is prohibited from approving any transaction
under the applicable statutes which:
(i) would result in a monopoly or which would be in furtherance of any
combination or conspiracy to monopolize or to attempt to
monopolize the business of banking in any part of the United
States; or
(ii) may have the effect in any section of the United States of
substantially lessening competition, or tending to create a
monopoly, or resulting in a restraint of trade, unless the
Federal Reserve Board finds that the anti-competitive effects of
the transaction are clearly outweighed in the public interest by
the probable effect of the transaction in meeting the convenience
and needs of the communities to be served.
In addition, in reviewing a transaction under the applicable statutes, the
Federal Reserve Board will consider the financial and managerial resources of
the companies and their subsidiary banks and the convenience and needs of the
communities to be served. As part of, or in addition to, consideration of the
above factors, it is assumed that the Federal Reserve Board considered the
regulatory status of Citizens and CB, current and projected economic conditions
in the Midwest and the overall capital and safety and soundness standards
established by the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") and the regulations promulgated thereunder.
In addition, under the Community Reinvestment Act of 1977, as amended (the
"CRA"), the Federal Reserve Board must take into account the record of
performance of each of Citizens and CB in meeting the credit needs of the entire
community, including low and moderate income neighborhoods, served by each
company. Each of Citizens' banking subsidiaries has an outstanding CRA rating
with the appropriate Federal regulator. Each of CB's banking subsidiaries has an
outstanding CRA rating with the appropriate Federal regulator. None of Citizens'
or CB's banking subsidiaries received any negative comments from its respective
Federal regulator in its last CRA examination relating to such ratings which
were material and remain unresolved.
The Federal Reserve Board has furnished notice and a copy of the
application for approval of the Merger to the Office of the Comptroller of the
Currency (the "OCC"), the Federal Deposit Insurance Corporation
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(the "FDIC") and the Financial Institutions Bureau of the State of Michigan
("FIB"). These agencies had an opportunity to submit any views, recommendations
or objections to the Federal Reserve Board. The Federal Reserve Board is
required to hold a public hearing in the event it receives a written
recommendation of disapproval of the application from any of these agencies.
Furthermore, the BHC Act and Federal Reserve Board regulations require
publication of notice of, and the opportunity for public comment on, the
application submitted by Citizens for approval of the Merger, and authorize the
Federal Reserve Board to hold a public hearing in connection therewith if the
Federal Reserve Board determines that such a hearing would be appropriate. Any
such hearing or comments provided by third parties could prolong the period
during which an application is subject to review by the Federal Reserve Board.
In addition, under federal law, a period of 30 days must expire following
approval by the Federal Reserve Board within which period the Department of
Justice may file objections to the Merger under the federal antitrust laws. With
the approval of the Federal Reserve Board and the Department of Justice, the
waiting period may be reduced to no less than 15 days. The May 16, 1997 Federal
Reserve Board approval granted to Citizens provides for a 15-day waiting period.
The Department of Justice could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including seeking to enjoin
the Merger unless divestiture of an acceptable number of branches to a
competitively suitable purchaser could be made. The commencement of an antitrust
action by the Department of Justice would stay the effectiveness of Federal
Reserve Board approval of the Merger unless a court specifically orders
otherwise. In reviewing the Merger, the Department of Justice could analyze the
Merger's effect on competition differently than the Federal Reserve Board, and
thus it is possible that the Department of Justice could reach a different
conclusion than the Federal Reserve Board regarding the Merger's competitive
effects. Failure of the Department of Justice to object to the Merger may not
prevent the filing of antitrust actions by private persons or state attorneys
general.
In general, the Federal Reserve Board and the Department of Justice will
examine the impact of the Merger on competition in various product and
geographic markets, including competition for deposits and loans, especially
loans to small and middle market businesses. While Citizens believes that the
likelihood of such action by the Department of Justice is remote in this case,
there can be no assurance that the Department of Justice will not initiate such
a proceeding.
Citizens' right to exercise the Stock Option Agreement is also subject to
the prior approval of the Federal Reserve Board, to the extent that the exercise
of options under the Stock Option Agreement would result in Citizens owning more
than 5% of the outstanding shares of CB Common Stock. In considering whether to
approve Citizens' right to exercise its option, including its right to purchase
more than 5% of the outstanding shares of CB Common Stock, the Federal Reserve
Board would generally apply the same statutory criteria it would apply to its
consideration of approval of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary description of the material Federal
income tax consequences of the Merger. This summary is not a complete
description of all of the consequences of the Merger and, in particular, may not
address federal income tax considerations that may affect the treatment of a
shareholder which, at the Effective Time, already owns Citizens Common Stock, is
not a U.S. person, is a tax-exempt entity or an individual who acquired CB
Common Stock pursuant to an employee stock option, or exercises some form of
control over CB. In addition, no information is provided herein with respect to
the tax consequences of the Merger under applicable foreign, state or local
laws. Consequently, each CB shareholder is advised to consult a tax advisor as
to the specific tax consequences of the transaction to that shareholder. The
following discussion is based on the Code, as in effect on the date of this
Joint Proxy Statement-Prospectus, without consideration of the particular facts
or circumstances of any holder of CB Common Stock.
The Merger. It is intended that the Merger will be treated as a
reorganization within the meaning of Section 368(a) of the Code, and it is a
condition to Citizen's and CB's respective obligations to consummate the Merger
that Citizens will receive an opinion from Dykema Gossett PLLC and CB will
receive an opinion from Howard & Howard Attorneys, P.C. dated as of the
Effective Time, based upon certain customary
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representations and assumptions set forth therein, substantially to the effect
that for federal income tax purposes the Merger constitutes a reorganization
within the meaning of Section 368 of the Code. The receipt of the forgoing tax
opinions are each waivable conditions, however, neither Citizens nor CB intends
to waive such condition. In the event that either opinion cannot be delivered at
the Effective Time and the Federal income tax consequences are materially
different from that described below, there will be a resolicitation of Citizens
and CB shareholders with respect to proxies for special meetings of each of
Citizens and CB to approve the Share Issuance and the Merger, respectively.
Based upon such opinions, the material federal income tax consequences of
the Merger for CB shareholders will be as follows:
(i) no gain or loss will be recognized by CB shareholders upon their
exchange of CB Common Stock for Citizens Common Stock, except that
a CB shareholder who receives cash proceeds in lieu of a
fractional share interest in Citizens Common Stock will recognize
gain or loss equal to the difference between such proceeds and the
tax basis allocated to the fractional share interest and such gain
or loss will constitute capital gain or loss if such shareholder's
CB Common Stock with respect to which gain or loss is recognized
is held as a capital asset at the Effective Time;
(ii) the tax basis of the Citizens Common Stock received by a CB
shareholder who exchanges his or her CB Common Stock for Citizens
Common Stock will be the same as such shareholder's tax basis in
the CB Common Stock surrendered in exchange therefor (reduced by
any amount allocable to a fractional share interest for which
cash is received); and
(iii) the holding period of the Citizens Common Stock received by a CB
shareholder will include the period during which the CB Common
Stock surrendered in exchange therefor was held (provided that
such CB Common Stock was held by such CB shareholder as a
capital asset at the Effective Time).
THE FOREGOING IS A GENERAL DISCUSSION OF CERTAIN MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER FOR THE CB SHAREHOLDERS AND IS INCLUDED FOR
GENERAL INFORMATION ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT
THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH CB SHAREHOLDER'S TAX STATUS AND
ATTRIBUTES. AS A RESULT, THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED IN THE
FOREGOING DISCUSSION MAY NOT APPLY TO EVERY CB SHAREHOLDER. ACCORDINGLY, EACH
SHAREHOLDER IS ENCOURAGED TO CONSULT HIS OR HER TAX ADVISOR AS TO PARTICULAR
FACTS AND CIRCUMSTANCES WHICH MAY BE SPECIFIC TO SUCH SHAREHOLDER AND NOT COMMON
TO SHAREHOLDERS AS A WHOLE AND ALSO AS TO ANY ESTATE, GIFT, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES THAT MAY ARISE OUT OF THE MERGER AND/OR ANY SALE
THEREAFTER OF CITIZENS COMMON STOCK RECEIVED IN THE MERGER.
Information Reporting and Backup Withholding. Payments in respect of CB
Common Stock may be subject to information reporting to the Internal Revenue
Service and to a 31% backup withholding tax. Backup withholding will not apply,
however, to a payment to a CB shareholder or other payee if such shareholder or
payee completes and signs the substitute Form W-9 that will be included as part
of the transmittal letter or otherwise proves to Citizens and the Exchange Agent
that it is exempt from backup withholding.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a
"pooling-of-interests" transaction under generally accepted accounting
principles. Under such method of accounting, holders of CB Common Stock will be
deemed to have combined their existing voting common stock interest with that of
holders of Citizens Common Stock by exchanging their shares for shares of
Citizens Common Stock. Accordingly, the book value of the assets, liabilities
and shareholders' equity of CB, as reported on its consolidated balance sheet,
will be carried over to the consolidated balance sheet of the combined
enterprise and no goodwill will be created. The
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combined enterprise will be able to include in its consolidated income the
consolidated income of both companies for the entire fiscal year in which the
Merger occurs; however, certain expenses incurred to effect the Merger must be
treated as current charges against income rather than adjustments to the balance
sheet.
Citizens and CB have received letters from their independent accountants to
the effect that pooling-of-interest accounting is appropriate for the Merger
under Accounting Principles Board Opinion No. 16, assuming the Merger is
consummated in accordance with the Merger Agreement.
The unaudited pro forma financial information contained in this Joint Proxy
Statement-Prospectus has been prepared using the pooling-of-interests accounting
method to account for the Merger. See "Comparative Per Share Data", "Pro Forma
Selected Financial Data" and "Unaudited Pro Forma Condensed Combined Financial
Statements."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement provides that the Merger Agreement may be terminated,
and the Merger abandoned, prior to the Effective Date, either before or after
its approval by the shareholders of CB or Citizens:
(a) by mutual consent of the Boards of Directors of Citizens and CB; or
(b) by either Citizens or CB, if any of the conditions to such party's
obligation to consummate the transactions contemplated in the Merger Agreement
shall have become impossible to satisfy if, but only if, such party has used its
best efforts and acted in good faith in attempting to satisfy all such
conditions and if such party is not then in breach or default in any material
respect of the Merger Agreement; or
(c) by the Board of Directors of Citizens if (i) there has been a material
breach or default by CB of any representation or warranty or in the observance
of its covenants and agreements contained in the Merger Agreement of which
notice has been given in writing by Citizens and which has not been cured within
thirty (30) business days of receipt of such notice; or (ii) the Effective Time
has not occurred prior to September 30, 1997 without fault on the part of
Citizens, or (iii) a public announcement with respect to an Acquisition Proposal
shall have been made by any person other than Citizens or an affiliate of
Citizens and the Board of Directors of CB shall have (A) failed to publicly
reject or oppose such Acquisition Proposal within ten (10) days of the public
announcement of such proposal, plan or intention or (B) shall have modified,
amended or withdrawn its recommended approval of the Merger Agreement and the
Merger to CB's shareholders; or
(d) by the Board of Directors of CB if (i) there has been a material breach
or default by Citizens of any representation or warranty or in the observance of
its covenants and agreements contained in the Merger Agreement of which notice
has been given in writing by CB and which has not been cured within thirty (30)
business days of receipt of such notice; or (ii) the Effective Time has not
occurred prior to September 30, 1997 without fault on the part of CB; or
(e) by the Board of Directors of either Citizens or CB (i) if any
shareholder approval of CB required for consummation of the Merger shall not
have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of shareholders or at any adjournment or postponement thereof;
or (ii) if any shareholder approval of Citizens required for consummation of the
Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of shareholders or at any adjournment or
postponement thereof or (iii) if any Regulatory Agency has denied approval for
the Merger and, if such denial is appealable, neither Citizens nor CB has filed
a petition seeking review of such order of denial or taken other similar action
under applicable law, within thirty (30) days after the issuance or entry by the
governmental agency of such order of denial; or
(f) by Citizens, if the information in any Disclosure Letter Update (as
defined in the Merger Agreement) together with the information in any or all of
the Disclosure Letter Updates previously provided to Citizens (as required by
the Merger Agreement), indicates that a Material Adverse Effect with respect to
CB has occurred or is reasonably likely to occur which either has not or cannot
be cured within the Cure
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Period provided for in the Merger Agreement, or (ii) which does not result
primarily from changes in the general level of interest rates;
(g) by CB or Citizens pursuant to the rights described in connection with
the conversion of CB Common Stock. See "The Merger -- Conversion of Shares."
In the event of the termination of the Merger Agreement, the Merger
Agreement will become null and void, and there will be no liability on the part
of Citizens, Merger Sub, CB, or any of their officers or directors except (i)
for fraud or willful and material breach of the Merger Agreement and (ii) that
certain provisions of the Merger Agreement relating to access and information,
those provisions of the Merger Agreement that are by their terms applicable
after the Effective Time, the agreement of the parties to waive the right to
trial by jury in any legal proceeding arising out of the Merger Agreement and
expenses of the parties in connection with the Merger Agreement will survive any
termination of the Merger Agreement.
WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Prior to the Effective Time, any provision of the Merger Agreement may be:
(i) waived by the party benefitted by the provision; or (ii) amended or modified
at any time (including the structure of the transaction) by an agreement in
writing between the parties to the Merger Agreement, except that, after the vote
by the shareholders of CB, no amendment may be made that would contravene the
applicable sections of the MBCA.
STOCK OPTION AGREEMENT
Concurrently with the execution of the Merger Agreement, CB (the "Issuer")
executed and delivered the Stock Option Agreement, pursuant to which CB granted
to Citizens (the "Grantee") the Option. CB approved and entered into the Stock
Option Agreement to induce Citizens to enter into the Merger Agreement. The
Stock Option Agreement is intended to increase the likelihood that the Merger
will be consummated in accordance with the terms of the Merger Agreement.
Consequently, certain aspects of the Stock Option Agreement may have the effect
of discouraging persons who might now or prior to the Effective Time be
interested in acquiring all of or a significant interest in CB from considering
or proposing such an acquisition. The Stock Option Agreement is included as
Exhibit 2 to Citizens' current report on Form 8-K dated February 3, 1997, which
is incorporated herein by reference. See "Information Incorporated by
Reference."
The Stock Option Agreement provides for the purchase by Citizens of up to
557,409 shares (the "Option Shares") of CB Common Stock at an exercise price of
$37.66 per share, payable in cash. The Option Shares, if issued pursuant to the
Stock Option Agreement, will not exceed 19.9% of the CB Common Stock issued and
outstanding without giving effect to the issuance of any CB Common Stock
pursuant to the Stock Option Agreement.
In the event of any change in, or distributions in respect of, the CB
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares,
or the like, the type and number of shares of CB Common Stock subject to the
Option, and the applicable exercise price per Option Share, will be
appropriately adjusted in such manner as to fully preserve the economic benefits
provided under the Stock Option Agreement.
The Grantee may exercise the Option, in whole or in part, at any time
following the occurrence of a "Purchase Event" (as such term is defined below)
prior to the termination of the Option. The term "Purchase Event" is defined as
the occurrence of either of the following events:
(i) The acquisition by any person other than Grantee or any Grantee
Subsidiary (as such term is defined below) of beneficial ownership
of 25% or more of the then outstanding CB Common Stock; or
(ii) The occurrence of a "Preliminary Purchase Event" (as such term is
defined below) described in clause (i) below, except that the
percentage referred to in subclause (z) thereof shall be 25%.
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The term "Preliminary Purchase Event" is defined as the occurrence of any
of the following events or transactions:
(i) Issuer or any of its subsidiaries (each an "Issuer Subsidiary")
without having received Grantee's prior written consent, shall
have entered into an agreement to engage in an Acquisition
Transaction (as defined below) with any person (the term "person"
for purposes of the Stock Option Agreement having the meaning
assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act and the rules and regulations thereunder) other than Grantee
or any of its subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer shall have modified, amended or
withdrawn its recommendation or approval of the Merger Agreement
or recommended that the shareholders of Issuer approve or accept
any Acquisition Transaction with any person other than Grantee or
any Grantee Subsidiary. For purposes of the Stock Option
Agreement, "Acquisition Transaction" means (x) a merger or
consolidation, or any similar transaction, involving Issuer or any
of Issuer's bank subsidiaries ("Material Subsidiaries"), (y) a
purchase, lease or other acquisition of all or substantially all
of the assets of Issuer or any Material Subsidiary or (z) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer or a
Material Subsidiary; provided that the term "Acquisition
Transaction" does not include any internal merger or consolidation
involving only Issuer and/or Issuer Subsidiaries;
(ii) Any person (other than Grantee or any Grantee Subsidiary) shall
have acquired beneficial ownership or the right to acquire
beneficial ownership of 10% or more of the outstanding shares of
CB Common Stock (the term "beneficial ownership" for purposes of
the Stock Option Agreement having the meaning assigned thereto in
Section 13(d) of the Exchange Act, and the rules and regulations
thereunder);
(iii) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its shareholders, by
public announcement or written communication that is or becomes
the subject of public disclosure, to engage in an Acquisition
Transaction (including, without limitation, any situation in
which any person other than Grantee or any subsidiary of Grantee
shall have commenced (as such term is defined in Rule 14d-2
under the Exchange Act) or shall have filed a registration
statement under the Securities Act, with respect to, a tender
offer or exchange offer to purchase any shares of CB Common
Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares
of CB Common Stock (such an offer being referred to as a "Tender
Offer" or an "Exchange Offer", respectively));
(iv) After a proposal is made by a third party to Issuer or its
shareholders to engage in an Acquisition Transaction, Issuer
shall have breached any covenant or obligation contained in the
Merger Agreement and such breach would entitle Grantee to
terminate the Merger Agreement or the holders of CB Common Stock
shall not have approved the Merger Agreement at the meeting of
such shareholders held for the purpose of voting on the Merger
Agreement, such meeting shall not have been held or shall have
been canceled prior to termination of the Merger Agreement or
Issuer's Board of Directors shall have withdrawn or modified in a
manner adverse to Grantee the recommendation of Issuer's Board of
Directors with respect to the Merger Agreement; or
(v) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given
its prior written consent, shall have filed an application or
notice with the Federal Reserve Board or other governmental
authority or regulatory or administrative agency or commission for
approval to engage in an Acquisition Transaction.
At any time after the occurrence of a Purchase Event, Issuer shall, at the
request of Grantee (whether on its own behalf or on behalf of any subsequent
holder of the Option (or part thereof) or any of the shares of CB Common Stock
issued pursuant hereto), promptly prepare, file and keep current a shelf
registration statement
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under the Securities Act covering any shares issued and issuable pursuant to the
Option. Grantee shall have the right to demand two such registrations. The
foregoing registration rights are subject to certain limitations contained in
the Stock Option Agreement.
The Option terminates upon the earliest to occur of (i) the time
immediately prior to the Effective Time, (ii) 12 months after the first
occurrence of a Purchase Event, (iii) 18 months after the termination of the
Merger Agreement following the occurrence of a Preliminary Purchase Event, (iv)
termination of the Merger Agreement in accordance with the terms thereof prior
to the occurrence of a Purchase Event or a Preliminary Purchase Event (other
than a termination of the Merger Agreement by Citizens pursuant to Section
7.1(c)(i) thereof) or (v) 12 months after the termination of the Merger
Agreement by Citizens pursuant to Section 7.1(c)(i) thereof. The events
described in clauses (i)-(v) in the preceding sentence are collectively referred
to as an "Exercise Termination Event."
Upon the occurrence of a Purchase Event that occurs prior to an Exercise
Termination Event, (i) at the request (the date of such request being the
"Option Repurchase Request Date") of Grantee, Issuer shall repurchase the Option
from Grantee at a price (the "Option Repurchase Price") equal to the amount by
which (A) the market/offer price (as defined below) exceeds (B) the Option Price
(as defined in the Stock Option Agreement), multiplied by the number of shares
for which the Option may then be exercised and (ii) at the request (the date of
such request being the "Option Share Repurchase Request Date") of the owner of
Option Shares from time to time (the "Owner"), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the price per share of CB Common Stock at
which a tender offer or exchange offer therefor has been made after the date of
the Stock Option Agreement and on or prior to the Option Repurchase Request Date
or the Option Share Repurchase Request Date, as the case may be, (ii) the price
per share of CB Common Stock paid or to be paid by any third party pursuant to
an agreement with Issuer (whether by way of a merger, consolidation or
otherwise), (iii) the highest last sale price for shares of CB Common Stock
within the 360-day period ending on the Option Repurchase Request Date or the
Option Share Repurchase Request Date, as the case may be, listed on either the
OTC Bulletin Board, The Nasdaq Stock Market or such other principal market or
exchange on which the CB Common Stock is traded, (iv) in the event of a sale of
all or substantially all of Issuer's assets, the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized independent investment banking
firm selected by Grantee or the Owner, as the case may be, divided by the number
of shares of Common Stock of Issuer outstanding at the time of such sale.
In the event that prior to an Exercise Termination Event, Issuer shall
enter into an agreement (i) to consolidate or merge with any person, other than
Grantee or a Grantee Subsidiary, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any person, other
than Grantee or a Grantee Subsidiary, to merge into Issuer and Issuer shall be
the continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of CB Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property or the then outstanding shares of CB Common Stock shall after such
merger represent less than 50% of the outstanding shares and share equivalents
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its or any Material Subsidiary's assets to any person,
other than Grantee or a Grantee Subsidiary, then, the agreement governing such
transaction shall make proper provision so that the Option shall be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
Grantee, of either (x) the Acquiring Corporation (as defined below) or (y) any
person that controls the Acquiring Corporation (the Acquiring Corporation and
any such controlling person being hereinafter referred to as the "Substitute
Option Issuer").
The Substitute Option will be exercisable for such number of shares of the
Substitute Common Stock (as defined below) as is equal to the market/offer price
(as defined above) multiplied by the number of shares of CB Common Stock for
which the Option was theretofore exercisable, divided by the Average Price (as
defined below). The exercise price of the Substitute Option per share of the
Substitute Common Stock (the "Substitute Purchase Price") shall then be equal to
the Option Price multiplied by a fraction in which the
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numerator is the number of shares of CB Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares for which
the Substitute Option is exercisable. The Substitute Option shall otherwise have
the same terms as the Option, to the extent possible.
"Acquiring Corporation" is defined as (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing or surviving person,
and (iii) the transferee of all or any substantial part of the Issuer's assets
(or the assets of any of Issuer's Material Subsidiaries). "Substitute Common
Stock" is defined as the common stock issued by the Substitute Option Issuer
upon exercise of the Substitute Option. "Average Price" is defined as the
average closing price of a share of the Substitute Common Stock for the one year
immediately preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of the Substitute Common Stock
on the day preceding such consolidation, merger or sale; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be computed with
respect to a share of common stock issued by Issuer, the person merging into
Issuer or by any company which controls or is controlled by such merging person,
as Grantee may elect.
Neither of the Issuer nor the Grantee may assign any of its rights or
delegate any of its obligations under the Stock Option Agreement or the Option
to any other person without the express written consent of the other party,
except that Grantee may assign the Stock Option Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights under the Stock Option
Agreement in whole or in part after the occurrence of a Preliminary Purchase
Event; provided, however, that until the date at which the Federal Reserve Board
has approved an application by Grantee to acquire the shares of CB Common Stock
subject to the Option, Grantee may not assign its rights under the Option, other
than to a wholly owned subsidiary of Grantee, except in (i) a widely dispersed
public distribution, (ii) a private placement in which no one party acquires the
right to purchase in excess of 2% of the voting shares of Issuer, (iii) an
assignment to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board.
The rights and obligations of the Grantee and Issuer under the Stock Option
Agreement are subject to receipt of certain regulatory approvals and both
parties have agreed to use their reasonable efforts in connection with obtaining
such approvals. These include, without limitation, making application, if
necessary, for listing of the shares of CB Common Stock issuable hereunder on
any exchange or quotation system and applying to the Federal Reserve Board for
approval to acquire the shares issuable under the Stock Option Agreement.
EMPLOYEE BENEFITS AND PLANS
For purposes of crediting periods of service for eligibility and vesting,
but not for benefit accrual purposes, under Citizens' qualified defined benefit
pension plan and Citizens' Amended and Restated Section 401(k) Plan , and for
purposes of crediting periods of service for eligibility for other employee
benefits provided to employees of Citizens, employees of CB who otherwise would
be eligible to participate in such plans and benefit programs after the
Effective Time shall be given credit for service with CB prior to the Effective
Time.
NASDAQ LISTING
The Merger Agreement provides for the filing of a listing application with
the Nasdaq National Market covering the Citizens Common Stock issuable pursuant
to the Merger. It is a condition to the consummation of the Merger that such
shares of Citizens Common Stock be authorized for listing on the Nasdaq National
Market effective upon official notice of issuance.
EXPENSES
The Merger Agreement provides that Citizens and CB will each pay its own
expenses in connection with the Merger Agreement and the transactions
contemplated thereby, provided that Citizens and CB will divide equally all fees
and expenses, other than accountants, attorneys and filing fees, incurred in
connection with the
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printing and filing of this Joint Proxy Statement-Prospectus and the
Registration Statement of which this Joint Proxy Statement-Prospectus is a part.
DIVIDENDS
The Merger Agreement provides that Citizens and CB will coordinate the
declaration and payment of dividends in respect of Citizens Common Stock and CB
Common Stock, it being the intent of Citizens and CB that holders thereof will
not receive two dividends or fail to receive any dividend for any quarter in
which they would otherwise receive a dividend in the absence of the Merger. See
"The Merger -- Conduct Pending the Merger."
RESTRICTIONS ON SALES BY AFFILIATES
The Citizens Common Stock issued pursuant to the Merger will be freely
transferable under the Securities Act, except for shares issued to any person
who may be deemed to be an affiliate (an "Affiliate") of Citizens or CB, as the
case may be, for purposes of Rule 145 promulgated under the Securities Act
("Rule 145").
In addition to the transfer restrictions of Rule 145, Commission guidelines
regarding qualifying for the "pooling-of-interests" method of accounting limit
sales of shares of the acquiring and acquired company by affiliates of either
company in a business combination. Commission guidelines indicate further that
the "pooling-of-interests" method of accounting will generally not be challenged
on the basis of sales by affiliates of the acquiring or acquired company if they
do not dispose of any of the shares of the corporation they own or shares of a
corporation they receive in connection with a merger during the period beginning
30 days before the merger and ending when financial results covering at least 30
days of post-merger operations of the combined entity have been published.
Each of CB and Citizens has agreed in the Merger Agreement to use its best
efforts to cause each person who is an Affiliate (for purposes of Rule 145 and
for purposes of qualifying the Merger for "pooling-of-interests" accounting
treatment) of such party to deliver to Citizens a written agreement intended to
ensure compliance with the Securities Act and preserve the ability to treat the
Merger as a "pooling-of-interests."
Citizens has agreed in the Merger Agreement to use its best efforts to
publish not later than 90 days after the end of the first month after the
Effective Time in which there are at least 30 days of post-Merger combined
operations, combined sales and net income figures as contemplated by and in
accordance with the terms of the Commission's Accounting Series Release No. 135.
NO APPRAISAL RIGHTS
Under the MBCA, holders of Citizens Common Stock and CB Common Stock will
have no appraisal rights in connection with the Share Issuance or the Merger
Agreement and the consummation of the transactions contemplated thereby.
BOARD OF DIRECTORS AND OPERATIONS FOLLOWING THE MERGER
BOARD OF DIRECTORS
Citizens has agreed to take such action as may be necessary to increase the
Citizens Board by one, subsequent to the Effective Time, so that the Citizens
Board will consist of 18 persons divided into three classes of directors and to
cause one person designated by the CB Board and acceptable to Citizens to be
appointed to the Citizens Board. As of the date of this Joint Proxy
Statement-Prospectus, the director to be designated by the CB Board and
appointed to the Citizens Board has not been determined.
Citizens has also agreed to take such action as may be necessary to
increase the size of the board of Citizens Bank by two, subsequent to the
Effective time and to appoint to the Citizens Bank board of directors
46
<PAGE> 57
two individuals selected by the CB Board and acceptable to Citizens. As of the
date of this Joint Proxy Statement-Prospectus, the directors to be appointed to
the Citizens Bank board have not been determined.
OPERATIONS
Following the Merger, it is Citizens' current intention to cause the
immediate merger of each of the three banks owned by CB with and into Citizens
Bank, subject to required regulatory approvals, the receipt of which is not a
condition to, or required for, consummation of the Merger. Following such bank
mergers, it is currently intended that each merged bank will, from a business
perspective, be operated as a "Community Bank" with local management and
decision making authority and with local "Advisory" or "Community" boards of
directors.
