<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1999
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>
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
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> <C>
D. RICHARD MCDONALD RANDALL A. HAAK KENNETH V. HALLETT
DYKEMA GOSSETT PLLC MCCARTY, CURRY, WYDEVEN, QUARLES & BRADY LLP
1577 NORTH WOODWARD AVENUE PEETERS & HAAK, LLP 411 EAST WISCONSIN AVENUE
SUITE 300 120 E. 4TH STREET MILWAUKEE, WI 53202-4497
BLOOMFIELD HILLS, MI 48304-2820 KAUKAUNA, WI 54130 (414) 277-5000
(248) 203-0859 (920) 766-4693
</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 this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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 PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE REGISTRATION FEE(3)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value (including the
attached Preferred Stock Purchase Rights)...... 21,133,306 $26.05 $550,522,621 $153,045.29
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement relates to (i) 21,133,306 shares of common
stock, no par value, of the Registrant, the maximum number of such shares
issuable in exchange for 16,218,961 shares of common stock, par value $1.00
per share, of F&M Bancorporation, Inc. ("F&M"), the maximum number of shares
of F&M 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 F&M 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)(1) under the Securities Act based on the
aggregate market value on August 30, 1999 of the shares of F&M common stock
expected to be cancelled in connection with the merger and computed by
dividing (i) the product of (A) the average of the high and low prices of
F&M common stock as reported on the Nasdaq National Market on August 30,
1999 ($33.94) and (B) 16,218,961, representing the maximum number of shares
of F&M common stock expected to be cancelled in connection with the merger,
by (ii) 21,133,306, representing the maximum number of shares of the
Registrant's common stock to be issued in connection with the merger.
(3) The registration fee of $153,045.29 was calculated pursuant to Rule 457(f)
under the Securities Act, as follows: .000278 multiplied by the proposed
maximum aggregate offering price. A fee of $126,102.42 was paid on July 23,
1999 pursuant to Section 14(g)(1)(A) of the Securities Exchange Act of 1934
and Rules 0-11 and 14a-6(i)(1) 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, resulting in a net fee payable of $26,942.87.
------------------------
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
[CITIZENS BANKING CORPORATION LOGO] [F&M BANCORPORATION INC. LOGO]
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Citizens Banking Corporation and F&M
Bancorporation, Inc. have agreed on a merger of F&M with a Citizens subsidiary,
after which F&M will be a subsidiary of Citizens. After the merger Citizens will
have total assets of approximately $7.3 billion, stockholders' equity of
approximately $666.0 million and deposits of approximately $5.8 billion. We
believe that this merger will position the combined company to grow and flourish
as the financial services business evolves and consolidates.
If the merger is completed, each share of F&M common stock will be
converted into 1.303 shares of Citizens common stock. Each share of Citizens
common stock outstanding will remain outstanding as a share of common stock of
the combined companies. Citizens and F&M common stock are traded on the Nasdaq
National Market under the trading symbols "CBCF" and "FMBK."
We cannot complete the merger unless the stockholders of F&M approve the
merger and the stockholders of Citizens approve the issuance of Citizens common
stock in connection with the merger. Each of us will hold a meeting of our
stockholders to vote on these merger related proposals. YOUR VOTE IS VERY
IMPORTANT. Whether or not you plan to attend your stockholder meeting, please
take the time to vote by completing and mailing the enclosed proxy card to us.
If you sign, date and mail your proxy card without indicating how you want to
vote, your proxy will be counted as a vote in favor of the issuance of Citizens
common stock or in favor of the merger. If you are an F&M stockholder and you do
not return your card or do not instruct your broker how to vote any shares held
for you in "street name," the effect will be a vote against the merger.
This joint proxy statement-prospectus provides you with detailed
information about these meetings and the proposed merger, and includes the
merger agreement as Annex A. You can also get information about our companies
from documents we have filed with the Securities and Exchange Commission. We
encourage you to read this entire document carefully.
We strongly support the merger of our companies and join with all of the
other members of our Boards of Directors in enthusiastically recommending that
you vote in favor of the merger and the issuance of Citizens common stock in
connection with it.
<TABLE>
<S> <C>
/s/ ROBERT J. VITITO /s/ GAIL E. JANSSEN
Robert J. Vitito Gail E. Janssen
Chairman of the Board Chairman of the Board
Citizens Banking Corporation F&M Bancorporation, Inc.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS JOINT PROXY
STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY STATEMENT-PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF ANY
BANK OR NON-BANK SUBSIDIARY OF ANY OF THE PARTIES, AND THEY ARE NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
JOINT PROXY STATEMENT-PROSPECTUS DATED SEPTEMBER 8, 1999
AND FIRST MAILED TO STOCKHOLDERS ON OR ABOUT SEPTEMBER 13, 1999
<PAGE> 3
[CITIZENS BANKING LOGO]
CITIZENS BANKING CORPORATION
328 South Saginaw Street
Flint, Michigan 48502
------------------
NOTICE OF SPECIAL MEETING OF CITIZENS STOCKHOLDERS
TO BE HELD ON OCTOBER 22, 1999
To the Stockholders of Citizens Banking Corporation:
A special meeting of the stockholders of Citizens Banking Corporation will
be held at Citizens Corporate Headquarters at 328 South Saginaw Street, Flint,
Michigan on Friday, October 22, 1999, at 9:00 a.m., local time, to consider and
vote upon a proposal to approve the issuance of shares of Citizens common stock
in connection with an Amended and Restated Agreement and Plan of Merger among
Citizens, Citizens Acquisition, Inc., a wholly-owned subsidiary of Citizens, and
F&M Bancorporation, Inc. Under that merger agreement, Citizens Acquisition will
be merged with and into F&M, which will become a Citizens subsidiary, and
holders of F&M common stock will receive 1.303 shares of Citizens common stock
for each share of F&M common stock. The transaction is further described in the
accompanying joint proxy statement-prospectus. A copy of the merger agreement is
included as Annex A to the joint proxy statement-prospectus.
The record date for the Citizens special meeting is the close of business
on August 31, 1999. Only Citizens stockholders of record at that time are
entitled to notice of and to vote at the special meeting or any adjournment or
postponement thereof. To approve the issuance of shares in connection with the
merger, a majority of the total votes cast at the meeting in person or by proxy
by the holders of shares of Citizens common stock must vote in favor of the
issuance of shares. Citizens stockholders do not have dissenters' rights of
appraisal under Michigan law in respect of this vote.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF NO INSTRUCTIONS ARE INDICATED
ON YOUR PROXY, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSED ISSUANCE OF SHARES.
YOU CAN REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY GIVING WRITTEN
NOTICE TO CITIZENS' CORPORATE SECRETARY OR THE ACTING SECRETARY OF THE SPECIAL
MEETING, BY FILING ANOTHER PROXY, OR BY ORAL NOTICE TO THE PRESIDING OFFICER AT
THE SPECIAL MEETING AND VOTING IN PERSON. ATTENDANCE AT THE SPECIAL MEETING, BY
ITSELF, DOES NOT REVOKE YOUR PROXY.
CITIZENS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
ISSUANCE OF SHARES OF CITIZENS COMMON STOCK.
By order of the Board of Directors
/s/ THOMAS W. GALLAGHER
Thomas W. Gallagher
Secretary
September 13, 1999
<PAGE> 4
[F&M BANCORPORATION LOGO]
F&M BANCORPORATION, INC.
One Bank Avenue
P.O. Box 410
Kaukauna, WI 54130
------------------
NOTICE OF SPECIAL MEETING OF F&M STOCKHOLDERS
TO BE HELD ON OCTOBER 22, 1999
To the Stockholders of F&M Bancorporation, Inc.:
A special meeting of the stockholders of F&M Bancorporation, Inc. will be
held at the Paper Valley Hotel and Conference Center, located at 333 West
College Avenue, Appleton, Wisconsin, 54911, on Friday, October 22, 1999, at 8:00
a.m., local time, to consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger among Citizens, Citizens Acquisition,
Inc., a wholly-owned subsidiary of Citizens, and F&M Bancorporation, Inc. Under
that merger agreement, Citizens Acquisition will be merged with and into F&M,
which will become a Citizens subsidiary, and holders of F&M common stock will
receive 1.303 shares of Citizens common stock for each share of F&M common
stock. The transaction is further described in the accompanying joint proxy
statement-prospectus. A copy of the merger agreement is included as Annex A to
the joint proxy statement-prospectus.
The record date for the F&M special meeting is the close of business on
August 31, 1999. Only F&M stockholders of record at that time are entitled to
notice of and to vote at the special meeting or any adjournment or postponement
thereof. To approve the merger, the holders of a majority of the outstanding
shares of F&M common stock must vote in favor of the merger agreement. F&M
stockholders do not have dissenters' rights of appraisal under Wisconsin law in
respect of this vote.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IF NO INSTRUCTIONS ARE INDICATED
ON YOUR PROXY, YOUR SHARES WILL BE VOTED "FOR" THE MERGER AGREEMENT. IF YOU DO
NOT RETURN YOUR PROXY OR VOTE IN PERSON, THE EFFECT IS A VOTE AGAINST THE
MERGER. YOU CAN REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY GIVING
WRITTEN NOTICE TO F&M'S CORPORATE SECRETARY OR THE ACTING SECRETARY OF THE
SPECIAL MEETING, BY FILING ANOTHER PROXY, OR BY ORAL NOTICE TO THE PRESIDING
OFFICER AT THE SPECIAL MEETING AND VOTING IN PERSON. ATTENDANCE AT THE SPECIAL
MEETING, BY ITSELF, DOES NOT REVOKE YOUR PROXY.
F&M'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
MERGER AGREEMENT.
By order of the Board of Directors
/s/ JANET M. LAKSO
Janet M. Lakso
Secretary
September 13, 1999
<PAGE> 5
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Citizens and F&M from documents that are not included in or delivered with
this document. This information is available to you without charge upon your
written or oral request. You can obtain documents related to Citizens and F&M
that are incorporated by reference in this document by requesting them in
writing or by telephone from:
<TABLE>
<S> <C>
Citizens F&M
- -------------------------------------------- --------------------------------------------
Thomas W. Gallagher, Secretary Janet M. Lakso, Secretary
Citizens Banking Corporation F&M Bancorporation, Inc.
328 S. Saginaw Street One Bank Avenue
Flint, Michigan 48502 Kaukauna, Wisconsin 54130
Telephone: (810) 766-7500 Telephone: (920) 766-1717
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY OCTOBER 15, 1999 IN
ORDER TO RECEIVE THEM BEFORE THE SPECIAL STOCKHOLDER MEETINGS OF CITIZENS AND
F&M.
See "Where You Can Find More Information" on page 82.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY OF JOINT PROXY
STATEMENT-PROSPECTUS................ 1
The Companies....................... 1
Exchange of Shares.................. 2
Material Federal Income Tax
Consequences..................... 2
F&M Stock Options................... 2
Stockholder Meetings................ 2
Stockholder Approval................ 2
Reasons For the Merger.............. 2
Our Recommendations to
Stockholders..................... 3
Interests of Certain Persons in the
Merger........................... 3
Fairness Opinions of Financial
Advisors......................... 3
Management and Operations After the
Merger........................... 3
Conditions to the Completion of the
Merger........................... 3
Termination of the Merger
Agreement........................ 4
Regulatory Approvals................ 4
Accounting Treatment................ 4
Stock Option Agreement.............. 5
No Appraisal Rights................. 5
Certain Differences in the Rights of
Stockholders..................... 5
Forward-Looking Statements May Prove
Inaccurate....................... 5
If You Have Questions............... 5
MARKET PRICE PER SHARE DATA........... 6
COMPARATIVE PER SHARE DATA............ 7
SELECTED CONSOLIDATED FINANCIAL
DATA................................ 9
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Citizens Banking Corporation and
Subsidiaries..................... 9
F&M Bancorporation, Inc. and
Subsidiaries..................... 11
UNAUDITED PRO FORMA COMBINED SELECTED
FINANCIAL DATA...................... 12
FORWARD-LOOKING STATEMENTS............ 14
CITIZENS BANKING CORPORATION.......... 14
F&M BANCORPORATION, INC............... 15
THE SPECIAL MEETING OF CITIZENS
STOCKHOLDERS........................ 15
Date, Time and Place; Purpose of
Meeting.......................... 15
Record Date......................... 16
Voting and Revocation of Proxies.... 16
Vote Required to Approve the Share
Issuance; Principal
Stockholders..................... 17
Absence of Appraisal Rights......... 17
Solicitation of Proxies............. 17
Recommendation of Citizens' Board of
Directors........................ 17
THE SPECIAL MEETING OF F&M
STOCKHOLDERS........................ 18
Date, Time and Place; Purpose of
Meeting.......................... 18
Record Date......................... 18
Voting and Revocation of Proxies.... 18
Vote Required to Approve the Merger;
Principal Stockholders........... 19
Absence of Appraisal Rights......... 19
Solicitation of Proxies............. 19
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Recommendation of F&M's Board of
Directors........................ 20
THE MERGER............................ 20
General............................. 20
Exchange Ratio and Conversion of F&M
Common Stock..................... 20
Completion and Effectiveness of the
Merger........................... 21
Exchange of F&M Stock Certificates
for Citizens Stock
Certificates..................... 21
Treatment of Options................ 21
Employee Benefits and Plans......... 22
Background of the Merger............ 22
Recommendation of the Citizens Board
of Directors and Reasons for the
Merger........................... 25
Recommendation of the F&M Board of
Directors and Reasons for the
Merger........................... 26
Fairness Opinions of Financial
Advisors......................... 27
Structure of the Merger............. 39
Articles and Bylaws................. 39
Directors and Officers.............. 39
Representations and Warranties...... 39
Conduct Pending the Merger.......... 40
Other Acquisition Proposals......... 41
Conditions to the Consummation of
the Merger....................... 41
Regulatory Approvals Required for
the Merger....................... 42
Material Federal Income Tax
Consequences..................... 44
Accounting Treatment................ 45
Termination of the Merger
Agreement........................ 45
Amendment and Waiver of the Merger
Agreement........................ 46
Stock Option Agreement.............. 46
Nasdaq Listing...................... 49
Expenses............................ 49
Dividends........................... 49
Restrictions on Sales by
Affiliates....................... 49
No Appraisal Rights................. 50
OPERATIONS FOLLOWING THE MERGER....... 50
INTERESTS OF CERTAIN PERSONS IN THE
MERGER.............................. 50
Employment and Other Agreements..... 50
F&M Options......................... 51
Directors' and Officers'
Indemnification.................. 51
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
New Directors....................... 52
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS................ 53
REGULATION AND SUPERVISION............ 61
DESCRIPTION OF CITIZENS CAPITAL
STOCK............................... 65
General............................. 65
Citizens Common Stock............... 65
Citizens Preferred Stock............ 66
Citizens Rights Agreement........... 66
COMPARISON OF STOCKHOLDERS' RIGHTS.... 68
General............................. 68
Number and Classification of
Directors........................ 68
Nomination of Director Candidates... 68
Qualifications for Directors........ 68
Removal of Directors................ 69
Filling Vacancies on the Board of
Directors........................ 69
Special Stockholder Meetings........ 69
Certain Business Combinations....... 70
Amendment of Articles of
Incorporation and Bylaws......... 71
Indemnification of Directors and
Officers......................... 72
Limited Liability of Directors...... 72
Vote Required for Certain
Reorganizations.................. 73
Stockholder Action by Consent....... 74
Statutory Stockholder Liability..... 74
Dissenters' Rights.................. 75
Director and Officer Discretion..... 75
Anti-Takeover Statutes -- Business
Combinations..................... 76
Anti-Takeover Statutes -- Control
Share Acquisitions............... 78
Anti-Takeover Statutes -- Anti-
Greenmail........................ 79
Anti-Takeover Statutes -- Fair Price
Provisions....................... 80
EXPERTS............................... 81
LEGAL MATTERS......................... 81
STOCKHOLDER PROPOSALS................. 81
WHERE YOU CAN FIND MORE INFORMATION... 82
</TABLE>
ANNEXES
<TABLE>
<S> <C> <C>
A -- Amended and Restated Agreement and Plan of Merger
B -- Opinion of Keefe, Bruyette & Woods, Inc.
C -- Opinion of Hovde Financial, Inc.
</TABLE>
ii
<PAGE> 7
SUMMARY OF JOINT PROXY STATEMENT-PROSPECTUS
This section summarizes information from this joint proxy
statement-prospectus and includes summaries of information we believe is
material. To understand the merger fully you should carefully read the entire
joint proxy statement-prospectus, including the annexes and other documents to
which it refers. We have included a copy of the merger agreement in this
document as Annex A. The merger agreement, and not this document, is the
document that governs the merger. For information on how to obtain the documents
that we have filed with the SEC, see "Where You Can Find More Information" on
page 82.
THE COMPANIES
(See pages 14 & 15)
Citizens Banking Corporation
328 S. Saginaw Street
Flint, Michigan 48502
(810) 766-7500
http://www.cbClientsFirst.com
Citizens is a registered bank holding company under the Bank Holding
Company Act of 1956, that, through its banking and non-banking subsidiaries,
provides banking and financial services in Michigan and Illinois to individuals,
corporations, governments, and other institutions.
At June 30, 1999, Citizens' total assets were $4.8 billion, total deposits
were $3.7 billion and total stockholders' equity was $411.1 million.
For additional information about Citizens and its business, see "Citizens
Banking Corporation" and "Where You Can Find More Information."
F&M Bancorporation, Inc.
One Bank Avenue
Kaukauna, Wisconsin 54130
(920) 766-1717
http://www.fmbanks.com
F&M is a midwestern bank holding company registered under the Bank Holding
Company Act of 1956, that, through its 22 bank subsidiaries, offers a wide range
of banking and financial services in Wisconsin, Iowa and Minnesota to
individuals, corporations, governments and other institutions.
On June 30, 1999, F&M's total assets were $2.6 billion, total deposits were
$2.1 billion and total stockholders' equity was $254.9 million.
For more information about F&M and its business, see "F&M Bancorporation,
Inc." and "Where You Can Find More Information."
1
<PAGE> 8
EXCHANGE OF SHARES
(See pages 20 & 21)
At the effective time of the merger, each outstanding share of F&M common
stock will be converted into 1.303 shares of Citizens common stock. The exchange
ratio is fixed regardless of changes of the market price of either company's
stock. The market value of Citizens common stock that F&M stockholders will
receive in the merger will almost certainly change and may be higher or lower
than its current market value. See "The Merger -- Exchange Ratio and Conversion
of F&M Common Stock."
After the merger, F&M stockholders will have to surrender their F&M common
stock certificates to receive new Citizens common stock certificates. This will
not be necessary until you receive further written instructions after we have
completed the merger. Citizens stockholders will keep their shares of common
stock and so they should not send in their Citizens stock certificates at all.