While no assurances can be given, the combined entities expect to achieve
annualized pre-tax cost savings of approximately $9 million within 18 months
after closing this transaction. Such cost savings are expected to be realized
primarily through reductions in staff, elimination or consolidation of certain
branches, consolidation of administrative offices, and other redundant
back-office operations and staff functions. Branch closures and consolidations
are expected in each of CB's three primary market areas due to over capacity in
the traditional retail delivery network and the non-optimal locations of some of
the branches. The extent to which cost savings will be achieved is dependent
upon various factors beyond the control of the combined entities, including the
regulatory environment, inflation, economic conditions and unanticipated changes
in business conditions. Therefore, no assurance can be given with respect to the
ultimate level of cost savings to be realized, or that such savings will be
realized in the time-frame currently anticipated.
The combined entities also anticipate that they will incur one-time merger
expenses and restructuring charges in connection with the Merger. Further such
Merger transaction costs would consist primarily of investment banking, legal
and accounting fees. Restructuring charges would include (a) severance payments
associated with the consolidation or elimination of various functions, (b)
facilities costs estimated to be incurred as a result of the elimination of
duplicate operations facilities and from branches to be closed, (c) systems and
operations costs, consisting primarily of equipment and software write-offs, and
(d) other charges, including the write-down or write-off of various assets.
Although no revenue enhancements were factored into the analysis of the
proposed combination, Citizens believes revenue enhancements are likely to
result through enhanced product offerings and services to CB's existing and
potential customer base.
CERTAIN FORWARD-LOOKING INFORMATION
This Joint Proxy Statement-Prospectus contains certain forward-looking
information that is subject to risks and uncertainties. Forward-looking
information also includes statements concerning possible or assumed future
results of the combined companies or the benefits of the Merger, including those
set forth under "The Merger -- Recommendation of the Citizens Board and Reasons
for the Merger" and "Board of Directors and Operations Following the Merger --
Operations." The following important factors, in addition to those discussed
elsewhere in this document and in the documents incorporated by reference, could
cause actual results to differ materially from any such results which might be
forecast, estimated or budgeted in forward-looking information. All of such
factors are difficult to predict and many are beyond the control of Citizens and
CB. These important factors include: (a) future economic conditions in the
regional and national markets in which the companies compete; (b) financial
market conditions, including, but not limited to, changes in interest rates; (c)
changing competition; (d) the ability to enter new markets successfully and
capitalize on growth opportunities; and (e) adverse changes in applicable law,
regulations or rules governing environmental, tax or accounting matters.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of CB's management and the CB Board, and Citizens'
management and the Citizens Board, respectively, may be deemed to have certain
interests in the Merger that are in addition to their
47
<PAGE> 58
interests as shareholders of CB or Citizens, as the case may be, generally. The
CB Board and the Citizens Board were aware of these interests and considered
them, among other matters, in approving the Merger Agreement and the
transactions contemplated thereby.
The directors, officers and principal shareholders of CB and their
associates may have had in the past, and expect to have in the future,
transactions in the ordinary course of business with Citizens and its
subsidiaries. Such transactions were, and are expected to be, on substantially
the same terms as those prevailing at the time for comparable transactions with
others.
NEW DIRECTORS
The Merger Agreement provides that, from and after the Effective Time, the
Citizens Board will be increased by one and that one person designated by the CB
Board and acceptable to Citizens will be appointed to the Citizens Board.
Citizens has also agreed to take such action as may be necessary to increase the
size of the Citizens Bank board of directors by two, subsequent to the Effective
Time, and to appoint to such board two persons selected by the CB Board and
acceptable to Citizens. As of the date of this Joint Proxy Statement-Prospectus,
the directors to be appointed to the Citizens Board and the Citizens Bank board
of directors have not been determined.
DIRECTORS' AND OFFICERS' INDEMNIFICATION
Citizens has agreed to indemnify the present and former directors and
officers of CB and its subsidiaries for certain losses. See "The Merger --
Indemnification."
RETIREMENT PLANS
For purposes of crediting periods of service for eligibility and vesting,
but not for benefit accrual purposes, under Citizens' qualified defined benefit
pension plan and Citizens' Amended and Restated Section 401(k) Plan , and for
purposes of crediting periods of service for eligibility for other employee
benefits provided to employees of Citizens, employees of CB who otherwise would
be eligible to participate in such plans and benefit programs after the
Effective Time shall be given credit for service with CB prior to the Effective
Time.
EMPLOYMENT AND OTHER AGREEMENTS
CB entered into an employment agreement with Brian D. Bell on October 22,
1996 for a term ending on September 1, 1999, which provides for the payment of a
salary of not less than $136,377 per year. Mr. Bell is also eligible to
participate in any other compensation and benefit plans generally available to
executive employees of CB of like grade and salary, including, but not limited
to, retirement plans, group life, disability, accidental death and
dismemberment, travel and accident, health and dental insurance plans and stock
option plans. The employment agreement also provides for Mr. Bell's use of an
automobile, which shall be transferred to Mr. Bell upon the expiration of the
term of the employment agreement or termination of Mr. Bell's employment
following a change in control or for any reason other than cause. Mr. Bell's
employment agreement provides that if there is a change in control and either
(a) Mr. Bell's employment is terminated other than with cause; or (b) Mr. Bell
resigns from his employment following a material change in his title,
authorities or duties in effect immediately prior to the change in control, a
reduction in his compensation or benefits, or a change in his principal place of
employment without his consent to a city different from the city which is the
principal place of employment immediately prior to the change in control, then
Mr. Bell is entitled to receive his salary then in effect, but in no event less
than $136,377 per year for the remainder of the term of his employment
agreement. Mr. Bell is also entitled to actively participate, or receive the
value of active participation in the aforementioned compensation and benefit
plans. The transactions contemplated by the Merger Agreement will result in a
change in control for purposes of Mr. Bell's employment agreement. Assuming Mr.
Bell resigned or was terminated from his employment as described above on July
1, 1997, following an assumed consummation of the Merger, the value of salary,
compensation and benefit payments under Mr. Bell's employment agreement is
estimated to be approximately $564,109.
48
<PAGE> 59
CB has entered into a Change of Control Agreement (the "Control Agreement")
with Steven W. Seely. Under the Control Agreement, if Mr. Seely is involuntarily
terminated other than for cause, if his duties are or his principal place of
employment is changed or if his compensation is reduced during a period of up to
two years following a change of control of CB, CB will pay Mr. Seely a specified
severance amount. Under the Control Agreement, the severance amount will equal
two times the greater of Mr. Seely's annual base salary upon the change of
control or upon termination, plus continuation of medical and dental insurance
coverage for 24 months. The transactions contemplated by the Merger Agreement,
followed by the termination of Mr. Seely's employment or resignation, may
trigger the obligation to pay the amounts specified in the Control Agreement.
Based on Mr. Seely's current annual base salary, the value of the severance
benefits payable under the Control Agreement is estimated to be approximately
$361,250 (which includes costs associated with the continuation of medical and
dental insurance coverage for 24 months).
DIRECTOR DEFERRAL PLAN
CB will terminate the CB Financial Corporation Nonqualified and Deferred
Compensation Plan for Independent Directors (the "Director Plan") and the
deferred compensation agreements between CB or its subsidiaries and any of their
directors (the "Deferred Compensation Agreements") as of the Effective Date. Any
Participant (as defined in the Director Plan) in the Director Plan as of the
Effective Time shall (i) be considered to be a participant under Citizens'
Second Amended and Restated Director Deferred Compensation Plan, as amended (the
"Citizens Director Plan") and (ii) have the balance of his or her Deferred
Compensation Account (as defined in the Director Plan) immediately credited for
the benefit of such Participant in the Citizens Director Plan. Thereafter, each
such Participant will be deemed a participant under the Citizens Director Plan.
Any options outstanding at the time of the termination of the Director Plan
shall not be affected by such termination but, to the extent not exercised,
shall be treated as provided in the Merger Agreement. See "The Merger --
Treatment of Options." Except as provided in the Merger Agreement, the
termination of the Director Plan will not affect any amounts, reflected in the
books and records of CB, (i) due to each participant in the Director Plan and
(ii) due to each director, who has entered into a Deferred Compensation
Agreement under such plan.
CB OPTIONS
The Merger Agreement provides that immediately prior to or at the Effective
Time, each outstanding option granted under the Option Plans, shall be canceled,
and each option, whether or not then vested or exercisable, shall be converted
into the right to receive shares of Citizens Common Stock as described under
"The Merger -- Treatment of Options."
49
<PAGE> 60
The following table sets forth, with respect to the executive officers and
directors of CB, (i) the number of CB shares subject to options held by such
persons, (ii) the number of shares of Citizens Common Stock into which such
options will be converted and (iii) the value of such Citizens Common Stock,
based on the per share closing price of Citizens Common Stock of $32.25 as of
May 9, 1997.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF VALUE OF
OPTION HOLDER OPTION SHARES CITIZENS SHARES CITIZENS SHARES
- ------------- ------------- --------------- ---------------
<S> <C> <C> <C>
Brian D. Bell........................................ 15,805 7,453.72 $240,382.55
Steven W. Seely...................................... 2,500 1,358.16 43,800.63
James E. Burtch...................................... 996 521.79 16,827.67
Francis B. Flanders.................................. 4,858 2,306.67 74,390.25
A. Wayne Klump....................................... 3,039 1,433.21 46,221.04
Harold P. Andrews.................................... 1,199 694.69 22,403.65
Douglas L. Burdick................................... 2,508 1,485.01 47,891.54
James N. Franklin.................................... 1,209 672.84 21,699.11
Sherwood M. Furman................................... 1,886 1,104.96 35,634.82
Alvin L. Glick....................................... 1,946 1,171.37 37,776.78
Stephen L. Lazaroff.................................. 1,758 929.11 29,963.85
Phillip G. Miller.................................... 954 455.89 14,702.57
Monte R. Storey...................................... 2,224 1,336.87 43,114.04
</TABLE>
50
<PAGE> 61
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheets as of
March 31, 1997, and the pro forma condensed combined statements of income for
the three-month periods ended March 31, 1996 and 1997, and for each of the three
years in the period ended December 31, 1996, give effect to the Merger,
accounted for as a pooling-of-interests. This pro forma information is based on
the historical consolidated financial statements of Citizens and CB and their
subsidiaries under the assumptions and adjustments set forth in the accompanying
notes to the unaudited pro forma condensed combined financial statements. Pro
forma per share amounts are based on the conversion rate of 1.489 shares of
Citizens Common Stock for each share of CB Common Stock. The pro forma condensed
combined financial statements, which include results of operations as if the
Merger had been consummated on January 1, 1994, do not reflect Merger expenses
and restructuring charges expected to be incurred by Citizens and CB, or the
anticipated cost savings. As a result, the pro forma combined financial
condition and results of operations of Citizens as of and after the Effective
Time may not be indicative of the results that actually would have occurred if
the Merger had been in effect during the periods presented or which may be
attained in the future.
This pro forma information should be read in conjunction with the
historical consolidated financial statements of Citizens and CB, including their
respective notes thereto, which are incorporated by reference in this Joint
Proxy Statement-Prospectus, and in conjunction with the consolidated historical
financial statement and pro forma financial data, including the notes thereto,
appearing elsewhere in this Joint Proxy Statement-Prospectus. See "Information
Incorporated by Reference." The pro forma financial information presented is not
necessarily indicative of actual results that would have occurred had the Merger
been consummated on March 31, 1997 or at the beginning of the year ended
December 31, 1994, or that may be obtained in the future.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF MARCH 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
CITIZENS CB PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks........................... $ 132,874 $ 35,906 $ -- $ 168,780
Money market investments.......................... 12,075 1,878 13,953
Investment securities available-for-sale.......... 598,976 125,147 724,123
Total loans....................................... 2,643,670 619,807 3,263,477
Less: Allowance for loan losses................... (36,975) (6,798) (43,773)
---------- -------- -------- ----------
Net loans......................................... 2,606,695 613,009 3,219,704
Premises and equipment............................ 60,202 13,012 73,214
Cost in excess of net assets acquired and premium
on core deposits, net........................... 63,546 8,476 72,022
Other assets...................................... 45,424 12,166 57,590
---------- -------- -------- ----------
TOTAL ASSETS.................................. $3,519,792 $809,594 $ -- $4,329,386
========== ======== ======== ==========
LIABILITIES
Noninterest-bearing deposits...................... $ 450,782 $100,838 $ -- $ 551,620
Interest-bearing deposits......................... 2,471,897 608,467 3,080,364
---------- -------- -------- ----------
Total deposits................................ 2,922,679 709,305 3,631,984
Short-term borrowings............................. 163,952 12,120 176,072
Other liabilities................................. 43,417 9,288 52,705
Long-term debt and capital leases................. 71,662 2,214 73,876
---------- -------- -------- ----------
Total Liabilities............................. 3,201,710 732,927 3,934,637
SHAREHOLDERS' EQUITY
Preferred stock................................... -- -- --
Common stock...................................... 89,380 21,008 (21,008)(1) 118,461
29,081 (1)
Capital surplus................................... -- 8,073 (8,073)(1) --
Retained earnings................................. 230,593 49,213 279,806
Net unrealized gain (loss) on securities
available-for-sale, net of tax.................. (1,891) (1,627) (3,518)
---------- -------- -------- ----------
Total Shareholders' Equity.................... 318,082 76,667 -- 394,749
---------- -------- -------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $3,519,792 $809,594 $ -- $4,329,386
========== ======== ======== ==========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
51
<PAGE> 62
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS CB PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................ $ 56,312 $ 13,096 $ 69,408
Interest and dividends on investment securities........... 8,571 2,037 10,608
Interest on money market investments...................... 201 22 223
---------- --------- ----------
Total interest income................................ 65,084 15,155 80,239
---------- --------- ----------
INTEREST EXPENSE
Interest on deposits...................................... 24,243 6,427 30,670
Interest on short-term borrowings......................... 1,966 244 2,210
Interest on long-term debt and capital leases............. 1,428 43 1,471
---------- --------- ----------
Total interest expense............................... 27,637 6,714 34,351
---------- --------- ----------
NET INTEREST INCOME....................................... 37,447 8,441 45,888
Provision for loan losses................................. 2,145 1,065 3,210
---------- --------- ----------
Net interest income after provision for loan
losses............................................. 35,302 7,376 42,678
NONINTEREST INCOME........................................ 9,696 1,672 11,368
NONINTEREST EXPENSE....................................... 32,062 6,585 38,647
---------- --------- ----------
Income before income taxes................................ 12,936 2,463 15,399
Income taxes.............................................. 3,728 782 4,510
---------- --------- ----------
NET INCOME................................................ $ 9,208 $ 1,681 $ 10,889
========== ========= ==========
PER COMMON SHARE DATA:(2)
NET INCOME:
Primary.............................................. $ 0.63 $ 0.60 $ 0.58
Fully diluted........................................ $ 0.63 $ 0.60 $ 0.57
AVERAGE COMMON SHARES:
Primary.............................................. 14,634,949 2,815,042 18,839,486
Fully Diluted........................................ 14,652,835 2,815,042 19,157,372
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
52
<PAGE> 63
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS CB PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................ $ 53,136 $ 10,008 $ 63,144
Interest and dividends on investment securities........... 8,048 3,023 11,071
Interest on money market investments...................... 1,785 56 1,841
---------- --------- ----------
Total interest income................................ 62,969 13,087 76,056
---------- --------- ----------
INTEREST EXPENSE
Interest on deposits...................................... 24,145 5,245 29,390
Interest on short-term borrowings......................... 1,722 67 1,789
Interest on long-term debt and capital leases............. 1,857 74 1,931
---------- --------- ----------
Total interest expense............................... 27,724 5,386 33,110
---------- --------- ----------
NET INTEREST INCOME....................................... 35,245 7,701 42,946
Provision for loan losses................................. 1,771 265 2,036
---------- --------- ----------
Net interest income after provision for loan
losses............................................. 33,474 7,436 40,910
NONINTEREST INCOME........................................ 9,540 2,078 11,618
NONINTEREST EXPENSE....................................... 30,824 6,722 37,546
---------- --------- ----------
Income before income taxes................................ 12,190 2,792 14,982
Income taxes.............................................. 3,449 876 4,325
---------- --------- ----------
NET INCOME................................................ $ 8,741 $ 1,916 $ 10,657
========== ========= ==========
PER COMMON SHARE DATA:(2)
NET INCOME:
Primary.............................................. $ 0.60 $ 0.68 $ 0.56
Fully diluted........................................ $ 0.60 $ 0.68 $ 0.56
AVERAGE COMMON SHARES:
Primary.............................................. 14,675,356 2,803,746 18,875,612
Fully Diluted........................................ 14,677,184 2,803,746 18,877,440
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
53
<PAGE> 64
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS CB PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans.............................. $219,266 $45,898 $265,164
Interest and dividends on investment securities......... 33,133 10,297 43,430
Interest on money market investments.................... 3,515 251 3,766
---------- --------- ----------
Total interest income................................ 255,914 56,446 312,360
---------- --------- ----------
INTEREST EXPENSE
Interest on deposits.................................... 96,035 23,150 119,185
Interest on short-term borrowings....................... 7,466 539 8,005
Interest on long-term debt and capital leases........... 6,297 249 6,546
---------- --------- ----------
Total interest expense............................... 109,798 23,938 133,736
---------- --------- ----------
NET INTEREST INCOME....................................... 146,116 32,508 178,624
Provision for loan losses................................. 8,334 3,792 12,126
---------- --------- ----------
Net interest income after provision for loan losses....... 137,782 28,716 166,498
NONINTEREST INCOME........................................ 40,530 7,577 48,107
NONINTEREST EXPENSE....................................... 125,986 29,152 155,138
---------- --------- ----------
Income before income taxes................................ 52,326 7,141 59,467
Income taxes.............................................. 14,905 2,137 17,042
---------- --------- ----------
Net income................................................ $ 37,421 $ 5,004 $ 42,425
========== ========= ==========
PER COMMON SHARE DATA:(2)
NET INCOME:
Primary.............................................. $2.55 $1.79 $2.25
Fully diluted........................................ $2.55 $1.79 $2.24
AVERAGE COMMON SHARES:
Primary.............................................. 14,666,146 2,803,364 18,869,595
Fully Diluted........................................ 14,696,805 2,803,364 18,900,254
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
54
<PAGE> 65
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS CB PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................ $ 201,242 $ 36,355 $ 237,597
Interest and dividends on investment securities........... 31,934 13,587 45,521
Interest on money market investments...................... 7,424 550 7,974
---------- --------- ----------
Total interest income................................ 240,600 50,492 291,092
---------- --------- ----------
INTEREST EXPENSE
Interest on deposits...................................... 88,157 19,173 107,330
Interest on short-term borrowings......................... 7,221 440 7,661
Interest on long-term debt and capital leases............. 7,727 371 8,098
---------- --------- ----------
Total interest expense............................... 103,105 19,984 123,089
---------- --------- ----------
NET INTEREST INCOME....................................... 137,495 30,508 168,003
Provision for loan losses................................. 6,441 672 7,113
---------- --------- ----------
Net interest income after provision for loan
losses............................................. 131,054 29,836 160,890
NONINTEREST INCOME........................................ 36,434 6,315 42,749
NONINTEREST EXPENSE....................................... 121,087 29,383 150,470
---------- --------- ----------
Income before income taxes................................ 46,401 6,768 53,169
Income taxes.............................................. 12,805 2,152 14,957
---------- --------- ----------
NET INCOME................................................ $ 33,596 $ 4,616 $ 38,212
========== ========= ==========
PER COMMON SHARE DATA:(2)
NET INCOME:
Primary.............................................. $ 2.31 $ 1.65 $ 2.04
Fully diluted........................................ $ 2.30 $ 1.65 $ 2.03
AVERAGE COMMON SHARES:
Primary.............................................. 14,574,871 2,803,437 18,773,022
Fully Diluted........................................ 14,611,736 2,803,437 18,809,887
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
55
<PAGE> 66
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS CB PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................ $ 144,263 $ 28,825 $ 173,088
Interest and dividends on investment securities........... 33,293 16,232 49,525
Interest on money market investments...................... 2,433 428 2,861
---------- --------- ----------
Total interest income................................ 179,989 45,485 225,474
---------- --------- ----------
INTEREST EXPENSE
Interest on deposits...................................... 56,020 15,134 71,154
Interest on short-term borrowings......................... 5,115 228 5,343
Interest on long-term debt and capital leases............. 454 517 971
---------- --------- ----------
Total interest expense............................... 61,589 15,879 77,468
---------- --------- ----------
NET INTEREST INCOME....................................... 118,400 29,606 148,006
Provision for loan losses................................. 5,303 534 5,837
---------- --------- ----------
Net interest income after provision for loan
losses............................................. 113,097 29,072 142,169
NONINTEREST INCOME........................................ 33,854 7,031 40,885
NONINTEREST EXPENSE....................................... 107,245 26,522 133,767
---------- --------- ----------
Income before income taxes................................ 39,706 9,581 49,287
Income taxes.............................................. 10,292 2,987 13,279
---------- --------- ----------
NET INCOME................................................ $ 29,414 $ 6,594 $ 36,008
========== ========= ==========
PER COMMON SHARE DATA:(2)
NET INCOME:
Primary.............................................. $ 2.03 $ 2.35 $ 1.93
Fully diluted........................................ $ 2.03 $ 2.35 $ 1.93
AVERAGE COMMON SHARES:
Primary.............................................. 14,463,068 2,803,158 18,652,840
Fully Diluted........................................ 14,511,706 2,803,158 18,701,478
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
56
<PAGE> 67
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(1) Pro forma adjustments to common shares and capital surplus at March 31, 1997
reflect the combination of Citizens and CB, accounted for as a
pooling-of-interests, through the exchange of 4,170,768 Citizens Common
Shares for all 2,801,053 outstanding shares of CB Common Stock at an
exchange ratio of 1.489 Citizens Common Shares for each share of CB Common
Stock. Further, an additional 33,769 shares of Citizens Common Stock will be
issued as payment for stock options previously issued by CB. This additional
number of shares assumes a Final Parent Stock Price for Citizens Common
Stock of $37.96 per share (the "Ceiling Price"). Under generally accepted
accounting principles ("GAAP"), the assets and liabilities of CB will be
combined with those of Citizens at book values. In addition, the statements
of income of CB will be combined with the statements of income of Citizens
on a retroactive basis to January 1, 1994.
(2) Pro forma weighted average shares outstanding for the three-month periods
ended March 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1996 reflect (a) the issuance of 1.489 Citizens Common
Shares for each share of CB Common Stock and (b) the issuance of additional
shares of Citizens Common Stock for the exercise of all stock options
previously issued by CB. This additional number of shares (33,769 and 29,488
on average for the three-month periods ended March 31, 1997 and 1996,
respectively; 32,681 on average in 1996; 27,383 on average in 1995 and
19,004 on average in 1994) assumes a Final Parent Stock Price for Citizens
Common Stock of $37.96 per share (the "Ceiling Price").
(3) The pro forma condensed combined financial statements do not reflect Merger
expenses and certain restructuring charges. Merger transaction costs consist
primarily of investment banking, legal and accounting fees. Restructuring
charges include (a) severance payments associated primarily with the
consolidation or elimination of various functions, (b) facilities costs
estimated to be incurred as a result of the elimination of duplicate
operations facilities and from branches to be closed, (c) systems and
operations costs, consisting primarily of equipment and software write-offs,
and (d) other charges, including the write-down or write-off of various
assets. The pro forma financial data do not give effect to the anticipated
cost savings in connection with the Merger from the consolidation of
operations and improved efficiencies of Citizens and CB.
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DESCRIPTION OF CITIZENS CAPITAL STOCK
GENERAL
Under the Citizens Articles, Citizens' authorized capital stock consists of
40,000,000 shares of Citizens Common Stock and 5,000,000 shares of preferred
stock (the "Citizens Preferred Stock"), of which 200,000 shares have been
designated as Series A Preferred Stock. The Citizens Common Stock and Citizens
Preferred Stock are collectively referred to as the "Citizens Capital Stock." At
May 2, 1997, no shares of Citizens Preferred Stock, including the Series A
Preferred Stock, were currently issued or outstanding, 14,377,411 shares of
Citizens Common Stock were outstanding (excluding treasury shares) and 1,203,595
shares of Citizens Common Stock were issuable upon the exercise or conversion of
options, warrants or convertible securities issuable by Citizens.
The Citizens Articles contain specific provisions with respect to the
election of directors, which include the provision that the Citizens Board is
divided into three classes, each having a number of directors as nearly equal as
possible, and each class being elected for a three-year term, with one class
being elected each year. The Citizens Articles also include specific provisions
with respect to mergers and other business combinations. See "Comparison of
Shareholders' Rights -- Provisions Relating to Directors" and "-- Certain
Business Combinations."
CITIZENS COMMON STOCK
Dividend Rights. Subject to any prior rights of outstanding Citizens
Preferred Stock, holders of the Citizens Common Stock are entitled to receive
such dividends as are declared by the Citizens Board out of funds legally
available for that purpose.
Voting Rights -- Non-Cumulative Voting. Subject to the voting rights, if
any, of the Citizens Preferred Stock, all voting rights are vested in the
holders of shares of Citizens Common Stock, each share being entitled to one
vote.
The shares of Citizens Common Stock have non-cumulative voting rights,
which means that the holders of more than 50% of the shares of Citizens Common
Stock voting for the election of directors can elect 100% of the directors
standing for election at any meeting if they choose to do so and, in such event,
the holders of the remaining shares voting for the election of directors will
not be able to elect any person or persons to the Citizens Board at that
meeting.
Liquidation Rights. Subject to the rights of the Citizens Preferred Stock,
in the event of liquidation, the holders of the Citizens Common Stock will be
entitled to receive pro rata any assets distributable to shareholders in respect
of shares held by them.
Preemptive Rights. Holders of Citizens Common Stock do not have any right
to subscribe to any additional securities which may be issued by Citizens.
Accordingly, holders of Citizens Common Stock have no statutory right to
purchase a proportionate share of any new Citizens Common Stock or other
securities issued by Citizens.
Other Matters. The Citizens Common Stock does not have any redemption
provisions applicable thereto, and all outstanding shares are, and the shares to
be issued to holders of CB Common Stock upon the consummation of the Merger will
be, fully paid and non-assessable.
Restrictions on Ownership. The BHC Act requires any "bank holding company"
(as defined in the BHC Act) to obtain the approval of the Federal Reserve Board
prior to the acquisition of 5% or more of the Citizens Common Stock. Any person
other than a bank holding company is required to obtain prior approval of the
Federal Reserve Board to acquire 10% or more of the Citizens Common Stock under
the Change in Bank Control Act (the "CBC Act"). Any holder of 25% or more of the
Citizens Common Stock (or a holder of 5% or more if such holder otherwise
exercises a "controlling influence" over Citizens) is subject to regulation as a
bank holding company under the BHC Act.
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CITIZENS PREFERRED STOCK
The Citizens Board is empowered by the Citizens Articles, without further
action by the Citizens shareholders, to determine the stated value per share of
the Citizens Preferred Stock and to divide and redivide the Citizens Preferred
Stock into series and to designate and redesignate the rights, preferences and
limitations of each series.
The Citizens Board has acted pursuant to this power, designating 200,000
shares as "Series A Preferred Stock," with the rights, preferences and
limitations provided for in a Certificate of Designations filed July 26, 1990
with the Michigan Department of Consumer and Industry Services, the provisions
of which thereby became a part of Citizens' Articles. Shares of the Series A
Preferred Stock are reserved for issuance pursuant to rights distributed to
holders of Citizens Common Stock pursuant to a Rights Agreement dated July 20,
1990 between Citizens and Citizens Bank (the "Citizens Rights Agreement"). The
rights are not currently exercisable. See "Comparison of Shareholders' Rights --
Citizens Rights Agreement." No shares of Citizens Preferred Stock have been
issued.
Shares of Citizens Preferred Stock redeemed or acquired by Citizens have
the status of authorized and unissued shares of Citizens Preferred Stock,
without designation as to series, and may be reissued by the Citizens Board. The
ability of the Citizens Board to issue Citizens Preferred Stock without
shareholder approval might have the effect of making more difficult any change
in control of Citizens.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF CITIZENS' BYLAWS
Certain provisions of the Citizens Bylaws summarized in the following
paragraphs may be deemed to have an anti-takeover effect and may delay, defer or
prevent a tender offer or takeover attempt that a shareholder might consider to
be in his or her best interest, including those attempts that might result in a
premium over the market price for the Citizens Common Stock held by
shareholders.
Special Meeting of Shareholders. The Citizens bylaws provide that special
meetings of shareholders may be called only by the Chairman of the Citizens
Board or the President and shall be called upon the request of a majority of
directors or at least two-thirds of the outstanding voting stock.
Advance Notice Requirements for Director Nominations. Citizens Bylaws
provide that shareholders seeking to nominate candidates for election as
directors at an annual or special meeting of shareholders, must provide timely
notice thereof in writing. These provisions may preclude some shareholders from
making nominations for directors at an annual or special meeting. For a more
complete description of the provisions of Citizens' Bylaws regarding these
matters, see "Comparison of Shareholders' Rights -- Shareholder Meetings" and
"-- Provisions Relating to Directors."