See "The Merger -- Exchange of F&M Stock Certificates for Citizens Stock
Certificates."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
(See page 44)
F&M's stockholders will not recognize gain or loss for United States
federal income tax purposes in the merger, except for taxes payable because of
cash received by F&M stockholders instead of fractional shares. We each have
received a legal opinion to the effect that the merger will constitute a
reorganization within the meaning of the Internal Revenue Code.
The tax consequences of the merger to you will depend on your own
situation. We urge you to consult your tax advisor for a full understanding of
these tax consequences, including how any state, local or foreign tax laws may
apply to you. For a more detailed discussion of the tax consequences of the
merger, see "The Merger -- Material Federal Income Tax Consequences."
F&M STOCK OPTIONS
(See page 51)
Citizens is assuming all of the outstanding stock options held by F&M
employees and directors. These options will be converted into options to
purchase Citizens' shares, and adjusted to reflect the exchange ratio.
STOCKHOLDER MEETINGS
(See pages 15 & 18)
Citizens Stockholders. The Citizens special meeting will be held at
Citizens Corporate Headquarters, 328 South Saginaw Street, Flint, Michigan on
October 22, 1999 at 9:00 a.m.
F&M Stockholders. The F&M special meeting will be held at the Paper Valley
Hotel and Conference Center, 333 West College Avenue, Appleton, Wisconsin on
October 22, 1999 at 8:00 a.m.
STOCKHOLDER APPROVAL
(See pages 17 & 19)
Citizens Stockholders. Citizens stockholders are not required to approve
the merger. However, in order to complete the merger, the holders of a majority
of the shares of Citizens common stock that vote on the proposal must approve
the issuance of a sufficient number of shares of Citizens common stock to
complete the exchange for F&M shares.
F&M Stockholders. To approve the merger, the affirmative vote of a majority
of the shares of F&M common stock outstanding on the record date is required. If
you do not vote at the special meeting on the merger proposal, either in person
or by proxy, you will effectively be voting against the merger proposal.
REASONS FOR THE MERGER
(See pages 25 & 26)
We believe that by merging F&M and Citizens we will be able to provide our
stockholders with substantial benefits and better serve our clients and markets.
We also think that we can create a company with enhanced financial performance
which will be better positioned to be a strong competitor in the
rapidly-changing financial services business.
For a more complete discussion of the factors considered by each of our
Boards of Directors see "The Merger -- Recommendation of the Citizens Board of
Directors and Reasons for the Merger" and "The Merger -- Recommendation of the
F&M Board of Directors and Reasons for the Merger."
2
<PAGE> 9
OUR RECOMMENDATIONS TO STOCKHOLDERS
(See pages 25 & 26)
Citizens Stockholders. The Citizens Board of Directors believes that the
merger is in the best interest of Citizens and its stockholders and unanimously
recommends that you vote "for" approval of the issuance of shares needed to
complete the merger. Citizens' Board of Directors reached its decision after
consulting with its legal advisors regarding the legal terms of the merger
agreement and with its financial advisor as to the fairness of the merger to
Citizens' stockholders.
F&M Stockholders. The F&M Board of Directors believes that the merger is in
the best interest of F&M and its stockholders and unanimously recommends that
you vote "for" approval of the merger. F&M's Board of Directors reached its
decision after consulting with its legal advisors regarding the legal terms of
the merger agreement and with its financial advisor as to the fairness of the
merger to F&M stockholders.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
(See page 50)
Certain members of F&M's management and the F&M Board of Directors may be
deemed to have certain interests in the merger that are in addition to their
interests generally as stockholders of F&M, including the following:
- outstanding F&M stock options, including options held by directors and
officers, will be converted into Citizens options.
- F&M's directors will be indemnified for six years, and Citizens will
maintain the current F&M directors' and officers' liability insurance
policy until August 1, 2001.
- Citizens will honor all existing F&M employment agreements and severance
plans.
- Citizens will elect Ronald E. Fenton, Gail E. Janssen, and Robert C.
Safford, members of the F&M Board of Directors, to the Citizens Board of
Directors.
- Citizens will credit F&M employees with years of F&M service for
eligibility and vesting, but not for benefit accrual, under Citizens'
employee benefit plans.
The Citizens Board of Directors and the F&M Board of Directors were aware
of these interests and considered them, among other matters, in approving the
merger agreement.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
(See page 27)
Keefe, Bruyette & Woods, Inc., Citizens' financial advisor in connection
with the merger, has delivered its opinion to the Citizens Board of Directors
that the consideration to be paid by Citizens in connection with the merger was
fair, from a financial point of view, to the Citizens stockholders.
Hovde Financial, Inc., F&M's financial advisor in connection with the
merger, has delivered its written opinion to the F&M Board of Directors that the
consideration to be received by the F&M stockholders in connection with the
merger is fair, from a financial point of view, to the F&M stockholders.
The full text of the opinions, which set forth the factors considered and
the assumptions made by each of the financial advisors, are attached as Annexes
B and C. You should read them in their entirety.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
(See pages 39 & 50)
The present managements of our companies will share the responsibility of
managing the resulting company. The current Citizens Board of Directors will be
increased from 18 members to 21 members. The F&M Board of Directors has
designated three individuals, who are acceptable to Citizens, to fill the three
new positions on the Citizens Board of Directors.
While no assurances can be made, Citizens expects to achieve cost savings
and additional revenue opportunities in the merger that should have a beneficial
effect on our earnings per share. Citizens also expects to recognize a one-time
charge to earnings in the year in which we complete the merger, related to
merger expenses and costs of integrating our two companies. Citizens believes
that charge will be about $25 million to $35 million.
CONDITIONS TO THE COMPLETION OF THE MERGER
(See page 41)
The merger will be completed only if the conditions set forth in the merger
agreement are
3
<PAGE> 10
satisfied, or to the extent permissible, waived. Some of these conditions are:
- the Citizens and F&M stockholders must approve the transaction;
- we must receive approval of the merger by federal and state regulatory
authorities;
- we must each receive an opinion of our tax counsel that the merger is a
tax-free reorganization for federal income tax purposes;
- we must each receive a letter from our respective independent accountants
to the effect that the merger will qualify for pooling of interests
accounting treatment; and
- there must be no injunction or legal restraint prohibiting consummation
of the merger.
TERMINATION OF THE MERGER AGREEMENT
(See page 45)
Citizens or F&M may terminate the merger agreement and abandon the merger
if any of the following occurs:
- our Boards of Directors mutually consent to terminate the merger;
- it becomes impossible to satisfy any of the conditions required of it by
the merger agreement, but only if the company requesting termination has
used its best efforts and attempted in good faith to satisfy all such
conditions and if such company is not then in breach of the merger
agreement;
- the merger has not been completed by December 31, 1999 without fault on
the part of the company requesting termination;
- the other company breaches or defaults on any representation or warranty,
or in the observance of its covenants and agreements, contained in the
merger agreement, and fails to cure the breach or default in a timely
manner;
- we fail to obtain any required regulatory or stockholder approvals;
- a disclosure update provided by the other company indicates that an event
having a material adverse effect on the company has occurred.
Citizens may also terminate the merger agreement and abandon the merger if
any of the following occur:
- F&M's Board of Directors fails to publicly reject or oppose a publicly
announced proposal made by a third party to acquire F&M;
- F&M's Board of Directors modifies, amends or withdraws its recommended
approval of the merger agreement and the merger to the F&M stockholders
following a publicly announced proposal by a third party to acquire F&M;
or
- A representation or warranty made by F&M regarding environmental matters
is untrue whether or not F&M knew it was untrue.
REGULATORY APPROVALS
(See page 42)
The merger must be approved by the Board of Governors of the Federal
Reserve System. The U.S. Department of Justice has input into this approval
process. Once the Board of Governors approves the merger, we have to wait for up
to 30 days before we can complete the merger for the Department of Justice to
complete its review.
In addition, certain state regulatory authorities will need to approve the
merger before we can complete it.
We have filed all of the required applications or notices with the Federal
Reserve Board and these other regulatory authorities.
As of the date of this document, we have not yet received the required
approvals. While we do not know of any reason why we would not be able to obtain
the necessary approvals in a timely manner, we cannot be certain when or if we
will get them.
ACCOUNTING TREATMENT
(See page 45)
We intend to account for the merger as a pooling of interests business
combination. It is a
4
<PAGE> 11
condition to the merger that we each receive letters from our respective
independent accountants to the effect that pooling of interests accounting for
the merger is appropriate under APB 16, if the merger is consummated in
accordance with the merger agreement. Under the pooling of interests method of
accounting, each of our historical recorded assets and liabilities will be
carried forward to the combined company at their recorded amounts. In addition,
the operating results of the combined company will include our operating results
for the entire fiscal year in which the merger is completed and our historical
reported operating results for prior periods will be combined and restated as
the operating results of the combined company.
STOCK OPTION AGREEMENT
(See page 46)
F&M entered into a stock option agreement with Citizens which granted
Citizens the option to purchase from F&M 3,097,908 shares of F&M common stock at
a price of $35.55 per share.
The stock option agreement was an inducement to and condition of Citizens
entering into the merger agreement. The option is intended to increase the
likelihood that the merger will be completed and, consequently, may discourage
third parties who might be interested in acquiring all of or a significant
interest in F&M from considering or proposing such an acquisition.
Citizens may exercise the option only if certain events described in the
stock option agreement occur. None of these events has occurred as of the date
of this joint proxy statement-prospectus. At the request of the holder of the
option, under certain circumstances, F&M will repurchase, for a specified price,
the option and any shares of F&M common stock purchased upon its exercise.
NO APPRAISAL RIGHTS
(See pages 17 & 19)
Under Michigan law, Citizens stockholders will have no appraisal rights
regarding the issuance of Citizens shares in connection with the merger.
Under Wisconsin law, F&M stockholders will have no appraisal rights in
connection with the merger.
CERTAIN DIFFERENCES IN THE RIGHTS OF STOCKHOLDERS
(See page 68)
The rights of F&M stockholders are currently governed by Wisconsin law, the
F&M articles of incorporation and the F&M bylaws. The rights of F&M stockholders
will materially change because they will become stockholders of Citizens, and
their rights will then be governed by Michigan law, the Citizens articles of
incorporation and the Citizens bylaws.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
(See page 14)
Citizens and F&M have made forward-looking statements in this joint proxy
statement-prospectus and in the documents to which we have referred you.
Forward- looking statements include information concerning possible or assumed
future results of operations of Citizens or F&M before the merger or of Citizens
following the merger. Many factors could affect the future financial results of
Citizens or F&M and could cause those results to differ materially from those
expressed in the forward-looking statements contained or incorporated by
reference in this joint proxy statement-prospectus.
IF YOU HAVE QUESTIONS
If you have questions about the merger, you should contact:
Citizens stockholders:
Citizens Banking Corporation
328 S. Saginaw Street
Flint, Michigan 48502
Attention: James M. Polehna
Phone Number: (810) 257-2593
F&M stockholders:
F&M Bancorporation, Inc.
One Bank Avenue
Kaukauna, Wisconsin 54130
Attention: Janet M. Lakso
Phone Number: (920) 766-1717
5
<PAGE> 12
MARKET PRICE PER SHARE DATA
Citizens common stock is listed on the Nasdaq National Market under the
symbol "CBCF." F&M common stock is listed on the Nasdaq National Market under
the symbol "FMBK." The table below shows, for the calendar quarters indicated,
the high and low sales prices per share reported on the Nasdaq National Market
for Citizens common stock and F&M common stock.
<TABLE>
<CAPTION>
CITIZENS F&M
---------------- ----------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C> <C>
1999 Third Quarter(1)...................................... $30.81 $26.00 $39.56 $32.87
Second Quarter........................................ 42.25 28.63 42.63 33.00
First Quarter......................................... 36.06 31.00 35.50 29.38
1998 Fourth Quarter........................................ 35.38 26.75 33.25 28.25
Third Quarter......................................... 36.13 28.00 37.95 32.50
Second Quarter........................................ 37.00 32.88 38.41 35.69
First Quarter......................................... 37.13 27.50 39.09 32.95
1997 Fourth Quarter........................................ 34.75 27.17 37.73 33.19
Third Quarter......................................... 29.42 22.33 35.91 30.91
Second Quarter........................................ 23.83 20.33 36.59 23.97
First Quarter......................................... 22.33 20.00 26.45 23.55
</TABLE>
- -------------------------
(1) Through September 2, 1999.
The following table shows the closing price per share on the Nasdaq
National Market of Citizens common stock and for F&M common stock and the
equivalent per share price of F&M common stock giving effect to the merger on
April 16, 1999 and on September 2, 1999. April 16, 1999 was the last trading day
prior to the public announcement of the proposed merger, and September 2, 1999
was the latest practicable trading day before the printing of this joint proxy
statement-prospectus. It also provides the 15 day average closing prices of F&M
and Citizens common stock for the period ending April 16, 1999. The equivalent
per share amount was determined by multiplying the closing sales prices of
Citizens' common stock by 1.303.
<TABLE>
<CAPTION>
CITIZENS F&M
COMMON COMMON EQUIVALENT
STOCK STOCK PER SHARE
------------ ------------ ----------
<S> <C> <C> <C>
Market value per share:
April 16, 1999......................................... $39.00 $39.75 $50.82
September 2, 1999...................................... $27.06 $34.69 35.26
15 day average for period ended April 16, 1999......... $35.58 $35.55 $46.36
</TABLE>
Because the exchange ratio is fixed, and because the market price of the
Citizens common stock is subject to fluctuation, the market value of the shares
of Citizens common stock that F&M stockholders will receive in the merger will
increase or decrease prior to and following the merger. You are urged to obtain
current market quotations for Citizens common stock and F&M common stock. No
assurance can be given as to the future prices or markets for Citizens common
stock or F&M common stock. See "The Merger -- Exchange Ratio and Conversion of
F&M Common Stock."
6
<PAGE> 13
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical, pro forma and pro forma
equivalent per share financial data for Citizens and F&M. The F&M equivalent pro
forma financial data is based upon the conversion rate of 1.303 shares of
Citizens common stock for each share of F&M common stock outstanding immediately
prior to the merger. You should not rely on the pro forma financial information
as an indication of the combined financial position or results of operations of
future periods or the results that actually would have been realized had the
companies been a single company during the periods presented. The information
presented below is only a summary and you should read it in conjunction with the
unaudited pro forma combined financial statements, including their notes, on
page 53, and the historical consolidated financial statements, including their
notes, of Citizens and F&M incorporated by reference in this joint proxy
statement-prospectus. See "Where You Can Find More Information."
<TABLE>
<CAPTION>
F&M
CITIZENS ------------------------
----------------------- EQUIVALENT
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
PER COMMON SHARE ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BOOK VALUE:
June 30, 1999.................................... $15.24 $13.89 $15.83 $18.10
December 31, 1998................................ 15.70 14.07 15.39 18.33
MARKET VALUE:(1)
June 30, 1999.................................... $30.06 $30.06 $37.75 $39.17
December 31, 1998................................ 33.75 33.75 30.25 43.98
December 31, 1997................................ 34.50 34.50 36.59 44.95
December 31, 1996................................ 21.00 21.00 24.59 27.36
CASH DIVIDENDS:(1)
Six months ended:
June 30, 1999................................. $ 0.45 $ 0.45 $ 0.48 $ 0.58
Year ended:
December 31, 1998............................. 0.82 0.82 0.84 1.07
December 31, 1997............................. 0.74 0.74 0.69 0.96
December 31, 1996............................. 0.67 0.67 0.55 0.87
BASIC NET INCOME:
Six months ended:
June 30, 1999................................. $ 1.06 $ 0.98 $ 1.14 $ 1.28
Year ended:
December 31, 1998............................. 2.02 1.86 2.15 2.42
December 31, 1997(2).......................... 1.13 1.17 1.59 1.52
December 31, 1996............................. 1.52 1.41 1.61 1.84
DILUTED NET INCOME:
Six months ended:
June 30, 1999................................. $ 1.05 $ 0.97 $ 1.14 $ 1.27
Year ended:
December 31, 1998............................. 1.98 1.84 2.15 2.40
December 31, 1997(3).......................... 1.11 1.15 1.58 1.50
December 31, 1996............................. 1.50 1.40 1.61 1.82
</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. Historical F&M dividends and
7
<PAGE> 14
market values have not been adjusted for acquisitions accounted for using
the pooling of interests method of accounting.
(2) The historical and pro forma basic net income per share amounts of Citizens
for 1997 before the special charge associated with its merger with CB
Financial Corporation and information technology operations reorganization
were $1.75 and $1.53 respectively. The F&M equivalent pro forma basic net
income per share was $1.99.
(3) The historical and pro forma diluted net income per share amounts of
Citizens for 1997 before the special charge associated with its merger with
CB Financial Corporation and information technology operations
reorganization were $1.72 and $1.51, respectively. The F&M equivalent pro
forma diluted net income per share was $1.97.