COMPARISON OF SHAREHOLDERS' RIGHTS
GENERAL
In the event the Merger is consummated, shareholders of CB whose shares of
CB Common Stock are converted into shares of Citizens Common Stock will become
shareholders of Citizens. The rights of Citizens shareholders are governed by
the Citizens Articles and the Citizens Bylaws (collectively, the "Citizens
Charter Documents"), the Citizens Rights Agreement and the MBCA. Currently, the
rights of CB shareholders are governed by the CB Articles and the CB Bylaws
(collectively, the "CB Charter Documents") and the MBCA.
There are differences between the Citizens Charter Documents and Citizens
Rights Agreement, on the one hand, and the CB Charter Documents, on the other,
which affect shareholders' rights. Certain differences between the rights of
holders of Citizens Common Stock and the rights of holders of CB Common Stock
are described and summarized below. The following discussion is not intended to
be relied upon as an exhaustive list or a detailed description of such
differences and is not intended to constitute a detailed comparison or
description of the provisions of the Citizens Charter Documents, Citizens Rights
Agreement, the CB Charter Documents, or the MBCA. The following discussion is
qualified in its entirety by reference to such
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documents, agreement, and the MBCA, and holders of CB Common Stock are referred
to the complete text of such documents, agreement and laws.
SHAREHOLDER MEETINGS
Special Meetings. The Citizens Bylaws provide that a special meeting of
Citizens shareholders may be called by the Chairman of the Citizens Board or by
the President and shall be called by the President or Secretary upon the request
in writing of a majority of the directors of Citizens, or at the request in
writing of shareholders owning, in the aggregate, at least two-thirds of the
entire capital stock of Citizens issued and outstanding and entitled to vote at
such special meeting. The request must state the purpose or purposes of the
proposed meetings, and the business transacted at any special meeting of
shareholders shall be limited to the purposes stated in Citizens' notice of
meeting delivered to shareholders. The CB Bylaws provide that a special meeting
of CB shareholders may be called by the CB Board, the Chairman of the CB Board
or the President and shall be called by the President or Secretary at the
written request of shareholders holding a majority of the shares of stock of CB
outstanding and entitled to vote, which request shall state the purpose or
purposes for which the meeting is to be called.
Inspectors of Election. The CB Bylaws provide that the CB Board, in advance
of a shareholders' meeting, may, and on request of a shareholder entitled to
vote shall, appoint one or more inspectors to appear and act at the meeting. The
Citizens Charter Documents do not contain a similar provision.
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS
The Citizens Articles provide that any action by shareholders that may be
taken at a meeting of shareholders may be taken without a meeting, without prior
notice, and without a vote if a consent in writing setting forth the action so
taken is signed by the holders of not less than two-thirds of the outstanding
capital stock entitled to vote. The CB Articles provide that any action that may
be taken at a meeting of shareholders may be taken without a meeting, without
prior notice, and without a vote, if a consent or consents in writing, setting
forth the action so taken is signed by the holders of outstanding stock having
no less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted.
CERTAIN BUSINESS COMBINATIONS
The Citizens Articles provide that the affirmative vote of the holders of
not less than two-thirds of the Citizens shares entitled to vote and the holders
of not less than a majority of the outstanding shares entitled to vote excluding
all such shares beneficially owned by a Related Person (as defined below) is
required to approve certain Business Combinations (as defined below) involving a
Related Person. This vote is not required if the Business Combination is
approved by a 75% vote of the Continuing Directors (as defined below) of
Citizens before or after the Related Person acquired such status, or if certain
conditions relating to the price to be paid in the Business Combination and
certain procedural requirements are met. The term "Business Combination"
includes: (i) any merger, consolidation or share exchange of Citizens or any
subsidiary; (ii) sale, lease, exchange, mortgage, pledge, transfer or other
disposition of all or a Substantial Part (as defined in the Citizens Articles)
of the assets of Citizens or any subsidiary; plus certain other transactions.
The term "Related Person" means a person owning beneficially, as defined in the
Citizens Articles, 10% or more of the outstanding shares of any class or series
of capital stock of Citizens. "Continuing Director" means a director who was a
director of Citizens immediately before the Related Person acquired such status
or who has been designated, before election as a director, as a Continuing
Director by a majority of the then Continuing Directors. These provisions of the
Citizens Articles are not applicable if Citizens is subject generally or with
respect to a specific transaction to the provisions of Chapter 7A of the MBCA.
Chapter 7A contains supermajority voting requirements for certain transactions
with persons who own more than 10% of the outstanding voting capital stock of a
Michigan corporation. Citizens is not now subject to the provisions of Chapter
7A of the MBCA, but the Board of Directors could elect to subject Citizens to
Chapter 7A in the future.
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The CB Articles provide that an affirmative vote or consent of holders of
not less than two-thirds of the outstanding shares of stock entitled to vote in
elections of directors is required to approve the merger or consolidation of CB
or any subsidiary with or into any other person, to authorize any sale, lease,
transfer, exchange, mortgage, pledge or other disposition to any other person of
all or substantially all of the assets of CB or any subsidiary, or to authorize
the issuance or transfer by CB or any subsidiary of any voting securities or any
securities convertible into voting securities of CB or any subsidiary in
exchange or payment for the securities or assets of any other person, if as of
the record date for the determination of shareholders entitled to notice and to
vote, the other person is, or at any time within the preceding twelve months has
been, the beneficial owner of five percent or more of the outstanding shares of
stock of CB entitled to vote in elections of directors.
The supermajority provision discussed above does not apply to (i) any
transaction in which the CB Board by resolution approves a memorandum of
understanding with the other person, setting forth the principal terms of the
transaction, provided that a majority of those directors voting in favor of the
resolution were duly elected and acting members of the CB Board prior to the
time that the other person became the beneficial owner of five percent or more
of the outstanding stock of CB; or (ii) any transaction in which a majority of
the outstanding shares of all classes of stock entitled to vote in elections of
directors is owned of record or beneficially by CB or its subsidiaries.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
The Citizens Articles provide that any amendment, change or repeal of the
provisions of the Citizens Articles relating to (i) size and classification of
the Citizens Board, (ii) certain amendments of the Citizens Bylaws proposed by
any shareholder of Citizens relating to the calling of special meetings of
shareholders, nomination of director candidates, and removal of directors, (iii)
Business Combinations, and (iv) actions of shareholders by written consent, must
be approved by a vote of at least two-thirds of the then outstanding shares of
capital stock entitled to vote (and, with respect to amending provisions
relating to Business Combinations, a majority of the shares of capital stock
entitled to vote of which a Related Person is not a beneficial owner); provided,
however, that such voting requirements are not required for any proposed
amendment, change, or repeal recommended to shareholders by not less than 75% of
the Citizens Board then in office (or with respect to proposals relating to
Business Combinations, 75% of the Continuing Directors), and in such case only
the vote required by the MBCA will be required. The Citizens Board may amend the
Citizens Bylaws not inconsistent with the provisions of the Citizens Articles.
The CB Articles require the affirmative vote or consent of the holders of
not less than two-thirds of the outstanding shares of CB Common Stock entitled
to vote in elections of directors in order to amend, modify or repeal certain
provisions of the CB Articles related to merger transactions, classification of
the CB Board, removal of directors only for cause, or an amendment to the CB
Bylaws unless a majority of the CB Board recommends to the shareholders the
adoption of the amendment, modification, or repeal (in which case only a
majority of the outstanding shares of CB Common Stock is needed to approve the
amendment, modification, or repeal).
PROVISIONS RELATING TO DIRECTORS
Number of Directors. The Citizens Articles provide that the number of
directors will be no less than 10 and no more than 25. The CB Bylaws provide
that the number of directors will be no less than 5 and no more than 15.
Pursuant to the Merger Agreement, the number of directors of Citizens after the
Effective Time will be 18 until such number is changed by the Board of Directors
of Citizens pursuant to the Citizens Bylaws.
Nominations of Director Candidates. The Citizens Bylaws provide that any
Citizens shareholder entitled to vote at an election of Citizens directors is
entitled to nominate candidates for election as directors of Citizens. However,
the Citizens Bylaws require any shareholder intending to nominate a candidate
for election as a Citizens director at any meeting to deliver certain
information to Citizens at least 30 days prior to the meeting. The CB Articles
and Bylaws do not contain any provision relating to the ability of shareholders
to nominate directors of CB.
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Removal. The Citizens Bylaws provide that a director may be removed only
upon a showing of cause, by the vote of the shareholders holding at least
two-thirds of the outstanding shares entitled to vote at any special meeting
called for that purpose. The CB Bylaws provide that a director may be removed
only for cause, by the vote of the shareholders holding a majority of the
outstanding shares entitled to vote in elections of directors given at a meeting
of the shareholders called for that purpose.
Qualifications for Directors. The Citizens Bylaws provide that when an
officer of Citizens or any of its subsidiaries concurrently serves as a director
of Citizens, then upon the cessation of active employment of such person as an
officer of Citizens or its subsidiaries, as determined from time to time by the
board of directors, he or she shall, at the same time, cease to serve as a
director. The CB Charter Documents do not contain a similar provision.
ANTI-TAKEOVER LAWS
Citizens is not currently subject to the Michigan "Fair Price" statute
(Chapter 7A of the MBCA). CB is subject to Chapter 7A; however, CB has opted out
of Chapter 7A with respect to the Merger. Chapter 7A applies to certain
"business combinations," such as mergers, sales of assets, issuances of equity
securities and a liquidation, recapitalization or reorganization, involving an
"interested shareholder" (generally, the holder of 10% or more of a class of a
corporation's voting stock). The approval of holders of 90% of each class of the
corporation's outstanding voting stock and the approval of the holders of
two-thirds of the outstanding stock of each such class other than shares
beneficially owned by the interested shareholder is required to approve a
business combination involving an interested shareholder. The supermajority
voting requirements do not apply to a business combination that meets certain
price, form of consideration and procedural requirements designed to make the
transaction fair to all shareholders or to a transaction that the board of
directors has approved with respect to a particular interested shareholder prior
to the interested shareholder becoming an interested shareholder. The Board of
Directors of Citizens may elect by resolution to subject Citizens to the
provisions of Chapter 7A.
The Citizens Articles and Bylaws expressly provide that Citizens is subject
to Chapter 7B, "Control Share Acquisitions," of the MBCA. Thus, shares of
capital stock of Citizens constituting "control shares" have the same voting
rights as were accorded the shares before the "control share acquisition" only
to the extent granted by resolution approved by the shareholders of Citizens in
accordance with Chapter 7B of the MBCA. Generally, Chapter 7B provides that a
person or an entity that acquires "control shares" in a control share
acquisition may vote the control shares on any matter only if a majority of all
shares entitled to vote thereon and of all non-"interested shares" entitled to
vote thereon approve such voting rights. "Interested shares" are defined
generally as those shares beneficially owned by officers of the corporation,
employee directors of the corporation and the person or entity making the
control share acquisition. "Control shares" are defined generally as shares that
when added to shares already owned by a person or entity would give the person
or entity voting power in the election of directors within any of three
thresholds: one-fifth, one-third or a majority of all voting power. The effect
of the statute is to condition the acquisition of voting control of a Michigan
corporation on the approval of a majority of its disinterested shareholders.
The CB Bylaws expressly provide that Chapter 7B of the MBCA does not apply
to any "control share acquisition" of shares of CB. Chapter 7B does not apply to
the Merger.
CITIZENS RIGHTS AGREEMENT
On July 20, 1990, the Citizens Board declared a dividend distribution of
one right ("Right") for each outstanding share of Citizens Common Stock payable
to shareholders of record on August 10, 1990. Each Right entitles the registered
holder to purchase from Citizens 1/100th of a share of Citizens Series A
Preferred Stock, no par value (the "Series A Preferred Stock"), at a price of
$75 per 1/100th of a share (the "Purchase Price"), subject to adjustment to
prevent dilution. As the result of the 2-for-1 split of Citizens Common Stock
effective April 30, 1993, each Right now represents the right to purchase
one-half of 1/100th of a share of Series A Preferred Stock at a price of $75 per
1/100th of a share. The Citizens Common Stock to be issued in the Merger will
have attached thereto the associated number of Rights. The description and terms
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of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between Citizens and Citizens Bank, as rights agent (the "Rights Agent"). The
Rights will not have any voting rights nor be entitled to dividends and will
expire on July 20, 2000.
At the present time the Rights attach to all Citizens Common Stock
certificates representing outstanding shares. No separate Rights certificates
have been distributed. The Rights will not be transferable apart from the
Citizens Common Stock until after a "Distribution Date" which will occur upon
the earlier of (i) the tenth business day after a public announcement that a
person or group of affiliated or associated persons has acquired, or obtained
the right to acquire, beneficial ownership of 15% or more of the outstanding
shares of Citizens Common Stock (an "Acquiring Person"), or (ii) such date as
the Citizens Board may fix following the commencement or announcement of a
tender offer or exchange offer by any person other than Citizens if, upon
consummation, such person would be an Acquiring Person. The Rights are not
exercisable until after the Distribution Date and after the Citizens Board's
right to redeem the Rights expires.
In the event that (i) a person or group becomes an Acquiring Person (except
pursuant to a cash tender offer for all outstanding shares of Citizens Common
Stock other than shares held by such person or its associates and affiliates
which results in such person, together with its associates and affiliates,
becoming the beneficial owner of 90% or more of the outstanding Citizens Common
Stock if Citizens has received the opinion of an investment banker that the
price to be paid in such tender offer is fair and has received a written
agreement from such person to pay all fees, costs and expenses incurred by
Citizens in connection with the rendering and receipt of such opinion), or (ii)
while there is an Acquiring Person, any form of recapitalization involving
Citizens occurs which has the effect of increasing the Acquiring Person's
proportionate share of the outstanding Common Stock by more than 1%, or (iii) an
Acquiring Person engages in any of several enumerated self-dealing transactions
with Citizens, then each holder of a Right (other than the Acquiring Person,
whose Rights become void upon the occurrence of such event) will have the right
to receive upon exercise that number of shares of the Common Stock having a
market value of two times the then-current Purchase Price.
In the event that, following the Distribution Date, (i) Citizens is
consolidated with or merged into another person, or (ii) another person is
merged into or consolidated with Citizens in a transaction in which Common Stock
is changed into or exchanged for stock or other securities of any other person
or cash or any other property, or (iii) 50% or more of Citizens' assets or
earning power are sold, then each Right (other than Rights held by the Acquiring
Person, which become void upon the occurrence of such event) will represent the
right to receive upon exercise that number of shares of common stock of the
acquiring person which at the time of such transaction would have a market value
of two times the then-current Purchase Price. Mergers and consolidations with
90% shareholders who became such pursuant to certain cash tender offers for all
outstanding shares are exempt under this provision if the consideration to be
paid is cash in an amount not less than that paid to all other shareholders in
such tender offer.
At any time after any person becomes an Acquiring Person but prior to the
time such Acquiring Person has acquired 50% or more of the outstanding Citizens
Common Stock, the Citizens Board may cause shareholders to exchange all or part
of their Rights for shares of Citizens Common Stock or Series A Preferred Stock
at a ratio of one-half share of Common Stock or one-half of 1/100th of a share
of Series A Preferred Stock per Right, subject to adjustment. As soon as the
Citizens Board has determined to make such exchange, the Rights may no longer be
exercised.
At any time prior to the close of business on the earlier of (i) the tenth
business day following public announcement that a person or group has become an
Acquiring Person (the "Shares Acquisition Date") or (ii) the date the Rights
expire, the Citizens Board may redeem the Rights in whole, but not in part, at a
price of $.005 per Right (the "Redemption Price"). Immediately upon the Citizens
Board's election to redeem the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price. The right of redemption may be reinstated under certain
circumstances if the Acquiring Person's ownership is reduced to less than 5% of
the outstanding Citizens Common Stock, there are no other Acquiring Persons and
the Citizens Board approves such reinstatement.
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The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire Citizens on
terms not approved by the Citizens Board. The Rights, however, should not affect
any prospective offeror willing to make an offer at a fair price and otherwise
in the best interests of Citizens and its shareholders as determined by a
majority of the independent directors on the Citizens Board, or willing to
negotiate with the Citizens Board. The Citizens Rights should not interfere with
any merger or other business combination approved by the Citizens Board since
the Citizens Board may, at its option, at any time until ten days following the
Shares Acquisition Date redeem all but not less than all of the then outstanding
Rights at the $.005 redemption price.
CB is not a party to any similar plan and has neither authorized nor issued
similar securities.
EXPERTS
The consolidated financial statements of Citizens incorporated by reference
in Citizens' Annual Report (Form 10-K) for the year ended December 31, 1996,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon incorporated by reference therein and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon the report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of CB incorporated in this Joint
Proxy Statement-Prospectus by reference from CB's Annual Report on Form 10-K for
the year ended December 31, 1996 have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein by reference in reliance upon the authority
of said firm as experts in accounting and auditing.
LEGAL OPINION
The legality of the shares of Citizens Common Stock to be issued to the
holders of CB Common Stock pursuant to the Merger, and certain other legal
matters in connection with the Merger, will be passed upon by Dykema Gossett
PLLC, counsel to Citizens.
Certain tax matters in connection with the Merger will be passed upon by
Dykema Gossett PLLC, counsel to Citizens and Howard & Howard Attorneys, P.C.,
counsel to CB.
SOLICITATION OF PROXIES
The cost of solicitation of proxies from holders of Citizens Common Stock
and CB Common Stock, including the cost of reimbursing brokerage houses and
other custodians, nominees or fiduciaries for forwarding proxies and proxy
statements to their principals, will be borne by each respective party. Kissel-
Blake Inc., specialists in proxy solicitation, have been retained by Citizens to
assist in the solicitation of proxies from brokers, bank nominees and other
institutional holders of Citizens Common Stock and will be compensated in the
estimated amount of $6,500 plus reasonable out-of-pocket expenses. In addition
to such solicitation and solicitation by use of the mails, solicitation may be
made in person or by telephone or telegraph by certain directors, officers and
regular employees of Citizens and CB who will not receive additional
compensation therefor.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, neither Citizens
nor CB knows of any other matters to be brought before the Citizens Meeting or
the CB Meeting other than those referred to herein, but if any other business
should properly come before the Citizens Meeting or the CB Meeting, the persons
named in the proxy, or authorized substitutes, intend to vote in accordance with
their best judgment.
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SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal for presentation to the
Citizens 1998 Annual Meeting of shareholders must submit the proposal to
Citizens Banking Corporation, One Citizens Banking Center, 328 South Saginaw
Street, Flint, Michigan 48502, Attention: Secretary, not later than November 15,
1997, for inclusion, if appropriate, in Citizens' proxy statement and the form
of proxy relating to the 1998 Annual Meeting of shareholders.
CB will hold a 1997 Annual Meeting of shareholders only if the Merger is
not consummated. In the event such meeting is held, CB shareholders shall be
notified of the deadline for submission of shareholder proposals to be
considered at the meeting.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 27TH DAY OF JANUARY, 1997
BY AND AMONG
CITIZENS BANKING CORPORATION,
POLARIS ACQUISITION, INC.
AND
CB FINANCIAL CORPORATION
A-1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. THE MERGER......................................................... A-6
Section 1.1. Structure of the Merger..................................... A-6
Section 1.2. Effect on Capital Stock..................................... A-6
Section 1.3. Exchange of Certificates.................................... A-8
Section 1.4. Alternative Structure....................................... A-10
Section 1.5. Options..................................................... A-10
Section 1.6. Tax and Accounting Consequences............................. A-10
ARTICLE II. CONDUCT PENDING THE MERGER........................................ A-10
Section 2.1. Conduct of the Company's Business Prior to the Effective A-10
Time........................................................
Section 2.2. Forbearance by the Company.................................. A-11
Section 2.3. Cooperation of the Company.................................. A-12
Section 2.4. Conduct of Parent's Business Prior to the Effective Time.... A-12
Section 2.5. Cooperation of Parent....................................... A-13
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................... A-13
Section 3.1. Recitals True............................................... A-13
Section 3.2. Capital Stock............................................... A-13
Section 3.3. Due Organization............................................ A-13
Section 3.4. Authority................................................... A-13
Section 3.5. Subsidiaries; Significant Investments....................... A-13
Section 3.6. Shareholder Approvals....................................... A-13
Section 3.7. No Violations............................................... A-14
Section 3.8. Consents and Approvals...................................... A-14
Section 3.9. Company Reports............................................. A-14
Section 3.10. Absence of Undisclosed Liabilities and Certain Changes or A-15
Events......................................................
Section 3.11. Taxes....................................................... A-15
Section 3.12. Absence of Claims........................................... A-15
Section 3.13. Absence of Regulatory Actions............................... A-15
Section 3.14. Agreements.................................................. A-15
Section 3.15. Labor Matters............................................... A-16
Section 3.16. Employee Benefit Plans...................................... A-16
Section 3.17. Properties.................................................. A-17
Section 3.18. Knowledge as to Conditions.................................. A-18
Section 3.19. Compliance with Laws........................................ A-18
Section 3.20. Fees........................................................ A-18
Section 3.21. Environmental Matters....................................... A-18
Section 3.22. Allowance................................................... A-20
Section 3.23. Antitakeover Provisions Inapplicable........................ A-20
Section 3.24. Material Interests of Certain Persons....................... A-20
Section 3.25. Insurance................................................... A-20
Section 3.26. Investment Securities....................................... A-21
Section 3.27. Pooling of Interests........................................ A-21
Section 3.28. Derivatives................................................. A-21
Section 3.29. Registration Obligations.................................... A-21
Section 3.30. Books and Records........................................... A-21
Section 3.31. Corporate Documents......................................... A-21
Section 3.32. Company Action.............................................. A-21
Section 3.33. Indemnification............................................. A-21
Section 3.34. Fair Lending; Community Reinvestment Act.................... A-21
Section 3.35. No Omission of Material Fact................................ A-21
Section 3.36. Conduct of Business......................................... A-22
</TABLE>
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<TABLE>
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT.......................... A-22
Section 4.1. Recitals True............................................... A-22
Section 4.2. Capital Stock............................................... A-22
Section 4.3. Due Organization............................................ A-22
Section 4.4. Authority................................................... A-22
Section 4.5. Subsidiaries; Significant Investments....................... A-22
Section 4.6. Shareholder Approvals....................................... A-22
Section 4.7. No Violations............................................... A-23
Section 4.8. Consents and Approvals...................................... A-23
Section 4.9. Parent Reports.............................................. A-23
Section 4.10. Absence of Undisclosed Liabilities and Certain Changes or A-24
Events......................................................
Section 4.11. Taxes....................................................... A-23
Section 4.12. Absence of Claims........................................... A-24
Section 4.13. Absence of Regulatory Actions............................... A-24
Section 4.14. Agreements.................................................. A-24
Section 4.15. Labor Matters............................................... A-24
Section 4.16. Employee Benefit Plans...................................... A-24
Section 4.17. Properties.................................................. A-25
Section 4.18. Knowledge as to Conditions.................................. A-26
Section 4.19. Compliance with Laws........................................ A-26
Section 4.20. Fees........................................................ A-26
Section 4.21. Environmental Matters....................................... A-26
Section 4.22. Allowance................................................... A-27
Section 4.23. Material Interests of Certain Persons....................... A-27
Section 4.24. Insurance................................................... A-28
Section 4.25. Investment Securities....................................... A-28
Section 4.26. Pooling of Interests........................................ A-28
Section 4.27. Derivatives................................................. A-28
Section 4.28. Registration Obligations.................................... A-28
Section 4.29. Books and Records........................................... A-28
Section 4.30. Corporate Documents......................................... A-28
Section 4.31. Parent Action............................................... A-28
Section 4.32. Fair Lending; Community Reinvestment Act.................... A-28
Section 4.33. No Omission of Material Fact................................ A-28
Section 4.34. Conduct of Business......................................... A-29
ARTICLE V. ADDITIONAL AGREEMENTS.............................................. A-29
Section 5.1. Acquisition Proposals....................................... A-29
Section 5.2. Certain Policies of the Company............................. A-29
Section 5.3. Access and Information...................................... A-29
Section 5.4. Certain Filings, Consents and Arrangements.................. A-30
Section 5.5. Antitakeover Statutes....................................... A-30
Section 5.6. Directors' and Officers' Indemnification.................... A-30
Section 5.7. Additional Agreements....................................... A-30
Section 5.8. Publicity................................................... A-31
Section 5.9. Regulatory Matters.......................................... A-31
Section 5.10. Shareholders' Meeting....................................... A-31
Section 5.11. Affiliates; Publication of Combined Financial Results....... A-32
Section 5.12. Authorization, Reservation and Listing...................... A-32
Section 5.13. Notification of Certain Matters............................. A-32
Section 5.14. Board of Directors of Parent and Subsidiary................. A-33
Section 5.15. Retirement Plans............................................ A-33
</TABLE>
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Section 5.16. Employment Agreements....................................... A-33
Section 5.17. Director Deferral Plan...................................... A-33
ARTICLE VI. CONDITIONS TO CONSUMMATION........................................ A-34
Section 6.1. Conditions to All Parties' Obligations...................... A-34
Section 6.2. Conditions to the Obligations of Parent and Merger Sub...... A-34
Section 6.3. Conditions to the Obligation of the Company................. A-35
ARTICLE VII. TERMINATION...................................................... A-35
Section 7.1. Termination................................................. A-35
Section 7.2. Effect of Termination....................................... A-36
ARTICLE VIII. EFFECTIVE DATE AND EFFECTIVE TIME............................... A-36
Section 8.1. Effective Date and Effective Time........................... A-36
ARTICLE IX. OTHER MATTERS..................................................... A-36
Section 9.1. Certain Definitions; Interpretation......................... A-36
Section 9.2. Survival.................................................... A-37
Section 9.3. Waiver...................................................... A-37
Section 9.4. Counterparts................................................ A-37
Section 9.5. Governing Law............................................... A-37
Section 9.6. Waiver of Jury Trial........................................ A-37
Section 9.7. Expenses.................................................... A-37
Section 9.8. Notices..................................................... A-37
Section 9.9. Entire Agreement; Etc....................................... A-38
Section 9.10. Assignment.................................................. A-38
ANNEX 1
Stock Option Agreement
ANNEX 2
Affiliate Letter
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 27th day of January, 1997
(this "Plan"), by and among Citizens Banking Corporation ("Parent"), Polaris
Acquisition, Inc., a wholly-owned subsidiary of Parent ("Merger Sub"), and CB
Financial Corporation (the "Company"). This Plan also constitutes a "Memorandum
of Understanding" between Parent, Merger Sub and the Company as such term is
used in Section B of Article XI of the Company's Articles of Incorporation.
RECITALS:
A. Parent. Parent is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Michigan, with its principal
executive offices located in Flint, Michigan. As of the date hereof, Parent has
40,000,000 authorized shares of common stock, without par value, of which no
more than 14,344,847 shares were outstanding as of the date hereof, 5,000,000
authorized shares of preferred stock, without par value, none of which were
outstanding as of the date hereof, and has no other class of capital stock
authorized. Parent is a bank holding company duly registered 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 "BHC Act"). All holders of
Common Stock of Parent will be entitled to vote with respect to the Merger (as
that term is hereinafter defined). The number of shares of Parent outstanding is
subject to change prior to the Effective Time (as hereinafter defined) as
described in subparagraph E of these Recitals.
B. Merger Sub. Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Michigan, with its
principal executive offices located in Flint, Michigan. As of the date hereof,
the Merger Sub has 60,000 authorized shares of common stock of which 100 shares
were outstanding and no other class of capital stock authorized. All the
outstanding shares of the capital stock of Merger Sub are owned directly by
Parent. The number of shares of Merger Sub outstanding is not subject to change
prior to the Effective Time.
C. The Company. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Michigan, with its
principal executive offices located in Jackson, Michigan. As of the date hereof,
the Company has 5,000,000 authorized shares of common stock, par value $7.50 per
share ("Company Common Stock"), of which 2,801,053 shares were outstanding as of
the date hereof, 100,000 authorized shares of preferred stock, without par
value, none of which were outstanding as of the date hereof, and has no other
class of capital stock authorized. The Company is a bank holding company duly
registered with the Federal Reserve Board under the BHC Act. All holders of
common stock of the Company will be entitled to vote with respect to the Merger.
The number of shares of Company Common Stock outstanding is subject to change
prior to the Effective Time as described in subparagraph D of these Recitals.
D. Options, Etc. Neither the Company nor any of its subsidiaries has any
shares of its capital stock reserved for issuance, any outstanding option, call
or commitment relating to shares of its capital stock or any outstanding
securities, obligations or agreements convertible into or exchangeable for, or
giving any person any right (including, without limitation, preemptive rights)
to subscribe for or acquire from it, any shares of its capital stock, except as
set forth in the Company Disclosure Letter (as defined in Article III), which
includes details on the terms and conditions of any such options including the
grantee, vesting periods and exercise prices of any options.