8
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected historical financial data for
Citizens and F&M for the six-month periods ended June 30, 1999 and 1998, and for
each year in the five year period ended December 31, 1998. This data is derived
from the historical consolidated financial statements of Citizens and F&M,
including the respective notes thereto, which are incorporated by reference in
this joint proxy statement-prospectus and should be read in conjunction
therewith. See "Where You Can Find More Information." Interim unaudited data for
the six-month periods ended June 30, 1999 and 1998 reflect, in the opinion of
management of Citizens and F&M, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such data. Results
for the six months ended June 30, 1999 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 FINANCIAL DATA(1)
(HISTORICAL)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995(2) 1994
---- ---- ---- ---- ---- ------- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income........... $ 164,912 $ 170,677 $ 339,880 $ 335,863 $ 312,336 $ 290,927 $ 225,474
Interest expense.......... 65,672 72,439 142,034 144,015 133,691 123,001 77,468
Net interest income..... 99,240 98,238 197,846 191,848 178,645 167,926 148,006
Provision for loan
losses.................. 7,700 7,020 14,090 15,332 12,126 7,112 5,837
Noninterest income before
investment security
gains (losses).......... 37,412 26,904 56,107 47,481 47,393 42,405 39,786
Investment security gains
(losses)................ 164 54 145 (787) 611 281 1,099
Noninterest expense before
special charge.......... 86,505 78,891 158,291 153,427 155,056 150,332 133,767
Special charge, net of
tax..................... -- -- -- 17,263 -- -- --
Income taxes.............. 13,122 12,080 24,932 21,012 17,042 14,957 13,279
Net income before special
charge.................. 29,489 27,205 56,785 48,771 42,425 38,211 36,008
Net income................ 29,489 27,205 56,785 31,508 42,425 38,211 36,008
Cash dividends............ 12,382 11,233 22,991 19,286 17,890 16,131 14,918
PER COMMON SHARE DATA(3)
Net income:
Basic................... $ 1.06 $ 0.97 $ 2.02 $ 1.13 $ 1.52 $ 1.39 $ 1.31
Diluted................. 1.05 0.95 1.98 1.11 1.50 1.36 1.29
Diluted before special
charge................ 1.05 0.95 1.98 1.72 1.50 1.36 1.29
Cash dividends.......... 0.45 0.40 0.82 0.74 0.67 0.60 0.55
Book value, end of
period close.......... 15.24 15.14 15.70 14.61 14.12 13.50 12.12
Market value, end of
period close.......... 30.06 33.63 33.75 34.50 21.00 19.83 18.50
AT PERIOD END
Assets.................... $4,757,992 $4,435,922 $4,501,409 $4,439,271 $4,305,973 $4,175,544 $3,424,087
Loans..................... 3,654,412 3,496,506 3,584,511 3,541,619 3,229,809 2,867,427 2,209,340
Deposits.................. 3,701,893 3,652,821 3,764,356 3,694,346 3,598,751 3,478,268 2,872,967
Long-term debt............ 142,814 130,611 130,937 108,165 86,826 110,022 11,775
Stockholders' equity...... 411,059 426,783 441,082 409,842 392,021 374,644 332,739
</TABLE>
9
<PAGE> 16
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995(2) 1994
---- ---- ---- ---- ---- ------- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
AVERAGE FOR THE PERIOD
Assets.................... $4,529,109 $4,442,184 $4,450,293 $4,371,509 $4,212,380 $3,969,702 $3,383,403
Earning assets............ 4,232,848 4,153,836 4,154,693 4,076,185 3,884,446 3,634,095 3,105,736
Loans..................... 3,566,931 3,506,450 3,506,812 3,380,652 3,062,021 2,706,855 2,142,105
Deposits.................. 3,771,382 3,700,392 3,695,310 3,647,302 3,515,498 3,297,528 2,840,894
Interest-bearing
deposits................ 3,162,092 3,119,178 3,097,211 3,081,736 2,950,398 2,750,265 2,359,558
Repurchase agreements and
other short-term
borrowings.............. 149,496 128,829 130,406 178,267 170,916 152,997 145,592
Long-term debt............ 131,468 141,800 138,793 90,822 86,788 108,209 16,070
Stockholders' equity...... 429,791 416,985 425,301 400,715 381,377 354,224 331,674
FINANCIAL RATIOS
(ANNUALIZED)
Return on average:(4)
Stockholders' equity.... 13.84% 13.16% 13.35% 7.86% 11.12% 10.79% 10.86%
Earning assets.......... 1.40 1.32 1.37 0.77 1.09 1.05 1.16
Assets.................. 1.31 1.23 1.28 0.72 1.01 0.96 1.06
Average stockholders'
equity/ avg. assets..... 9.49 9.39 9.56 9.17 9.05 8.91 9.80
Dividend payout ratio..... 41.99 41.29 40.49 61.21 42.17 42.22 41.43
Net interest margin
(FTE)................... 4.86 4.89 4.91 4.86 4.77 4.80 4.99
Tier I leverage........... 8.10 8.31 8.68 7.98 7.52 7.13 9.49
Risk-based capital:
Tier I capital.......... 9.67 10.32 10.52 9.78 9.83 9.76 13.74
Total capital........... 10.91 11.58 11.77 11.03 11.08 11.01 14.98
</TABLE>
- -------------------------
(1) All information presented has been restated to reflect the July 1, 1997
merger with CB Financial Corporation, accounted for as a pooling of
interests.
(2) 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.
(3) Per share information is computed, and where necessary, restated to comply
with Statement of Financial Accounting Standard No. 128 "Earnings per share"
and reflects a three for two stock split effected in the form of a dividend
paid to stockholders on November 18, 1997.
(4) Returns on average stockholders' equity, earning assets, and assets for 1997
before the special charge associated with the CB Financial Corporation
merger and information technology operations reorganization were 12.17%,
1.20%, and 1.12%, respectively.
10
<PAGE> 17
F&M BANCORPORATION, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(HISTORICAL)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS(1)
Interest income........... $ 94,614 $ 90,757 $ 182,427 $ 162,845 $ 138,361 $ 125,397 $ 106,379
Interest expense.......... 43,081 44,092 87,239 79,836 66,693 60,209 45,245
Net interest income..... 51,533 46,665 95,188 83,009 71,668 65,188 61,134
Provision for loan
losses.................. 1,183 1,456 2,438 5,179 3,599 2,806 2,268
Noninterest income........ 9,133 7,793 16,824 12,780 10,199 8,760 7,859
Net income................ 18,309 16,043 33,497 23,383 22,179 19,892 15,868
Net income applicable to
common stock............ 18,309 16,043 33,497 23,383 22,179 19,892 15,846
PER COMMON SHARE DATA(2)
Net income:
Basic................... $ 1.14 $ 1.03 $ 2.15 $ 1.59 $ 1.61 $ 1.47 $ 1.17
Diluted................. 1.14 1.03 2.15 1.58 1.61 1.47 1.17
Cash dividends(3)......... 0.48 0.40 0.84 0.69 0.55 0.45 0.36
AT PERIOD END
Assets.................... $2,592,839 $2,348,890 $2,429,651 $2,191,703 $1,867,542 $1,660,344 $1,533,005
Net loans................. 1,838,291 1,629,133 1,656,904 1,511,512 1,272,036 1,079,101 1,003,751
Deposits.................. 2,079,518 1,931,362 2,008,963 1,819,967 1,577,282 1,421,965 1,316,921
Short-term borrowings..... 141,210 71,222 60,847 74,770 67,988 32,371 39,873
Other borrowings.......... 95,404 91,633 95,234 71,026 27,906 28,697 29,291
Stockholders' equity...... 254,935 229,911 239,419 200,933 173,243 155,143 135,835
</TABLE>
- -------------------------
(1) Except as indicated, the data have been restated to reflect F&M's
acquisitions of F&M Bank-Waushara County in 1995, F&M Bank-Algoma in 1996,
F&M Bank-Prairie du Chien and F&M Bank-Darlington in 1997 and BancSecurity
Corporation in 1998, all using the pooling of interests method of
accounting. The F&M Bank-Superior acquisition in 1996, the 1997 acquisitions
of F&M Bank-East Troy, F&M Bank-Brodhead and F&M Bank-Landmark, the 1998
acquisitions of Bank of South Wayne and Financial Management Services of
Jefferson, and the 1999 acquisition of Community Bank of Elkhorn, accounted
for as poolings of interests, were not material to prior years' reported
operating results and accordingly, previous years' results have not been
restated. The acquisitions of Bradley Bank and the TCF office in Little
Chute in 1996, the 1997 acquisition of the Security office in Antigo and the
1998 acquisition of Sentry Bancorp, were accounted for using the purchase
method of accounting; accordingly, the financial data includes results of
operations only since the dates of acquisition.
(2) Per share information has been restated to reflect the two-for-one stock
split paid to stockholders on March 19, 1993 and the 10% stock dividends
paid to stockholders on June 10, 1996, June 9, 1997, and September 1, 1998.
(3) Cash dividends per common share are not restated to reflect the acquisitions
accounted for using the pooling of interests method of accounting.
11
<PAGE> 18
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
The following table sets forth unaudited pro forma combined selected
financial data for Citizens for the six-month periods ended June 30, 1999 and
1998, and for each year in the three year period ended December 31, 1998, 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 F&M
had been combined at the beginning of all reported periods. The pro forma
combined selected financial data is based on historical consolidated financial
statements of Citizens and F&M and their subsidiaries after giving effect to the
pro forma adjustments described in the notes to "Unaudited Pro Forma Condensed
Combined Financial Statements." For a description of pooling of interests
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 F&M,
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 "Where You Can Find More Information" 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 one time charges for merger transaction
costs and other special charges anticipated to be incurred by Citizens and F&M
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 of the merger may be materially different from
that reflected herein. See "Operations Following the Merger."
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------------ --------------------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income.................. $ 259,526 $ 261,434 $ 522,307 $ 498,708 $ 450,697
Interest expense................. 108,753 116,531 229,273 223,851 200,384
Net interest income........... 150,773 144,903 293,034 274,857 250,313
Provision for loan losses........ 8,883 8,476 16,528 20,511 15,725
Noninterest income before
investment security gains
(losses)...................... 46,216 34,694 72,600 60,046 57,376
Investment security gains
(losses)...................... 493 57 476 (572) 827
Noninterest expense before
special charge................ 118,887 108,835 220,017 209,998 201,460
Special charge, net of tax....... -- -- -- 17,263 --
Income taxes..................... 21,914 19,095 39,283 31,668 26,727
Net income before special
charge........................ 47,798 43,248 90,282 72,154 64,604
Net income....................... 47,798 43,248 90,282 54,891 64,604
Cash dividends................... 21,712 19,359 39,671 33,467 29,909
PER SHARE DATA
Net income:
Basic......................... $ 0.98 $ 0.89 $ 1.86 $ 1.17 $ 1.41
Diluted....................... 0.97 0.88 1.84 1.15 1.40
Cash dividends (Citizens only)... 0.45 0.40 0.82 0.74 0.67
Book value, end of period
close......................... 13.89 13.54 14.07 12.93 12.36
Market value (Citizens end of
period close)................. 30.06 33.63 33.75 34.50 21.00
</TABLE>
12
<PAGE> 19
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------------ --------------------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
AT PERIOD END
Assets........................... $7,350,831 $6,784,812 $6,931,060 $6,630,974 $6,173,515
Loans............................ 5,517,221 5,148,852 5,264,706 5,074,230 4,517,814
Deposits......................... 5,781,410 5,584,183 5,773,319 5,514,313 5,176,033
Long-term debt................... 238,218 222,244 226,171 179,191 114,732
Stockholders' equity............. 665,994 656,694 680,501 610,775 565,264
AVERAGE FOR THE PERIOD
Assets........................... $7,073,985 $6,763,120 $6,792,829 $6,439,737 $5,972,417
Earning assets................... 6,635,077 6,348,075 6,367,284 6,033,874 5,550,463
Loans............................ 5,367,389 5,147,175 5,159,584 4,843,507 4,258,404
Deposits......................... 5,836,347 5,604,029 5,616,894 5,359,464 5,012,387
Interest-bearing deposits........ 4,964,696 4,808,821 4,787,143 4,602,093 4,284,919
Repurchase agreements and other
short-term borrowings......... 253,377 207,019 202,639 259,040 227,415
Long-term debt................... 228,096 227,137 228,969 144,306 107,669
Stockholders' equity............. 680,973 641,078 655,034 597,242 546,463
FINANCIAL RATIOS (ANNUALIZED)
Return on average:(1)
Stockholders' equity.......... 14.15% 13.60% 13.78% 9.19% 11.82%
Earning assets................ 1.45 1.37 1.42 0.91 1.16
Assets........................ 1.36 1.29 1.33 0.85 1.08
Average stockholders' equity/
average assets................ 9.63 9.48 9.64 9.27 9.15
Dividend payout rate............. 45.43 44.76 43.94 60.97 46.30
Tier I leverage.................. 11.68 N/A 8.95 8.00 N/A
Risk-based capital:
Tier I capital................ 10.45 N/A 11.01 10.50 N/A
Total capital................. 8.62 N/A 12.26 11.76 N/A
</TABLE>
- -------------------------
(1) Pro forma returns on average stockholders' equity, earning assets, and
assets for 1997 before the special charge associated with Citizens' CB Financial
Corporation merger and information technology operations reorganization were
12.08%, 1.20%, and 1.12% respectively.
N/A -- not available
13
<PAGE> 20
FORWARD-LOOKING STATEMENTS
This joint proxy statement-prospectus contains or incorporates by reference
statements that, to the extent that they are not recitations of historical fact,
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. The words "may," "will,"
"believe," "estimate," "anticipate," "project," "intend," "expect" and similar
expressions are intended to identify forward-looking statements. All
forward-looking statements involve risks and uncertainties related to, among
other things, the following:
- expected cost savings from the merger may not be fully realized or
realized within the expected time frame;
- revenues following the merger may be lower than expected, or be greater
than expected;
- competitive pressures among depository and other financial institutions
may increase significantly;
- relationships with third party vendors and clients may change;
- costs or difficulties related to the integration of the business of
Citizens and F&M may be greater than expected;
- future economic conditions in the regional and national markets in which
the companies compete;
- financial market conditions, including, but not limited to, changes in
interest rates;
- the ability to enter new markets successfully and capitalize on growth
opportunities;
- adverse changes in applicable law, regulations or rules governing
environmental, tax or accounting matters; and
- technological changes, including "Year 2000" data systems compliance
issues, may be more difficult or expensive than anticipated.
You are cautioned not to place undue reliance on forward-looking statements
as these speak only as of the date of this joint proxy statement-prospectus.
Neither Citizens nor F&M undertakes any obligation to publicly release any
revisions to forward-looking statements to reflect events, circumstances or
changes in expectations after the date of this joint proxy statement-prospectus,
or to reflect the occurrence of unanticipated events. Citizens and F&M intend
that forward-looking statements in this document, and documents incorporated by
reference, be subject to the safe harbor protection provided by Sections 27A of
the Securities Act and 21E of the Exchange Act. For a discussion identifying
additional important factors that could cause actual results to vary materially
from those anticipated in any forward-looking statements, you should read
Citizens' and F&M's respective SEC filings.
CITIZENS BANKING CORPORATION
Citizens Banking Corporation is a multi-bank bank holding company
headquartered in Flint, Michigan. Citizens owns two banking subsidiaries namely
Citizens Bank, headquartered in Flint, Michigan, and Citizens Bank-Illinois
N.A., headquartered in Berwyn, Illinois. Citizens owns indirectly four non-
banking subsidiaries through its Michigan banking subsidiary. Citizens has
approximately 2,100 full-time equivalent employees. Citizens' banks are full
service commercial banks offering a variety of financial services to corporate,
commercial, correspondent and individual bank clients. These services include
commercial, mortgage and consumer lending, demand and time deposits, trust
services, investment services, retirement planning, asset management, insurance
services, safe deposit facilities and other financial products and services.
Citizens ranks as the third largest bank holding company headquartered in
Michigan with assets of over $4.8 billion. A network of 123 branch, private
banking and financial center locations and approximately 150 ATMs throughout
Michigan and suburban Chicago, provide banking convenience to the 320,000
households served.
14
<PAGE> 21
Citizens' CLIENTS FIRST! strategy is its commitment to focusing on client
needs, delivering superior service, and building lasting relationships. This
strategy has proven successful in allowing Citizens to make substantial progress
toward achieving its goal of becoming the single source of financial services
for all its clients. Personal Bankers have been assigned to a majority of the
bank's households to serve as financial consultants that advise clients, monitor
their portfolios and facilitate transactions.
The growth of Citizens can, in large part, be attributed to a successful
fifteen year acquisition history. Each of our community banks is dedicated to
helping local businesses grow and meet the local needs through civic leadership
and involvement. Our community banks are located in Flint, Saginaw, Greater
Lansing, Bay City, Charlevoix, Fenton, Grayling, Royal Oak, Standish, Jackson,
Sturgis and Ypsilanti, Michigan and Berwyn, Illinois, and are locally managed by
a regional or community board of directors. This structure allows for local
decision making including: pricing and lending activities, Community
Reinvestment Act practices, staffing and promotions and local public and
community relations.
Citizens is well positioned for a new era in banking. We recently released
our web site and Internet banking service. The web site (www.cbClientsFirst.com)
posts Citizens' most recent financial statements and offers product and service
information. Clients First On-Line(SM) is the Internet banking service which
allows clients to access account information, initiate funds transfers and pay
bills electronically. Moreover, Citizens believes it is technologically
positioned to overcome any Y2K issues that may arise. Nearly four years of
research, planning and testing has prepared Citizens for the Year 2000. "Mission
Critical" systems became Y2K compliant on December 31, 1998. Non-compliant
hardware was replaced in May of 1999 and "Third Party" systems and software
compliance is expected in September. See "Where You Can Find More Information."
F&M BANCORPORATION, INC.
F&M is a multi-bank bank holding company. As of June 30, 1999, F&M had 20
bank subsidiaries with 71 offices throughout Wisconsin, three banks with 14
offices in Iowa, one bank with one office in Minnesota, and a full service trust
company. Subsequently, F&M opened an additional office in Wisconsin, and F&M's
three Iowa banks merged into a single bank. F&M's banks offer a wide range of
banking and other financial services for both individuals and businesses. As a
holding company registered under the Bank Holding Company Act, F&M is subject to
supervision and regulation by the Federal Reserve Board.
On June 30, 1999, F&M and its subsidiaries together had total assets of
$2.6 billion. On that date, F&M was the fourth largest bank holding company
headquartered in Wisconsin. F&M was formed in 1980, and has grown internally and
through its active pursuit of acquisitions of other institutions from a one-bank
holding company with total assets of $37 million at its inception. F&M's
principal offices are located at One Bank Avenue, Kaukauna, Wisconsin 54130, and
its telephone number is (920) 766-1717. See "Where You Can Find More
Information."
F&M has also been working diligently to become Year 2000 compliant. This
has involved monitoring the compliance efforts of its data processing providers,
developing contingency plans, reviewing its computers, data processing equipment
and systems and non-computer equipment which may be impacted by Y2K issues and
assessing the impact Y2K issues might have on third parties who do business with
F&M. F&M has used both its internal staff and outside consultants to achieve
Year 2000 compliance. Although no one can predict with certainty the impact of
Year 2000, F&M believes it has taken appropriate steps to minimize any negative
impact resulting from Year 2000.
THE SPECIAL MEETING OF CITIZENS STOCKHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
This joint proxy statement-prospectus is being furnished in connection with
the solicitation of proxies from the holders of Citizens common stock by the
Citizens Board of Directors for use at a special meeting
15
<PAGE> 22
of Citizens stockholders. The Citizens special meeting will be held at Citizens
Corporate Headquarters, 328 South Saginaw Street, Flint, Michigan, at 9:00 a.m.,
local time, on October 22, 1999.
At the Citizens special meeting Citizens stockholders will be asked to vote
upon a proposal to approve the issuance of shares of Citizens common stock in
connection with the merger. Management of Citizens knows of no other matters to
be brought before the Citizens special meeting. If any other business should
come before the Citizens special meeting, the persons named in the proxy, or
their authorized substitutes, will vote on this business in accordance with
their best judgment.
RECORD DATE
Citizens' Board of Directors has fixed the close of business on August 31,
1999 as the record date. Only Citizens stockholders of record on the record date
are entitled to notice of and to vote at the Citizens special meeting. On the
record date, there were 26,735,270 shares of Citizens common stock outstanding,
held of record by approximately 10,200 stockholders, and entitled to vote at the
Citizens special meeting.
A majority, or 13,367,636 of these shares, present in person or represented
by proxy, will constitute a quorum for the transaction of business. If a quorum
is not present, it is expected that Citizens will adjourn or postpone its
special meeting to solicit additional proxies. Each Citizens stockholder is
entitled to one vote for each share of Citizens common stock held as of the
record date.