E. Parent Options, Etc. Neither the Parent nor any of its subsidiaries has
any shares of its capital stock reserved for issuance, any outstanding option,
call or commitment relating to shares of its capital stock or any outstanding
securities, obligations or agreements convertible into or exchangeable for, or
giving any person any right (including, without limitation, preemptive rights)
to subscribe for or acquire from it, any shares of its capital stock except as
set forth in the Parent Reports (as defined in Section 4.9).
F. Stock Option Agreement. As a condition and inducement to Parent's and
Merger Sub's willingness to enter into this Plan, the Company is entering into a
Stock Option Agreement dated as of the date hereof in the form of Annex 1 hereto
(the "Stock Option Agreement") with Parent pursuant to which the Company has
granted to Parent an option to purchase shares of Company Common Stock.
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G. Tax-Free Reorganization. The parties hereto intend that the Merger
provided for herein shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the rules and regulations promulgated thereunder, and this Plan is intended
to be and is adopted as a plan of reorganization within the meaning of Section
368 of the Code.
H. Board Approvals. The respective Boards of Directors of Parent, Merger
Sub and the Company have duly approved this Plan and have duly authorized its
execution and delivery and a majority of the members of the Company's Board of
Directors voting in favor of this Plan were duly elected and acting members of
the Board of Directors of the Company prior to the date hereof.
In consideration of their mutual promises and obligations hereunder, the
parties hereto adopt and make this Plan and prescribe the terms and conditions
hereof and the manner and basis of carrying it into effect, which shall be as
follows:
ARTICLE I. THE MERGER
SECTION 1.1. Structure of the Merger. On the Effective Date (as defined in
Section 8.1):
(a) Effect of the Merger. Merger Sub will merge (the "Merger") with and
into the Company, with the Company being the surviving corporation (the
"Surviving Corporation"), pursuant to the provisions of, and with the effect
provided in the Michigan Business Corporation Act (the "State Corporation Law").
The separate corporate existence of Merger Sub shall thereupon cease. The name
of the surviving corporation shall be "CB Financial Corporation." The Surviving
Corporation shall continue to be governed by the State Corporation Law and its
separate corporate existence with all of its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. The Merger shall
have the effects set forth in Section 724 of the State Corporation Law.
(b) Articles of Incorporation and By-laws. The articles of incorporation
and by-laws of the Surviving Corporation shall be the articles of incorporation
and by-laws of the Company immediately prior to the Effective Time (as defined
in Section 8.1).
(c) Directors and Officers. The Board of Directors of Merger Sub
immediately prior to the Effective Time shall be the initial Board of Directors
of the Surviving Corporation and the officers of the Merger Sub immediately
prior to the Effective Time shall be the initial officers of the Surviving
Corporation.
SECTION 1.2. Effect on Capital Stock. At the Effective Time (as defined in
Section 8.1), automatically and without any action on the part of any holder of
any of the following securities:
(a) Conversion of Outstanding Shares. Each share (a "Share") of Company
Common Stock issued and outstanding at the Effective Time (other than shares
held directly or indirectly by Parent, other than shares held in a fiduciary or
agency capacity or in satisfaction of a debt previously contracted), shall be
converted, subject to Sections 1.2(b) and 1.2(e), into the right to receive
1.489 shares (the "Exchange Ratio") of validly issued, fully paid and
nonassessable shares ("Parent Shares") of the common stock, without par value,
of Parent (the "Parent Common Stock"). The aggregate number of Parent Shares
that shall be issued in the Merger, subject to Section 1.2(b), shall be referred
to herein as the "Stock Amount."
(b) Company Termination Right; Parent Adjustment Right; Parent Termination
Right.
(i) Company Termination Right. The Company shall have the right to
elect to abandon the Merger and terminate this Plan, if its Board
of Directors so determines, whether before or after approval of
the Merger by the shareholders of the Company or of Parent, if the
Final Parent Stock Price (as defined below) shall be less than
$25.30 (the "Floor Price") subject, however, to the following
Subparagraph (ii):
(ii) Parent Adjustment Right. If the Company makes an election to
abandon the Merger under subparagraph (i) above, it shall give
written notice thereof to Parent within 2 calendar days after the
end of the Valuation Period (as defined below) or such right
shall be deemed waived. If the Company shall have the right to
terminate this Plan pursuant to subparagraph (i) above
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but shall not have done so within such period, or at any time within
2 calendar days of the Company's having done so, and if the Final
Parent Stock Price is not less than $23.72, Parent shall have the
right but not the obligation to elect to increase the Exchange Ratio
by multiplying (A) the Exchange Ratio by (B) the number of Parent
Shares, carried to three decimal places, which when multiplied by the
Final Parent Stock Price will equal the Floor Price; and increasing
the Stock Amount such that (A) the per Share value of the Parent
Common Stock received (valued at the Final Parent Stock Price) is at
least equal to the per Share consideration that would have been
received if the Final Parent Stock Price had been equal to the Floor
Price and (B) the Merger continues to qualify as a reorganization
within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code") and as a pooling of interests for
accounting purposes. If Parent elects to make the above-described
adjustment within such period, it shall give prompt written notice to
the Company thereof, and set forth the increase in the Parent Common
Stock which will be delivered to holders of Company Common Stock,
whereupon no abandonment or termination shall be deemed to have
occurred and this Plan shall remain in effect in accordance with its
terms (except the Exchange Ratio and Stock Amount shall have been so
increased). If the Company shall not have made the election to
abandon the Merger under subparagraph (i) above and Parent shall not
have elected to make the above-described adjustment, then the Stock
Amount shall not be increased, the other adjustments contemplated by
the foregoing provisions of this subparagraph shall not be made and
this Plan shall remain in effect in accordance with its terms.
(iii) Parent Termination Right. Notwithstanding any other provision of
this Plan, in the event that the Final Parent Stock Price shall be
more than $37.96 (the "Ceiling Price"), Parent shall have the
right to elect to abandon and terminate this Plan, if its Board of
Directors so determines, whether before or after approval of the
Merger by the shareholders of the Company or of Parent; provided,
however, that this subparagraph (iii) shall not apply if the Final
Parent Stock Price exceeds the Ceiling Price and prior to or during
the Valuation Period (as defined below) (A) Parent has signed a
letter of intent or a definitive agreement providing for, or (B) any
person other than the Company, its officers and directors or any of
their affiliates shall have made a bona fide proposal to Parent, by
public announcement or written communication that is the subject of
public disclosure to engage in (including any situation in which
such person shall have commenced, as such term is defined in Rule
14d-2 under the Securities Exchange Act of 1934, or shall have filed
a registration statement with respect to a tender offer to purchase
Parent Common Stock), or (C) Parent has publicly announced that it
is engaged in discussions, in each case, involving a reorganization,
merger, consolidation or similar transaction between Parent and an
unaffiliated third party, if as a result of such transaction,
shareholders of Parent (immediately prior to the date such
transaction is announced or such agreement is executed) will not own
a majority of the voting stock of the corporation surviving the
transaction and a majority in value of the total outstanding stock
of such surviving corporation after the transaction.
(iv) The following definitions apply for purposes of this Section 1.2(b):
(A) "Final Parent Stock Price" shall mean the average of the
Closing Prices of Parent Common Stock for the Valuation Period;
(B) "Closing Prices" shall mean the last sale price for shares of
Parent Common Stock listed on The Nasdaq Stock Market (as reported by
The Wall Street Journal, or if not reported thereby, another
authoritative source) for each trading day during the Valuation Period;
and
(C) "Valuation Period" shall mean the twenty (20) consecutive days
on which shares of Parent Common Stock are traded on The Nasdaq Stock
Market ending on the seventh (7th) calendar day immediately prior to the
anticipated Effective Time.
(c) Cancellation. Each Share held directly or indirectly by Parent, other
than shares held in a fiduciary or agency capacity or in satisfaction of a debt
previously contracted, and shares held as treasury stock of the
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<PAGE> 83
Company, shall be canceled and retired and shall cease to exist, and no exchange
or payment shall be made with respect thereto.
(d) Capital Stock of Merger Sub. The shares of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into validly issued, fully paid and nonassessable shares of common
stock of the Surviving Corporation and shall thereafter constitute all of the
issued and outstanding shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio and Stock Amount
shall be equitably adjusted to reflect fully the effect of any reclassification,
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization or other like change with respect to Parent Common
Stock or Company Common Stock, as applicable, occurring after the date hereof
and prior to the Effective Date.
(f) Fractional Shares. No certificates or script representing less than one
Parent Share shall be issued upon the surrender for exchange of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates"). In lieu of any such fractional share,
each holder of Shares who would otherwise have been entitled to a fraction of a
Parent Share upon surrender of Certificates for exchange shall be paid, upon
such surrender, cash (without interest) determined by multiplying (i) the Final
Parent Stock Price by (ii) the fractional interest of Parent Common Stock to
which such holder would otherwise be entitled. As soon as practicable after
determining the amount of cash, if any, to be paid to former holders of Company
Common Stock with respect to any fractional shares of Parent Common Stock, the
Exchange Agent shall promptly pay such amounts to such holders in accordance
with this Article I.
SECTION 1.3. Exchange of Certificates.
(a) Exchange Agent. Parent shall supply, or shall cause to be supplied, to
or for the account of ChaseMellon Shareholder Services, L.L.C., or such other
bank (which may be a subsidiary of Parent) or trust company as shall be
designated by Parent and reasonably satisfactory to the Company (the "Exchange
Agent"), in trust for the benefit of the holders of Company Common Stock, for
exchange in accordance with this Section 1.3, through the Exchange Agent,
certificates evidencing the Parent Shares issuable pursuant to Section 1.2 in
exchange for outstanding Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent and the Company
may reasonably specify), and (ii) instructions to effect the surrender of the
Certificates in exchange for the certificates evidencing Parent Shares. Upon
surrender of a Certificate for cancellation to the Exchange Agent together with
such letter of transmittal, duly executed, and such other customary documents as
may be required pursuant to such instructions, the holder of such Certificate
shall be entitled to receive in exchange therefor (A) certificates evidencing
that number of whole Parent Shares which such holder has the right to receive in
accordance with the Exchange Ratio in respect of the Shares formerly evidenced
by such Certificate, (B) any dividends or other distributions to which such
holder is entitled pursuant to Section 1.3(c), and (C) cash in respect of
fractional shares as provided in Section 1.2(f) (the Parent Shares, dividends,
distributions and cash being, collectively, the "Merger Consideration"), and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares which is not registered in the transfer records
of the Company as of the Effective Time, the Merger Consideration may be issued
and paid in accordance with this Article I to a transferee if the Certificate
evidencing such Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer pursuant to this Section
1.3 and by evidence that any applicable stock transfer taxes have been paid.
Until so surrendered, each outstanding Certificate that, prior to the Effective
Time, represented Shares of Company Common Stock will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends and subject to Section 1.2(f), to evidence the ownership of the number
of full Parent Shares into which such shares of Company Common Stock shall have
been so converted. Parent Shares issued in the Merger shall be issued as of and
deemed to be outstanding as of the Effective Time.
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<PAGE> 84
Parent shall cause all such Parent Shares issued in accordance with the Merger
to be duly authorized, validly issued, fully paid and nonassessable.
(c) Distributions With Respect to Unexchanged Parent Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Parent Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Parent Shares they
are entitled to receive until the holder of such Certificate shall surrender
such Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole Parent Shares issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole Parent shares and (ii) at the appropriate payment date,
the amount of dividend or other distributions with a record date after the
Effective Time and a payment date subsequent to such surrender.
(d) Transfers of Ownership. If any certificate for Parent Shares is to be
issued in a name other than that which the Certificate surrendered in exchange
therefor is registered, it will be a condition to the issuance thereof that the
Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange will have paid to
Parent or any agent designated by it any transfer or other taxes required by
reason of the issuance of a Certificate for Parent Shares in any name other than
that of the registered holder of the certificate surrendered, or have
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(e) Withholding Rights. Parent or the Exchange Agent shall be entitled to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Plan to any holder of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Parent or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this Plan as having
been paid to the holder of the Shares in respect of which such deduction and
withholding was made by Parent or the Exchange Agent.
(f) No Further Ownership Rights in Company Common Stock. The Merger
Consideration delivered upon the surrender for exchange of Shares in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such Shares. From and after the Effective Time,
there shall be no transfers on the stock transfer records of the Company of any
shares of Company Common Stock that were outstanding immediately prior to the
Effective Time. If after the Effective Time Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this Plan in accordance
with the procedures set forth in this Section 1.3.
(g) Unclaimed Merger Consideration. Any portion of the aggregate Merger
Consideration or the proceeds of any investments thereof that remains unclaimed
by the shareholders of the Company for six months after the Effective Time shall
be repaid by the Exchange Agent to Parent. Any shareholder of the Company who
has not theretofore complied with this Section 1.3 shall thereafter be entitled
to look only to Parent for payment of the Merger Consideration deliverable in
respect of each share of Company Common Stock held by such shareholder without
any interest thereon. If outstanding certificates for shares of Company Common
Stock are not surrendered or the payment for them is not claimed prior to the
date on which such payments would otherwise escheat to or become the property of
any governmental unit or agency, the unclaimed items shall, to the extent
permitted by abandoned property and any other applicable law, become the
property of Parent (and to the extent not in its possession shall be paid over
to Parent), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, none of Parent, the
Surviving Corporation, the Exchange Agent or any other person shall be liable to
any former holder of Company Common Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(h) Lost, Stolen or Destroyed Certificates. In the event any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost, stolen
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<PAGE> 85
or destroyed and, if required by the Exchange Agent, the posting by such person
of a bond in such amount as the Exchange Agent may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate a check for the Merger Consideration deliverable in exchange
therefor.
SECTION 1.4. Alternative Structure. Notwithstanding anything in this Plan
to the contrary, Parent may specify that, before or after the Merger, any of its
direct or indirect subsidiaries and the Company and any of its direct or
indirect subsidiaries shall enter into transactions other than those described
in Article I hereof in order to effect the purposes of this Plan, and Parent and
the Company shall take all action necessary and appropriate to effect, or cause
to be effected, such transactions; provided, however, that no such specification
shall materially and adversely effect the timing of the consummation of the
transactions contemplated herein or the tax effect or economic benefits of the
Merger to the holders of Company Common Stock.
SECTION 1.5. Options. Immediately prior to or at the Effective Time, each
outstanding employee stock option to purchase shares of Company Common Stock (an
"Option") granted under (i) the CB Financial Corporation 1992 Employee Stock
Option Plan (the "1992 Option Plan"), (ii) the CB Financial Corporation
Nonqualified and Deferred Compensation Plan for Independent Directors (the
"Director Plan") and (ii) any other stock option plan or arrangement of the
Company (such plans or arrangements, together with the 1992 Option Plan and the
Director Plan, are hereinafter collectively referred to as the "Option Plans"),
shall be canceled, and each Option, whether or not then vested or exercisable,
shall be converted into the right to receive shares of Parent Common Stock at a
ratio which shall be determined by dividing (i) the difference of the product of
the Exchange Ratio and the Final Parent Stock Price less the exercise price of
each Option by (ii) the Final Parent Stock Price. The Company shall use all
reasonable efforts to effectuate the foregoing, including without limitation
amending the Option Plans and obtaining any necessary consents from Option
holders, in such form as is reasonably acceptable to Parent and which shall
include an acknowledgment that such transaction may be subject to applicable
withholding taxes, which the Company shall withhold as required by law;
provided, however, that prior to the Effective Time, the Board of Directors of
the Company shall adopt such resolutions or take such other actions as are
permitted and required to adjust, effective immediately prior to the Effective
Time, the terms of each outstanding Option under the Option Plans as to which
any such consent is not obtained prior to the Effective Time to provide that
such Option shall be converted into the right, upon exercise of such Option at
any time after the Effective Time, to receive shares of Parent Common Stock as
provided herein.
SECTION 1.6. Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Code and (ii) qualify for accounting treatment as a
pooling of interests. The parties hereto hereby adopt this Plan as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1. Conduct of the Company's Business Prior to the Effective
Time. Except as expressly provided in this Plan, during the period from the date
of this Plan to the Effective Time, the Company shall, and shall cause each of
its subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course of business consistent with past practice, (ii) use its best efforts to
maintain and preserve intact its business organization, properties, leases,
employees and advantageous business relationships and retain the services of its
officers and key employees, (iii) take no action which would adversely affect or
delay the ability of the Company, Parent, Merger Sub or any subsidiary thereof
to obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated hereby or to perform its
covenants and agreements on a timely basis under this Plan and (iv) take no
action that is reasonably likely to have a Material Adverse Effect (as defined
in Section 9.1 hereof) on the Company.
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SECTION 2.2. Forbearance by the Company. During the period from the date of
this Plan to the Effective Time, the Company shall not, and shall not permit any
of its subsidiaries, without the prior written consent of Parent, to:
(a) other than in the ordinary course of business consistent with past
practice, make any loan or advance or incur any indebtedness for borrowed money,
assume, guarantee, endorse or otherwise as an accommodation become responsible
for the obligations of any other person;
(b) adjust, split, combine or reclassify any capital stock; make, declare
or pay any dividend or make any other distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its capital stock or any
securities or obligations convertible into or exchangeable for any shares of its
capital stock, or grant any stock appreciation rights or grant, sell or issue to
any individual, corporation or other person any right or option to acquire, or
securities evidencing a right to convert into or acquire, any shares of its
capital stock, except for regular quarterly cash dividends both (i) at a rate
per share of Company Common Stock not in excess of $0.30 per share and (ii)
having record dates and payment dates consistent with past practice, provided,
however, that the Company may not declare regular quarterly cash dividends after
receipt of all regulatory approvals necessary for consummation (excluding any
applicable waiting periods) of the Merger to the extent that the Company's
shareholders would, after giving effect to the Merger, be eligible to receive a
dividend from Parent for the same quarter for which the Company did not declare
a dividend as a result of this subsection 2.2(b) (ii) and may not declare any
regular quarterly cash dividends in any quarter if with respect to such quarter
the amount of the dividend exceeds the amount of net income for such quarter; or
issue any additional shares of capital stock except pursuant to the exercise of
Company options outstanding as of the date hereof and on the terms in effect on
the date hereof;
(c) other than in the ordinary course of business consistent with past
practice and pursuant to policies currently in effect, sell, transfer, mortgage,
encumber or otherwise dispose of any of its properties, leases or assets to any
person, or cancel, release or assign any indebtedness of any such person, except
pursuant to contracts or agreements in force as of the date of this Plan;
(d) make any capital expenditures, other than capital expenditures made in
the ordinary course of business consistent with past practice in amounts not
exceeding $50,000, individually, or $200,000 in the aggregate;
(e) increase in any manner the compensation or fringe benefits of any of
its employees or directors, or create or institute, or make any payments
pursuant to, any severance plan or package, or pay any pension or retirement
allowance not required by any existing plan or agreement to any such employees
or directors, or become a party to, amend or commit itself to or fund or
otherwise establish any trust or account related to any Employee Plan (as
defined in Section 3.16), with or for the benefit of any employee, other than
general increases in compensation in the ordinary course of business consistent
with past practice not in excess of an average of 3% in any 12-month period or
any amendment required by applicable law (provided that any such amendment shall
provide the least increase to cost permitted under such applicable law), or
voluntarily accelerate the vesting of any stock options or other compensation or
benefit;
(f)(i) other than in the ordinary course of business consistent with past
practice in individual amounts not to exceed $50,000 or $200,000 in the
aggregate or in securities transactions as provided in (f)(ii) below, make
any investment either by contributions to capital, property transfers, or
purchase of any property or assets of any person, provided that the Company
shall make no acquisition of business operations without Parent's prior
consent; or
(ii) other than purchases of direct obligations of the United States
of America with a remaining maturity at the time of purchase of 3 years or
less, purchase or acquire securities of any type; provided, however, that,
in the case of investment securities, the Company may purchase (or permit
any subsidiary of the Company to purchase) investment securities if, within
two business days after the Company requests in writing (which notice shall
describe in detail the investment securities to be purchased and the price
thereof) that Parent consent to the making of any such purchase, Parent has
approved such request in writing or has not responded in writing to such
request;
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(g) enter into or terminate any contract or agreement, or make any change
in any of its leases or contracts, other than with respect to those involving
aggregate payments of less than, or the provision of goods or services with a
market value of less than, $50,000;
(h) settle any claim, action or proceeding involving any liability of the
Company or any of its subsidiaries for money damages in excess of $50,000 or
material restrictions upon the operations of the Company or any of its
subsidiaries;
(i) except in the ordinary course of business and in amounts less than
$250,000 in the aggregate waive or release any material right or collateral or
cancel or compromise any extension of credit or other debt or claim;
(j) make, renegotiate, renew, increase, extend or purchase any loan, lease
(credit equivalent), advance, credit enhancement or other extension of credit,
or make any commitment in respect of any of the foregoing, except (i) unsecured
loans, advances or commitments in amounts less than $250,000 made in the
ordinary course of business consistent with past practice and made in conformity
with all applicable policies and procedures, (ii) secured loans, advances or
commitments in an amount less than $1,000,000 made in the ordinary course of
business consistent with past practice and made in conformity with all
applicable policies and procedures and (iii) loans or advances as to which the
Company has a legally binding obligation to make such loan or advance as of the
date hereof and a description of which has been provided by the Company in
writing to Parent prior to the execution of this Plan;
(k) except as contemplated by Section 5.2, change its fiscal year or its
method of accounting as in effect at December 31, 1996, except as required by
changes in generally accepted accounting principles as concurred in by the
Company's independent auditors;
(l) knowingly take any action that would prevent or impede the Merger from
qualifying (i) for "pooling of interests" accounting treatment or (ii) as a
reorganization within the meaning of Section 368 of the Code; provided, however,
that nothing contained herein shall limit the ability of Parent to exercise its
rights under the Stock Option Agreement;
(m) enter into any new activities or lines of business, or cease to conduct
any activities or lines of business that it conducts on the date hereof, or
conduct any business activity not consistent with past practice;
(n) amend its articles of incorporation or its by-laws; or
(o) agree to, or make any commitment to, take any of the actions prohibited
by this Section 2.2 or any action which would make any of the representations or
warranties of the Company contained in this Plan incorrect or prevent the
Company from performing or cause the Company not to perform its covenants
hereunder.
SECTION 2.3. Cooperation of the Company. The Company shall, and the Company
shall cause each of its subsidiaries to, cooperate with Parent and Merger Sub in
completing the transactions contemplated hereby, including, as set forth in
Section 1.4, with respect to any merger or consolidation of the Company's
subsidiaries with Parent's subsidiary which the Parent may request and the
taking of actions and giving of notices related thereto and providing such
notices as may be required to terminate those contracts identified by Parent
prior to the Effective Time, which terminations shall be effective on the
Effective Date and conditioned upon the consummation of the Merger. Neither the
Company nor any of its subsidiaries shall take, cause to be taken or agree or
make any commitment to take any action: (i) that would cause any of the
representations or warranties that are set forth in Article III hereof not to be
true and correct, or (ii) that is inconsistent with or prohibited by Section 2.1
or Section 2.2.
SECTION 2.4. Conduct of Parent's Business Prior to the Effective
Time. Except as expressly provided in this Plan, during the period from the date
of this Plan to the Effective Time, Parent shall, and shall cause each of its
subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course of business consistent with past practice, (ii) take no action outside of
the ordinary course of business (mergers and acquisitions by Parent shall be
deemed to be in the ordinary course of its business) which would adversely
affect or delay the ability of the Company, Parent, Merger Sub or any subsidiary
thereof to obtain any necessary approvals, consents or waivers of any
governmental authority required for the transactions
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contemplated hereby or to perform its covenants and agreements on a timely basis
under this Plan and (iii) take no action that is reasonably likely to have a
Material Adverse Effect on Parent. Parent shall not knowingly take any action
that would prevent or impede the Merger from qualifying for "pooling of
interests" accounting treatment or as a reorganization within the meaning of
Section 368 of the Code; provided, however, that nothing contained herein shall
limit the ability of Parent to exercise its rights under the Stock Option
Agreement.
SECTION 2.5 Cooperation of Parent. Parent shall, and Parent shall cause
each of its subsidiaries to, cooperate with the Company in completing the
transactions contemplated hereby and shall not take, cause to be taken or agree
to make any commitment to take any action (i) that is reasonably likely to have
a Material Adverse Effect on Parent, or (ii) that is inconsistent with or
prohibited by Section 2.4.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, that, except
as specifically disclosed in a letter (the "Company Disclosure Letter") of the
Company delivered to Parent prior to the execution of this Plan (and making
specific reference to the Section of this Plan for which an exception is taken
or for which information is required):
SECTION 3.1. Recitals True. The facts set forth in the Recitals of this
Plan with respect to the Company are true and correct.
SECTION 3.2. Capital Stock. All outstanding shares of capital stock of the
Company and its subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable and are not subject to any preemptive rights.
SECTION 3.3. Due Organization. Each subsidiary of the Company is a
corporation or banking organization duly incorporated, validly existing and in
good standing under the laws of the state of its incorporation. Each of the
Company's subsidiaries which is a bank is a member of the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation (the "FDIC") and all of its
deposits are subject to assessment by the BIF.
SECTION 3.4. Authority. Each of the Company and its subsidiaries has the
power and authority, and is duly qualified in all jurisdictions (except for such
qualifications the absence of which, in the aggregate, would not have a Material
Adverse Effect on Company) where such qualification is required, to carry on its
business as it is now being conducted and to own all its properties and assets,
and it has all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now being conducted.
SECTION 3.5. Subsidiaries; Significant Investments. The only subsidiaries
of the Company are set forth in the Company Disclosure Letter. All of the shares
of capital stock of each subsidiary of the Company are owned directly and of
record by the Company or a wholly-owned subsidiary of the Company, in each such
case free and clear of all liens, claims, encumbrances and restrictions on
transfer ("Liens") and there are no Options with respect to any such capital
stock. Neither the Company nor any of its subsidiaries maintains a liquidation
or similar type of account. None of the Company or any of such subsidiaries owns
any equity securities, any security convertible or exchangeable into an equity
security or any rights to acquire any equity security except those of its
subsidiaries as listed in the Company Disclosure Letter.
SECTION 3.6. Shareholder Approvals.
(a) Subject to the receipt of required shareholder approval of this Plan,
this Plan and the transactions contemplated herein have been duly authorized by
all necessary corporate action of the Company. In addition, the Company has
received the written opinion of ABN AMRO Chicago Corporation to the effect that
the Merger Consideration to be received by the shareholders of the Company is
fair to such shareholders from a financial point of view and will provide as
soon as practicable after the date hereof a true and complete copy of such
opinion to Parent. Subject to receipt of (i) such shareholder approval and (ii)
the required approvals, consents or waivers of governmental authorities referred
to in Section 6.1(b), this Plan is a valid and binding
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agreement of the Company enforceable against it in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors, rights and to general equity principles.
(b) The affirmative vote of a majority of the outstanding shares of Company
Common Stock entitled to vote on this Plan is the only shareholder vote required
for approval of the Plan and consummation of the Merger and the other
transactions contemplated hereby.
SECTION 3.7. No Violations. The execution, delivery and performance of this
Plan by the Company do not, and the consummation of the transactions
contemplated hereby by the Company and each of its subsidiaries will not,
constitute (a) a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of the Company or any subsidiary of the
Company or to which the Company or any of its subsidiaries (or any of their
respective properties) is subject, or enable any person to enjoin the Merger or
the other transactions contemplated hereby, (b) a breach or violation of, or a
default under, the articles of incorporation or by-laws or similar
organizational documents of the Company or any subsidiary of the Company or (c)
a breach or violation of, or a default under (or an event which with due notice
or lapse of time or both would constitute a default under), or result in the
termination of, accelerate the performance required by, or result in the
creation of any lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of the Company or any subsidiary of the
Company under, any of the terms, conditions or provisions of any note, bond,
indenture, deed of trust, loan agreement or other agreement, instrument or
obligation to which the Company or any subsidiary of the Company is a party, or
to which any of their respective properties or assets may be bound or affected.
SECTION 3.8. Consents and Approvals. Except for (a) the filing with the
Securities and Exchange Commission (the "SEC") of a joint proxy statement in
definitive form relating to the meetings of the Company's and Parent's
shareholders (the "Company Meeting" and "Parent Meeting," respectively) to be
held in connection with this Plan and the transactions contemplated hereby (the
"Joint Proxy Statement") and the registration statement on Form S-4 (the "S-4")
in which the Joint Proxy Statement will be included as a prospectus, (b) the
filing of the Certificate of Merger with the Department of Consumer and Industry
Services pursuant to the State Corporation Law, and (c) the approval of this
Plan by the requisite vote of the shareholders of the Company, no consents or
approvals of or filings or registrations with any court, administrative agency
or commission or other governmental authority or instrumentality or with any
third party are necessary in connection with (i) the execution and delivery by
the Company of this Plan and (ii) the consummation by the Company of the Merger
and the other transactions contemplated hereby.
SECTION 3.9. Company Reports.
(a) As of their respective dates, neither the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, nor any other document
filed by the Company subsequent to December 31, 1995 under Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act"), each in the form (including exhibits) filed with the SEC)
(collectively, the "Company Reports"), contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading and the
Company Reports complied in all material respects with the requirements of the
Securities Exchange Act. Each of the consolidated balance sheets contained or
incorporated by reference in the Company Reports (including in each case any
related notes and schedules) fairly presented in all material respects the
financial position of the entity or entities to which it relates as of its date
and each of the consolidated statements of income, consolidated statements of
shareholders, equity and consolidated statement of cash flows, contained or
incorporated by reference in the Company Reports (including in each case any
related notes and schedules), fairly presented in all material respects the
results of operations, stockholders, equity and cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein
(subject, in the case of unaudited interim statements, to normal year-end audit
adjustments that are not material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
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(b) Except with respect to the filing of a registration statement on Form
S-8 in connection with the Company's 401(k) Plan, which is currently in process,
the Company and each of its subsidiaries have each timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since December 31, 1993
with (i) the SEC, (ii) the Federal Reserve Board, (iii) the FDIC, (iv) the BIF,
(vi) any state banking or insurance commission or other regulatory authority
(each, a "State Regulator") (such entities collectively, the "Regulatory
Agencies"), and (vii) the National Association of Securities Dealers, Inc. and
any other self-regulatory organization (an "SRO"), and all other material
reports and statements required to be filed by them since December 31, 1993,
including, without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, the Regulatory
Agencies or any SRO, and have paid all fees and assessments due and payable in
connection therewith.
SECTION 3.10. Absence of Undisclosed Liabilities and Certain Changes or
Events. Since December 31, 1995, the Company and its subsidiaries have conducted
their business only in the ordinary course of business consistent with past
practice and have not incurred any material liability, except in the ordinary
course of their business consistent with past practice. Since December 31, 1995,
there has not been any change in the condition (financial or other), properties,
business, results of operations or prospects of the Company or its subsidiaries
which, individually or in the aggregate, has had, or is reasonably likely to
have, a Material Adverse Effect on the Company.
SECTION 3.11. Taxes. All federal, state, local, and foreign tax returns
required to be filed by or on behalf of the Company or any of its subsidiaries
have been timely filed or requests for extensions have been timely filed and any
such extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all respects. All taxes shown on such
returns have been paid in full or adequate provision has been made for any such
taxes on the Company's balance sheet (in accordance with generally accepted
accounting principles). There is no audit examination, deficiency, or refund
litigation with respect to any taxes of the Company or any of its subsidiaries
that could result in a determination. All taxes, interest, additions, and
penalties due with respect to completed and settled examinations or concluded
litigation relating to it have been paid in full or adequate provision has been
made for any such taxes on the Company's balance sheet (in accordance with
generally accepted accounting principles). The Company has not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any material tax due that is currently in effect.
SECTION 3.12. Absence of Claims. Except as set forth in the Company
Disclosure Letter and except for retail collections and mortgage foreclosures in
the ordinary course of business, as of the date hereof, no litigation,
proceeding or controversy before any court or governmental agency is pending,
and there is no pending claim, action or proceeding against the Company or any
of its subsidiaries, and, to the best of the Company's knowledge after
reasonable inquiry, no such litigation, proceeding, controversy, claim or action
has been threatened or is contemplated.
SECTION 3.13. Absence of Regulatory Actions. Neither the Company nor any of
its subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of, federal or state governmental authorities charged with the
supervision or regulation of depository institutions or depository institution
holding companies or engaged in the insurance of bank and/or savings and loan
deposits ("Government Regulators") nor has it been advised by any Government
Regulator that it is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, directive, written
agreement, memorandum of understanding, extraordinary supervisory letter,
commitment letter, board resolutions or similar undertaking.
SECTION 3.14. Agreements.
(a) Except for this Plan and arrangements made in the ordinary course of
business, the Company and its subsidiaries are not bound by any material
contract (as defined in Item 601(b)(10) of Regulation S-K) to be performed after
the date hereof that has not been filed with or incorporated by reference in the
Company
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Reports filed prior to the date of this Plan. Except as disclosed in the Company
Reports filed prior to the date of this Plan and except as set forth in the
Company Disclosure Letter, neither the Company nor any of its subsidiaries is a
party to an oral or written (i) other than with respect to the agreement
referenced in Section 3.20 hereof, consulting agreement (other than data
processing, software programming and licensing contracts entered into in the
ordinary course of business) involving the payment of more than $25,000 per
annum, (ii) agreement with any executive officer or other key employee of the
Company or any of its subsidiaries the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence of a transaction
involving the Company or any of its subsidiaries of the nature contemplated by
this Plan and which provides for the payment of in excess of $25,000, (iii)
agreement with respect to any executive officer of the Company or any of its
subsidiaries providing any term of employment or compensation guarantee
extending for a period longer than one year and for the payment of in excess of
$25,000 per annum, (iv) agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Plan or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this Plan,
(v) agreement containing covenants that limit the ability of the Company or any
of its subsidiaries to compete in any line of business or with any person, or
that involve any restriction on the geographic area in which, or method by
which, the Company (including any successor thereof) or any of its subsidiaries
may carry on its business (other than as may be required by law or any
regulatory agency) or (vi) agreement (other than agreements relating to credit
or credit equivalent type transactions by bank subsidiaries of the Company)
containing provisions under which the Company or any of its subsidiaries is
obligated to pay in excess of $50,000 per annum.
(b) Neither the Company nor any of its subsidiaries is in default under or
in violation of any provision of any note, bond, indenture, mortgage, deed of
trust, loan agreement or other agreement to which it is a party or by which it
is bound or to which any of its respective properties or assets is subject.
SECTION 3.15. Labor Matters. Neither the Company nor any of its
subsidiaries is a party to, or is bound by, any collective bargaining agreement,
contract, or other agreement or understanding with a labor union or labor
organization, nor is the Company or any of its subsidiaries the subject of any
proceeding asserting that it has committed an unfair labor practice or seeking
to compel it or any such subsidiary to bargain with any labor organization as to
wages and conditions of employment, nor is there any strike, other labor dispute
or organizational effort involving the Company or any of its subsidiaries
pending or threatened.
SECTION 3.16. Employee Benefit Plans. The Company Disclosure Letter
contains a complete and correct list of the names and current annual salary or
director fees, as applicable, for each director and officer of the Company and
each of its subsidiaries, including those whose compensation was paid in whole
or in part by persons or entities other than the Company or any of its
subsidiaries (bonus, commission and perquisite arrangements, written or
unwritten, with respect to such persons will be provided to Parent within ten
(10) calendar days of the date hereof). The Company Disclosure Letter also
contains a complete list of all pension, retirement, stock option, stock
purchase, stock ownership, savings, stock appreciation right, profit sharing,
deferred compensation, consulting, bonus, group insurance, severance and other
benefit plans, contracts, agreements, arrangements, including, but not limited
to, "employee benefit plans", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), incentive and
welfare policies, contracts, plans and arrangements and all trust agreements
related thereto in respect to any present or former directors, officers, or
other employees of the Company or any of its subsidiaries (hereinafter referred
to collectively as the "Employee Plans"). (i) All of the Employee Plans comply
in all material respects with all applicable requirements of ERISA, the Code and
other applicable laws; neither the Company nor any of its subsidiaries has
engaged in a "prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to any Employee Plan which could subject
the Company or any subsidiary to a material tax or penalty under Section 4975 of
the Code or Section 502(i) of ERISA; and all contributions required to be made
under the terms of any Employee Plan have been timely made or have been
reflected on the Company's balance sheet (ii) no liability to the Pension
Benefit Guaranty Corporation (the "PBGC") has been or is expected by the Company
or any of its subsidiaries to be incurred with respect to any Employee
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Plan which is subject to Title IV of ERISA (a "Pension Plan"), or with respect
to any "single employer plan" (as defined in Section 4001(a)(15) of ERISA)
currently or formerly maintained by the Company or any entity (an "ERISA
Affiliate") which is considered one employer with the Company under Section 4001
of ERISA or Section 414 of the Code (an "ERISA Affiliate Plan"); and no
proceedings have been instituted to terminate any Pension Plan or ERISA
Affiliate Plan and no condition exists that presents a material risk of the
institution of such proceedings; (iii) no Pension Plan or ERISA Affiliate Plan
had an "accumulated funding deficiency" (as defined in Section 302 of ERISA
(whether or not waived)) as of the last day of the end of the most recent plan
year ending prior to the date hereof; the fair market value of the assets of
each Pension Plan and ERISA Affiliate Plan exceeds the present value of the
"benefit liabilities" (as defined in Section 4001(a)(16) of ERISA) under such
Pension Plan or ERISA Affiliate Plan as of the end of the most recent plan year
with respect to the respective Pension Plan or ERISA Affiliate Plan ending prior
to the date hereof, calculated on the basis of the actuarial assumptions used in
the most recent actuarial valuation for such Pension Plan or ERISA Affiliate
Plan prior to the date hereof, and there has been no material change in the
financial condition of any such Pension Plan or ERISA Affiliate Plan since the
last day of the most recent plan year; and no notice of a "reportable event" (as
defined in Section 4043 of ERISA) for which the 30-day reporting requirement has
not been waived has been required to be filed for any Pension Plan or ERISA
Affiliate Plan within the 12-month period ending on the date hereof; (iv)
neither the Company nor any subsidiary of the Company has provided or is
required to provide, security to any Pension Plan or to any ERISA Affiliate Plan
pursuant to section 401(a)(29) of the Code; (v) neither the Company, its
subsidiaries, nor any ERISA Affiliate has contributed to any "multiemployer
plan", as defined in Section 3(37) of ERISA, on or after September 26, 1980;
(vi) each Employee Plan of the Company or any of its subsidiaries which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) has
received a favorable determination letter from the Internal Revenue Service
deeming such plan (a "Qualified Plan") to be qualified under Section 401(a) of
the Code; and neither the Company nor its subsidiaries are aware of any
circumstances likely to result in revocation of any such favorable determination
letter; (vii) each Qualified Plan which is an "employee stock ownership plan"
(as defined in Section 4975(e)(7) of the Code) has satisfied all of the
applicable requirements of Sections 409 and 4975(e)(7) of the Code and the
regulations thereunder; all Employee Plans covering foreign participants comply
in all material respects with applicable local law, and there are no material
unfunded liabilities with respect to any Employee Plan which covers foreign
employees; (viii) there is no pending or threatened litigation, administrative
action or proceeding relating to any Employee Plan; (ix) there has been no
announcement or commitment by the Company or any subsidiary of the Company to
create an additional Employee Plan, or to amend an Employee Plan except for
amendments required by applicable law which do not increase the cost of such
Employee Plan; and the Company and its subsidiaries do not have any obligations
for retiree health and life benefits under any Employee Plan except as set forth
in the Company Disclosure Letter, and there are no such Employee Plans that
cannot be amended or terminated without incurring any liability thereunder; (x)
with respect to the Company or any of its subsidiaries, except as specifically
identified in the Company Disclosure Letter, the execution and delivery of this
Plan and the consummation of the transactions contemplated hereby will not
result in any payment or series of payments by the Company or any subsidiary of
the Company to any person which is an "excess parachute payment" (as defined in
Section 28OG of the Code) under any Employee Plan, increase or secure (by way of
a trust or other vehicle) any benefits payable under any Employee Plan, or
accelerate the time of payment or vesting of any such benefit, and (xi) with
respect to each Employee Plan, the Company has supplied to Parent a true and
correct copy, if applicable, of (A) the two most recent annual reports on the
applicable form of the Form 5500 series filed with the Internal Revenue Service
(the "IRS"), (B) such Employee Plan, including amendments thereto, (C) each
trust agreement and insurance contract relating to such Employee Plan, including
amendments thereto, (D) the most recent summary plan description for such
Employee Plan, including amendments thereto, if the Employee Plan is subject to
Title I of ERISA, (E) the most recent actuarial report or valuation if such
Employee Plan is a Pension Plan, (F) the most recent determination letter issued
by the IRS if such Employee Plan is a Qualified Plan and (G) the most recent
financial statements and auditor's report.
SECTION 3.17. Properties. Except as disclosed in the Company Reports filed
prior to the date hereof, the Company and its subsidiaries (a) have good, clear
and marketable title to all the properties and assets
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which are material to the Company's business on a consolidated basis and are
reflected in the latest audited statement of condition included in the Company
Reports as being owned by the Company and its subsidiaries or acquired after the
date thereof (except properties sold or otherwise disposed of since the date
thereof), free and clear of all Liens except (i) statutory Liens securing
payments not yet due, (ii) Liens on assets of subsidiaries of the Company
incurred in the ordinary course of their business and (iii) such imperfections
or irregularities of title or Liens as do not affect the use of the properties
or assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties, in either case in such a manner as to
have a Material Adverse Effect on the Company, and (b) are collectively the
lessee of all leasehold estates which are material to the Company's business on
a consolidated basis and are reflected in the latest audited financial
statements included in the Company Reports or acquired after the date thereof
(except for leases that have expired by their terms or as to which the Company
has agreed to terminate or convey since the date thereof) and is in possession
of the properties purported to be leased thereunder, and each such lease is
valid without default thereunder by the lessee or, to the Company's knowledge,
the lessor, other than defaults that would not have a Material Adverse Effect on
the Company. Each of the Company and each of its subsidiaries enjoys peaceful
and undisturbed possession of all such leases. Substantially all the Company's
and its subsidiaries, owned buildings, structures and equipment have been well
maintained and are in good and serviceable condition, normal wear and tear
excepted.
SECTION 3.18. Knowledge as to Conditions. As of the date hereof, the
Company knows of no reason why the approvals, consents and waivers of
governmental authorities referred to in Section 6.1(b) should not be obtained
without the imposition of any condition of the type referred to in the provisos
thereto.
SECTION 3.19. Compliance with Laws. Since December 31, 1993, the Company
and each of its subsidiaries have complied in all material respects with all
applicable laws. The Company and each of its subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect,
and, to the best knowledge of the Company, no suspension or cancellation of any
of them is threatened.
SECTION 3.20. Fees. Other than financial advisory services performed for
the Company by ABN AMRO Chicago Corporation in an amount and pursuant to an
agreement both previously disclosed to Parent and attached to the Company
Disclosure Letter, neither the Company nor any of its subsidiaries, nor any of
their respective officers, directors, employees or agents, has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions, or finder's fees, and no broker or finder has acted
directly or indirectly for the Company or any subsidiary of the Company, in
connection with the Plan or the transactions contemplated hereby.
SECTION 3.21. Environmental Matters.
(a) Except as will not, individually or in the aggregate, involve any
liability of the Company or any of its subsidiaries in excess of $1,000,000,
with respect to the Company and each of its subsidiaries:
(i) Each of the Company and its subsidiaries, the Participation
Facilities, and the Loan Properties (each as defined below) are, and have
been, in substantial compliance with all Environmental Laws (as defined
below);
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened, before any court, governmental agency or board or other forum
against it or any of its subsidiaries or any Participation Facility (A) for
alleged noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (B) relating to the presence of or release
into the environment of any Hazardous Material (as defined below) or oil,
whether or not occurring at or on a site owned, leased or operated by it or
any of its subsidiaries or any Participation Facility;
(iii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened, before any court, governmental agency or board or other forum
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relating to or against any Loan Property (or the Company or any of its
subsidiaries in respect of such Loan Property) (A) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (B) relating to the presence of or release into the
environment of any Hazardous Material or oil whether or not occurring at or
on a site owned, leased or operated by a Loan Property;
(iv) There is no reasonable basis for any suit, claim, action, demand,
executive or administrative order, directive or proceeding of a type
described in Section 3.21(a)(ii) or (iii);
(v) The properties currently or formerly owned or operated by the
Company or any of its subsidiaries (including, without limitation, soil,
groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) do not contain any Hazardous Material (as defined below)
other than as permitted under applicable Environmental Law (provided,
however, that with respect to properties formerly owned or operated by the
Company or any of its subsidiaries, such representation is limited to the
period the Company or any such subsidiary owned or operated such
properties);
(vi) None of it or any of its subsidiaries has received any notice,
demand letter, executive or administrative order, directive or request for
information from any Federal, state, local or foreign governmental entity
or any third party indicating that it may be in violation of, or liable
under, any Environmental Law;
(vii) There are no underground storage tanks on, in or under any
properties or Participation Facility and, except with respect to the
property of the Company's subsidiary owned and operated in St. Johns,
Michigan, which is fully described in the Company Disclosure Letter, no
underground storage tanks have been closed or removed from any properties
or Participation Facility which are or have been in the ownership of it or
any of its subsidiaries;
(viii) During the period of (A) its or any of its subsidiaries,
ownership or operation of any of their respective current properties, (B)
its or any of its subsidiaries, participation in the management of any
Participation Facility, or (C) its or any of its subsidiaries, holding of a
security interest in a Loan Property, there has been no contamination by or
release of Hazardous Material or oil in, on, under or affecting such
properties. Prior to the period of (x) its or any of its subsidiaries'
ownership or operation of any of their respective current properties, (y)
its or any of its subsidiaries, participation in the management of any
Participation Facility, or (z) its or any of its subsidiaries, holding of a
security interest in a Loan Property, there was no contamination by or
release of Hazardous Material or oil in, on, under or affecting any such
property, Participation Facility or Loan Property; and
(ix) None of it or its subsidiaries participates in the management of
a Loan Property or Participation Facility to an extent that it would be
deemed an "owner or operator" as defined in 42 U.S.C. Section 9601 or any
similar Environmental Law.
(b) The following definitions apply for purposes of this Section 3.21: (i)
"Loan Property" means any property in which the applicable party (or a
subsidiary of it) holds a security interest, and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property; (ii) "Participation Facility" means any facility in which the
applicable party (or a subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary or agency
capacity) and, where required by the context, includes the owner or operator of
such property; (iii) "Environmental Law" means (A) any federal, state or local
law, statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, directive, executive or administrative
order, judgment, decree, injunction, requirement or agreement with any
governmental entity, (x) relating to the protection, preservation or restoration
of the environment (which includes, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, structures, soil, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of, Hazardous Materials, in each case
as amended and as now in effect, including all current Environmental Laws. The
term Environmental Law includes, without limitation, the federal Comprehensive
Environmental
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Response Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the federal Water Pollution Control Act of 1972, the
federal Clean Air Act, the federal Clean Water Act, the federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the federal Solid Waste Disposal and the federal Toxic
Substances Control Act, the Federal insecticide, Fungicide and Rodenticide Act,
the Federal Occupational Safety and Health Act of 1970, the Federal Hazardous
Materials Transportation Act, or any so called "Superfund" or "Superlien" law,
each as amended and as now or hereafter in effect, and (B) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of or exposure to any Hazardous Material; and (iv)
"Hazardous Material" means any substance in any concentration which is or could
be detrimental to human health or safety or to the environment, currently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity, including any substance containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
SECTION 3.22. Allowance. The allowance for possible loan losses shown on
the Company's unaudited balance sheet as of September 30, 1996 was, and the
allowance for possible loan losses shown on the balance sheets in the Company
Reports for periods ending after the date of this Plan will be, adequate, as of
the date thereof, under generally accepted accounting principles applicable to
banks and bank holding companies. The Company has disclosed to Parent in writing
prior to the execution hereof and has set forth in the Company Disclosure Letter
all loans, leases, advances, credit enhancements, other extensions of credit,
commitments and interest-bearing assets of the Company and its subsidiaries that
have been classified as "Other Loans Specially Mentioned", "Special Mention",
"Substandard", "Doubtful", "Loss", "Classified", "Criticized", "Credit Risk
Assets", "Concerned Loans" or words of similar import and the aggregate amount
thereunder of each such category or type. The Other Real Estate Owned included
in any non-performing assets of the Company or any of its subsidiaries is
carried net of reserves at the lower of cost or market value based on current
independent appraisals.
SECTION 3.23. Antitakeover Provisions Inapplicable. The Company has taken
all actions required to exempt this Plan and the Merger and any amendment or
revision thereto, the Stock Option Agreement and any amendment or revision
thereof and the transactions contemplated hereby and thereby from any state
antitakeover laws, including without limitation, Chapters 7A and 7B of the State
Corporation Law.
SECTION 3.24. Material Interests of Certain Persons. Except as disclosed in
the Company's Proxy Statement for its 1996 Annual Meeting of Stockholders, no
officer or director of the Company, or any "associate" (as such term is defined
in Rule 12b-2 under the Securities Exchange Act) of any such officer or
director, has any material interest in any material contract or property (real
or personal), tangible or intangible, used in or pertaining to the business of
the Company or any of its subsidiaries other than loan relationships established
in the ordinary course of business which were made on substantially the same
terms as comparable transactions made with unrelated parties prevailing at the
time of such transactions.
SECTION 3.25. Insurance. The Company and its subsidiaries are presently
insured, and since December 31, 1993, have been insured, for reasonable amounts
with financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by the Company and its subsidiaries are in full force and effect, the
Company and its subsidiaries are not in default thereunder and all material
claims thereunder have been filed in due and timely fashion. Since December 31,
1993, no claim by the Company or any of its subsidiaries on or in respect of an
insurance policy or bond has been declined or refused by the relevant insurer or
insurers. In the best judgment of the Company's management, such insurance
coverage is adequate and will be available in the future under terms and
conditions substantially similar to those in effect on the date hereof. Between
the date hereof and the Effective Time, the Company and its subsidiaries will
maintain the levels of insurance coverage in effect on the date hereof and
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will submit all potential claims existing prior to the Effective Time to its
insurance carrier on or before the Effective Time. The Company Disclosure Letter
lists all insurance policies maintained by or for the benefit of the Company, of
its subsidiaries or its directors, officers, employees or agents, specifying the
(i) type of policy and a brief description thereof, (ii) policy limits and (iii)
self insurance amounts.
SECTION 3.26. Investment Securities. Except for pledges to secure public
and trust deposits and reverse repurchase agreements entered into in
arm's-length transactions pursuant to normal commercial terms and conditions and
other pledges required by law, none of the investments reflected in the
consolidated balance sheet of the Company included in the Company's Report on
Form 10-Q for the quarter ended September 30, 1996, and none of the material
investments made by it or any of its subsidiaries since December 31, 1995, is
subject to any restriction (contractual, statutory or otherwise) that would
materially impair the ability of the entity holding such investment freely to
dispose of such investment at any time.
SECTION 3.27. Pooling of Interests. As of the date of this Plan, the
Company has no reason to believe that the Merger will not qualify as a "pooling
of interests" for accounting purposes.
SECTION 3.28. Derivatives. Neither the Company nor any of its subsidiaries
is currently a party to any interest rate swap, cap, floor, option agreement,
other interest rate risk management arrangement or agreement or derivative-type
security or derivative arrangement or agreement.
SECTION 3.29. Registration Obligations. Neither the Company nor any of its
subsidiaries is under any obligation, contingent or otherwise, to register any
of its securities under the Securities Act of 1933, as amended.
SECTION 3.30. Books and Records. The books and records of the Company and
its subsidiaries have been, and are being, maintained in accordance with
applicable legal and accounting requirements and reflect in all material
respects the substance of events and transactions that should be included
therein.
SECTION 3.31. Corporate Documents. The Company has delivered to Parent true
and complete copies of (i) its articles of incorporation and by-laws and (ii)
the charter and by-laws of each subsidiary of the Company.
SECTION 3.32. Company Action. The Board of Directors of the Company has
adopted resolutions recommending that this Plan be approved by the shareholders
of the Company and directing that this Plan be submitted for consideration by
the Company's shareholders at the Company Meeting.
SECTION 3.33. Indemnification. Except as provided in the State Corporation
Law and in the by-laws of the Company and its subsidiaries, neither the Company
nor any subsidiary of the Company is a party to any indemnification agreement
with any of its present or future directors, officers, employees, agents or
other persons who serve or served in any other capacity with any other
enterprise at the request of the Company or a subsidiary of the Company (a
"Covered Person"), and to the best knowledge of the Company, there are no claims
for which any Covered Person would be entitled to indemnification under Section
5.6 if such provisions were deemed to be in effect.
SECTION 3.34. Fair Lending; Community Reinvestment Act. As of the date
hereof, with the exception of routine investigation of consumer complaints,
neither the Company nor any of its subsidiaries has been advised that it is or
may be in violation of the Equal Credit Opportunity Act or the Fair Housing Act
or any similar federal or state statute. Each of the Company's subsidiaries
received a CRA rating of "1" or "outstanding" in its most recent CRA
examination.
SECTION 3.35. No Omission of Material Fact. No representation or warranty
by the Company in this Plan or under any documents, instruments, certificates or
schedules delivered or to be delivered pursuant hereto or in connection with the
transactions contemplated hereby contains any untrue statement of material fact,
or omits to state a material fact necessary to make the statements or facts
contained herein or therein not misleading. None of the information regarding
the Company or any of its subsidiaries or the transactions contemplated hereby
supplied or to be supplied by the Company or any of its subsidiaries for
inclusion in any documents or filings to be filed with any regulatory authority
in connection with the transactions contemplated
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hereby will contain any untrue statement of material fact, or omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
SECTION 3.36. Conduct of Business. Since September 30, 1996, except as
contemplated by this Plan, neither the Company nor any of its subsidiaries has
taken any action which would have violated Section 2.1 or Section 2.2 had such
Sections been in effect since September 30, 1996. The Company has not purchased
or caused to be purchased any Company Common Stock since 1994.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent and Merger Sub represent and warrant to the Company that, except as
specifically disclosed in a letter (the "Parent Disclosure Letter") of Parent
delivered to the Company prior to the execution of this Plan (and making
specific references to the section of this Plan for which an exception is
taken):
SECTION 4.1. Recitals True. The facts set forth in the Recitals of this
Plan with respect to Parent and Merger Sub are true and correct.
SECTION 4.2. Capital Stock. All outstanding shares of capital stock of
Parent and its subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are not subject to any preemptive rights.
SECTION 4.3. Due Organizations. Each subsidiary of Parent is a corporation
or banking organization duly incorporated, validly existing and in good standing
under the laws of the state of its incorporation. Each of the Parent's
subsidiaries which is a bank is a member of the Bank Insurance Fund ("BIF") of
the Federal Deposit Insurance Corporation (the "FDIC") and all of its deposits
are subject to assessment by the BIF.
SECTION 4.4. Authority. Each of Parent and its subsidiaries has the power
and authority, and is duly qualified in all jurisdictions (except for such
qualifications the absence of which, in the aggregate, would not have a Material
Adverse Effect on Parent) where such qualification is required, to carry on its
business as it is now being conducted and to own all its properties and assets,
and it has all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now being conducted.
SECTION 4.5. Subsidiaries; Significant Investments. The only subsidiaries
of Parent are set forth in the Disclosure Letter. All of the shares of capital
stock of each subsidiary of Parent are owned directly and of record by Parent or
a wholly-owned subsidiary of Parent, in each such case free and clear of all
Liens and there are no options or similar rights with respect to any such
capital stock. Neither Parent nor any of its subsidiaries maintains a
liquidation or similar type of account. None of Parent or any of such
subsidiaries owns any equity securities, any security convertible or
exchangeable into an equity security or any rights to acquire any equity
security except those of its subsidiaries as listed in the Parent Disclosure
Letter.
SECTION 4.6. Shareholder Approvals.
(a) Subject to the receipt of required shareholder approval of this Plan,
this Plan and the transactions contemplated herein have been duly authorized by
all necessary corporate action of Parent and Merger Sub. In addition, Parent
expects to receive the written opinion of its financial advisor to the effect
that the Merger is fair to Parent and its shareholders from a financial point of
view in standard industry form with respect to transactions of this nature.
Subject to receipt of (i) such shareholder approval and (ii) the required
approvals, consents or waivers of governmental authorities referred to in
Section 6.1(b), this Plan is a valid and binding agreement of Parent and Merger
Sub enforceable against each in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors, rights and to general equity principles.
(b) The affirmative vote of a majority of the outstanding shares of Parent
Common Stock entitled to vote on this Plan and the vote of the sole shareholder
of Merger Sub are the only shareholder votes required for approval of the Plan
and consummation of the Merger and the other transactions contemplated hereby.
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SECTION 4.7. No Violations. The execution, delivery and performance of this
Plan by Parent and Merger Sub do not, and the consummation of the transactions
contemplated hereby by Parent and each of its subsidiaries will not, constitute
(i) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of Parent or any subsidiary of Parent or to which Parent
or any of its subsidiaries (or any of their respective properties) is subject,
or enable any person to enjoin the Merger or the other transactions contemplated
hereby, (ii) a breach or violation of, or a default under, the articles of
incorporation or by-laws or similar organizational documents of Parent or any
subsidiary of Parent or (iii) a breach or violation of, or a default under (or
an event which with due notice or lapse of time or both would constitute a
default under), or result in the termination of, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the properties or assets of Parent or
any subsidiary of Parent under, any of the terms, conditions or provisions of
any note, bond, indenture, deed of trust, loan agreement or other agreement,
instrument or obligation to which Parent or any subsidiary of Parent is a party,
or to which any of their respective properties or assets may be bound or
affected.