VOTING AND REVOCATION OF PROXIES
Shares of Citizens common stock represented by a properly executed proxy
received prior to the vote at the Citizens special meeting and not revoked will
be voted at the Citizens special meeting as directed in the proxy. IF YOU SUBMIT
A PROXY AND GIVE NO DIRECTION, THE PROXY WILL BE VOTED "FOR" APPROVAL OF THE
ISSUANCE OF SHARES OF CITIZENS COMMON STOCK IN CONNECTION WITH THE MERGER. To
determine whether a quorum exists for the transaction of business, Citizens
intends to count as present at the Citizens special meeting shares of Citizens
common stock present in person at the Citizens special meeting but not voting,
and shares of Citizens common stock for which it has received proxies that are
marked "abstain."
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 proposal to issue
shares of Citizens common stock. Therefore, abstentions and non-voting shares
will not affect the outcome of the vote with respect to the proposal. In
addition, brokers who hold shares in street name for customers who are the
beneficial owners of the shares are prohibited from giving a proxy to vote
shares held for these customers without specific instructions from their
customers. The failure of these customers to provide to their brokers specific
instructions with respect to their shares of Citizens common stock will have the
effect of a non-vote.
If sufficient proxies are not obtained to approve the issuance of shares of
Citizens common stock, the Citizens special meeting will be postponed or
adjourned to give Citizens additional time to solicit and obtain additional
proxies or votes. No proxy which is voted against the proposal to approve and
adopt the issuance of shares will be voted in favor of this adjournment or
postponement.
You may revoke a proxy at any time prior to its being counted at the
Citizens special meeting in the following ways:
- by filing a written notice of revocation bearing a later date than the
proxy with Thomas W. Gallagher, Secretary of Citizens at 328 South
Saginaw Street, Flint, Michigan 48502;
- by filing a duly executed proxy bearing a later date than the original
proxy; or
- by appearing at the Citizens special meeting in person, notifying the
Secretary, and voting by ballot at the Citizens special meeting. Your
attendance at the Citizens special meeting will not in itself constitute
the revocation of a proxy.
16
<PAGE> 23
VOTE REQUIRED TO APPROVE THE SHARE ISSUANCE; PRINCIPAL STOCKHOLDERS
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 issuance of
shares of Citizens common stock. The approval of this issuance of shares by the
Citizens stockholders is a condition to the consummation of the merger.
As of the record date of the Citizens special meeting, 26,735,270 shares of
Citizens common stock were outstanding and entitled to vote, of which
approximately 2,883,899 shares, or approximately 10.8%, were held by directors
and executive officers of Citizens, its subsidiaries and their respective
affiliates. All of the directors and executive officers of Citizens intend to
vote their shares for approval of the proposed issuance of shares. As of the
record date of the Citizens special meeting, the banking subsidiaries of
Citizens, as fiduciaries, custodians or agents, held a total of approximately
4,249,869 shares, or approximately 15.9 %, 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 approximately
3,395,769 of these shares.
As of the record date of the Citizens special meeting, neither any F&M
director nor any F&M executive officer beneficially owned shares of Citizens
common stock. As of the record date of the Citizens special meeting, no banking
subsidiaries of F&M, as fiduciaries, custodians or agents, held any shares of
Citizens common stock under trust agreements or other instruments and
agreements.
Information with respect to beneficial ownership of Citizens common stock
by entities owning more than 5% of the outstanding Citizens common 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' 1998 Annual Report on Form 10-K which is incorporated
herein by reference. See "Where You Can Find More Information."
ABSENCE OF APPRAISAL RIGHTS
Under Michigan law, Citizens stockholders will not be entitled to any
appraisal rights in connection with the proposed issuance of shares of Citizens
common stock.
SOLICITATION OF PROXIES
In addition to soliciting proxies by mail, Citizens' directors, officers,
and employees may solicit proxies personally without additional compensation.
These persons may be reimbursed for out-of-pocket expenses that they incur. In
addition, Citizens has retained Kissel-Blake, Inc., a firm that provides
professional proxy soliciting services, to assist in soliciting proxies from
brokers, bank nominees, institutional holders, and other Citizens stockholders.
Citizens will pay Kissel-Blake approximately $6,250 as compensation for these
services and will reimburse Kissel-Blake for reasonable out-of-pocket expenses.
Citizens intends to reimburse brokerage houses and other custodians, nominees,
and fiduciaries for reasonable out-of-pocket expenses incurred in forwarding
copies of solicitation materials to beneficial owners of Citizens common stock
held of record by those persons. Citizens and F&M have agreed to share equally
all expenses relating to the printing of this joint proxy statement-prospectus.
RECOMMENDATION OF CITIZENS' BOARD OF DIRECTORS
The Citizens Board of Directors has determined that the merger is in the
best interests of Citizens and its stockholders and has unanimously approved the
merger. THE CITIZENS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CITIZENS'
STOCKHOLDERS VOTE "FOR" THE APPROVAL OF ISSUING SHARES OF CITIZENS COMMON STOCK
IN CONNECTION WITH THE MERGER AT THE SPECIAL MEETING. See "The Merger --
Recommendation of the Citizens Board of Directors and Reasons for the Merger."
17
<PAGE> 24
THE SPECIAL MEETING OF F&M STOCKHOLDERS
DATE, TIME AND PLACE; PURPOSE OF MEETING
This joint proxy statement-prospectus is being furnished in connection with
the solicitation of proxies from the holders of F&M common stock by the F&M
Board of Directors for use at a special meeting of F&M stockholders. The F&M
special meeting will be held at the Paper Valley Hotel and Conference Center,
located at 333 West College Avenue, Appleton, Wisconsin, 54911 at 8:00 a.m.,
local time, on October 22, 1999.
At the F&M special meeting F&M stockholders will be asked to consider and
vote upon a proposal to approve and adopt the merger agreement. Management of
F&M knows of no other matters to be brought before the F&M special meeting. If
any other business should come before the F&M special meeting, the persons named
in the proxy, or their authorized substitutes, will vote on this business in
accordance with their best judgment.
RECORD DATE
F&M's Board of Directors has fixed the close of business on August 31, 1999
as the record date. Only F&M stockholders of record on the record date are
entitled to notice of and to vote at the F&M special meeting. On the record
date, there were 16,105,880 shares of F&M common stock outstanding, held of
record by approximately 3,600 stockholders, and entitled to vote at the F&M
special meeting.
A majority, or 8,052,941 of these shares, present in person or represented
by proxy, will constitute a quorum for the transaction of business. If a quorum
is not present, it is expected that F&M will adjourn or postpone its special
meeting to solicit additional proxies. Each F&M stockholder is entitled to one
vote for each share of F&M common stock held as of the record date.
VOTING AND REVOCATION OF PROXIES
Shares of F&M common stock represented by a properly executed proxy
received prior to the vote at the F&M Meeting and not revoked will be voted at
the F&M special meeting as directed in the proxy. IF YOU SUBMIT A PROXY AND GIVE
NO DIRECTION, THE PROXY WILL BE VOTED "FOR" APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. To determine whether a quorum exists for the transaction of business,
F&M intends to count as present shares of F&M common stock present in person at
the F&M special meeting but not voting, and shares of F&M common stock for which
it has received proxies that are marked "abstain."
The affirmative vote of the holders of a majority of the outstanding shares
of F&M common stock entitled to vote on the merger is required to approve and
adopt the merger. Therefore, nonvoting shares and abstentions will have the
effect of a vote "against" the approval of the merger. In addition, brokers who
hold shares in street name for customers who are the beneficial owners of the
shares are prohibited from giving a proxy to vote shares held for these
customers without specific instructions from their customers. The failure of
these customers to provide to their brokers specific instructions with respect
to their shares of F&M common stock will have the effect of voting "against" the
approval of the merger.
If sufficient proxies are not obtained to approve the merger, the F&M
special meeting will be postponed or adjourned to give F&M additional time to
solicit and obtain additional proxies or votes. No proxy which is voted against
the proposal to approve and adopt the merger will be voted in favor of this
adjournment or postponement.
You may revoke a proxy at any time prior to its being counted at the F&M
special meeting in the following ways:
- by filing a written notice of revocation bearing a later date than the
proxy with Janet M. Lakso, Secretary of F&M at One Bank Avenue, P.O. Box
410, Kaukauna, Wisconsin 54130;
- by filing a duly executed proxy bearing a later date than the original
proxy; or
18
<PAGE> 25
- by appearing at the F&M special meeting in person, notifying the
Secretary, and voting by ballot at the F&M special meeting. Your
attendance at the F&M special meeting will not in itself constitute the
revocation of a proxy.
F&M stockholders should not send their stock certificates with their proxy
cards. After the merger is effective, F&M stockholders will receive instructions
and a letter of transmittal for the submission of F&M stock certificates.
VOTE REQUIRED TO APPROVE THE MERGER; PRINCIPAL STOCKHOLDERS
The affirmative vote of the holders of a majority of the shares of F&M
common stock outstanding and entitled to vote at the F&M special meeting is
necessary to approve the merger. The approval of the merger by F&M's
stockholders is a condition to the consummation of the merger.
As of the record date of the F&M special meeting, 16,105,880 shares of F&M
common stock were outstanding and entitled to vote, of which approximately
666,969 shares, or approximately 4.1%, were held by directors and executive
officers of F&M, its subsidiaries and their respective affiliates. All of the
directors and executive officers of F&M intend to vote their shares for approval
of the merger. As of the record date of the F&M special meeting, the banking and
trust company subsidiaries of F&M, as fiduciaries, custodians or agents, held a
total of 434,212 shares, or 2.7%, of the outstanding shares of F&M common stock
under trust agreements and other instruments and agreements. These entities
maintained sole or shared voting power with respect to 238,714 of these shares.
In addition, F&M Trust Company holds 199,030 shares of F&M common stock as
trustee of the F&M Retirement Plan, in addition to those included in director
and officer ownership. F&M Trust Company may vote these shares if not voted by
plan participants.
As of the record date of the F&M special meeting, neither any Citizens
director nor any Citizens executive officer beneficially owned shares of F&M
common stock. As of the record date of the F&M special meeting, no banking
subsidiaries of Citizens, as fiduciaries, custodians or agents, held any shares
of F&M common stock under trust agreements or other instruments and agreements.
Information with respect to beneficial ownership of F&M common stock by
entities owning more than 5% of the outstanding F&M common stock and more
detailed information with respect to beneficial ownership of F&M common stock by
F&M directors and executive officers is incorporated by reference to F&M's 1998
Annual Report on Form 10-K which is incorporated herein by reference. See "Where
You Can Find More Information."
ABSENCE OF APPRAISAL RIGHTS
Under Wisconsin law, F&M stockholders will not be entitled to any appraisal
rights in connection with the merger agreement and the transactions with
Citizens.
SOLICITATION OF PROXIES
In addition to soliciting proxies by mail, F&M's directors, officers, and
employees may solicit proxies personally without additional compensation. These
persons may be reimbursed for out-of-pocket expenses that they incur. In
addition, F&M has retained Kissel-Blake, a firm that provides professional proxy
soliciting services, to assist in soliciting proxies from brokers, bank
nominees, institutional holders, and other F&M stockholders. F&M will pay
Kissel-Blake approximately $6,250 as compensation for these services and will
reimburse Kissel-Blake for reasonable out-of-pocket expenses. F&M intends to
reimburse brokerage houses and other custodians, nominees, and fiduciaries for
reasonable out-of-pocket expenses incurred in forwarding copies of solicitation
materials to beneficial owners of F&M common stock held of record by those
persons. F&M and Citizens have agreed to share equally all expenses relating to
the printing of this joint proxy statement-prospectus.
19
<PAGE> 26
RECOMMENDATION OF F&M'S BOARD OF DIRECTORS
The F&M Board of Directors has determined that the merger is in the best
interests of F&M and its stockholders and has approved the merger agreement. THE
F&M BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT F&M'S STOCKHOLDERS VOTE IN
FAVOR OF APPROVAL OF THE MERGER AGREEMENT AT THE SPECIAL MEETING. See "The
Merger -- Recommendation of the F&M Board of Directors and Reasons for the
Merger."
For a discussion of interests of certain members of F&M's management and
Board of Directors in the merger other than as F&M stockholders, see "Interests
of Certain Persons in the Merger."
THE MERGER
This section of the joint proxy statement-prospectus describes the material
aspects of the proposed merger and the material terms of the merger agreement
and the stock option agreement. It also provides a discussion of the background
of the merger and the parties' reasons for the merger. While we believe that the
description covers the material terms of the merger and the related
transactions, this summary may not contain all of the information that is
important to you. You should read this entire document and the merger agreement
which is attached as Annex A to this joint proxy statement-prospectus and is
incorporated by reference. The stock option agreement is attached as an exhibit
to the Current Reports on Form 8-K, each dated April 18, 1999, of F&M and
Citizens.
GENERAL
The Boards of Directors of Citizens and F&M have unanimously approved the
merger agreement. Under the merger agreement, F&M will become a wholly-owned
subsidiary of Citizens. Each share of F&M common stock outstanding at the
effective time of the merger will be converted into 1.303 shares of Citizens
common stock. Shares of Citizens common stock outstanding immediately before the
merger will remain outstanding after the merger.
On a pro forma basis, at June 30, 1999, F&M stockholders as a group would
own approximately 44% of the then-outstanding shares of the combined company's
common stock. On that date, giving effect to the merger, F&M will contribute
35.3% of the total assets, 36.0% of the deposits, and 38.3% of the capital of
the combined company. Similarly, F&M would contribute 38.3% and 37.1% of the pro
forma net income of the combined company for the six months ended June 30, 1999
and the year ended December 31, 1998.
EXCHANGE RATIO AND CONVERSION OF F&M COMMON STOCK
On the effective date of the merger, each issued and outstanding share of
F&M common stock will be canceled and converted into the right to receive 1.303
shares of Citizens common stock. The shares of Citizens' common stock will be
issued in tandem with preferred stock purchase rights issued under the Citizens
rights agreement. See "Description of Citizens Capital Stock -- Citizens Rights
Agreement."
The exchange ratio will be adjusted to reflect the effect of any
reclassification, stock split, reverse split, stock dividend, reorganization or
other like change with respect to Citizens common stock or F&M common stock, as
applicable, occurring after the date of the merger agreement and before the
conversion of F&M common stock into Citizens common stock.
No fractional shares of Citizens common stock will be issued in the merger.
Each holder of F&M common stock entitled to a fractional share of Citizens
common stock will instead receive cash, without interest, in an amount equal to
such fraction multiplied by the closing price of a share of Citizens common
stock on the Nasdaq National Market on the effective date of the merger.
20
<PAGE> 27
COMPLETION AND EFFECTIVENESS OF THE MERGER
The effective date of the merger will be the day that articles of merger
are filed with the State of Wisconsin, or on another date as may be specified in
the articles of merger. Citizens may select this effective date; however, in
accordance with the merger agreement, the effective date must be within 30 days
after the last to occur of:
- the expiration of all applicable waiting periods in connection with
approvals of governmental authorities;
- the receipt of all approvals of governmental authorities; and
- the satisfaction or waiver of all conditions to the consummation of the
merger.
Citizens and F&M may agree to select an earlier or later effective date. It
is a condition to the parties' obligations that the merger occur by December 31,
1999.
Assuming that we receive regulatory approvals on a timely basis, we expect
to complete the merger in late October, 1999. The effective date of the merger
would need to be delayed if regulatory approvals have not yet been received by
that date or if other factors intervene.
EXCHANGE OF F&M STOCK CERTIFICATES FOR CITIZENS STOCK CERTIFICATES
On or prior to the effective date of the merger, Citizens will appoint an
exchange agent reasonably acceptable to F&M and will deposit with the exchange
agent certificates representing the shares of Citizens common stock that will be
issued to F&M stockholders in exchange for their certificates of F&M common
stock.
After completion of the merger, the exchange agent will mail to each F&M
stockholder a letter of transmittal. The letter will contain instructions on how
F&M stockholders should surrender their F&M stock certificates to the exchange
agent and receive their certificates of Citizens common stock and, if
applicable, cash for their fractional shares.
For F&M stockholders who participate in the F&M Automatic Dividend
Reinvestment Plan, shares of F&M common stock held on your behalf in the plan
will automatically convert into shares of Citizens common stock in accordance
with the terms of the merger agreement, and you will automatically become a
participant in the Citizens Dividend Reinvestment Plan. To maintain your
participation in the Citizens plan you will need to complete and return a formal
enrollment card that you will receive in the mail after the merger. You will
need to turn in your stock certificates, with a letter of transmittal, for the
shares which you own outside of the plan. The letter of transmittal will include
further information.
F&M STOCKHOLDERS SHOULD NOT RETURN THEIR F&M STOCK CERTIFICATES WITH THE
ENCLOSED PROXY AND SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL THEY
RECEIVE A LETTER OF TRANSMITTAL FOLLOWING THE EFFECTIVE DATE OF THE MERGER.
F&M stockholders will not be entitled to receive any dividends or other
distributions on shares of Citizens common stock that are declared or made after
the effective date of the merger until they exchange their F&M stock
certificates for Citizens stock certificates. After F&M stockholders deliver
their F&M stock certificates to the exchange agent, they will, subject to
applicable laws, receive any accumulated dividends or distribution less the
amount of withholding taxes, if required, without interest.
TREATMENT OF OPTIONS
In the merger, Citizens will assume all outstanding options granted under
F&M's stock option plans for employees and directors of F&M. Each stock option
outstanding and unexercised immediately prior to the effective date of the
merger will be converted automatically into an option to purchase shares of
Citizens common stock in an amount determined by multiplying the number of
shares of F&M common stock subject to the original option times the exchange
ratio of 1.303. The exercise price per share of Citizens common stock under the
new option will equal the exercise price per share of F&M common
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stock under the original option divided by the exchange ratio, rounded down to
the nearest whole cent. Citizens has agreed to file a registration statement
with the SEC to register the shares of Citizens common stock issuable upon the
exercise of the outstanding F&M options.
EMPLOYEE BENEFITS AND PLANS
For purposes of crediting periods of service for eligibility and vesting,
but not for benefit accrual purposes, under Citizens' pension plan and Citizens'
401(k) plan, and for purposes of crediting periods of service for eligibility
for other employee benefits provided to employees of Citizens, employees of F&M
who otherwise would be eligible to participate in these plans and benefit
programs after the merger shall be given credit for service with F&M prior to
the merger. Citizens will also assume F&M employment agreements and severance
plans, and provide F&M employees a credit for years of service to F&M for many
benefit plan matters. See "Interests of Certain Persons in the Merger."
BACKGROUND OF THE MERGER
The terms of the merger agreement are the result of arm's-length
negotiations between representatives of F&M and Citizens. The following briefly
discusses the background of these negotiations and related matters.