SECTION 4.8. Consents and Approvals. Except for (a) the filing of
applications and notices, as applicable, with the Federal Reserve Board under
the BHC Act and approval of such applications and notices, (b) the filing of any
required applications or notices with any state or foreign agencies and approval
of such applications and notices ("State Approvals"), (c) the filing with the
SEC of the Joint Proxy Statement and the S-4 in which the Joint Proxy Statement
will be included as a prospectus, (d) the filing of the Certificate of Merger
with the Department of Consumer and Industry Services pursuant to the State
Corporation Law, (e) any notices to or filings with the Small Business
Administration ("SBA"), (f) such filings and approvals as are required to be
made or obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of the shares of Parent Common Stock pursuant to
this Plan, and (g) the approval of this Plan by the requisite vote of the
shareholders of the Company, and the Parent, no consents or approvals of or
filings or registrations with any Regulatory Agencies or with any third party
are necessary in connection with (i) the execution and delivery by Parent and
Merger Sub of this Plan and (ii) the consummation by Parent and Merger Sub of
the Merger and the other transactions contemplated hereby.
SECTION 4.9. Parent Reports.
(a) As of their respective dates, neither Parent's Annual Report on Form
10-K for the fiscal year ended December 31, 1995, nor any other document filed
by Parent subsequent to December 31, 1995 under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act, each in the form (including exhibits)
filed with the SEC (collectively, the "Parent Reports"), contained or will
contain any untrue statement of a material fact or omitted or will omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading and the Parent Reports complied in all material respects
with the requirements of the Securities Exchange Act. Each of the consolidated
balance sheets contained or incorporated by reference in the Parent Reports
(including in each case any related notes and schedules) fairly presented in all
material respects the financial position of the entity or entities to which it
relates as of its date and each of the consolidated statements of income,
consolidated statements of shareholders, equity and consolidated statement of
cash flows, contained or incorporated by reference in the Parent Reports
(including in each case any related notes and schedules), fairly presented in
all material respects the results of operations, stockholders, equity and cash
flows, as the case may be, of the entity or entities to which it relates for the
periods set forth therein (subject, in the case of unaudited interim statements,
to normal year-end audit adjustments that are not material in amount or effect),
in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein.
(b) Parent and each of its subsidiaries have each timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since December. 31, 1993
with (i) the Regulatory Agencies, and (ii) any SRO, and all other material
reports and statements required to be filed by them since December 31, 1993,
including, without limitation, any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States, the Regulatory
Agencies or any SRO, and have paid all fees and assessments due and payable in
connection therewith.
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SECTION 4.10. Absence of Undisclosed Liabilities and Certain Changes or
Events. Since December 31, 1995, Parent and its subsidiaries have conducted
their business only in the ordinary course of business consistent with past
practice and have not incurred any material liability, except in the ordinary
course of their business consistent with past practice. Since December 31, 1995,
there has not been any change in the condition (financial or other), properties,
business, results of operations or prospects of Parent or its subsidiaries
which, individually or in the aggregate, has had, or is reasonably likely to
have, a Material Adverse Effect on Parent.
SECTION 4.11. Taxes. All federal, state, local, and foreign tax returns
required to be filed by or on behalf of Parent or any of its subsidiaries have
been timely filed or requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and all such filed
returns are complete and accurate in all respects. All taxes shown on such
returns have been paid in full or adequate provision has been made for any such
taxes on Parent's balance sheet (in accordance with generally accepted
accounting principles). There is no audit examination, deficiency, or refund
litigation with respect to any taxes of Parent or any of its subsidiaries that
could result in a determination. All taxes, interest, additions, and penalties
due with respect to completed and settled examinations or concluded litigation
relating to it have been paid in full or adequate provision has been made for
any such taxes on Parent's balance sheet (in accordance with generally accepted
accounting principles). Parent has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any material tax due
that is currently in effect.
SECTION 4.12. Absence of Claims. As of the date hereof, no litigation,
proceeding or controversy before any court or governmental agency is pending,
and there is no pending claim, action or proceeding against Parent or any of its
subsidiaries, and, to the best of Parent's knowledge after reasonable inquiry,
no such litigation, proceeding, controversy, claim or action has been threatened
or is contemplated, which in any case is reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on Parent or to hinder or delay
consummation of the transactions contemplated hereby.
SECTION 4.13. Absence of Regulatory Actions. Neither Parent nor any of its
subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
any extraordinary supervisory letter from, or has adopted any board resolutions
at the request of Government Regulators nor has it been advised by any
Government Regulator that it is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
SECTION 4.14. Agreements.
(a) Except for this Plan and arrangements made in the ordinary course of
business, Parent and its subsidiaries are not bound by any material contract (as
defined in Item 601(b)(10) of Regulation S-K) to be performed after the date
hereof that has not been filed with or incorporated by reference in the Parent
Reports filed prior to the date of this Plan.
(b) Neither Parent nor any of its subsidiaries is in default under or in
violation of any provision of any note, bond, indenture, mortgage, deed of
trust, loan agreement or other agreement to which it is a party or by which it
is bound or to which any of its respective properties or assets is subject.
SECTION 4.15. Labor Matters. Neither Parent or any of its subsidiaries is a
party to, or is bound by, any collective bargaining agreement, contract, or
other agreement or understanding with a labor union or labor organization, nor
is Parent or any of its subsidiaries the subject of any proceeding asserting
that it has committed an unfair labor practice or seeking to compel it or any
such subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike, other labor dispute or
organizational effort involving Parent or any of its subsidiaries pending or
threatened.
SECTION 4.16. Employee Benefit Plans. (i) All of Parent's pension,
retirement, stock option, stock purchase, stock ownership, savings, stock
appreciation right, profit sharing, deferred compensation, consulting, bonus,
group insurance, severance and other benefit plans, contracts, agreements,
arrangements, including, but
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not limited to, "employee benefit plans", as defined under ERISA, incentive and
welfare policies, contracts, plans and arrangements and all trust agreements
related thereto in respect to any present directors, officers, or other
employees of Parent or any of its subsidiaries (hereinafter referred to
collectively as the "Parent Employee Plans") comply in all material respects
with all applicable requirements of ERISA, the Code and other applicable laws;
neither Parent nor any of its subsidiaries has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Parent Employee Plan which could subject Parent or any
subsidiary to a material tax or penalty under Section 4975 of the Code or
Section 502(i) of ERISA; and all contributions required to be made under the
terms of any Parent Employee Plan have been timely made or have been reflected
on Parent's balance sheet (ii) no liability to the PBGC has been or is expected
by Parent or any of its subsidiaries to be incurred with respect to any Parent
Employee Plan which is subject to Title IV of ERISA (a "Parent Pension Plan"),
or with respect to any "single employer plan" (as defined in Section 4001(a)(15)
of ERISA) currently or formerly maintained by Parent or any entity (an "ERISA
Affiliate") which is considered one employer with Parent under Section 4001 of
ERISA or Section 414 of the Code (an "ERISA Affiliate Plan"); and no proceedings
have been instituted to terminate any Parent Pension Plan or ERISA Affiliate
Plan and no condition exists that presents a material risk of the institution of
such proceedings; (iii) no Parent Pension Plan or ERISA Affiliate Plan had an
"accumulated funding deficiency" (as defined in Section 302 of ERISA (whether or
not waived)) as of the last day of the end of the most recent plan year ending
prior to the date hereof; the fair market value of the assets of each Parent
Pension Plan and ERISA Affiliate Plan exceeds the present value of the "benefit
liabilities" (as defined in Section 4001(a)(16) of ERISA) under such Parent
Pension Plan or ERISA Affiliate Plan as of the end of the most recent plan year
with respect to the respective Parent Pension Plan or ERISA Affiliate Plan
ending prior to the date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for such Parent Pension
Plan or ERISA Affiliate Plan prior to the date hereof, and there has been no
material change in the financial condition of any such Parent Pension Plan or
ERISA Affiliate Plan since the last day of the most recent plan year; and no
notice of a "reportable event" (as defined in Section 4043 of ERISA) for which
the 30-day reporting requirement has not been waived has been required to be
filed for any Parent Pension Plan or ERISA Affiliate Plan within the 12-month
period ending on the date hereof; (iv) neither Parent nor any subsidiary of
Parent has provided or is required to provide, security to any Parent Pension
Plan or to any ERISA Affiliate Plan pursuant to section 401(a)(29) of the Code;
(v) neither Parent, its subsidiaries, nor any ERISA Affiliate has contributed to
any "multiemployer plan", as defined in Section 3(37) of ERISA, on or after
September 26, 1980; (vi) each Parent Employee Plan of Parent or any of its
subsidiaries which is an "employee pension benefit plan" (as defined in Section
3(2) of ERISA) has received a favorable determination letter from the Internal
Revenue Service deeming such plan (a "Qualified Parent Plan") to be qualified
under Section 401(a) of the Code; and neither Parent nor its subsidiaries are
aware of any circumstances likely to result in revocation of any such favorable
determination letter; (vii) each Qualified Parent Plan which is an "employee
stock ownership plan" (as defined in Section 4975(e)(7) of the Code) has
satisfied all of the applicable requirements of Sections 409 and 4975(e)(7) of
the Code and the regulations thereunder; all Parent Employee Plans covering
foreign participants comply in all material respects with applicable local law ,
and there are no material unfunded liabilities with respect to any Parent
Employee Plan which covers foreign employees; (viii) there is no pending or
threatened litigation, administrative action or proceeding relating to any
Parent Employee Plan; (ix) there has been no announcement or commitment by
Parent or any subsidiary of Parent to create an additional Parent Employee Plan,
or to amend an Parent Employee Plan except for amendments required by applicable
law which do not increase the cost of such Parent Employee Plan; and Parent and
its subsidiaries do not have any obligations for retiree health and life
benefits under any Parent Employee Plan which would have a Material Adverse
Effect on Parent.
SECTION 4.17. Properties. Except as disclosed in the Parent Reports filed
prior to the date hereof, Parent and its subsidiaries (a) have good, clear and
marketable title to all the properties and assets which are material to Parent's
business on a consolidated basis and are reflected in the latest audited
statement of condition included in the Parent Reports as being owned by Parent
and its subsidiaries or acquired after the date thereof (except properties sold
or otherwise disposed of since the date thereof), free and clear of all Liens
except (i) statutory Liens securing payments not yet due, (ii) Liens on assets
of subsidiaries of Parent
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incurred in the ordinary course of their business and (iii) such imperfections
or irregularities of title or Liens as do not affect the use of the properties
or assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties, in either case in such a manner as to
have a Material Adverse Effect on Parent, and (b) are collectively the lessee of
all leasehold estates which are material to Parent's business on a consolidated
basis and are reflected in the latest audited financial statements included in
the Parent Reports or acquired after the date thereof (except for leases that
have expired by their terms or as to which Parent has agreed to terminate or
convey since the date thereof) and is in possession of the properties purported
to be leased thereunder, and each such lease is valid without default thereunder
by the lessee or, to Parent's knowledge, the lessor, other than defaults that
would not have a Material Adverse Effect on Parent. Each of Parent and each of
its subsidiaries enjoys peaceful and undisturbed possession of all such leases.
Substantially all Parent's and its subsidiaries, owned buildings, structures and
equipment have been well maintained and are in good and serviceable condition,
normal wear and tear excepted.
SECTION 4.18. Knowledge as to Conditions. As of the date hereof, Parent
knows of no reason why the approvals, consents and waivers of governmental
authorities referred to in Section 6.1(b) should not be obtained without the
imposition of any condition of the type referred to in the provisos thereto.
SECTION 4.19. Compliance with Laws. Since December 31, 1993, Parent and
each of its subsidiaries have complied in all material respects with all
applicable laws. Parent and each of its subsidiaries has all permits, licenses,
certificates of authority, orders and approvals of, and has made all filings,
applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect,
and, to the best knowledge of Parent, no suspension or cancellation of any of
them is threatened.
SECTION 4.20. Fees. Other than financial advisory services referred to in
Section 4.6, neither Parent nor any of its subsidiaries, nor any of their
respective officers, directors, employees or agents, has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for Parent or any subsidiary of Parent, in connection with the
Plan or the transactions contemplated hereby.
SECTION 4.21. Environmental Matters.
(a) Except as will not, individually or in the aggregate, have a Material
Adverse Effect on Parent, with respect to Parent and each of its subsidiaries:
(i) Each of Parent and its subsidiaries, the Participation Facilities,
and the Loan Properties (each as defined below) are, and have been, in
substantial compliance with all Environmental Laws (as defined below);
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened, before any court, governmental agency or board or other forum
against it or any of its subsidiaries or any Participation Facility (A) for
alleged noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (B) relating to the presence of or release
into the environment of any Hazardous Material (as defined below) or oil,
whether or not occurring at or on a site owned, leased or operated by it or
any of its subsidiaries or any Participation Facility;
(iii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or proceeding pending or
threatened, before any court, governmental agency or board or other forum
relating to or against any Loan Property (or Parent or any of its
subsidiaries in respect of such Loan Property) (A) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (B) relating to the presence of or release into the
environment of any Hazardous Material or oil whether or not occurring at or
on a site owned, leased or operated by a Loan Property;
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(iv) There is no reasonable basis for any suit, claim, action, demand,
executive or administrative order, directive or proceeding of a type
described in Section 3.21(a)(ii) or (iii);
(v) The properties currently or formerly owned or operated by Parent
or any of its subsidiaries (including, without limitation, soil,
groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) do not contain any Hazardous Material (as defined below)
other than as permitted under applicable Environmental Law (provided,
however, that with respect to properties formerly owned or operated by
Parent or any of its subsidiaries, such representation is limited to the
period Parent or any such subsidiary owned or operated such properties);
(vi) None of it or any of its subsidiaries has received any notice,
demand letter, executive or administrative order, directive or request for
information from any Federal, state, local or foreign governmental entity
or any third party indicating that it may be in violation of, or liable
under, any Environmental Law;
(vii) There are no underground storage tanks on, in or under any
properties or Participation Facility and no underground storage tanks have
been closed or removed from any properties or Participation Facility which
are or have been in the ownership of it or any of its subsidiaries;
(viii) During the period of (A) its or any of its subsidiaries,
ownership or operation of any of their respective current properties, (B)
its or any of its subsidiaries, participation in the management of any
Participation Facility, or (C) its or any of its subsidiaries, holding of a
security interest in a Loan Property, there has been no contamination by or
release of Hazardous Material or oil in, on, under or affecting such
properties. Prior to the period of (x) its or any of its subsidiaries'
ownership or operation of any of their respective current properties, (y)
its or any of its subsidiaries, participation in the management of any
Participation Facility, or (z) its or any of its subsidiaries, holding of a
security interest in a Loan Property, there was no contamination by or
release of Hazardous Material or oil in, on, under or affecting any such
property, Participation Facility or Loan Property; and
(ix) None of it or its subsidiaries participates in the management of
a Loan Property or Participation Facility to an extent that it would be
deemed an "owner or operator" as defined in 42 U.S.C. Section 9601 or any
similar Environmental Law.
(b) The following definitions apply for purposes of this Section 4.21: (i)
"Loan Property" means any property in which the applicable party (or a
subsidiary of it) holds a security interest, and, where required by the context,
includes the owner or operator of such property, but only with respect to such
property; (ii) "Participation Facility" means any facility in which the
applicable party (or a subsidiary of it) participates in the management
(including all property held as trustee or in any other fiduciary or agency
capacity) and, where required by the context, includes the owner or operator of
such property; (iii) "Environmental Law" has the meaning set forth in Section
3.21(b); and (iv) "Hazardous Material" has the meaning set forth in Section
3.21(b).
SECTION 4.22. Allowance. The allowance for possible loan losses shown on
Parent's unaudited balance sheet as of September 30, 1996 was, and the allowance
for possible loan losses shown on the balance sheets in its Parent Reports for
periods ending after the date of this Plan will be, adequate, as of the date
thereof, under generally accepted accounting principles applicable to banks and
bank holding companies. The Other Real Estate Owned included in any
non-performing assets of Parent or any of its subsidiaries is carried net of
reserves at the lower of cost or market value based on current independent
appraisals.
SECTION 4.23. Material Interest of Certain Persons. Except as disclosed in
Parent's Proxy Statement for its 1996 Annual Meeting of Stockholders, no officer
or director of Parent, or any "associate" (as such term is defined in Rule 12b-2
under the Securities Exchange Act) of any such officer or director, has any
material interest in any material contract or property (real or personal),
tangible or intangible, used in or pertaining to the business of Parent or any
of its subsidiaries other than loan relationships established in the ordinary
course of business which were made on substantially the same terms as comparable
transactions made with unrelated parties prevailing at the time of such
transactions.
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SECTION 4.24. Insurance. Parent and its subsidiaries are presently insured,
and since December 31, 1993, have been insured, for reasonable amounts with
financially sound and reputable insurance companies, against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured. All of the insurance policies and bonds
maintained by Parent and its subsidiaries are in full force and effect, Parent
and its subsidiaries are not in default thereunder and all material claims
thereunder have been filed in due and timely fashion. Since December 31, 1993,
no claim by Parent or any of its subsidiaries on or in respect of an insurance
policy or bond has been declined or refused by the relevant insurer or insurers.
In the best judgment of Parent's management, such insurance coverage is adequate
and will be available in the future under terms and conditions substantially
similar to those in effect on the date hereof. Between the date hereof and the
Effective Time, Parent and its subsidiaries will maintain the levels of
insurance coverage in effect on the date hereof.
SECTION 4.25. Investment Securities. Except for pledges to secure public
and trust deposits and reverse repurchase agreements entered into in
arm's-length transactions pursuant to normal commercial terms and conditions and
other pledges required by law, none of the investments reflected in the
consolidated balance sheet of Parent included in Parent's Report on Form 10-Q
for the quarter ended September 30, 1996, and none of the material investments
made by it or any of its subsidiaries since December 31, 1995, is subject to any
restriction (contractual, statutory or otherwise) that would materially impair
the ability of the entity holding such investment freely to dispose of such
investment at any time.
SECTION 4.26. Pooling of Interests. As of the date of this Plan, Parent has
no reason to believe that the Merger will not qualify as a "pooling of
interests" for accounting purposes.
SECTION 4.27. Derivatives. Neither Parent nor any of its subsidiaries is
currently a party to any interest rate swap, cap, floor, option agreement, other
interest rate risk management arrangement or agreement or derivative-type
security or derivative arrangement or agreement.
SECTION 4.28. Registration Obligations. Except as contemplated by the terms
of this Plan, neither Parent nor any of its subsidiaries is under any
obligation, contingent or otherwise, to register any of its securities under the
Securities Act of 1933, as amended.
SECTION 4.29. Books and Records. The books and records of Parent and its
subsidiaries have been, and are being, maintained in accordance with applicable
legal and accounting requirements and reflect in all material respects the
substance of events and transactions that should be included therein.
SECTION 4.30. Corporate Documents. Parent has delivered to the Company true
and complete copies of (i) its articles of incorporation and by-laws and (ii)
the charter and by-laws of each subsidiary of Parent.
SECTION 4.31. Parent Action. The Board of Directors of Parent has adopted
resolutions recommending that this Plan be approved by the shareholders of
Parent and directing that this Plan be submitted for consideration by Parent's
shareholders at the Parent Meeting.
SECTION 4.32. Fair Lending; Community Reinvestment Act. As of the date
hereof, with the exception of routine investigation of consumer complaints,
neither Parent nor any of its subsidiaries has been advised that it is or may be
in violation of the Equal Credit Opportunity Act or the Fair Housing Act or any
similar federal or state statute. Each of Parent's subsidiaries received a CRA
rating of "1" or "outstanding" in its most recent CRA examination.
SECTION 4.33. No Omission of Material Fact. No representation or warranty
by Parent in this Plan or under any documents, instruments, certificates or
schedules delivered or to be delivered pursuant hereto or in connection with the
transactions contemplated hereby contains any untrue statement of material fact,
or omits to state a material fact necessary to make the statements or facts
contained herein or therein not misleading. None of the information regarding
Parent or any of its subsidiaries or the transactions contemplated hereby
supplied or to be supplied by Parent or any of its subsidiaries for inclusion in
any documents or filings to be filed with any regulatory authority in connection
with the transactions contemplated hereby will contain any untrue statement of
material fact, or omit to state a material fact necessary to make the statements
or facts contained therein not misleading.
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SECTION 4.34. Conduct of Business. Since September 30, 1996, except as
contemplated by this Plan, neither Parent nor any of its subsidiaries has taken
any action which would have violated Section 2.4 had such Section been in effect
since September 30, 1996.
ARTICLE V. ADDITIONAL AGREEMENTS
SECTION 5.1. Acquisition Proposals. The Company agrees that neither it nor
any of its subsidiaries nor any of the respective officers and directors of the
Company or its subsidiaries shall, and the Company shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by it or any
of its subsidiaries) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to shareholders of the Company) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, the Company or any of its subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or, if the
Company's Board of Directors determines, upon receipt of a written opinion of
its outside counsel, that it is required to take the following action in order
to fulfill their fiduciary duties to the Company's shareholders under the State
Corporation Law, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and enforce any confidentiality agreements to which it
or any of its subsidiaries is a party. The Company will take the necessary steps
to inform the appropriate individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 5.1. The Company
will notify (describing the relevant facts) Parent immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with, the Company.
SECTION 5.2. Certain Policies of the Company. At the request of Parent, the
Company shall modify and change its loan, litigation and real estate valuation
policies and practices (including loan classifications and levels of reserves)
after the date on which all required regulatory approvals are received and prior
to the Effective Time so as to be consistent on a mutually satisfactory basis
with those of Parent and generally accepted accounting principles. The Company's
representations, warranties and covenants contained in this Plan shall not be
deemed to be untrue or breached in any respect for any purpose as a consequence
of any modifications or changes undertaken solely on account of this Section 5.2
nor shall the conditions set forth in Section 5.13 of this Plan be deemed to
have occurred by virtue thereof.
SECTION 5.3. Access and Information. Upon reasonable notice, each of the
Company and Parent shall (and shall cause its subsidiaries to) afford to the
other party and its representatives (including, without limitation, directors,
officers and employees of the other party and its affiliates, and counsel,
accountants and other advisors retained by the other party and its affiliates)
such access (including, without limitation, for the purpose of conducting
supplemental due diligence reviews) during normal business hours throughout the
period prior to the Effective Time, except that with respect to the Company,
during the Due Diligence Period (as defined in Section 7.1(g)) access shall be
provided each calendar day during the periods requested by Parent, to the books,
records (including, without limitation, loan and credit files, tax returns and
work papers of independent auditors), properties, personnel and to such other
information as such party may reasonably request; provided, however, that no
investigation pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty made herein. The Company and Parent will not, and
each will cause its representatives not to, use any information obtained
pursuant to this Section 5.3 for any purpose unrelated to the consummation of
the transactions contemplated by this Plan. Subject to the requirements of law,
the Company and Parent will keep confidential, and will cause its
representatives to keep confidential, all information and documents obtained
pursuant to this Section 5.3 unless such information (i) was already known to
the Company or Parent, as the case may be, or an affiliate of the Company or
Parent, (ii) becomes available to the Company or Parent, as the case may be, or
an affiliate of the Company or Parent, as the case may be, from other sources
not known by such party to be bound by a confidentiality agreement, (iii) is
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disclosed with the prior written approval of the Company or Parent, as the case
may be, or (iv) is or becomes readily ascertainable from published information
or trade sources. In the event that this Plan is terminated or the transactions
contemplated by this Plan shall otherwise fail to be consummated, each party
shall promptly cause all copies of documents or extracts thereof containing
information and data as to another party hereto (or an affiliate of any party
hereto) to be returned to the party which furnished the same.
SECTION 5.4. Certain Filings, Consents and Arrangements. Parent, Merger Sub
and the Company shall, and Parent and the Company shall cause their respective
subsidiaries to, (a) as soon as practicable make any filings and applications
required to be filed in order to obtain all approvals, consents and waivers of
governmental authorities necessary or appropriate for the consummation of the
transactions contemplated hereby, (b) cooperate with one another (i) in promptly
determining what filings are required to be made or approvals, consents or
waivers are required to be obtained under any relevant federal, state or foreign
law or regulation and (ii) in promptly making any such filings (including, at
the Effective Time, the filing of a Certificate of Merger pursuant to the State
Corporation Law), furnishing information required in connection therewith and
seeking timely to obtain any such approvals, consents or waivers and (c) deliver
to the other copies of the publicly available portions of all such filings and
applications promptly after they are filed.
SECTION 5.5. Antitakeover Statutes. The Company shall take all actions
necessary (i) to exempt the Company and the Plan from the requirements of any
state antitakeover law by action of its Board of Directors or otherwise and
(ii), upon the request of Parent, to assist in any challenge by Parent to the
applicability to the Merger of any state antitakeover law.
SECTION 5.6. Directors' and Officers' Indemnification.
(a) From and after the Effective Time through the sixth anniversary of the
Effective Date, Parent agrees to indemnify and hold harmless each present and
former director and officer of the Company and its subsidiaries determined as of
the Effective Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys, fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the extent to which such Indemnified Parties were
entitled under the State Corporation Law and the Company's articles of
incorporation or by-laws in effect on the date hereof, and Parent shall also
advance expenses as incurred to the extent permitted under the State Corporation
Law and the Company's articles of incorporation and by-laws.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.6(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall as promptly as possible notify Parent thereof, but the
failure to so notify shall not relieve Parent of any liability it may have to
such Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) Parent
shall have the right to assume the defense thereof and Parent shall not be
liable to such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties in
connection with the defense thereof, except that if Parent elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
issues which raise conflicts of interest between Parent and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
Parent shall pay the reasonable fees and expenses of one such counsel for the
Indemnified Parties in any jurisdiction unless the use of one counsel for such
Indemnified parties would present such counsel with a conflict of interest, (ii)
the Indemnified Parties will cooperate in the defense of any such matter and
(iii) Parent shall not be liable for any settlement effected without its prior
written consent; and provided, further, that Parent shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that the indemnification of such Indemnified
Party in the manner contemplated hereby is not permitted or is prohibited by
applicable law.
SECTION 5.7. Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable efforts
to take promptly, or cause to be taken promptly, all actions and to do promptly,
or cause to be done promptly, all things necessary, proper or advisable under
applicable
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laws and regulations to consummate and make effective the transactions
contemplated by this Plan as soon as practicable, including using efforts to
obtain all necessary actions or non-actions, extensions, waivers, consents and
approvals from all applicable governmental entities, effecting all necessary
registrations, applications and filings (including, without limitation, filings
under any applicable state securities laws) and obtaining any required
contractual consents and regulatory approvals.
SECTION 5.8. Publicity. The initial press release announcing this Plan
shall be a joint press release and thereafter the Company and Parent shall
consult with each other in issuing any press releases or otherwise making public
statements with respect to the other or the transactions contemplated hereby and
in making any filings with any governmental entity or with any national
securities exchange with respect thereto.
SECTION 5.9. Regulatory Matters.
(a) Parent and the Company shall promptly prepare and file with the SEC the
Joint Proxy Statement and Parent shall promptly prepare and file with the SEC
the S-4, in which the Joint Proxy Statement will be included as a prospectus.
Each of the Company and Parent shall use all reasonable efforts to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing, and the Company and Parent shall thereafter mail or deliver the
Joint Proxy Statement to their respective shareholders. Parent shall also use
all reasonable efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions contemplated
by this Plan, and the Company shall furnish all information concerning the
Company and the holders of the Company Common Stock as may be reasonably
requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their best
efforts to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Plan (including, without limitation, the
Merger), and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Governmental Entities. The
Company and Parent shall have the right to review in advance, and, to the extent
practicable, each will consult the other on, in each case subject to applicable
laws relating to the exchange of information, all the information relating to
Parent or the Company, as the case may be, and any of their respective
subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with the
transactions contemplated by this Plan. In exercising the foregoing right, each
of the parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Plan and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.
(c) The Company and Parent shall, upon request, furnish each other with all
information concerning themselves, their subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Joint Proxy Statement, the S-4 or any other statement,
filing, notice or application made by or on behalf of the Company, Parent or any
of their respective subsidiaries to any Governmental Entity in connection with
the Merger and the other transactions contemplated by this Plan.
(d) The Company and Parent shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Plan which
causes such party to believe that there is a reasonable likelihood that any
regulatory approval will not be obtained or that the receipt of any such
approval will be materially delayed.
SECTION 5.10. Shareholders' Meeting. Each of Parent and Company shall take
all action necessary, in accordance with applicable law and its articles of
incorporation and by-laws, to convene a meeting of its shareholders as promptly
as practicable for the purpose of approving the issuance of Parent Shares
pursuant to this Plan and approving this Plan, respectively. The Board of
Directors of the Company and Parent shall unanimously recommend that this Plan
be approved by the shareholders of each of the Company and Parent,
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as applicable; provided, however, that the Board of Directors of either the
Company or Parent may withdraw its recommendation and make no recommendation
with respect to the Plan, if either board determines, upon receipt of a written
opinion of its outside counsel, that it is required to do so in order to fulfill
its respective fiduciary duties to its shareholders under the State Corporation
Law. Notwithstanding the preceding sentence, the Company shall not in any way be
relieved of its obligation to convene a meeting of its shareholders as promptly
as practicable for the purpose of approving this Plan.
SECTION 5.11. Affiliates; Publication of Combined Financial Results.
(a) Each of the Company and Parent shall use its best efforts to cause each
director, executive officer and other person who is an "affiliate" (for purposes
of Rule 145 under the Securities Act and for purposes of qualifying the Merger
for "pooling of interests" accounting treatment) of such party to deliver to the
other party hereto, as soon as practicable after the date of this Plan, and
prior to the date of the shareholders meetings called by the Company and Parent
to approve this Plan, a written agreement, in the form of Annex 2 hereto,
providing that such person will not sell, pledge, transfer or otherwise dispose
of any shares of the Company Common Stock or Parent Common Stock held by such
"affiliate" and, in the case of the "affiliates" of the Company, the shares of
Parent Common Stock to be received by such "affiliate" in the Merger, except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder; and during the period commencing 30 days prior to
the Merger and ending at the time of the publication of financial results
covering at least 30 days of combined operations of the Company and Parent.
(b) Parent shall use its best efforts to publish as promptly as reasonably
practical but in no event later than 90 days after the end of the first month
after the Effective Time in which there are at least 30 days of post-Merger
combined operations (which month may be the month in which the Effective Time
occurs), combined sales and net income figures as contemplated by and in
accordance with the terms of SEC Accounting Series Release No. 135.
SECTION 5.12. Authorization, Reservation and Listing. By appropriate
resolution, a certified copy of which shall be provided to the Company, the
Board of Directors of Parent shall, prior to the Effective Time, authorize and
reserve the required number of shares of Parent Common Stock to be issued
pursuant to the Plan of Merger. Parent shall cause the shares of Parent Common
Stock to be issued in the Merger to be approved for listing on The Nasdaq Stock
Market, subject to official notice of issuance, prior to the Effective Time.
SECTION 5.13. Notification of Certain Matters.
(a) Each party shall give prompt notice to the others of: (i) any notice
of, or other communication relating to, a default or event that, with notice or
lapse of time or both, would become a default, received by it or any of its
subsidiaries subsequent to the date of this Plan and prior to the Effective
Time, under any contract material to the financial condition, properties,
businesses or results of its operations, to which it or any subsidiary is a
party or is subject; and (ii) any Material Adverse Effect or the occurrence of
any event which, so far as reasonably can be foreseen at the time of its
occurrence, is reasonably likely to result in any such Material Adverse Effect.
Each of the Company, Parent and Merger Sub shall give prompt notice to the other
party of any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Plan.
(b) From and after the due date hereof to the Effective Time and at and as
of the Effective Time, the Company shall supplement or amend any of its
representations and warranties which apply to the period after the date hereof
by delivering monthly updates to the Company Disclosure Letter ("Disclosure
Letter Updates") to Parent with respect to any matter hereafter arising which,
in its good faith judgment, would render any such representation or warranty
after the date of this Plan materially inaccurate or incomplete as a result of
such matter arising. The Disclosure Letter Updates shall be provided to Parent
on or before the 25th day of each calendar month. Within twenty (20) days after
receipt of any Disclosure Letter Update (or if cure is promptly commenced by the
Company, but is not effected within thirty (30) days after receipt of any
Disclosure Letter Update (the "Cure Period")), Parent may exercise its right to
terminate this Plan pursuant to Section 7.1(f) hereof, if the information in
such Disclosure Letter Update together with the information in
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any or all of the Disclosure Letter Updates previously provided Parent,
indicates that a Material Adverse Effect with respect to the Company has
occurred or is reasonably likely to occur which either has not or cannot be
cured within the Cure Period, or (ii) which does not result primarily from
changes in the general level of interest rates.
SECTION 5.14. Board of Directors of Parent and Subsidiary. Parent will take
such action as may be necessary so that the number of directors of Parent shall
be increased by one (1) subsequent to the Effective Time and so that the number
of directors of its Michigan banking subsidiary will be increased by two (2)
subsequent to the Effective Time. One (1) individual designated by the Board of
Directors of the Company within thirty (30) days prior to the Effective Time and
acceptable to Parent in accordance with the policies of Parent with respect to
the service of directors shall be added to the Board of Directors of Parent
subsequent to the Effective Time and two (2) individuals designated by the Board
of Directors of the Company within thirty (30) days prior to the Effective Time
and acceptable to Parent in accordance with the policies of its Michigan banking
subsidiary with respect to the service of directors shall be added to the Board
of Directors of its Michigan banking subsidiary subsequent to the Effective
Time. Such individuals shall hold office for the terms which shall coincide with
the remaining terms of the classes to which they are added.
SECTION 5.15. Retirement Plans. For purposes of crediting periods of
service for eligibility and vesting, but not for benefit accrual purposes, under
Parent's qualified defined benefit pension plan (the "Parent Retirement Plan")
and the Parent's Amended and Restated Section 401(k) Plan (the "Parent 401(k)
Plan), and for purposes of crediting periods of service for eligibility for
other employee benefits provided to employees of Parent, employees of the
Company who otherwise would be eligible to participate in such plans and benefit
programs after the Effective Time shall be given credit for service with the
Company prior to the Effective Time.
SECTION 5.16. Employment Agreements. Parent agrees to cause to be honored
the employment agreements of the Company with Brian D. Bell and Steven W. Seely
in effect as of the date hereof and further agrees to cause to be honored the
nonqualified retirement benefit which the Company has committed to provide James
Burtch, all of which are identified in the Company Disclosure Letter.
SECTION 5.17. Director Deferral Plan. Notwithstanding anything to the
contrary contained in this Plan, at or prior to the Effective Time, the Company
and its subsidiaries shall take such actions as are necessary or reasonably
requested by Parent to terminate the Director Plan and the deferred compensation
agreements entered into between the Company, or its subsidiaries, and any of its
or their directors (the "Deferred Compensation Agreements") as of the Effective
Date. Provided that as of the Effective Time, any Participant (as defined in the
Director Plan) in the Director Plan shall (i) be considered to be a participant
under Parent's Second Amended and Restated Director Deferred Compensation Plan,
as amended (the "Parent Director Plan") and (ii) have the balance of his or her
Deferred Compensation Account (as defined in the Director Plan) immediately
credited for the benefit of such Participant in the Parent Director Plan.
Thereafter, each such Participant shall be deemed a participant under the Parent
Director Plan. Any Options outstanding at the time of the termination of the
Director Plan shall not be affected by such termination but, to the extent not
exercised, shall be treated as provided in Section 1.5 of this Plan. Except as
provided herein, the termination of the Director Plan will not affect any
amounts, reflected in the books and records of the Company, (i) due to each
participant in the Director Plan and (ii) due to each director, who has entered
into a Deferred Compensation Agreement under such plan. The Company shall
provide to Parent, within ten (10) calendar days of the date hereof, the name of
each director subject to the Director Plan, the number of options issued to such
director and the terms related thereto and the amount of all director fees
deferred under the Director Plan.
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ARTICLE VI. CONDITIONS TO CONSUMMATION
SECTION 6.1. Conditions to All Parties' Obligations. The respective
obligations of Parent, Merger Sub and the Company to effect the Merger shall be
subject to the satisfaction or waiver prior to the Effective Time of the
following conditions:
(a) The Plan and the transactions contemplated hereby shall have been
approved by the requisite vote of the shareholders of the Company and Parent in
accordance with their respective articles of incorporation and applicable law.
(b) Parent, Merger Sub, the Company and each of their respective
subsidiaries shall have procured, if required in the opinion of counsel for
Parent, the approvals, consents or waivers with respect to the Plan and the
transactions contemplated hereby by (i) the Reserve Bank of Chicago, (ii) the
appropriate State Regulators, and (iii) the Federal Reserve Board, and all
applicable statutory waiting periods shall have expired; and the parties shall
have procured all other regulatory approvals, consents or waivers of
governmental authorities or other persons that, in the opinion of counsel for
Parent, are necessary or appropriate for the consummation of the transactions
contemplated by the Plan; provided, however, that no approval, consent or waiver
referred to in this Section 6.1(b) shall be deemed to have been received if it
shall include any condition or requirement that, individually or in the
aggregate, (i) would result in a Material Adverse Effect on Parent, (ii) imposes
any requirement upon Parent, the Company or their respective subsidiaries to (x)
dispose of any asset which is material to Parent or the Company, (y) materially
restrict or curtail the current business operations or activities of Parent or
the Company or (z) raise an amount of capital, the issuance and sale of which,
in the absence of the Merger and the other transactions contemplated by this
Plan, would in Parent's judgment be materially burdensome in light of Parent's
capital raising policies or (iii) would reduce the benefits of the transactions
contemplated by the Plan to Parent in so significant a manner that Parent, in
its judgment, would not have entered into this Plan had such condition or
requirement been known at the date hereof.
(c) The S-4 shall have become effective under the Securities Act and no
stop order suspending the effectiveness of the S-4 shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(d) Parent and the Company shall each have received a letter from their
respective independent accountants addressed to Parent or the Company, as the
case may be, to the effect that the Merger will qualify for "pooling of
interests" accounting treatment.
(e) All other requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Plan shall have been
satisfied.
(f) No party hereto 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 or any other transaction contemplated by this Plan,
and no litigation or proceeding shall be pending against Parent or the Company
or any of their subsidiaries brought by any governmental agency seeking to
prevent consummation of the transactions contemplated hereby.
(g) No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated, interpreted, applied or enforced by any
governmental authority which prohibits, restricts or makes illegal consummation
of the Merger or any other transaction contemplated by this Plan.
SECTION 6.2. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger shall be subject to
the satisfaction or waiver prior to the Effective Time of the following
additional conditions:
(a) Each of the representations and warranties of the Company contained in
this Plan shall have been true on the date hereof and shall be true in all
material respects on the Effective Date as if made on such date (or on the date
when made in the case of any representation or warranty which specifically
relates to an earlier date); the Company shall have performed, in all material
respects, each of its covenants and agreements
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contained in this Plan; and Parent shall have received a certificate signed by
the Chief Executive Officer and the Chief Financial officer of the Company,
dated the Effective Date, to the foregoing effect.
(b) Parent shall have received a written opinion, dated the Effective Date,
from Howard & Howard Attorneys, P.C., counsel to the Company, in form and
substance satisfactory to Parent.
(c) Parent shall have received a written opinion from Dykema Gossett PLLC,
in form and substance satisfactory to Parent, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368 of the Code.
(d) Parent shall have received the fairness opinion referred to in Section
4.6 prior to the date of the Parent shareholder meeting and such fairness
opinion shall not have been withdrawn.
(e) The Company shall not have experienced any event, change or occurrence
that has had a material adverse effect upon the financial condition of the
Company and its subsidiaries taken as a whole.
SECTION 6.3. Conditions to the Obligation of the Company. The obligation of
the Company to effect the Merger shall be subject to the satisfaction or waiver
prior to the Effective Time of the following additional conditions:
(a) Each of the representations and warranties of Parent and Merger Sub
contained in this Plan shall have been true on the date hereof and shall be true
in all material respects on the Effective Date as if made on such date (or on
the date when made in the case of any representation or warranty which
specifically relates to an earlier date); Parent and Merger Sub shall have
performed, in all material respects, each of its covenants and agreements
contained in this Plan; and the Company shall have received certificates signed
by the Chief Financial Officer of Parent, dated the Effective Date, to the
foregoing effect.
(b) The Company shall have received a written opinion from Howard & Howard
Attorneys, P.C. in form and substance satisfactory to the Company, to the effect
that the Merger will constitute a reorganization within the meaning of Section
368 of the Code.
(c) The fairness opinion referred to in Section 3.6 shall not have been
withdrawn.
(d) The Company shall have received a written opinion, dated the Effective
Date, from Dykema Gossett PLLC, in form and substance satisfactory to the
Company.
(e) Parent shall not have experienced any event, change or occurence that
has had a material adverse effect upon the financial condition of Parent and its
subsidiaries taken as a whole.
ARTICLE VII. TERMINATION
SECTION 7.1. Termination. This Plan may be terminated, and the Merger
abandoned, prior to the Effective Date, either before or after its approval by
the shareholders of the Company or Parent;
(a) by mutual consent of the Boards of Directors of Parent and the Company;
or
(b) by either Parent or the Company, if any of the conditions to such
party's obligation to consummate the transactions contemplated in this Plan
shall have become impossible to satisfy if, but only if, such party has used its
best efforts and acted in good faith in attempting to satisfy all such
conditions and if such party is not then in breach or default in any material
respect of this Plan; or
(c) by the Board of Directors of Parent if (i) there has been a material
breach or default by the Company of any representation or warranty or in the
observance of its covenants and agreements contained in this Plan of which
notice has been given in writing by Parent and which has not been cured within
thirty (30) business days of receipt of such notice; or (ii) the Effective Time
has not occurred prior to September 30, 1997 without fault on the part of
Parent, or (iii) a public announcement with respect to an Acquisition Proposal
shall have been made by any person other than Parent or an affiliate of Parent
and the Board of Directors of the Company shall have (A) failed to publicly
reject or oppose such Acquisition Proposal within ten (10) days of the public
announcement of such proposal, plan or intention or (B) shall have modified,
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amended or withdrawn its recommended approval of this Plan and the Merger to the
Company's shareholders; or
(d) by the Board of Directors of the Company if (i) there has been a
material breach or default by Parent of any representation or warranty or in the
observance of its covenants and agreements contained in this Plan of which
notice has been given in writing by the Company and which has not been cured
within thirty (30) business days of receipt of such notice; or (ii) the
Effective Time has not occurred prior to September 30, 1997 without fault on the
part of the Company; or
(e) by the Board of Directors of either Parent or the Company (i) if any
shareholder approval of the Company required for consummation of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of shareholders or at any adjournment or
postponement thereof; or (ii) if any shareholder approval of Parent required for
consummation of the Merger shall not have been obtained by reason of the failure
to obtain the required vote at a duly held meeting of shareholders or at any
adjournment or postponement thereof or (iii) if any Regulatory Agency has denied
approval for the Merger and, if such denial is appealable, neither Parent nor
the Company has filed a petition seeking review of such order of denial or taken
other similar action under applicable law, within thirty (30) days after the
issuance or entry by the governmental agency of such order of denial; or
(f) by Parent pursuant to Section 5.13(b); or
(g) by Parent, at its sole discretion, at any time within twenty-two (22)
calendar days from the date Parent is advised in writing by Arthur Andersen that
its audit work papers for the Company's 1996 calendar year financial results are
available, in accordance with Section 5.3, for review by Parent and its
designees, and, if such advice is not provided by Arthur Anderson, at any time
prior to the Effective Time (the "Due Diligence Period"); or
(h) by the Company or Parent pursuant to Section 1.2(b).
SECTION 7.2. Effect of Termination. Subject to the provisions of Section
1.2(b), in the event of the termination of this Plan as provided in Section 7.1,
written notice thereof shall forthwith be given to the other party or parties
specifying the provision hereof pursuant to which such termination is made, and
this Plan shall forthwith become null and void, and there shall be no liability
on the part of Parent, Merger Sub, the Company, or any of their officers or
directors except (i) for fraud or willful and material breach of this Plan and
(ii) that Sections 5.3, 7.2, 9.2, 9.6 and 9.7 hereof shall survive any
termination of this Plan.
ARTICLE VIII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 8.1. Effective Date and Effective Time. On such date as Parent
selects, which shall be within 30 days after the last to occur of the expiration
of all applicable waiting periods in connection with approvals of governmental
authorities occurs and the receipt of all approvals of governmental authorities
and all conditions to the consummation of the Merger are satisfied or waived, or
on such earlier or later date as may be agreed in writing by the parties, a
certificate of merger shall be executed in accordance with all appropriate legal
requirements and shall be filed as required by law, and the Merger provided for
herein shall become effective upon such filing or on such date and at such time
as may be specified in such certificate of merger. The date and time of such
filing or such later effective date is herein called the "Effective Date". The
"Effective Time" of the Merger shall be the time of such filing or as set forth
in such certificate of merger.
ARTICLE IX. OTHER MATTERS
SECTION 9.1. Certain Definitions; Interpretation. As used in this Plan, the
following terms shall have the meanings indicated:
"material" means material with respect to the entity in question and
its respective subsidiaries, taken as a whole.
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"Material Adverse Effect", with respect to a person, means any
condition, event, change or occurrence that is reasonably likely to have a
material adverse effect upon (A) the condition (financial or other),
properties, assets, business, results of operations or prospects of such
person and its subsidiaries, taken as a whole, or (B) the ability of such
person to perform its obligations under, and to consummate the transactions
contemplated by, this Plan.
"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
"subsidiary", with respect to a person, means any other person
controlled by such person.
When a reference is made in this Plan to Sections or Annexes, such
reference shall be to a Section of, or Annex to, this Plan unless otherwise
indicated. The table of contents and headings contained in this Plan are for
ease of reference only and shall not affect the meaning or interpretation of
this Plan. Whenever the words "include", "includes", or "including" are used in
this Plan, they shall be deemed followed by the words "without limitation". Any
singular term in this Plan shall be deemed to include the plural, and any plural
term the singular.
SECTION 9.2. Survival. Only those agreements and covenants of the parties
that are by their terms applicable in whole or in part after the Effective Time,
including the Stock Option Agreement, shall survive the Effective Time. All
other representations, warranties, agreements and covenants shall be deemed to
be conditions of the Plan and shall not survive the Effective Time.
SECTION 9.3. Waiver. Prior to the Effective Time, any provision of this
Plan may be: (i) waived by the party benefitted by the provision; or (ii)
amended or modified at any time (including the structure of the transaction) by
an agreement in writing between the parties hereto, except that, after the vote
by the shareholders of the Company, no amendment may be made that would
contravene the applicable sections of the State Corporation Law.
SECTION 9.4. Counterparts. This Plan may be executed and delivered in
counterparts each of which shall be deemed to constitute an original, but all of
which together shall constitute one and the same instrument.
SECTION 9.5. Governing Law. This Plan shall be governed by, and interpreted
in accordance with, the laws of the State of Michigan.
SECTION 9.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS PLAN OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.7. Expenses. Each party hereto will bear all expenses incurred by
it in connection with this Plan and the transactions contemplated hereby;
provided, however, that Parent and the Company shall share equally all fees and
expenses, other than accountants; attorneys' and filing fees, incurred in
connection with the printing and filing of the S-4 and the Joint Proxy Statement
(including any preliminary materials related thereto and any amendments or
supplements thereof).
SECTION 9.8. Notices. All notices, requests, acknowledgments and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, telecopy, telegram, telex or
facsimile (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
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If to the Company, to:
CB Financial Corporation
One Jackson Square
Jackson, Michigan 49201
Facsimile: (517) 788-2867
Attention: Brian D. Bell
With copies to:
Howard & Howard Attorneys, P.C.
107 West Michigan Avenue, Suite 400
Kalamazoo, Michigan 49007
Facsimile: (616) 382-1568
Attention: Joseph B. Hemker, Esq.
If to Parent or Merger Sub, to:
Citizens Banking Corporation
One Citizens Banking Center
Flint, Michigan 48502
Facsimile: (810) 257-2570
Attention: Thomas W. Gallagher
With copies to:
Dykema Gossett PLLC
1577 North Woodward Avenue
Suite 300
Bloomfield Hills, Michigan 48304-2820
Facsimile: (810) 540-0763
Attention: Rex E. Schlaybaugh, Jr., Esq.
SECTION 9.9. Entire Agreement; Etc. This Plan and the Stock Option
Agreement represents the entire understanding of the parties hereto with
reference to the transactions contemplated hereby and supersedes any and all
other oral or written agreements heretofore made. All terms and provisions of
the Plan shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Except as to Sections 5.6,
5.15 and 5.16 (which may only be enforced by any person who is not a party to
this Plan after the Effective Time), nothing in this Plan is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Plan.
SECTION 9.10. Assignment. This Plan may not be assigned by any party hereto
without the written consent of the other parties, except that Parent and Merger
Sub may assign all or any of their rights hereunder to any subsidiary thereof
provided that no such assignment shall relieve the assigning party of its
obligations hereunder.
[this space intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Plan to be executed
by their duly authorized officers as of the day and year first above written.
CITIZENS BANKING CORPORATION
By: /s/ Robert J. Vitito
-------------------------------------
Name: Robert J. Vitito
Title: President and Chief Executive
Officer
POLARIS ACQUISITION, INC.
By: /s/ Thomas W. Gallagher
-------------------------------------
Name: Thomas W. Gallagher
Title: Secretary
CB FINANCIAL CORPORATION
By: /s/ Brian D. Bell
-------------------------------------
Name: Brian D. Bell
Title: Chairman and Chief Executive
Officer
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ANNEX B
[RONEY & CO. LETTERHEAD]
March 20, 1997
Board of Directors
Citizens Banking Corporation
328 South Saginaw Street
Flint, MI 48502-2401
Gentlemen:
We understand that Citizens Banking Corporation ("Citizens" or the
"Company") intends to enter into a strategic merger with CB Financial
Corporation ("CB Financial") pursuant to the Agreement and Plan of Merger dated
January 27, 1997 (referred to as the "Agreement"). Citizens proposes that the
affiliation be effected by a merger of its wholly-owned subsidiary with and into
CB Financial, with CB Financial becoming a wholly-owned subsidiary of Citizens.
Under the proposed terms contained in the Agreement, each share of CB Financial
common stock would be converted into the right to receive 1.489 shares of common
stock of Citizens (the "Consideration"). You have requested that Roney & Co.
render an opinion as to whether the Consideration as proposed under the
Agreement is fair, from a financial point of view, to the shareholders of
Citizens.
Roney & Co. is a regional investment banking firm of recognized standing.
As part of our investment banking services, we are regularly engaged in the
valuation of corporate entities in connection with public offerings and merger
and acquisition transactions. Our research analysts publish regular reports on
individual banks and thrifts as well as other financial institutions. Our firm
makes principal markets in various financial institution stocks, and, we have
managed public offerings for banks and thrifts as well as other companies.
In arriving at the opinion as set forth below, we have, among other things:
I. Reviewed the Annual Reports on Form 10-K and related financial information
for the fiscal years ended 1993 to 1995 and unaudited summary results of
operations for the three months and year ended December 31, 1996 of both
Citizens and CB Financial;
II. Reviewed the historical stock price and trading activity for the common
stock for both Citizens and CB Financial and compared them with those of
certain publicly traded companies which we deemed to be relevant;
III. Reviewed the Agreement dated January 27, 1997;
IV. Compared certain financial characteristics of Citizens and CB Financial
with other Michigan and Midwestern financial institutions we deemed to be
relevant;
V. Compared the proposed terms contemplated in the Agreement, to the extent
publicly available, with the financial terms of certain other mergers and
acquisitions in the financial services industry which we deemed to be
relevant;
VI. Conducted limited discussions with members of senior management of
Citizens and CB Financial concerning their respective business and
prospects and the benefits of the Agreement;
VII. Considered, based on information provided to us (including financial
forecasts) by Citizens' senior management, the pro forma effects of the
Agreement on Citizen's future earnings;
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<PAGE> 116
VIII. Reviewed such other financial data and performed such other analysis and
took into account such other matters as we deemed appropriate.
In preparing our opinion, we have relied upon the accuracy and completeness
of all of the above information and all other financial and other information
supplied or otherwise made available to us by Citizens and CB Financial and we
have not independently verified such information or undertaken an independent
evaluation or appraisal of the assets or liabilities of Citizens or CB
Financial, and have not been furnished any such evaluation or appraisal. We have
also reviewed certain other information provided to us by Citizens and CB
Financial, and have met with Citizens management to discuss the business, assets
and prospects of Citizens, including the benefits expected to be achieved under
the Agreement. We have also assumed and relied (and the assumptions therein)
provided to us which take into account the merger with CB Financial. In that
regard, we have assumed with your consent that such forecasts, including without
limitation financial forecasts and projections regarding the amount and timing
of cost savings that could result after the Agreement is consummated,
under-performing and non-performing assets, net charge-offs and the adequacy of
reserves, reflect the best currently available estimates and judgments of
management of Citizens as to the future financial performance of Citizens and CB
Financial. We are not experts in the evaluation of allowances for loan losses,
and we have not made an independent evaluation of the adequacy of allowances for
loan losses, and we have not made an independent evaluation of the adequacy of
the allowance for loan losses of Citizens or CB Financial nor have we reviewed
any individual credit files, and we have assumed that the current aggregate
allowance for loan losses of Citizens and CB Financial is adequate to cover such
losses. Further, in connection with our review, we have not assumed any
responsibility for independent verification of any of the foregoing information
and have relied on its being complete and accurate in all material respects.
In our analyses, we have made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of Citizens and CB Financial. Any estimates contained in
our analyses are not necessarily indicative of future results or value, which
may be significantly more or less favorable than such estimates. The estimated
values of both Citizens and CB Financial do not purport to be appraisals or
necessarily reflect the price at which companies or their securities actually
may be sold. No company or transaction utilized in our analyses was identical to
Citizens or CB Financial or the Agreement. Accordingly, such analyses are not
based solely on arithmetic calculations; rather, they involve complex
considerations and judgments concerning differences in financial and operating
characteristics of the relevant companies, the timing of the relevant
transactions and prospective buyer interests, as well as other factors that
could affect the public trading markets of Citizens or companies to which they
are being compared. None of the analyses performed by us was assigned a greater
significance than any other.
It should be noted that this opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date hereof. In addition, our opinion is, in any event, limited to
the fairness, from a financial point of view, of the Consideration being offered
by Citizens pursuant to the Agreement and does not address Citizen's underlying
business decision to effect the Agreement or any other terms of the Agreement.
In the ordinary course of our business, we may actively trade securities of
both Citizens and CB Financial for our own account and for the accounts of
customers and, accordingly, we may at any time hold a long or short position in
such securities.
Our opinion is directed to the Board of Directors of Citizens and does not
constitute a recommendation to the Board of Directors of Citizens in connection
with any matter relating to the Agreement and has been prepared for the
confidential use of the Board of Directors and senior management of Citizens and
will not be reproduced, summarized, described or referred to or given to any
other person without our prior written consent. Notwithstanding the foregoing,
this opinion may be included in the registration statement or prospectus and
proxy statement filed in connection with the Agreement, provided that this
opinion will be reproduced in full, and any description of or reference to us or
summary of the opinion in such registration statement or prospectus and proxy
statement will be in a form acceptable to us and our counsel.
B-2
<PAGE> 117
On the basis of, and subject to, the foregoing, we are of the opinion that,
as of the date hereof, the Consideration, as proposed by the Agreement, is fair
to the shareholders of Citizens, from a financial point of view.
Sincerely,
/s/ RONEY & CO.
--------------------------------------
RONEY & CO.
B-3
<PAGE> 118
ANNEX C
OPINION OF ABN AMRO CHICAGO CORPORATION
May 21, 1997
Board of Directors
CB Financial Corporation
1 Jackson Square
Jackson, MI 49201
Members of the Board:
CB Financial Corporation, a Michigan corporation ("CB"), Citizens Banking
Corporation, a Michigan corporation ("Citizens") and Polaris Acquisition, Inc.
("Merger Sub"), a wholly-owned subsidiary of Citizens have entered into an
Agreement and Plan of Merger, dated as of January 27, 1997 (the "Agreement"),
pursuant to which Merger Sub will be merged with and into CB, which will become
a wholly-owned subsidiary of Citizens (the "Merger"). As set forth in the
Agreement, each share of CB common stock, par value $7.50 per share ("CB Common
Stock") issued and outstanding, shall be converted into the right to receive
1.489 shares of Citizens Common Stock ("Merger Consideration"). You have
requested our opinion as to the fairness of the Merger Consideration, from a
financial point of view, to the shareholders of CB, as of the date hereof.
During the course of our engagement, we have, among other things: (i)
reviewed the Agreement, the Joint Proxy Statement-Prospectus and certain related
documents; (ii) reviewed certain publicly-available financial and other data,
including the audited and unaudited recent financial statements of CB and
Citizens, as well as certain other relevant internally-generated CB and Citizens
reports relating to asset/liability management, asset quality and so forth, as
made available to us; (iii) reviewed and analyzed other materials bearing upon
the financial and operating condition of CB and Citizens and materials prepared
in connection with the proposed transaction; (iv) reviewed the operating
characteristics of certain other financial institutions deemed relevant to the
contemplated transaction; (v) reviewed the nature and terms of recent sale and
merger transactions involving banks, thrifts, bank and thrift holding companies
and other financial institutions that we considered relevant; (vi) reviewed
historical and current market data for CB Common Stock and Citizens Common
Stock; (vii) conducted meetings with members of the senior managements of CB and
Citizens for the purpose of reviewing the future prospects of CB and Citizens,
the strategic objectives of each, and the possible financial benefits which
might be realized following the Merger; (viii) reviewed certain information,
including forecasts pertaining to prospective cost savings relative to the
Merger; (ix) evaluated the pro forma ownership of Citizens Common Stock by CB
shareholders, relative to the pro forma contribution of CB's assets,
liabilities, equity and earnings to Citizens; and (x) performed such other
analyses and examinations as we deemed appropriate.