Over the last several years the financial services industry has become
increasingly competitive, with many financial institutions expanding their size
and market area through consolidation. This trend was accelerated in 1998, with
a number of multi-billion dollar mergers announced whose effects would continue
to increase the competition in the banking and the financial services industry
in F&M's marketplace. As part of its effort to remain competitive within this
environment, F&M's management and Board of Directors have continually analyzed
various strategic options available to F&M, including the following:
- remaining as an independent financial institution via operational
improvements, internal growth, stock repurchase and a continued
investment in technology;
- pursuing external growth through either selected strategic acquisitions
or potential merger-of-equals transactions; and
- entering into a business combination with a larger entity.
In spring and early summer 1998, F&M's Board of Directors contemplated
F&M's role in this increasingly competitive environment and the internal
operating efficiencies and investments that would have to take place in order to
continue to remain competitive. In late July 1998 F&M's Board of Directors
determined it was appropriate to expand the scope of its review of the strategic
options available to F&M to maximize stockholder value and, accordingly,
authorized management to retain outside advisors to assist in the process. On
July 30, 1998, F&M retained Hovde Financial, Inc. as F&M's financial advisor to
assist in further analysis of its strategic options. The engagement led to
continuing discussions among F&M's Board of Directors, F&M's management and
Hovde over the ensuing several months in determining future alternatives.
After discussions of various alternatives for F&M, including a continuation
of, or changes in, F&M's own acquisition program, various types of affiliations
with other companies, a stock buyback program and other matters to enhance
stockholder value, in late August 1998, the F&M Board of Directors asked Hovde
to begin to prepare a confidential information package to be sent to a selected
group of potential strategic alliance partners. At the same time, Hovde
recommended, and F&M's management and Board of Directors agreed, that F&M should
continue to evaluate acquisition opportunities that would be accretive to
earnings per share and that were in attractive banking markets.
Over the next several weeks, discussions were held between Hovde and
management of F&M regarding strategies, processes and potential partners in a
business combination. Based on examinations of F&M documents and records as well
as interviews with management, Hovde assisted F&M in preparing a
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confidential information package for distribution to potential strategic
alliance partners based on F&M's August 31, 1998 financial information and began
preliminary discussions with, and distributions to, selected possible
transaction partners. However, from August to October 1998, a significant
downturn occurred in the common stock valuations of financial institutions,
including a number of the potential affiliation partners with whom F&M could
entertain discussions. Common stock valuations of some financial institutions
decreased by over 30%. In late October 1998, Hovde commented to F&M's Board of
Directors that given the significant downturn that had occurred in valuations of
bank and thrift stocks, and the preliminary discussions that it had with
potential partners, a transaction with a potential partner at an acceptable
pricing level would be unlikely at that time. Hovde believed that once financial
institution stocks started to recover from their October 1998 levels, the timing
of discussions with potential affiliation partners would be more appropriate. As
such, Hovde recommended that F&M's management and Board of Directors,
collectively reassess the stability of the prevailing market conditions in late
November and if appropriate update the confidential information package with
September 30, 1998 information.
Throughout its analysis of strategic options, F&M continued to analyze and
pursue potential acquisitions. In late October 1998, F&M was contacted regarding
a significant, in-market acquisition opportunity. F&M's management and Board of
Directors believed the target institution was located in attractive markets and
should be pursued if the transaction could be structured so that it would be
accretive to F&M's earnings per share in a reasonable period of time. In
mid-November F&M submitted a non-binding indication of interest for the target
institution. In late November F&M was notified that it was not selected to enter
into further discussions with the target institution because the nominal
consideration F&M offered was not competitive. Since F&M's stock price had yet
to recover from the October lows, unlike many other publicly traded bank holding
companies, F&M was not in a position to be competitive without incurring an
unacceptable level of earnings dilution.
By late November the valuations for financial institution stocks, as well
as the broader stock market indices had or were starting to recover from the
September and October lows. Hovde and F&M agreed that the timing was now
appropriate to approach a selected universe of potential acquirors. The
confidential information package was updated with September 30th financial
information. Hovde and F&M prepared a list of select financial institution
holding companies, including Citizens, that were considered acceptable potential
merger partners, and Hovde provided F&M with detailed financial information
about them. F&M and Hovde then agreed upon a group of bank holding companies to
contact based upon the likelihood of receiving an acceptable offer.
By mid-December the confidential information package was completed and was
sent to the group of potential partners, including Citizens, each of which had
entered into a confidentiality agreement with F&M. A request for a preliminary
non-binding indication of interest by January 21, 1999 was made to each of the
potential partners.
On January 28, 1999, Hovde and F&M's Board of Directors and management met
to discuss and consider the characteristics, advantages and disadvantages of the
potential merger partners and their respective indications of interest. In
reviewing the profiles of those companies, and preliminary indications of the
level of interest, F&M, with the assistance of Hovde, selected four companies,
one of which was Citizens, with whom it would continue to hold discussions. F&M
and Hovde selected those companies primarily because of the financial
superiority of their indications of interest and the attractiveness of their
common stock. During February, Hovde and F&M representatives met with
representatives from each of the potential partners, answered questions and
provided additional materials. During these discussions, the parties discussed
the economic terms of each potential partner's preliminary proposal, as well as
the business philosophies and future business plans and strategies of the
respective institutions. The management representatives also discussed potential
benefits of operating as a combined entity. Each company was asked to submit a
proposal, expressing the basic terms and conditions of a revised indication of
interest, by March 10, 1999.
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On March 15, 1999 F&M's Board of Directors met to discuss the revised
indications of interest. The F&M Board of Directors, with the assistance of
Hovde, considered and compared the competing proposals by examining and
analyzing many factors, including the following material factors:
- the nominal value to F&M stockholders of the proposed exchange ratios;
- operating characteristics and market data for each of the competing
institutions as compared to each other and as compared to each
institution's individual peer group of companies;
- historical stock performance of each entity, as well as historical daily
trading volume, growth rates and dividend yields of the competing
entities;
- consensus analyst ratings of the competing entities;
- ownership structure of each institution; and
- a direct comparison on key issues between the competing proposals.
Based on these revised indications, Citizens and another party, were
provided additional information on F&M. Additional discussions and meetings
occurred with both of the potential partners over the next ten days to further
discuss financial and non-financial aspects of F&M and the details of a
potential transaction.
The remaining two potential partners were asked to develop final proposals,
including economic and other transaction terms, and to present those proposals
to Hovde and F&M by March 26, 1999. Hovde reviewed the proposals with the F&M
Board of Directors on March 29, 1999. On the basis of those final proposals, the
F&M Board of Directors determined that the combination of the financial plus the
non-financial terms offered by Citizens was superior to that of the other
proposal. Therefore, on March 30, 1999 Hovde informed Citizens that F&M would
provide Citizens a period in which it could exclusively conduct further
diligence with respect to F&M and seek to negotiate a definitive agreement.
Citizens conducted additional diligence regarding F&M from March 31 to
April 15. Its diligence included review of documents provided by F&M and counsel
throughout the period, and meetings with F&M officers and employees in Kaukauna
and Green Bay, Wisconsin from April 12 through 15.
In addition, F&M officers, counsel, accountants and Hovde conducted
diligence on behalf of F&M with respect to Citizens. The diligence included
reviews of documents provided by Citizens and its counsel, and meetings with
Citizens officers and employees in Flint, Michigan on April 7 and 8. During the
continuing diligence periods, F&M management periodically advised directors, on
an informal one-on-one basis, of the status of activities.
On April 8, 1999, counsel to Citizens circulated a draft of the merger
agreement and the stock option agreement to F&M, its counsel and Hovde. After a
review of the drafts, counsel for F&M met with Citizens' counsel on April 12 at
the offices of Citizens' counsel to negotiate these agreements and related
matters. A redraft of the agreements reflecting those discussions was circulated
later that week. Telephonic negotiations, consultations among F&M management,
counsel, accountants and Hovde, and revisions of the draft agreements continued
until the execution of the merger agreement and the option agreement.
In the late morning and early afternoon of Friday, April 16, the F&M Board
of Directors met to discuss the proposed transaction and agreements. The
directors had previously been provided with a current draft of the merger
agreement and the stock option agreement. F&M's counsel reviewed the terms and
conditions of the agreements, and described items that remained open. Counsel
also reviewed with the members of the F&M Board of Directors their fiduciary
duties and responsibilities in approving a transaction such as the merger, the
expected timing of the transaction from signing the merger agreement through
closing and required regulatory and stockholder approvals. Hovde made a
presentation of the results of various financial analyses undertaken by Hovde
and advised the F&M Board of Directors that, as of that date, the proposed
exchange ratio was fair, from a financial point of view, to the F&M
stockholders. Officers of F&M described F&M's diligence activities regarding
Citizens and the results of those reviews. After further reviewing the proposed
terms and the Hovde fairness opinion, other
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discussions, and instructing F&M's officers and counsel on acceptable resolution
of the remaining open items, the F&M Board of Directors approved the proposed
merger and recommended it for approval to F&M stockholders.
On April 16, 1999, a special meeting of the Citizens Board of Directors was
held. This meeting was held to continue the review and analysis of the F&M
transaction that had taken place at the January 15, 1999 and April 1, 1999
meetings of the Board of Directors of Citizens. At the April 16, 1999 meeting,
the Board of Directors again reviewed the business case supporting a transaction
with F&M as well as the preliminary strategies that had been developed as a
result of the meetings that had taken place between certain of Citizens'
executive management and certain of F&M's executive management, as well as the
full Board of Directors of F&M. The Board of Directors also reviewed in detail
with Citizens' outside financial advisor, Keefe, Bruyette & Woods, the financial
aspects of the proposed merger transaction with F&M and the fairness of the
transaction to the stockholders of Citizens from a financial point of view. Mr.
Richard Mitsdarfer, General Auditor of Citizens, provided a detailed report
concerning the due diligence examination findings to the members of the Board of
Directors. Mr. Thomas W. Gallagher, General Counsel of Citizens, reviewed in
detail the provisions of the merger agreement and the related stock option
agreement, current drafts of which had been furnished to the members of the
Board of Directors. Mr. Gallagher also discussed the bank regulatory approval
process, the SEC registration process and the expected timing relative to
consummating the transaction. Finally, Mr. Gallagher noted the few items that
remained open in terms of negotiation.
Negotiations between F&M management and counsel and Citizens management and
counsel regarding open items continued on April 16, 17 and 18, 1999, with the
ultimate resolution of open items in a manner consistent with the F&M Board of
Directors' direction. Final copies of the merger agreement and the option
agreement were circulated on the morning of April 18, and F&M and Citizens
executed the merger agreement and the stock option agreement later that day. The
parties announced the transaction prior to the opening of the market on Monday,
April 19, 1999.
On July 30, 1999, Citizens and F&M amended the merger agreement to provide
for the revised merger structure described in this joint proxy
statement-prospectus, in which Citizens Acquisition, Inc., a company
wholly-owned by Citizens, will be merged into F&M, and F&M will become a
wholly-owned subsidiary of Citizens. The amendment did not change what was to be
received in the merger by F&M stockholders.
RECOMMENDATION OF THE CITIZENS BOARD OF DIRECTORS AND REASONS FOR THE MERGER
THE CITIZENS BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF CITIZENS AND ITS STOCKHOLDERS. THE CITIZENS BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ISSUANCE OF SHARES OF
CITIZENS COMMON STOCK IN CONNECTION WITH THE MERGER.
In approving the merger agreement and the stock option agreement, the
Citizens Board of Directors consulted with Citizens management, as well as with
its financial and legal advisors, and considered many factors, including the
following:
- the formation of an attractive $7.0 billion multi-state, Midwestern bank
holding company;
- the merger consideration to be paid to F&M stockholders in relation to
the market value, book value and earnings per share of F&M common stock;
- the shared emphasis of Citizens and F&M on community banking and the
resulting complimentary business lines of Citizens and F&M;
- the results of Citizens' due diligence and pro forma analysis, which
indicate that the combined entity would have an opportunity for
significant revenue growth and continue to have high asset quality, solid
core funding and a strong capital base;
- the fact that the acquisition of F&M provides Citizens with access to
markets in Wisconsin, Iowa and Minnesota, providing more opportunities
for future growth and acquisitions;
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- increased opportunities for direct and indirect consumer lending;
- 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;
- the increased presence of the combined entity on a region-wide basis with
major market shares in the communities within which it operates;
- a more diverse loan and deposit portfolio;
- the opportunity to leverage Citizens' consolidation and reengineering
experience;
- the opportunity to utilize Citizens' expertise in technology, sales and
marketing;
- the opportunity to expand Citizens' banking and wealth management
services to F&M clients;
- significant opportunity for Citizens to enhance F&M's fee-based revenues,
i.e. brokerage, trust, insurance, cash management, ATMs, etc.;
- significantly enhanced net income for the consolidated organization to
provide the capital to fund technological and strategic investments; and
- the terms of the merger agreement and the stock option agreement.
The Citizens Board of Directors also reviewed certain potential
disadvantages in connection with its approval of the merger agreement and
related transactions including the costs and operational risks of integrating
the two companies and the increased exposure to agricultural lending. Citizens
Board of Directors took into account these potential disadvantages when
considering the merger and concluded that any such disadvantages were outweighed
by the material benefits described above.
The foregoing discussion of the information and factors considered by the
Citizens Board of Directors is not intended to be exhaustive but is believed to
include all material factors considered by the Citizens Board of Directors. In
view of the variety of factors considered in connection with its evaluation and
approval of the merger transaction, the Citizens Board of Directors did not find
it practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its decision. In addition,
individual members of the Citizens Board of Directors may have given different
weights to different factors.
RECOMMENDATION OF THE F&M BOARD OF DIRECTORS AND REASONS FOR THE MERGER
The F&M Board of Directors:
- approved and adopted the merger agreement;
- determined that the merger with Citizens is fair to, and in the best
interests of F&M and its stockholders; and
- unanimously recommends that F&M stockholders vote "for" approval of the
merger agreement.
In reaching these conclusions the F&M Board of Directors considered many
factors. The material factors, which were the primary ones considered by the
Board of Directors, were:
- increased economic value for F&M stockholders, because the exchange ratio
in the merger is at a premium over the historical F&M market price;
- the opportunity for F&M stockholders to continue their investment in a
regional bank holding company through a tax-free exchange;
- the advice from Hovde, F&M's investment advisor, that the exchange ratio
was fair to F&M's stockholders from a financial point of view;
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- conditions in the marketplace for financial institutions that might
affect the ability of F&M to obtain an attractive offer in the future;
- the ability to combine F&M's operations with an attractive bank holding
company sharing many of F&M's philosophies but also providing a larger,
five state market area and many enhanced operational and technological
capabilities to support operations going forward;
- availability for employees and customers of opportunities for employment
with and service from a larger bank holding company; and
- the terms of the merger agreement and the stock option agreement.
The F&M Board of Directors also reviewed certain potential disadvantages in
connection with its approval of the merger agreement and related transactions.
In particular, the F&M Board of Directors discussed that an acquisition by
Citizens may have a somewhat negative effect, at least in the short run, on the
price of Citizens common stock as compared to its trading values on the date of
approval. Also, the F&M Board of Directors considered that an acquisition
transaction would cause F&M to lose its independence going forward. F&M Board of
Directors took into account these potential disadvantages when considering the
merger and concluded that any such disadvantages were outweighed by the material
benefits described above.
This discussion of the various factors considered by the F&M Board of
Directors is not, and is not intended to be, exhaustive. It is not necessarily
in the order of importance to the Board of Directors or any particular director.
The F&M Board of Directors did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination due to the variety of factors considered. In
addition, the Board of Directors is composed of nine individual members, and
each director may have given different weights to different factors. For a
discussion of the interests of certain members of F&M's management and F&M's
Board of Directors in the merger, see "Interests of Certain Persons in the
Merger."
THE F&M BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF F&M
COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT.
FAIRNESS OPINIONS OF FINANCIAL ADVISORS
Opinion of Financial Advisor to Citizens.
On April 1, 1999, Citizens retained Keefe, Bruyette & Woods, Inc. to render
an opinion as to the fairness, from a financial point of view of the merger to
the stockholders of Citizens. Keefe Bruyette was selected to serve as Citizens'
financial advisor because Keefe Bruyette is a nationally recognized investment
banking firm with substantial experience in transactions similar to the merger
and is familiar with Citizens and its business. As part of its investment
banking business, Keefe Bruyette is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions.
As part of its engagement, representatives of Keefe Bruyette attended the
meeting of the Citizens Board of Directors held on April 16, 1999 at which the
Citizens Board of Directors considered and approved the merger agreement. At the
April 16, 1999 meeting, Keefe Bruyette rendered an oral opinion, subsequently
confirmed in writing, that, as of such date, the exchange ratio was fair to the
holders of shares of Citizens common stock from a financial point of view. Such
opinion was reconfirmed in writing as of the date of this joint proxy
statement-prospectus.
Keefe Bruyette's opinion is directed to the Citizens Board of Directors and
does not constitute a recommendation to any Citizens stockholder as to how such
stockholders should vote at the special meeting with respect to the merger or
any other matter related to the special meeting. No limitations were imposed by
the Citizens Board of Directors upon Keefe Bruyette with respect to the
investigations made or procedures followed by Keefe Bruyette in rendering its
opinion.
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THE FULL TEXT OF KEEFE BRUYETTE'S WRITTEN OPINION DATED AS OF THE DATE OF
THIS JOINT PROXY STATEMENT-PROSPECTUS IS ATTACHED AS ANNEX B TO THIS JOINT PROXY
STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF
THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX
B. CITIZENS STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR A
DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED,
AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY KEEFE BRUYETTE IN
CONNECTION WITH THE OPINION.
In rendering its opinion, Keefe Bruyette reviewed, analyzed and relied upon
the following material relating to the financial and operating condition of F&M
and Citizens:
- the merger agreement;
- Annual Reports to Shareholders for the three years ended December 31,
1998 for F&M and Citizens;
- certain interim reports to stockholders of F&M and Citizens and Quarterly
Reports on Form 10-Q of F&M and Citizens and certain other communications
from F&M and Citizens to their respective stockholders;
- other financial information concerning the businesses and operations of
F&M and Citizens furnished to Keefe Bruyette by F&M and Citizens for the
purpose of Keefe Bruyette's analysis, including certain internal
financial analyses and forecasts for F&M and Citizens prepared by senior
management of F&M and Citizens;
- certain publicly available information concerning the trading of, and the
trading market for, the common stock of F&M and Citizens; and
- certain publicly available information with respect to banking companies
and the nature and terms of certain other transactions that Keefe
Bruyette considered relevant to its inquiry.
Additionally, in connection with its written opinion attached as Annex B to this
joint proxy statement-prospectus, Keefe Bruyette reviewed a draft of this joint
proxy statement-prospectus in substantially the form that it appears here. Keefe
Bruyette also held discussions with senior management of F&M and Citizens
concerning their past and current operations, financial condition and prospects,
as well as the results of regulatory examinations. Keefe Bruyette also
considered such financial and other factors as it deemed appropriate under the
circumstances and took into account its assessment of general economic, market
and financial conditions and its experience in similar transactions, as well as
its experience in securities valuation and its knowledge of banks, bank holding
companies and thrift institutions generally. Keefe Bruyette's opinion was
necessarily based upon conditions as they existed and could be evaluated on the
date of the opinion and the information made available to Keefe Bruyette through
the date of the opinion.
In conducting its review and arriving at its opinion, Keefe Bruyette relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and Keefe Bruyette did not
attempt to verify such information independently. Keefe Bruyette relied upon the
managements of F&M and Citizens as to the reasonableness and achievability of
the financial and operating forecasts (the assumptions and bases for the
forecasts) provided to Keefe Bruyette and assumed that such forecasts reflected
the best available estimates and judgments of such managements and that such
forecasts will be realized in the amounts and in the time periods estimated by
such managements. Keefe Bruyette also assumed, without independent verification,
that the aggregate allowances for loan losses for F&M and Citizens are adequate
to cover such losses. Keefe Bruyette did not make or obtain any evaluations or
appraisals of the property of F&M or Citizens, nor did Keefe Bruyette examine
any individual loan credit files. Keefe Bruyette was informed by Citizens, and
assumed for purposes of its opinion, that the merger would be accounted for as a
pooling of interests under generally accepted accounting principles.
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The following is a summary of the material financial analyses employed by
Keefe Bruyette in connection with its opinion and does not purport to be a
complete description of all analyses employed by Keefe Bruyette, although all
material elements of the opinion are included in the summary.
Transaction Summary. Keefe Bruyette calculated the merger consideration to
be paid pursuant to the exchange ratio as a multiple of F&M's book value and
tangible book value as of December 31, 1998 and earnings per share for the year
ended December 31, 1998. This computation assumed a price per share of Citizens
common stock of $39.75 (closing price on April 15, 1999) and a ten day average
trading price (up to and including April 15, 1999) of $35.93 and exchange ratio
of 1.303 shares of Citizens common stock per share of F&M common stock. Based
upon a share price of $39.75, this analysis indicated F&M stockholders would
receive shares of Citizens common stock worth $51.79 for each share of F&M
common stock held, and that such an amount would represent a multiple of 3.37
times book value per share, 3.53 times tangible book value per share and 24.1
times 1998 earnings per share. Based upon the ten day average share price of
$35.93, this analysis indicated F&M stockholders would receive shares of
Citizens common stock worth $46.82 for each share of F&M common stock held, and
that such an amount would represent a multiple of 3.05 times book value per
share, 3.19 times tangible book value per share and 21.8 times 1998 earnings per
share.
Financial Overview. Keefe Bruyette reviewed financial ratios, market
capitalization and summary 1998 income statement and balance sheet information
for both Citizens and F&M and the combined company before acquisition
adjustments, cost savings and revenue enhancements.
Contribution Analysis. Keefe Bruyette analyzed the relative contribution of
each of Citizens and F&M to certain balance sheet and income statement items,
including assets, common equity, deposits and 1998 net income. Keefe Bruyette
then compared the relative contribution of such balance sheet and income
statement items with the estimated pro forma ownership of 43.4% for F&M
stockholders based on an exchange ratio of 1.303. The contribution analysis
showed that F&M would contribute approximately 36.1% of the combined assets, 36%
of the combined common equity, 35.9% of the combined deposits and 38.2% of the
combined 1998 net income.
Financial Impact Analysis. Keefe Bruyette performed a pro forma merger
analysis that combined projected income statement and balance sheet information.
Assumptions regarding the accounting treatment, cost savings, and revenue
enhancements were used to calculate the financial impact that the merger would
have on certain projected financial results of Citizens. This analysis was based
on median Institutional Brokers Estimate System earnings estimates for Citizens
and Keefe Bruyette's research estimates of F&M for 1999 and 2000 earnings per
share and on Citizens managements' estimates of expected cost savings and
revenue enhancements in connection with the merger. These projections were
discussed with the management of each of F&M and Citizens. The actual results
achieved by Citizens following the merger may vary from the projected results
and the variations may be material.
Keefe Bruyette calculated the impact of the merger on Citizens' 1999 and
2000 earnings per share estimates, of $2.18 and $2.35, respectively, and on
earnings per share for 2001, 2002 and 2003 which were projected to grow at 7.5%
annually. For F&M, 1999 and 2000 earnings per share estimates were $2.35 and
$2.60, respectively and for 2001, 2002 and 2003 earnings per share were
projected to grow at 10% annually. Projections included estimated after-tax cost
savings of F&M's non-interest expenses of $50,000 in 1999, $4.8 million in 2000,
$6.8 million in 2001, $7.2 million in 2002 and $7.7 million in 2003 and
after-tax revenue enhancements of $1.5 million in 2000, $2.5 million in 2001,
$3.5 million in 2002 and $4.5 million in 2003. The resulting pro forma combined
estimated earnings per share resulted in projected decreases of $.16 in 1999,
$.02 in 2000 and projected increases in earnings per share of $.05 in 2001, $.09
in 2002 and $.14 in 2003.
Keefe Bruyette also calculated Citizens pro forma combined book value per
share dilution from 1999 to 2003 of 11.37%, 10.60%, 9.67%, 8.71% and 7.73%,
respectively.
Return on Investment Analysis. Keefe Bruyette also provided a return on
investment analysis for Citizens based on an $835,790,000 purchase price and
assuming an annual income growth rate of 10% for
29
<PAGE> 36
F&M, cost savings and revenue enhancements as outlined above and a terminal
multiple of 20 times F&M's earnings contribution in 2003. The analysis resulted
in an 18.7% return on Citizens' purchase of F&M.
Selected Transaction Analysis. Keefe Bruyette analyzed certain financial
data related to fifteen acquisitions of bank holding companies with assets of
$1.0 to $3.5 billion announced from January 12, 1998 to March 19, 1999.
The following transactions were analyzed:
<TABLE>
<CAPTION>
BUYER SELLER
----- ------
<S> <C>
Old Kent Financial Corp Pinnacle Banc Group
Union Planters Corp. Republic Banking Corp.
Summit Bancorp Prime Bancorp, Inc.
Chittenden Corp Vermont Financial
Sky Financial Group First Western Bancorp
BB&T Corp. MainStreet Financial Corporation
FirstMerit Corp. Signal Corp.
City Holding Company Horizon Bancorp, Inc.
Banknorth Group Inc. Evergreen Bancorp
Old Kent Financial Corp. First Evergreen Corp.
Star Banc Corp Trans Financial Inc.
Mercantile Bancorp Firstbank of IL
First Midwest Bancorp Heritage Financial Services
Mercantile Bancorp CBT Corp
National City Corp. Fort Wayne National Corp.
</TABLE>
For the bank acquisitions analyzed, Keefe Bruyette calculated an average
multiple of price to the sellers' earnings (trailing twelve months) as 24.63
times compared to a multiple of 24.09 times 1998 earnings per share associated
with the proposed F&M merger with Citizens; an average premium to the sellers'
stated book value of 297% compared to a premium of 337% associated with the
proposed F&M merger with Citizens; and an average premium to the sellers'
tangible book value of 346% compared to a premium of 353% associated with the
proposed F&M merger with Citizens. In addition to the above comparison of the
analyzed bank acquisitions prices based upon Citizens' stock price of $39.75 a
share, Keefe Bruyette also compared the analyzed bank acquisition multiples to
the premiums paid in the proposed F&M merger with Citizens based upon a Citizens
10 day average price of $35.93 a share. The multiples were 21.8 times 1998
earnings per share, 305% of the sellers' stated book value and 319% of the
sellers' tangible book value.
30
<PAGE> 37
Selected Peer Group Analysis. Keefe Bruyette compared the financial
performance and market performance of F&M based on various financial measures of
earnings performance, operating efficiency, capital adequacy and asset quality
and various measures of market performance, including market/book values, price
to earnings and dividend yields to those of a group of comparable holding
companies. For purposes of such analysis, the financial information used by
Keefe Bruyette was as of and for the quarter ended December 31, 1998 as
available and the market price information was as of April 15, 1999. The
companies in the peer group were midwestern bank holding companies in Illinois,
Ohio, Indiana, Kentucky and Michigan which had total assets ranging from
approximately $2 billion to $5.2 billion and included the following bank holding
companies:
- First Midwest Bancorp, Inc.
- AMCORE Financial, Inc.
- 1st Source Corporation
- Park National Corporation
- Republic Bancorp Inc.
- Area Bancshares Corporation
- Sky Financial Group, Inc.
- First Financial Bancorp.
- Corus Bankshares, Inc.
- Community Trust Bancorp, Inc.
- National City Bancshares, Inc.
Keefe Bruyette's analysis showed the following concerning F&M's financial
performance:
<TABLE>
<CAPTION>
PEER
GROUP
F&M AVERAGE
--- -------
<S> <C> <C>
Return on equity (annualized)............................... 14.86% 13.71%
Return on assets (annualized)............................... 1.48% 1.23%
Net interest margin (annualized)............................ 4.56% 4.24%
Efficiency ratio (annualized)............................... 50.92% 59.01%
Equity to assets ratio...................................... 9.85% 9.01%
Ratio of nonperforming assets to total loans and other real
estate owned.............................................. 0.99% 0.65%
Ratio of loan loss reserve to non-performing loans.......... 174% 313%
Ratio of net charge-offs to average loans................... 0.11% 0.39%
</TABLE>
Keefe Bruyette's analysis further showed the following concerning F&M's
market performance:
<TABLE>
<CAPTION>
PEER
GROUP
F&M AVERAGE
--- -------
<S> <C> <C>
Price to earnings multiple (based on 1999 estimated
earnings)................................................. 15.85 15.13
Price to book value multiple................................ 2.41 2.37
Dividend yield.............................................. 2.59% 2.32%
</TABLE>
For purposes of the above calculations, 1999 earnings estimates were based
upon estimates of Keefe Bruyette and Institutional Brokers Estimate System.
31
<PAGE> 38
Selected Peer Group Market Analysis of Citizens/F&M Combined. Keefe
Bruyette compared the market performance of the pro forma combined Citizens with
midwestern bank holding companies which had total market capitalization ranging
from approximately $850 million to $1.9 billion and included the following peer
group of institutions:
- Provident Financial Group, Inc.
- Mercantile Bankshares Corporation
- FirstMerit Corporation
- Old National Bancorp
- Fulton Financial Corporation
- UMB Financial Corporation
- CNB Bancshares, Inc.
- Keystone Financial, Inc.
- Community First Bankshares, Inc.
- First Midwest Bancorp, Inc.
Keefe Bruyette analyzed various measures of market performance, including
market/book values, price to earnings and dividend yields. For purposes of such
analysis, the financial information used by Keefe Bruyette was as of and for the
quarter ended December 31, 1998 as available and the market price information
was as of April 15, 1999.
Keefe Bruyette's analysis further showed the following concerning Citizens'
pro forma market performance:
<TABLE>
<CAPTION>
PEER
GROUP
CITIZENS AVERAGE
-------- -------
<S> <C> <C>
1999 price to earnings multiple (based on pro forma combined
estimated earnings)....................................... 19.11 14.75
2000 price to earnings multiple (based on pro forma combined
estimated earnings)....................................... 17.06 13.45
Price to book value multiple................................ 2.79 2.38
Price to tangible book value multiple....................... 3.09 2.66
Dividend yield.............................................. 2.11% 2.43%
</TABLE>
For purposes of the above calculations, 1999 and 2000 earnings estimates of
$2.08 and $2.33 per share, respectively, were based upon estimates of Keefe
Bruyette and Institutional Broker Estimate System.
Market Reaction to Announced Acquisitions. Keefe Bruyette analyzed the
market reaction, post acquisition announcement, on selected acquisitions in the
Midwest based on one day and 30 day time periods relative to the Keefe Bank
Index during the same time period. The four acquisitions analyzed were:
- Old Kent Financial Corp./Pinnacle Banc Group, Inc.
- FirstMerit Corporation/Signal Corp.
- Star Banc Corporation/Firstar Corporation
- First Midwest Bancorp/Heritage Financial Services
The following results were calculated, Old Kent Financial Corp.'s stock
price was down 3.61% after one day compared to the Keefe Bank Index which was
down 1.28% over the same one day period. FirstMerit Corporation's stock price
for the one and 30 day periods was down 9.98% for both periods compared to the
Keefe Bank Index down .69% and down 6.66% during the same periods respectively.
Star Banc Corporation's stock price for the one and 30 day periods was down .20%
and up 10.08% respectively compared to the Keefe Bank Index up 2.28% and down
9.45% for the same periods respectively. First Midwest Bancorp's stock price was
down 7.08% and up 1.33% for the one day and 30 day periods respectively,
compared to the Keefe Bank Index up .33% and 9.00% for the same periods.
Keefe Bruyette has been retained by the Board of Directors of Citizens as
an independent contractor to act as financial adviser to Citizens with respect
to the merger. Keefe Bruyette as part of its investment banking business, is
continually engaged in the valuation of banking businesses and their securities
in
32
<PAGE> 39
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. As
specialists in the securities of banking companies, Keefe Bruyette has
experience in, and knowledge of, the valuation of banking enterprises. In the
ordinary course of its business as a broker-dealer, Keefe Bruyette may, from
time to time, purchase securities from, and sell securities to, Citizens and as
a market maker in securities Keefe Bruyette may from time to time have a long or
short position in, and buy or sell, debt or equity securities of Citizens for
Keefe Bruyette's own account and for the accounts of its customers.
Citizens and Keefe Bruyette have entered into a letter agreement dated
April 1, 1999 relating to the services to be provided by Keefe Bruyette in
connection with the merger. The terms of the letter agreement, including the
amount of the fee to be paid by Citizens to Keefe Bruyette, were the result of
negotiations between the two parties. Citizens has agreed to pay Keefe Bruyette
fees as follows: a cash fee of $75,000 following the signing of the merger
agreement between Citizens and F&M, $100,000 upon the mailing of the joint proxy
statement/prospectus relating to the merger and $200,000 upon consummation of
the merger. Pursuant to the Keefe Bruyette engagement agreement, Citizens also
agreed to reimburse Keefe Bruyette for reasonable out-of-pocket expenses and
disbursements incurred in connection with its retention and to indemnify Keefe
Bruyette against certain liabilities, including liabilities under the federal
securities laws.
Opinion of Financial Advisor to F&M.
Hovde has delivered to the F&M Board of Directors its opinion that, based
upon and subject to the various considerations set forth in its written opinion
dated April 16, 1999, the exchange ratio is fair from a financial point of view
to the holders of F&M common stock as of such date. In requesting Hovde's advice
and opinion, no limitations were imposed by F&M upon Hovde with respect to the
investigations made or procedures followed by it in rendering its opinion. THE
FULL TEXT OF THE OPINION OF HOVDE, DATED APRIL 16, 1999, WHICH DESCRIBES THE
PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX C. F&M STOCKHOLDERS SHOULD READ
THIS OPINION IN ITS ENTIRETY.
Hovde is a nationally recognized investment banking firm and, as part of
its investment banking business, is continually engaged in the valuation of
financial institutions in connection with mergers and acquisitions, private
placements and valuations for other purposes. As a specialist in securities of
financial institutions, Hovde has experience in, and knowledge of, banks,
thrifts and bank and thrift holding companies. F&M's Board of Directors selected
Hovde to act as its financial advisor in connection with the merger on the basis
of the firm's reputation and expertise in transactions such as the merger. F&M
initially became acquainted with Hovde in connection with F&M's 1998 acquisition
of BancSecurity Corporation, for which Hovde acted as financial advisor to
BancSecurity.
Hovde will receive a fee contingent upon the completion of the merger for
services rendered in connection with advising F&M regarding the merger,
including the fairness opinion and financial advisory services provided to F&M.
The fee is determined as a percentage of the transaction value; the percentage
varies depending upon the total consideration. As of the date of this joint
proxy statement-prospectus, such fee would have been approximately $3.5 million;
Hovde has received $1.1 million of such fee to date which, except for a limited
portion, is refundable if the merger does not occur.
HOVDE'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE EXCHANGE RATIO, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY F&M
STOCKHOLDERS AS TO HOW THE STOCKHOLDER SHOULD VOTE AT THE F&M SPECIAL MEETING.
THE SUMMARY OF THE OPINION OF HOVDE SET FORTH IN THIS JOINT PROXY
STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF THE OPINION.
The following is a summary of the analyses performed by Hovde in connection
with its fairness opinion. Certain of these analyses were presented to the F&M
Board of Directors by Hovde on April 16, 1999. The summary set forth below does
not purport to be a complete description of either the analyses
33
<PAGE> 40
performed by Hovde in rendering its opinion or the presentation made by Hovde to
the F&M Board of Directors, but it does summarize all of the material analyses
performed and presented by Hovde.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances. In arriving at its
opinion, Hovde did not attribute any particular weight to any analysis and
factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Hovde may have given
various analyses more or less weight than other analyses. Accordingly, Hovde
believes that its analyses and the following summary must be considered as a
whole and that selecting portions of its analyses, without considering all
factors and analyses, could create an incomplete view of the process underlying
the analyses set forth in its report to the F&M Board of Directors and its
fairness opinion.
In performing its analyses, Hovde made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of F&M and Citizens. The analyses
performed by Hovde are not necessarily indicative of actual value or actual
future results, which may be significantly more or less favorable than suggested
by the analyses. These analyses were prepared solely as part of Hovde's analysis
of the fairness of the exchange ratio, from a financial point of view, to the
F&M stockholders. The analyses do not purport to be an appraisal or to reflect
the prices at which a company might actually be sold or the prices at which any
securities may trade at the present time or at any time in the future. Hovde's
opinion does not address the relative merits of the merger as compared to any
other business combination in which F&M might engage. In addition, as described
above, Hovde's opinion to the F&M Board of Directors was one of many factors
taken into consideration by the F&M Board of Directors in making its
determination to approve the merger agreement.
During the course of its engagement, and as a basis for arriving at its
opinion, Hovde reviewed and analyzed material bearing upon the financial and
operating condition of F&M and Citizens and material prepared in connection with
the merger, including, among other things, the following:
- the merger agreement;
- certain historical publicly available information concerning F&M and
Citizens;
- the nature and terms of recent merger transactions; and
- financial and other information provided to Hovde by the management of
F&M and Citizens. Hovde conducted meetings and had discussions with
members of senior management of F&M and Citizens for purposes of
reviewing the future prospects F&M and Citizens. Hovde also took into
account its experience in other transactions, as well as its knowledge of
the commercial banking industry and its general experience in securities
valuations.
In rendering its opinion, Hovde assumed, without independent verification,
the accuracy and completeness of the financial and other information reviewed by
it and relied upon the accuracy of the representations of the parties contained
in the merger agreement. Hovde also assumed that the financial forecasts
furnished to or discussed with Hovde by F&M or Citizens were reasonably prepared
and reflected the best currently available estimates and judgments of senior
management of F&M and Citizens as to the future financial performance of F&M,
Citizens or the combined entity, as the case may be. Hovde has not made any
independent evaluation or appraisal of any properties, assets or liabilities of
F&M. Hovde assumed and relied upon the accuracy and completeness of the publicly
available and other financial and other information provided to it, relied upon
the representations and warranties of F&M and Citizens made pursuant to the
merger agreement, and did not independently attempt to verify any of such
information.