In rendering this opinion, we have relied upon, without independent
verification, the accuracy and completeness of the financial and other
information and representations provided to us by CB and Citizens. We have
relied upon the managements of CB and Citizens as to the reasonableness and
achievability of the financial forecasts and projections (and the assumptions
and bases therefore) utilized in our analyses, and have assumed that such
forecasts and projections represent the best available estimates of management.
We are not experts in the evaluation of loan portfolios or the allowances for
loan losses with respect thereto and have assumed that such allowances by CB and
Citizens are in the aggregate adequate to cover such losses. In addition, we
have not reviewed individual credit files nor have we made an independent
appraisal of the assets and liabilities of CB and Citizens or any of their
subsidiaries and we have not been furnished with any such evaluation or
appraisal. We have also assumed that the Merger will be recorded as a pooling of
interests in accordance with generally accepted accounting principles as
stipulated in the Agreement. Finally, our opinion is necessarily based on
economic, monetary, market and other conditions as in effect on, and the
information made available to us as of the date hereof.
C-1
<PAGE> 119
ABN AMRO Chicago Corporation ("AACC"), as part of its investment banking
business, is continually engaged in the valuation of banks and bank holding
companies and thrifts and thrift holding companies in connection with mergers
and acquisitions, as well as initial and secondary offerings of securities and
valuations for other purposes. AACC is a member of all principal U.S. securities
exchanges and may from time to time purchase securities from, or sell securities
to, CB or Citizens and, either directly or through affiliates, buy or sell the
equity securities of CB or Citizens as principal or for the accounts of
customers.
The Board of Directors has requested that AACC issue this opinion and AACC
will receive a fee from CB for delivering this opinion to be used in evaluating
the proposed Merger.
This opinion is limited to the fairness, from a financial point of view, to
the holders of CB Common Stock, of the Merger Consideration. Moreover, this
letter, and the opinion expressed herein, is directed to the Board of Directors
of CB and does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the Merger.
Based on the foregoing and our experience as investment bankers, we are of
the opinion that, as of the date hereof, the Merger Consideration to be paid to
the shareholders of CB, as described in the Agreement, is fair from a financial
point of view.
Sincerely,
/s/ ABN AMRO CHICAGO CORPORATION
---------------------------------------------
ABN AMRO CHICAGO CORPORATION
C-2
<PAGE> 120
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 561 through 571 of the Michigan Business Corporation Act (the
"MBCA") set forth the conditions and limitations governing the indemnification
of officers, directors and other persons by Michigan corporations.
The Bylaws of Citizens require Citizens to indemnify directors and
officials to the extent permitted by the MBCA.
Citizens has entered into an agreement with each of its directors under
which Citizens agrees to indemnify the director against certain liabilities and
expenses incurred by the director by reason of serving as a director of Citizens
or in certain other capacities at the request of Citizens. In general, under the
agreements, Citizens agrees to indemnify the director to the extent permitted by
the MBCA subject to the following: (a) Citizens agrees to reimburse the director
for expenses incurred prior to the final disposition of the matter or
proceeding, subject to certain limitations; (b) the director may file a suit
against Citizens if Citizens refuses to indemnify the director, and the court is
authorized to determine whether the director is entitled to be indemnified
whether or not a determination in such respect has or has not been made by the
Board of Directors, independent legal counsel, or the shareholders of Citizens;
and (c) in the event of a "Change in Control of Citizens" as defined in the
agreements, the director may require Citizens to establish a trust for the
director and at his or her request fund the trust in an amount sufficient to
satisfy any expenses that may properly be subject to indemnification under the
agreement anticipated at the time of the request.
The MBCA permits a corporation to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee, or agent of the
corporation against liabilities arising out of such person's positions with the
corporation, whether or not the corporation would have the power to indemnify
such person against liability under the MBCA.
Citizens carries a directors and officers liability insurance policy which
insures directors and officers of Citizens against certain liability by reason
of certain acts or omissions in connection with their duties for Citizens and
which insures Citizens against certain amounts for which it is legally obligated
to pay or for which it has agreed or is required to indemnify the directors or
officers. During each policy year, the aggregate limit of liability under the
policy is $10,000,000, and the insurer is generally obligated to pay for any
loss experienced by a director or officer and for any loss in excess of $250,000
experienced by Citizens. The insurance policy is in effect until October 1,
1997.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a list of Exhibits to this Registration
Statement:
<TABLE>
<S> <C>
2 Agreement and Plan of Merger, dated as of January 27, 1997,
by and among Citizens Banking Corporation, Polaris
Acquisition, Inc., a wholly-owned subsidiary of Citizens
Banking Corporation, and CB Financial Corporation, (included
in Part I of this Registration Statement as Annex A to the
Joint Proxy Statement-Prospectus). The Agreement and Plan of
Merger does not contain the "Company Disclosure Letter" or
the "Parent Disclosure Letter," which include routine
background information relating to the parties. Annex 1 to
the Agreement and Plan of Merger is included as Exhibit 99.3
to this Registration Statement and Annex 2 to the Agreement
and Plan of Merger is a standard form of Affiliate Letter
relating to the Merger. The Registrant will furnish
supplementally a copy of the omitted material to the
Commission upon request.
4.1 Restated Articles of Incorporation, as amended, including
Certificates of Designations Establishing And Designating
The Series And Fixing And Determining The Relative Rights
And Preferences Of The Series A Preferred Stock
(incorporated by reference from Exhibit 3(a) of the Citizens
Annual Report on Form 10-K for the year ended December 31,
1995).
</TABLE>
II-1
<PAGE> 121
4.2 Rights Agreement dated as of July 20, 1990 between Citizens
and Citizens Bank, as Rights Agent (incorporated by
reference to Exhibit 1 of Citizens Registration Statement on
Form 8-A, Commission File No. 0-10535).
5 Opinion of Dykema Gossett PLLC as to legality of securities
being issued.
8.1 Opinion of Dykema Gossett PLLC as to federal income tax
matters.
8.2 Opinion of Howard & Howard Attorneys, P.C. as to federal
income tax matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Roney & Company.
23.4 Consent of ABN AMRO Chicago Corporation.
23.5 Consent of Dykema Gossett PLLC (included in Exhibits 5 and
8.1 hereof).
23.6 Consent of Howard & Howard Attorneys, P.C. (included in
Exhibit 8.2 hereof).
24 Powers of Attorney (included on signature pages to this
Registration Statement).
99.1 Form of Proxy for Citizens.
99.2 Form of Proxy for CB.
99.3 Stock Option Agreement, dated as of January 27, 1997, by and
between Citizens Banking Corporation and CB Financial
Corporation (incorporated by reference to Exhibit 2 to
Citizens' Current Report on Form 8-K dated February 3,
1997).
(b) Financial Statement Schedules.
Not Applicable
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's and CB'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 this Registration
Statement shall be deemed to be a new registration statement relating
to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof;
(2) 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;
(3) 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 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) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of
Form S-4, within one business day of receipt of such request, and to
II-2
<PAGE> 122
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; and
(5) 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.
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 Item 20 of this Registration Statement, 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 Act
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 Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Flint and
State of Michigan on May 16, 1997.
CITIZENS BANKING CORPORATION
By: /s/ ROBERT J. VITITO
--------------------------------------
Robert J. Vitito
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Robert
J. Vitito, John W. Ennest and Thomas W. Gallagher, and each of them, his or her
attorneys-in-fact for him or her in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on May 16, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ CHARLES R. WEEKS Chairman of the Board and Director
- ------------------------------------------
Charles R. Weeks
/s/ /S/ ROBERT J. VITITO President, Chief Executive Officer and Director
- ------------------------------------------
Robert J. Vitito
/s/ JOHN W. ENNEST Vice Chairman, Chief Financial Officer, Treasurer and
- ------------------------------------------ Director (Principal Financial Officer)
John W. Ennest
/s/ DANIEL E. BEKEMEIER Senior Vice President and Controller of Citizens Bank
- ------------------------------------------ (Principal Accounting Officer)
Daniel E. Bekemeier
/s/ EDWARD P. ABBOTT Director
- ------------------------------------------
Edward P. Abbott
/s/ HUGO E. BRAUN, JR. Director
- ------------------------------------------
Hugo E. Braun, Jr.
/s/ JONATHAN E. BURROUGHS, II Director
- ------------------------------------------
Jonathan E. Burroughs, II
</TABLE>
II-4
<PAGE> 124
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JOSEPH P. DAY Director
- ------------------------------------------
Joseph P. Day
/s/ LAWRENCE O. ERICKSON Director
- ------------------------------------------
Lawrence O. Erickson
/s/ VICTOR E. GEORGE Director
- ------------------------------------------
Victor E. George
/s/ WILLIAM J. HANK Director
- ------------------------------------------
William J. Hank
/s/ WILLIAM F. NELSON, JR. Director
- ------------------------------------------
William F. Nelson, Jr.
/s/ WILLIAM C. SHEDD Director
- ------------------------------------------
William C. Shedd
/s/ JAMES E. TRUESDELL, JR. Director
- ------------------------------------------
James E. Truesdell, Jr.
/s/ KENDALL B. WILLIAMS Director
- ------------------------------------------
Kendall B. Williams
/s/ GERALD SCHREIBER Director
- ------------------------------------------
Gerald Schreiber
/s/ ADA C. WASHINGTON Director
- ------------------------------------------
Ada C. Washington
/s/ JAMES L. WOLOHAN Director
- ------------------------------------------
James L. Wolohan
</TABLE>
II-5
<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
- ------- --------------------
<C> <S>
2 Agreement and Plan of Merger, dated as of January 27, 1997,
by and among Citizens Banking Corporation, Polaris
Acquisition, Inc., a wholly-owned subsidiary of Citizens
Banking Corporation, and CB Financial Corporation, (included
in Part I of this Registration Statement as Annex A to the
Joint Proxy Statement-Prospectus). The Agreement and Plan of
Merger does not contain the "Company Disclosure Letter" or
the "Parent Disclosure Letter," which include routine
background information relating to the parties. Annex 1 to
the Agreement and Plan of Merger is included as Exhibit 99.3
to this Registration Statement and Annex 2 to the Agreement
and Plan of Merger is a standard form of Affiliate Letter
relating to the Merger. The Registrant will furnish
supplementally a copy of the omitted material to the
Commission upon request.
4.1 Restated Articles of Incorporation, as amended, including
Certificates of Designations Establishing And Designating
The Series And Fixing And Determining The Relative Rights
And Preferences Of The Series A Preferred Stock
(incorporated by reference from Exhibit 3(a) of the Citizens
Annual Report on Form 10-K for the year ended December 31,
1995).
4.2 Rights Agreement dated as of July 20, 1990 between Citizens
and Citizens Bank, as Rights Agent (incorporated by
reference to Exhibit 1 of Citizens Registration Statement on
Form 8-A, Commission File No. 0-10535).
5 Opinion of Dykema Gossett PLLC as to legality of securities
being issued.
8.1 Opinion of Dykema Gossett PLLC as to federal income tax
matters.
8.2 Opinion of Howard & Howard Attorneys, P.C. as to federal
income tax matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Roney & Company
23.4 Consent of ABN AMRO Chicago Corporation.
23.5 Consent of Dykema Gossett PLLC (included in Exhibits 5 and
8.1 hereof).
23.6 Consent of Howard & Howard Attorneys, P.C. (included in
Exhibit 8.2 hereof).
24 Powers of Attorney (included on signature pages to this
Registration Statement).
99.1 Form of Proxy for Citizens.
99.2 Form of Proxy for CB.
99.3 Stock Option Agreement, dated as of January 27, 1997, by and
between Citizens Banking Corporation and CB Financial
Corporation (incorporated by reference to Exhibit 2 to
Citizens' Current Report on Form 8-K dated February 3,
1997).
</TABLE>
<PAGE> 1
EXHIBIT 5
OPINION AND CONSENT OF DYKEMA GOSSETT PLLC
May 19, 1997
Citizens Banking Corporation
328 South Saginaw Street
Flint, Michigan 48502
Re: Citizens Banking Corporation
Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel for Citizens Banking Corporation, a Michigan
Corporation ("Citizens"), in connection with the preparation and filing with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), of a Registration Statement on Form S-4 (the "Registration
Statement") relating to the issuance by the Company of up to 4,246,304 shares of
Common Stock, without par value, of the Company (the "Common Stock") to the
shareholders of CB Financial Corporation, a Michigan corporation ("CB"), in
connection with the merger (the "Merger") of Citizens' wholly-owned subsidiary,
Polaris Acquisition, Inc., a Michigan corporation ("Merger Sub"), with and into
CB, all as set forth in the Agreement and Plan of Merger, dated as of January
27, 1997, by and among Citizens, Merger Sub and CB (the "Merger Agreement"). As
a result of the Merger, the outstanding shares of common stock, par value $7.50
per share, of CB will be converted into the Common Stock, all as set forth in
the Merger Agreement.
We have examined and relied upon the originals, or copies certified or
otherwise identified to our satisfaction, of such corporate records, documents,
certificates and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below:
Based upon the foregoing, we are of the opinion that:
1. Citizens has been duly incorporated and is in good standing under the
laws of the State of Michigan; and
2. The Common Stock to which the Registration Statement relates has been
duly authorized for issuance and, when issued and delivered to the shareholders
of CB in accordance with the Merger Agreement, will be legally issued, fully
paid and non-assessable.
We hereby consent to the inclusion of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Joint Proxy Statement-Prospectus constituting a part of the
Registration Statement. In giving such consent, we do not concede that we are
experts within the meaning of the Act, or the rules or regulations thereunder or
that this consent is required by Section 7 of the Act.
Very truly yours,
DYKEMA GOSSETT PLLC
/s/ GERALD T. LIEVOIS
--------------------------------------
GERALD T. LIEVOIS
<PAGE> 1
EXHIBIT 8.1
OPINION OF DYKEMA GOSSETT PLLC
May 21, 1997
Citizens Banking Corporation
One Citizens Banking Center
Flint, Michigan 48502
Gentlemen:
We have acted as counsel to Citizens Banking Corporation, a Michigan
corporation ("Citizens"), in connection with the contemplated merger under the
laws of the State of Michigan (the "Merger") of Polaris Acquisition, Inc.
("Merger Sub"), a Michigan corporation and a wholly-owned subsidiary of
Citizens, and CB Financial Corporation, a Michigan corporation ("CB Financial")
pursuant to an Agreement and Plan of Merger dated January 27, 1997 (the "Merger
Agreement") by and among Citizens, Merger Sub and CB Financial. The delivery of
an opinion to Citizens on the Effective Time, substantially to the effect and in
substantially the form set forth below, is a condition to the Merger pursuant to
Section 6.2(c) of the Merger Agreement. All capitalized terms used herein,
unless otherwise specified, have the meanings assigned to them in the Joint
Proxy Statement-Prospectus of Citizens and CB Financial issued with respect to
the Merger (the "Joint Proxy Statement-Prospectus").
In rendering this opinion, we have examined and relied upon (without any
independent investigation or review thereof) the accuracy and completeness of
the facts, information, covenants and representations contained in originals or
copies, certified or otherwise identified to our satisfaction, of the Merger
Agreement, the Joint Proxy Statement-Prospectus, and such other documents as we
have deemed necessary or appropriate as a basis for the opinion set forth below.
In addition, we have relied upon certain statements and representations made by
executives of Citizens and CB Financial, as well as other statements,
representations and assumptions. Our opinion is conditioned on, among other
things, the initial and continuing accuracy of such facts, information,
covenants, representations and assumptions.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, the authenticity of the
originals of such documents and that there has been (or will be by the Effective
Time of the Merger) due execution and delivery of all documents where due
execution and delivery are prerequisites to effectiveness thereof. We have
assumed that the Merger will be consummated pursuant to applicable state law in
accordance with the Merger Agreement and as described in the Joint Proxy
Statement-Prospectus. We have also assumed that any representation or statement
made "to the best of knowledge" or similarly qualified is correct without such
qualification. As to all matters in which a person or entity making a
representation referred to above has represented that such person or entity
either is not a party to, does not have, or is not aware of, any plan or
intention, understanding or agreement, we have assumed that there is in fact no
such plan, intention, understanding or agreement.
Based upon the facts and statements set forth above, our examination and
review of the documents referred to above and subject to the assumptions set
forth above, we are of the opinion that for federal income tax purposes:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
2. No gain or loss will be recognized by shareholders of CB Financial with
respect to shares of common stock of Citizens received in the merger in
exchange for shares of common stock of CB Financial, except with respect
to cash received in lieu of fractional shares of common stock of
Citizens. A shareholder of CB Financial who receives cash proceeds in
lieu of a fractional share interest in the
<PAGE> 2
Citizens Banking Corporation
May 21, 1997
Page 2
common stock of Citizens will recognize gain or loss equal to the
difference between such proceeds and the tax basis allocated to the
fractional share interest. The gain or loss will constitute capital gain
or loss if such shareholder's common stock of CB Financial with respect
to which gain or loss is recognized is held as a capital asset at the
Effective Time.
3. The tax basis of the common stock of Citizens received by a shareholder
of CB Financial who exchanges his or her common stock of CB Financial
for common stock of Citizens will be the same as such shareholder's tax
basis in the common stock of CB Financial surrendered in exchange
therefor (reduced by any amount allocable to a fractional share interest
for which cash is received).
4. The holding period of common stock of Citizens received by a shareholder
of CB Financial will include the period during which the common stock of
CB Financial surrendered in exchange therefor was held (provided that
such common stock of CB Financial was held by such shareholder of CB
Financial as a capital asset at the Effective Time).
We express no opinion concerning any tax consequences of the merger other
than those specifically set forth herein.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
This opinion represents and is based upon our best judgment regarding the
application of federal income tax laws arising under the Code, Treasury
Regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service and such other authorities as we have
considered relevant. Our opinion is not binding upon the Internal Revenue
Service or the courts, and the Internal Revenue Service is not precluded from
successfully asserting a contrary position. It should be noted that statutes,
regulations, judicial decisions and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive effect. A
material change in the authorities upon which our opinion is based could affect
our conclusion.
Except as set forth above, we express no opinion to any party as to the tax
consequences, whether federal, state, local or foreign, of the Merger or of any
transactions related thereto. We undertake no responsibility to update this
letter. This opinion is solely for your benefit and is not to be used,
circulated, quoted or otherwise referred to for any purpose without our express
written permission.
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the captions "The
Merger -- Certain Federal Income Tax Consequences" and "Legal Opinion" in the
Joint Proxy Statement-Prospectus constituting a part of the Registration
Statement. In giving such consent, we do not concede that we are experts within
the meaning of the Securities Act of 1933, as amended (the "Act"), or the rules
or regulations thereunder or that this consent is required by Section 7 of the
Act.
In the event any one of the statements, representations, warranties or
assumptions upon which we have relied to issue this opinion is incorrect, our
opinion might be adversely affected and may not be relied upon.
Sincerely,
/s/ DYKEMA GOSSETT PLLC
--------------------------------------
DYKEMA GOSSETT PLLC
<PAGE> 1
EXHIBIT 8.2
May 21, 1997
CB Financial Corporation
One Jackson Square
Jackson, Michigan 49201
Attention: Brian D. Bell
RE: AGREEMENT AND PLAN OF MERGER DATED AS OF THE 27TH DAY OF JANUARY, 1997,
BY AND AMONG CITIZENS BANKING CORPORATION, POLARIS ACQUISITION, INC.
AND CB FINANCIAL CORPORATION
Dear Mr. Bell:
We have acted as counsel to CB Financial Corporation, a Michigan
corporation ("CB"), in connection with the Agreement and Plan of Merger dated as
of the 27th day of January, 1997 (the "Merger Agreement"), made and entered into
by and among CB and Citizens Banking Corporation and Polaris Acquisition, Inc.
(collectively "Citizens"). Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Merger Agreement.
In furnishing this opinion, we have examined an executed original of: (i)
the Merger Agreement; and (ii) the Certificate of Representations dated as of
May 21, 1997, made by CB and Citizens (the "Certificate of Representations"). We
have also examined: (iii) the Joint Proxy Statement-Prospectus comprising part
of Citizens' Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "Registration Statement"); (iv) such records of CB as we
considered appropriate, including the Articles of Incorporation, Bylaws and
minutes of CB; (v) certified copies of official records of various authorities
with respect to the organization, qualification and good standing of CB; and
(vi) originals or copies satisfactory to us of all such agreements,
certificates, governmental orders, permits, authorizations and other documents
as we have deemed relevant and necessary as a basis for this opinion.
In rendering this opinion, we have considered the applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, pertinent judicial authorities, interpretive rulings of the
Internal Revenue Service and such other authorities as we have considered
relevant. In addition, we have assumed that the facts set forth in the
Certificate of Representations and in the Joint Proxy Statement-Prospectus are
accurate and that the Merger will be consummated in accordance with the Merger
Agreement.
This opinion is based upon and is subject to the following assumptions,
limitations and exceptions:
A. Our opinion is limited to the effect and applicability of the presently
existing laws of the United States of America and the laws of the State of
Michigan, and we express no opinion with respect to the effect and applicability
of the laws of any other state or other jurisdiction. We have assumed that, if
and where applicable, laws of other states are the same as the laws of the State
of Michigan. Our opinion is based upon the law and the state of facts which
exist as of the date hereof. Any change in those facts or any change in
applicable law, including, but not limited to, any change in the Code, Treasury
Regulations or other applicable law, after the date hereof could adversely
affect this opinion. We assume no responsibility to advise CB or the Securities
and Exchange Commission of any subsequent changes in the existing law or the
state of facts.
B. We have assumed in every case the due authorization and execution
(including witnessing and acknowledging where appropriate) and delivery of all
instruments executed and delivered in connection with the transactions
contemplated by the Merger Agreement by all parties, other than CB.
C. To the extent that we have examined and relied on original documents or
copies thereof, we have assumed in every case the accuracy and correctness of
all documents we have examined, the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals and the conformity to the originals of all documents submitted
to us as copies.
<PAGE> 2
CB Financial Corporation
May 21, 1997
Page 2
D. The rights and remedies provided in the aforementioned instruments and
documents and any other instruments and documents executed and delivered in
connection with the Merger Agreement are subject to any and all applicable
bankruptcy, reorganization, insolvency, liquidation, arrangement, fraudulent
conveyance, moratorium or similar laws, state or federal, judicial decisions,
principles of public policy or other rights, now or hereafter in effect,
relating to or affecting the enforcement of creditor's rights and to the
application of equitable principles and judicial discretion in any equitable or
legal proceedings involving the enforcement of any of the provisions of the
Merger Agreement.
E. Our opinion is limited to the matters expressly set forth herein and no
opinion is to be implied or may be inferred beyond the matters expressly so
stated.
F. As to any various questions of fact material to our opinion, we have, to
the extent that such facts were not independently established by us, relied upon
the representations and warranties of CB set forth in the Merger Agreement and
oral statements, written information and certificates of public officials and
officers or other representatives of CB.
Based upon and subject to the foregoing, we are of the opinion that the
Merger will constitute a tax-free reorganization within the meaning of Section
368(a) of the Code.
We consent to the filing of this opinion as Exhibit 8.2 to the Registration
Statement and to the reference to Howard & Howard Attorneys, P.C. under the
captions "The Merger -- Certain Federal Income Tax Consequences" and "Legal
Opinion" in the Joint Proxy Statement-Prospectus contained in the Registration
Statement.
This opinion is rendered pursuant to Item 4 of Form S-4 and Item 601 of
Regulation S-K and may be relied upon only by CB and the Securities and Exchange
Commission and may not be used, quoted or referenced to and/or filed with any
other person without our written permission.
Very truly yours,
/s/ HOWARD & HOWARD
Peter J. Livingston
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Joint Proxy Statement-Prospectus
of Citizens Banking Corporation for the registration of approximately 4,246,304
shares of its common stock and to the incorporation by reference therein of our
report dated January 15, 1997, with respect to the consolidated financial
statements of Citizens Banking Corporation included its Annual Report (Form
10-K) for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG L.L.P.
Detroit, Michigan
May 16, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Joint Proxy
Statement-Prospectus constituting part of this Registration Statement on Form
S-4 of Citizens Banking Corporation of our report dated February 4, 1997,
appearing in CB Financial Corporation's Annual Report on Form 10-K for the year
ended December 31, 1996. We also consent to the references to us under the
heading "Experts" in such Joint Proxy Statement-Prospectus.
/s/ ARTHUR ANDERSEN L.L.P.
Detroit, Michigan
May 21, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF RONEY & CO.
We hereby consent to the use of our opinion letter to the Board of
Directors of Citizens Banking Corporation included as Annex B to the Joint Proxy
Statement-Prospectus which forms a part of the Registration Statement on Form
S-4, relating to the proposed merger of Citizens Banking Corporation, CB
Financial Corporation and Polaris Acquisition, Inc. and to the references to our
firm and such opinion in such Joint Proxy Statement-Prospectus. In giving such
consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
(the "Act") or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "experts" as
used in the Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
/s/ RONEY & CO.
May 15, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF ABN AMRO CHICAGO CORPORATION
We hereby consent to the use of our opinion letter to the Board of
Directors of CB Financial Corporation included as Annex C to the Joint Proxy
Statement -- Prospectus which forms a part of the Registration Statement on Form
S-4, relating to the proposed merger of CB Financial Corporation, Citizens
Banking Corporation and Polaris Acquisition, Inc. and to the references to our
firm and such opinion in such Joint Proxy Statement -- Prospectus. In giving
such consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby admit that we are experts with respect to any part
of such Registration Statement within the meaning of the term "experts" as used
in the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
/s/ ABN AMRO CHICAGO CORPORATION
May 21, 1997
<PAGE> 1
EXHIBIT 99.1
CITIZENS BANKING CORPORATION
The undersigned hereby appoints William C. Shedd and Victor E. George,
and each of them, as Proxies with full power of substitution to represent and
vote as designated below, all shares of the undersigned at the Special Meeting
of Shareholders of Citizens Banking Corporation to be held at One Citizens
Banking Center, 328 South Saginaw Street, Flint, Michigan 48502, at 10:00 a.m.
local time, on June 24, 1997 and at any adjournments thereof.
The Board of Directors recommends votes FOR:
1. Approval of the Share Issuance, pursuant to the Agreement and Plan of
Merger, dated as of January 27, 1997, by and among Citizens Banking
Corporation, Polaris Acquisition, Inc. and CB Financial Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED ABOVE. IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR THE ABOVE
PROPOSAL. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CITIZENS BANKING CORPORATION.
In the event proxies representing a sufficient number of shares voting
to approve the Share Issuance are not obtained before the meeting, a proposal
to adjourn the meeting in order to solicit additional proxies will be put to a
vote at the meeting.
- --------------------------------------------------------------------------------
In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting or any adjournment or
postponement thereof.
DATED_____________________________, 1997
________________________________________
________________________________________
________________________________________
Please date and sign above exactly as
same appears indicating, if appropriate,
official position or representative
capacity. If stock is held in joint
tenancy, each joint owner should sign.
<PAGE> 1
EXHIBIT 99.2
CB FINANCIAL CORPORATION
The undersigned hereby appoints Brian D. Bell and Karen R. Gamin, and each
of them, as Proxies with full power of substitution to represent and vote as
designated below, all shares of the undersigned at the Special Meeting of
Shareholders of CB Financial Corporation to be held at The Town Club, One
Jackson Square, Jackson, Michigan at 10:00 a.m. local time on June 24, 1997 and
at any adjournments thereof.
1. Approval and adoption of the Agreement and Plan of Merger, dated as
of January 27, 1997, by and among Citizens Banking Corporation, Polaris
Acquisition, Inc. and CB Financial Corporation, and the transaction
contemplated thereby.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR THE PROPOSAL:
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
ABOVE. IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR THE ABOVE PROPOSAL. THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CB FINANCIAL
CORPORATION.
In the event proxies representing a sufficient number of shares voting to
approve the Agreement and Plan of Merger are not obtained before the meeting, a
proposal to adjourn the meeting in order to solicit additional proxies will be
put to a vote at the meeting.
- --------------------------------------------------------------------------------
In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting or any adjournment or
postponement thereof.
DATED_____________________________, 1997
________________________________________
________________________________________
________________________________________
Please date and sign above exactly as
same appears indicating, if appropriate,
official position or representative
capacity. If stock is held in joint
tenancy, each joint owner should sign.