Throughout the various analyses used to derive its fairness opinion, Hovde
examined the financial impact of F&M's pending acquisition of Community Bank of
Elkhorn. Hovde assumed that approximately 563,456 shares of F&M common stock
would be issued in the transaction. The CBE transaction subsequently closed on
May 14, 1999, and F&M issued 525,200 shares to CBE stockholders.
34
<PAGE> 41
Premium Analysis. Based upon the 60-day average closing price of Citizens
common stock for the period ending on April 15, 1999 (one trading day prior to
Hovde's presentation to the F&M Board of Directors), the exchange ratio resulted
in an implied price of $43.63 per share of F&M common stock, representing a
premium of approximately 28.85% to the 60-day average closing price of $33.86 of
F&M common stock for the period ending on April 15, 1999.
Implied Offer Value Analysis Based on Citizens Historical Trading
Valuation. Hovde reviewed the implied offer value per share to F&M common stock
based on the price of Citizens common stock at different intervals during the
period commencing 60 trading days prior to April 15, 1999, using the 5-day,
10-day, 20-day, 30-day, 45-day and 60-day average closing price of Citizens
common stock during such period. Using such average closing prices, Hovde
observed that the implied value per share to F&M common stock was as follows:
<TABLE>
<CAPTION>
CITIZENS IMPLIED VALUE
AVERAGE PER SHARE TO
CLOSING PRICE F&M STOCKHOLDERS
------------- ----------------
<S> <C> <C>
April 15, 1999.............................................. $39.750 $51.794
Last 5 Trading Days......................................... $37.475 $48.830
Last 10 Trading Days........................................ $35.934 $46.822
Last 20 Trading Days........................................ $34.638 $45.133
Last 30 Trading Days........................................ $34.077 $44.402
Last 45 Trading Days........................................ $33.678 $43.883
Last 60 Trading Days........................................ $33.482 $43.627
</TABLE>
Hovde advised the F&M Board of Directors of the atypical trading activity
that had been occurring in Citizens common stock in the approximately 5 to 10
day trading period preceding the announcement of the transaction; as such, it
was Hovde's opinion that although the F&M Board of Directors should be aware of
what an approximate announced transaction value would be for F&M, it was more
appropriate to analyze a potential transaction with Citizens based on the 60-day
trading average of Citizens common stock.
35
<PAGE> 42
Analysis of Selected Mergers. As part of its analysis, Hovde reviewed
comparable mergers involving banks nationwide announced since January 1, 1995,
in which the announced deal value was between $500 million and $2 billion. This
nationwide merger group consisted of the following 22 transactions:
<TABLE>
<CAPTION>
BUYER SELLER
----- ------
<S> <C>
BB&T Corp, Winston-Salem, NC Main Street Financial, Martinsville, VA
Star Banc Corp, Cincinnati, OH Trans Financial Inc., Bowling Green, KY
Zions Bancorp, Salt Lake City, UT Sumitomo Bank of CA, San Francisco, CA
Mercantile Bancorp, St. Louis, MO Firstbank of IL, Springfield, IL
National City Corp., Cleveland, OH Fort Wayne National Corp, Fort Wayne, IN
M&T Bank Corp., Buffalo, NY ONBANCorp Inc., Syracuse, NY
Wachovia Corp, Winston-Salem, NC Jefferson Bankshares, Charlottesville, VA
Huntington Bancshares, Cleveland, OH First Michigan Bank Corp, Holland, MI
Allied Irish Banks, Dublin, Ireland Dauphin Deposit Corp, Harrisburg, PA
Bank One Corp., Columbus, OH Liberty Bancorp, Inc. Oklahoma City, OK
BB&T Corp., Winston-Salem, NC United Carolina Bancshares, Whiteville, NC
Mercantile Bancorp, St. Louis, MO Mark Twain Bancshares, St. Louis, MO
Crestar Financial, Richmond, VA Citizens Bancorp, Laurel, MD
Regions Financial, Birmingham, AL First National Bancorp, Gainesville, GA
UJB Financial, Princeton, NJ Summit Bancorp, Chatham, NJ
NationsBank Corp., Charlotte, NC Bank South Corp., Atlanta, GA
Boatmen's Bancshares, St. Louis, MO Fourth Financial, Wichita, KS
First Bank System, Minneapolis, MN FirsTier Financial, Omaha, NE
Bank One Corp., Columbus, OH Premier Bancorp, Baton Rouge, LA
Union Bank of CA, San Francisco, CA BanCal Tri-State, San Francisco, CA
US Bancorp, Portland, OR West One Bancorp, Boise, ID
National Australia Bank, Melbourne, Australia Michigan National Corp., Farmington Hills, MI
</TABLE>
Hovde also reviewed comparable mergers involving banks headquartered in the
Midwest announced since January 1, 1995, in which the total assets of the seller
were between $1 billion and $10 billion. This midwestern merger group consisted
of the following 18 transactions:
<TABLE>
<CAPTION>
BUYER SELLER
----- ------
<S> <C>
Old Kent Financial Corp., Grand Rapids, MI Pinnacle Banc Group, Oak Brook, IL
FirstMerit Corp, Akron, OH Signal Corp., Wooster, OH
Old Kent Financial Corp., Grand Rapids, MI First Evergreen Corp., Evergreen Park, IL
Star Banc Corp, Cincinnati, OH Trans Financial, Inc., Bowling Green, KY
Union Planters Corp., Memphis, TN Magna Group, St. Louis, MO
Mercantile Bancorp, St. Louis, MO Firstbank of IL, Springfield, IL
First Midwest Bancorp, Naperville, IL Heritage Financial Services, Tinley Park, IL
Mercantile Bancorp, St. Louis, MO CBT Corp., Paducah, KY
National City Corp, Cleveland, OH Fort Wayne National Corp., Fort Wayne, IN
Union Planters Corp, Memphis, TN Peoples First Corp, Paducah, KY
Huntington Bancshares, Columbus, OH First Michigan Bank Corp, Holland, MI
Mercantile Bancorp, St. Louis, MO Mark Twain Bancshares, St. Louis, MO
Magna Group, St. Louis, MO Homeland Bankshares, Waterloo, IA
Firstar Corp, Milwaukee, WI American Bancorp, St. Paul, MN
Boatmen's Bancshares, St. Louis, MO Fourth Financial, Wichita, KS
First Bank System, Minneapolis, MN FirsTier Financial, Omaha, NE
Mercantile Bancorp, St. Louis, MO Hawkeye Bancorp, Des Moines, IA
National Australia Bank, Melbourne, Australia Michigan National Corp, Farmington Hills, MI
</TABLE>
Hovde calculated the medians and averages for the following relevant
transaction ratios in the nationwide merger group and the midwest merger group:
the multiple of the offer value to the acquired
36
<PAGE> 43
company's earnings per share for the twelve months preceding the announcement
date of the transaction; the multiple of the offer value to the acquired
company's book value per share and tangible book value per share; and the
tangible book value premium to core deposits, each as of the announcement date
of the transaction. Hovde compared these multiples with the corresponding
multiples for the merger, valuing the shares of Citizens common stock that would
be received pursuant to the merger agreement at $43.63 per share of F&M common
stock. In calculating the multiples for the merger, Hovde used F&M's earnings
per share for the 12 months ended December 31, 1998, and F&M's book value per
share, tangible book value per share, and total deposits as of December 31,
1998. The results of this analysis are as follows:
<TABLE>
<CAPTION>
OFFER VALUE TO
-------------------------------------
TANGIBLE PRECEDING BOOK VALUE
BOOK VALUE BOOK VALUE EARNINGS PREMIUM TO
PER SHARE PER SHARE PER SHARE CORE DEPOSITS
(X) (X) (X) (%)
---------- ---------- --------- -------------
<S> <C> <C> <C> <C>
F&M.............................................. 2.84 2.97 20.1 22.14
Nationwide merger group median................... 2.39 2.48 19.3 18.12
Nationwide merger group average.................. 2.38 2.54 18.8 19.49
Nationwide merger group high..................... 4.34 4.62 34.7 44.76
Nationwide merger group low...................... 1.27 1.27 5.2 3.65
Midwest merger group median...................... 2.39 2.52 20.5 23.65
Midwest merger group average..................... 2.53 2.88 19.6 23.52
Midwest merger group high........................ 4.34 4.67 27.9 49.84
Midwest merger group low......................... 1.69 1.69 10.1 9.16
</TABLE>
Discounted Cash Flow Analysis. Hovde performed a discounted cash flow
analysis to determine a present value per share of F&M common stock assuming F&M
continued to operate as a stand-alone entity and was acquired at a later date.
This present value was determined by projecting F&M's after-tax net income for
the five calendar years ending December 31, 1999 through 2003. For purposes of
this analysis, Hovde assumed that F&M's earnings per share for these five
calendar years would be $2.45, $2.73, $3.00, $3.27 and $3.59, respectively,
based upon F&M's 1999 budgeted net income and then applying historical growth
rates for F&M to estimate future years' earnings per share. These projections
were shared by Hovde with senior management of F&M, who did not object to the
estimates used by Hovde. The "terminal value" per share, meaning the projected
2003 value per share, of F&M common stock was determined by applying a price to
earnings multiple of 16.1 times against F&M's projected earnings at December 31,
2003. The present value of the terminal value was then determined using an
annual discount rate of 12.0%, which Hovde viewed as the appropriate discount
rate for a company with F&M's risk characteristics. The above calculations
resulted in a net present value per share of F&M common stock of $41.45. The
implied value of $43.63 per share to F&M stockholders, based on Citizens' 60-day
average closing price of $33.48 for the period ending on April 15, 1999,
resulted in a premium of 5.26% to F&M's net present value of $41.45 per share.
As part of this analysis, Hovde also provided a table, set forth immediately
below, that utilized a discount rate ranging from 10.00% to 13.50% and varied
the terminal multiple value from 12.0 to 20.0 times F&M's projected earnings at
December 31, 2003.
37
<PAGE> 44
NET PRESENT VALUE PER SHARE (DISCOUNT RATE VS. TERMINAL VALUE MULTIPLE)
<TABLE>
<CAPTION>
DISCOUNT RATE
--------------------------------------------------------------------
10.00 10.50 11.00 11.50 12.00 12.50 13.00 13.50
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TERMINAL VALUE MULTIPLE
12.00............................. 34.29 33.72 33.16 32.61 32.07 31.55 31.04 30.53
13.00............................. 36.74 36.12 35.52 34.93 34.35 33.79 33.24 32.69
14.00............................. 39.19 38.53 37.88 37.25 36.63 36.03 35.43 34.86
15.00............................. 41.64 40.93 40.24 39.57 38.91 38.26 37.63 37.02
16.00............................. 44.09 43.34 42.60 41.89 41.19 40.50 39.83 39.18
17.00............................. 46.53 45.74 44.97 44.21 43.47 42.74 42.03 41.34
18.00............................. 48.98 48.15 47.33 46.53 45.74 44.98 44.23 43.50
19.00............................. 51.43 50.55 49.69 48.85 48.02 47.22 46.43 45.66
20.00............................. 53.88 52.96 52.05 51.17 50.30 49.46 48.63 47.82
</TABLE>
Contribution Analysis. Hovde prepared a contribution analysis showing
percentages of assets, loans, deposits and common equity at December 31, 1998
for F&M, including the financial effects of the CBE acquisition, and as of March
31, 1999 for Citizens and actual fiscal year 1998 net income and estimated
fiscal year 1999 net income that would be contributed to the combined company on
a pro forma basis by F&M and Citizens. In addition, this analysis showed that
holders of F&M common stock would own approximately 43.27% of the pro forma
common shares outstanding of Citizens, assuming an exchange ratio of 1.303.
<TABLE>
<CAPTION>
F&M F&M
CONTRIBUTION OWNERSHIP
TO CITIZENS OF CITIZENS
------------ -----------
<S> <C> <C>
Total assets................................................ 36.08% 43.27%
Total net loans............................................. 32.99% 43.27%
Total deposits.............................................. 35.97% 43.27%
Total equity................................................ 36.63% 43.27%
Net income -- actual fiscal year 1998....................... 38.11% 43.27%
Net income -- estimated fiscal year 1999.................... 39.90% 43.27%
</TABLE>
Financial Implications to F&M Stockholders. Hovde prepared an analysis of
the financial implications of the Citizens offer to a holder of F&M common
stock. This analysis indicated that on a pro forma equivalent basis, assuming
the merger was completed at the exchange ratio of 1.303 and excluding any
potential cost savings and revenue enhancement opportunities, a stockholder of
F&M would achieve approximately 8.3% accretion in earnings per share, an
increase in dividends per share of approximately 14.0% and a decrease in book
value per share of approximately 20.6% in 1999 as a result of the consummation
of the merger. Assuming that the projected earnings per share and dividends per
share do not materially change from historical growth rate levels, the holders
of F&M common stock will experience an increase of approximately 16.4% in
earnings per share, an increase of approximately 20.1% in dividends per share,
and a decrease of approximately 10.3% in book value per share in 2003 as a
result of the consummation of the merger. The table below summarizes the results
discussed above:
<TABLE>
<CAPTION>
EARNINGS PER SHARE DIVIDENDS PER SHARE BOOK VALUE PER SHARE
------------------- ------------------- ---------------------
1999 2003 1999 2003 1999 2003
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
F&M standalone.................... $2.45 $3.59 $0.96 $1.46 $16.87 $24.41
Pro Forma......................... $2.66 $4.17 $1.09 $1.75 $13.40 $21.90
% Accretion -- Dilution........... 8.3% 16.4% 14.0% 20.1% (20.6)% (10.3)%
</TABLE>
Comparative Stockholder Returns. Hovde presented an analysis of comparative
theoretical stockholder returns in several scenarios, including F&M remaining
independent, F&M being acquired in 2003, F&M being acquired by Citizens through
the merger and F&M being acquired by Citizens through the merger with Citizens
in turn being acquired in 2003. This analysis, which was based on the net
present value of
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<PAGE> 45
projected dividend streams and projected common stock valuations, using
historical operating and acquisition price-to-earnings multiples, indicated
total stockholder returns of 14.66% if F&M remained independent, 18.10% for a
merger in 2003, 20.42% based on the acceptance of the offer from Citizens at the
exchange ratio of 1.303 Citizens shares per F&M share, and 26.35% based on the
acceptance of the offer from Citizens at the exchange ratio of 1.303 Citizens
shares per F&M share and Citizens in turn being acquired in 2003.
Based upon the foregoing analyses and other investigations and assumptions
set forth in its opinion, without giving specific weightings to any one factor
or comparison, Hovde determined that the exchange ratio was fair from a
financial point of view to the F&M stockholders.
STRUCTURE OF THE MERGER
On the effective date of the merger, Citizens Acquisition, Inc., a
wholly-owned subsidiary of Citizens, will merge with and into F&M. F&M will be
the surviving corporation in the merger, and will continue its corporate
existence under the same name but as a wholly-owned subsidiary of Citizens. At
the time of the merger, the separate corporate existence of Citizens
Acquisition, Inc. will cease.
ARTICLES AND BYLAWS
The articles of incorporation and bylaws of Citizens Acquisition, Inc., as
in effect immediately prior to the effective date of the merger, will be the
articles of incorporation and bylaws of F&M as the surviving corporation
following the merger.
DIRECTORS AND OFFICERS
Citizens has agreed to increase the Citizens Board of Directors by three,
after the merger is completed, so that the Citizens Board of Directors will have
21 members. Citizens has also agreed to appoint three persons designated by the
F&M Board of Directors and acceptable to Citizens, to fill these three new
vacancies on the Citizens Board of Directors. The directors designated by the
F&M Board of Directors to be appointed to the Citizens Board of Directors, are
Ronald E. Fenton, Gail E. Janssen, and Robert C. Safford. All three are
currently members of the F&M Board of Directors. Information about them is
incorporated by reference to F&M's 1998 Annual Report on Form 10-K which is
incorporated by reference into this joint proxy statement-prospectus. See "Where
You Can Find More Information."
Citizens has also agreed to, after the merger is completed, add one
individual designated by the F&M Board of Directors and acceptable to Citizens
as a rotating member of the Executive Committee of the Board of Directors of
Citizens.
The directors and officers of Citizens Acquisition, Inc. immediately prior
to the effective date of the merger will be the initial directors and officers
of F&M as the surviving corporation following the merger.
REPRESENTATIONS AND WARRANTIES
F&M and Citizens have made customary representations and warranties to each
other about, 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 representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles in the
merger agreement entitled "Representations and Warranties of the Company" and
"Representations and Warranties of the Parent."
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<PAGE> 46
CONDUCT PENDING THE MERGER
Until the merger is completed, F&M has agreed to generally conduct its
business and the business of its subsidiaries in the ordinary course. F&M has
agreed to:
- use its best efforts to preserve intact its business organization,
properties, leases, employees and advantageous business relationships and
retain the services of its officers and key employees;
- take no action which would harm or delay the ability of F&M or Citizens
to obtain any necessary approvals, consents or waivers of any
governmental authority required for the merger or to perform its
covenants and agreements under the merger agreement on a timely basis;
and
- take no action that is reasonably likely to have a material adverse
effect on F&M's business or on its ability to complete the merger.
F&M has agreed that until the merger is completed, or unless Citizens
consents in writing, F&M and its subsidiaries will not take certain specific
actions, including the following:
- other than in the ordinary course of business, make any loan or incur any
indebtedness or become responsible for the obligations of any other
person;
- adjust, split, combine, reclassify or acquire any of its capital stock;
- pay any dividends or other distributions except for, with certain
limitations, regular quarterly cash dividends at a rate of $0.25 per
share;
- grant any stock appreciation rights or grant, sell or issue any right or
option to acquire any shares of its capital stock;
- issue any shares of its capital stock except due to the exercise of
outstanding F&M options;
- other than in the ordinary course of business, dispose of any of its
properties, leases or assets, or release any indebtedness of any person;
- make any capital expenditures over a specified amount and other than in
the ordinary course of business;
- increase the compensation or benefits of any employees or directors other
than general increases in compensation in the ordinary course of business
not in excess of a specified amount;
- other than in the ordinary course of business in amounts not to exceed
specified amounts, make any investment in any person, and make no
acquisition of another business;
- acquire securities of any type, other than specified securities, without
giving Citizens an opportunity to consent in advance to their
acquisition;
- enter into, modify or terminate any material contract;
- settle any material claim, action or proceeding involving any liability
of, or restrictions on, F&M;
- except in the ordinary course of business and in amounts less than a
specified amount, waive or release any material right or collateral or
cancel or compromise any extension of credit or other claim;
- make, modify or purchase any loan or other extension of credit, or make
any commitment to do so, unless made in the ordinary course of business
and within specified amounts;
- change its fiscal year or its method of accounting;
- take any action that would impede the merger from qualifying for pooling
of interests accounting treatment or as a tax-free reorganization;
- enter into any new, or cease any existing, activities or lines of
business;
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<PAGE> 47
- amend its articles of incorporation or its bylaws; or
- agree to take any action which would make any of the representations or
warranties of F&M in the merger agreement incorrect or prevent F&M from
performing or cause F&M not to perform its covenants under the merger
agreement.
Until the merger is completed, Citizens has agreed to generally conduct its
business and the business of its subsidiaries in the ordinary course. In
particular, Citizens has agreed to:
- take no action outside of the ordinary course of business that would harm
or delay the ability of F&M or Citizens to obtain any necessary
approvals, consents or waivers of any governmental authority required for
the merger or to perform its covenants and agreements on a timely basis;
- take no action that is reasonably likely to have a material adverse
effect on Citizens' business or on its ability to complete the merger;
- enter into any agreement that would result in the acquisition of Citizens
by, or the sale of all of its assets to, another entity without the prior
written consent of F&M, subject to certain exceptions;
- take no action that would impede the merger from qualifying for pooling
of interests accounting treatment or as a tax-free reorganization.
OTHER ACQUISITION PROPOSALS
F&M has agreed that it, its subsidiaries, its officers and its directors
will not take actions which could facilitate a competing acquisition proposal.
F&M has agreed to:
- not initiate, solicit or encourage any inquiries or the making of any
acquisition proposal;
- not engage in any negotiations concerning, provide any confidential
information to, or have any discussions with, any person relating to an
acquisition proposal, or otherwise facilitate any effort or attempt to
make an acquisition proposal;
- immediately cease any existing activities or negotiations with any person
with respect to any acquisition proposal and will enforce any
confidentiality agreements to which it is a party; and
- notify Citizens immediately if any such inquiries or proposals are
received by F&M.
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Citizens and F&M. Citizens and F&M are not obligated to complete the merger
unless:
- the merger agreement and the transactions contemplated by it are approved
as required by the stockholders of F&M and Citizens;
- all applicable statutory waiting periods have expired, and all the
necessary approvals, consents or waivers by governmental authorities or
other persons are received, without any specified conditions or
requirements, and other legal requirements are met;
- Citizens and F&M each receive a letter from their respective independent
accountants to the effect that the merger will qualify for pooling of
interests accounting treatment; and
- no party to the merger agreement shall be subject to any court or agency
action which enjoins or prohibits the merger, and no proceeding against
Citizens or F&M or any of their subsidiaries brought by any governmental
agency seeking to prevent consummation of the merger shall be pending.
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<PAGE> 48
Citizens. In addition, Citizens is not obligated to complete the merger
unless each of the following conditions is satisfied or waived before completion
of the merger:
- F&M's representations and warranties remain true and correct;
- F&M shall have performed its covenants and agreements in the merger
agreement;
- Citizens shall have received a written opinion from counsel to F&M; and
- Citizens shall have received a written opinion from its counsel that the
merger will constitute a tax-free reorganization.
F&M. F&M is not obligated to complete the merger unless each of the
following conditions is satisfied or waived before completion of the merger:
- Citizen's representations and warranties remain true and correct;
- Citizens shall have performed each of its covenants and agreements in the
merger agreement;
- F&M shall have received a written opinion from counsel to Citizens; and
- F&M shall have received a written opinion from its counsel that the
merger will constitute a tax-free reorganization.
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.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
General. We have agreed to use our best efforts to obtain all permits,
consents, approvals and authorizations of all third parties and governmental
entities which are necessary or advisable to consummate the merger. These
include approvals of the Federal Reserve Board and the banking departments of
Wisconsin, Iowa and Minnesota. Citizens has completed the filing of all
application materials necessary to obtain these regulatory approvals. The merger
cannot be completed without these regulatory approvals. We cannot assure that we
will obtain the required regulatory approvals, or when they will be received, or
whether there will be conditions in the approvals or any litigation challenging
the approvals. We also cannot assure that the United States Department of
Justice or any state attorney general will not attempt to challenge the merger
on antitrust grounds, or what the outcome will be if such a challenge is made.
We are not aware of any material governmental approvals or actions that are
required prior to the merger other than those described below. We presently
contemplate that we will seek any additional governmental approvals or actions
that may be required; however, we cannot assure that we will successfully obtain
any such additional approvals or actions.
Federal Reserve Board. The merger is subject to approval by the Federal
Reserve Board pursuant to Section 3 of the Bank Holding Company Act. Citizens
has filed the required application and notification with the Federal Reserve
Board for approval of the merger.
The Federal Reserve Board is prohibited from approving any transaction
that:
- 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
- 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.
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<PAGE> 49
In addition, in reviewing a transaction, the Federal Reserve Board
considers 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 these factors, we expect that
the Federal Reserve Board will consider our regulatory status, current and
projected economic conditions in the Midwest and our overall capital and safety
and soundness as compared with standards established by the Federal Deposit
Insurance Corporation Improvement Act of 1991 and the regulations promulgated
under it.
In addition, under the Community Reinvestment Act of 1977, the Federal
Reserve Board must take into account the record of performance of each of us in
meeting the credit needs of our entire communities, 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 F&M's banking subsidiaries has a satisfactory or outstanding
CRA rating with the appropriate federal regulator. None of Citizens' or F&M's
banking subsidiaries received any negative comments from its respective federal
regulator in its last CRA examination relating to CRA ratings which were
material and remain unresolved.
The Federal Reserve Board will give a copy of the application for approval
of the merger to the FDIC and the banking departments of Wisconsin, Iowa and
Minnesota. These agencies have 30 days 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 within this 30-day
period. Furthermore, federal law requires publication of notice of, and the
opportunity for public comment on, the application submitted by Citizens for
approval of the merger, and authorizes the Federal Reserve Board to hold a
public hearing in connection with the application if it determines that such a
hearing would be appropriate. Any such hearing or comments provided by third
parties could prolong the period during which the 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. The
Federal Reserve Board and the Department of Justice may agree to reduce this
waiting period to no less than 15 days. The Department of Justice could take any
action permitted under the antitrust laws that 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.
If the Department of Justice were to commence an antitrust action, that
action 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. In particular, the
Department of Justice may focus on the impact of the merger on competition for
loans and other financial services to small and middle market businesses.
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.
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 F&M 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 F&M common stock, the Federal Reserve
Board would generally apply the same statutory criteria it would apply to its
consideration of approval of the merger.
State Regulatory Approvals. The merger is also subject to the approvals by
the state banking departments of Wisconsin, Iowa and Minnesota. Citizens has
filed the required applications with each of these state banking departments.
Similar to the Federal Reserve Board, the factors that each of the state
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banking departments consider in determining whether to approve of the
transaction include the financial and managerial resources of the applicant,
undue concentration of resources or substantial lessening of competition, and
the applicant's record under the Community Reinvestment Act.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of material United States federal income tax
considerations in connection with the merger. This discussion merely summarizes
principal United States federal income tax consequences of the merger and is not
a complete analysis of all of the potential tax effects relevant to the merger.
In this regard, this discussion does not deal with all federal income tax
considerations that may be relevant to certain F&M stockholders in light of
their particular circumstances, or to stockholders subject to special rules
under United States federal income tax law, including dealers in securities,
stockholders who do not hold their shares of F&M common stock as capital assets,
foreign persons, tax-exempt entities, or persons who are subject to the
alternative minimum tax provisions of the Internal Revenue Code. Furthermore, it
does not address F&M stockholders who acquired their shares in connection with
stock options or stock purchase plans or in other compensatory transactions. It
also does not address the tax consequences of the merger under foreign, state,
or local tax laws.
F&M STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES TO THEM.
F&M and Citizens intend for the merger to constitute a reorganization under
Section 368 of the Code. Neither F&M nor Citizens will request a ruling from the
IRS with regard to any of the United States federal income tax consequences of
the merger. This discussion of the tax consequences of the merger is based on
and subject to certain assumptions and limitations as well as factual
representations received from F&M and Citizens, as discussed below.
Quarles & Brady LLP has given its opinion to F&M and Dykema Gossett PLLC
has given its opinion to Citizens collectively to the effect that, assuming the
merger is completed as provided in the merger agreement, subject to the
assumptions, limitations, and qualifications described in this discussion, the
material United States federal income tax consequences of the merger are as
follows:
- neither F&M nor Citizens will recognize gain or loss solely as a result
of Citizens' issuance of Citizens common stock to the F&M stockholders in
the merger;
- F&M's stockholders will not recognize gain or loss upon their receipt in
the merger of Citizens common stock in exchange for their shares of F&M
common stock, except to the extent of cash received in lieu of a
fractional share of Citizens common stock;
- the aggregate tax basis of Citizens common stock received in the merger
will be the same as the aggregate tax basis of the F&M common stock
surrendered in exchange for the Citizens common stock, reduced by any
amount of tax basis allocable to a fractional share interest in Citizens
common stock for which cash is received;
- the holding period of each share of Citizens common stock received by an
F&M stockholder in the merger will include the period during which the
F&M stockholder held his or her F&M common stock surrendered in exchange
for the shares of Citizens common stock; and
- cash payments in lieu of a fractional share should be treated as if a
fractional share of Citizens common stock had been issued in the merger
and then redeemed by Citizens, and capital gain or loss generally should
be recognized by an F&M stockholder in respect of such a cash payment
equal to the difference, if any, between the amount of cash received and
the stockholder's allocable tax basis in the fractional share (which will
be a pro rata portion of the stockholder's tax basis in the Citizens
common stock received in the merger).
Limitations on Tax Opinion and Discussion. As noted earlier, this
discussion is subject to certain assumptions, relating to, among other things,
the truth and accuracy of certain representations made by
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<PAGE> 51
F&M and Citizens, and the consummation of the merger in accordance with the
terms of the merger agreement and applicable state law. The tax opinions will
not bind the IRS and, therefore, the IRS is not precluded from asserting a
contrary position. The tax opinions and this discussion are based on currently
existing provisions of the Code, existing and proposed Treasury regulations, and
current administrative rulings and court decisions. There can be no assurance
that future legislative, judicial, or administrative changes or interpretations
will not adversely affect the accuracy of the tax opinions or of the statements
and conclusions set forth in this discussion. Any such changes or
interpretations could be applied retroactively and could affect the tax
consequences of the merger.
ACCOUNTING TREATMENT
We intend to account for the merger as a pooling of interests business
combination. It is a condition to the completion of the merger that both
Citizens and F&M each receive a letter from their respective independent
accountants to the effect that pooling of interests accounting for the merger is
appropriate under APB 16, if the merger is consummated in accordance with the
merger agreement. Under the pooling of interests method of accounting, each of
our historical recorded assets and liabilities will be carried forward to the
combined company at their recorded amounts. In addition, the operating results
of the combined company will include our operating results for the entire fiscal
year in which the merger is completed and our historical reported operating
results for prior periods will be combined and restated as the operating results
of the combined company.
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", "Unaudited
Pro Forma Combined Selected Financial Data" and "Unaudited Pro Forma Condensed
Combined Financial Statements."
TERMINATION OF THE MERGER AGREEMENT
Termination by either Citizens or F&M. Citizens and F&M may terminate the
merger agreement and abandon the merger by mutual consent. Either company may
also terminate the merger agreement if:
- any of the conditions to either company's obligations to consummate the
merger become impossible to satisfy if the terminating party has used its
best efforts and acted in good faith in attempting to satisfy all such
conditions and if it is not at that time in material breach or default of
the merger agreement;
- any required approval of the stockholders of F&M or Citizens is not
obtained;
- any governmental authority denies approval for the merger and neither
Citizens nor F&M files a petition seeking review of the denial within a
specified time frame; or
- the merger has not been completed prior to December 31, 1999, without
fault on the part of the terminating company.
Termination by Citizens. Citizens may also terminate the merger agreement
if:
- F&M materially breaches or defaults on any representation, warranty or
obligation in the merger agreement and fails to timely cure the breach or
default;
- any representation or warranty of F&M about environmental matters (as
defined in the merger agreement) is untrue, without respect to knowledge
of F&M;
- a party other than Citizens makes a public announcement regarding a
proposal to acquire F&M and F&M's Board of Directors fails to publicly
oppose the acquisition proposal within ten days of its announcement or
modifies its recommended approval of the merger agreement and the merger
to F&M's stockholders;
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<PAGE> 52
- the information in any updated disclosure letter provided by F&M
indicates that a material adverse effect on the financial or other
condition of F&M has occurred or is reasonably likely to occur which
either has not or cannot be cured within a specified period of time.
Termination by F&M. F&M may also terminate the merger agreement if:
- Citizens materially breaches or defaults on any representation, warranty
or obligation in the merger agreement and fails to timely cure the breach
or default; or
- the information in any updated disclosure letter provided by Citizens
indicates that a material adverse effect on the financial or other
condition of Citizens has occurred or is reasonably likely to occur which
either has not or cannot be cured within a specified period of time.
AMENDMENT AND WAIVER OF THE MERGER AGREEMENT
We may amend the merger agreement before completion of the merger. However,
after the F&M stockholders vote to approve the merger, no change may be made
that would contravene Michigan or Wisconsin law. Also, before the completion of
the merger, either company may waive any provision of the merger agreement if
the provision benefits the waiving company.
STOCK OPTION AGREEMENT
On April 18, 1999, F&M and Citizens executed a stock option agreement. The
stock option agreement grants to Citizens the option to buy up to 3,097,908
shares of F&M common stock at an exercise price of $35.55 per share, payable in
cash; provided, however, that in no event will the number of shares of F&M
common stock for which the option is exercisable exceed 19.9% of the F&M common
stock issued and outstanding without giving effect to the issuance of any F&M
common stock pursuant to the stock option agreement. The $35.55 amount was the
average closing price paid for F&M common stock in the 15 days preceding the
execution of the stock option agreement. The number and type of shares and the
exercise price per share may be adjusted for stock dividends, stock splits,
recapitalizations and similar transactions. The stock option agreement is
included as Exhibit 2.2 to each of F&M's and Citizens' Current Report on Form
8-K dated April 18, 1999, which are incorporated herein by reference. See "Where
You Can Find More Information."
The option is intended to increase the likelihood that the merger will be
completed. Consequently, aspects of the stock option agreement may have the
effect of discouraging persons who might now or at any time be interested in
acquiring all of or a significant interest in F&M or its assets before
completion of the merger.
Citizens may exercise the option, in whole or in part, at any time prior to
the termination of the option and following the occurrence of any of the
following "purchase events":
- the acquisition by any person other than Citizens of beneficial ownership
of 20% or more of the then outstanding F&M common stock;
- F&M, or any of its subsidiaries, without Citizen's consent, enters into
an agreement to engage in an acquisition transaction, as defined in the
stock option agreement, with any person other than Citizens, or F&M's
Board of Directors recommends that the F&M stockholders approve or accept
an acquisition transaction with any person other than Citizens;
- F&M or any of its subsidiaries, without Citizens' consent, authorizes,
recommends, proposes or publicly announces its intention to authorize,
recommend or propose, to engage in an acquisition transaction with any
person other than Citizens, or F&M's Board of Directors publicly
withdraws or modifies, or publicly announces its intent to withdraw or
modify, in any manner adverse to Citizens, its recommendation that the
F&M stockholders approve the merger in anticipation of engaging in an
acquisition transaction;
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- any person, other than Citizens or any subsidiary of Citizens or any
subsidiary of F&M acting in a fiduciary capacity, acquires beneficial
ownership or the right to acquire beneficial ownership of 10% or more of
the outstanding shares of F&M common stock;
- any person other than Citizens makes a proposal to F&M or its
stockholders, that becomes publicly known, to engage in an acquisition
transaction, such an offer being referred to as a "tender offer" or an
"exchange offer;"
- after a proposal is made by a third party to F&M or its stockholders to
engage in an acquisition transaction, F&M breaches any covenant or
obligation in the merger agreement and the breach would entitle Citizens
to terminate the merger agreement and is not cured prior to the date that
Citizens exercises the option; or
- any person other than Citizens, without Citizens' consent, files an
application or notice with any governmental authority for approval to
engage in an acquisition transaction.
If one of these purchase events occurs prior to an event which terminates
the option (which are described below), F&M will, at Citizens' request, promptly
prepare, file and keep current a shelf registration statement under the
Securities Act covering any shares issued and issuable pursuant to the option.
Citizens shall have the right to demand two of these registrations. These
registration rights are subject to certain limitations contained in the stock
option agreement.
The option terminates upon the earliest to occur of:
- the time immediately prior to the time at which the merger is completed;
- 12 months after the first occurrence of an event that would allow
Citizens to exercise the option;
- 18 months after the termination of the merger agreement following the
occurrence of an event that would allow Citizens to exercise the option,
other than the acquisition by any person other than Citizens or any of
its subsidiaries of beneficial ownership of 20% or more of the then
outstanding F&M common stock;
- termination of the merger agreement in accordance with its terms prior to
the occurrence of an event that would allow Citizens to exercise the
option other than a termination of the merger agreement by Citizens due
to a volitional material breach or default by F&M of any representation
or warranty or in the observance of its covenants and agreements in the
merger agreement which F&M does not timely cure; or
- 12 months after the termination of the merger agreement by Citizens due
to a volitional material breach or default by F&M of any representation
or warranty or in the observance of its covenants and agreements in the
merger agreement which F&M does not timely cure.
If a purchase event occurs prior to an event which terminates the option,
- at Citizens' request, F&M will repurchase the option from Citizens at a
price equal to the amount by which (1) the "market/offer price," as
defined below, exceeds (2) the option price, multiplied by the number of
shares for which the option may then be exercised, and
- at the request of the owner of option shares, F&M will repurchase the
number of option shares designated by their owner at a price equal to the
market/offer price multiplied by the number of option shares designated.
The term "market/offer price" means the highest of:
- the price per share of F&M common stock at which a tender offer or
exchange offer for F&M common shares has been made;
- the price per share of F&M common stock paid or to be paid by any third
party under an agreement with F&M;
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- the highest last sale price for shares of F&M common stock within the
180-day period ending on the date of an option repurchase request or an
option share repurchase request; or
- in the event of a sale of all or substantially all of F&M's assets, the
sum of the price paid for these assets and the current market value of
the remaining assets of F&M as determined by a nationally-recognized
independent investment banking firm selected by Citizens or the owner of
the option shares, as the case may be, divided by the number of shares of
common stock of F&M outstanding at the time of the sale.
If prior to an event which terminates the option, F&M enters into any of
the following agreements, then, the agreement governing the transaction must
provide that the option shall be converted into, or exchanged for, a substitute
of the acquiring corporation:
- an agreement to consolidate or merge with any person, other than
Citizens, in which Citizens will not be the continuing or surviving
corporation,
- an agreement to permit any person, other than Citizens, to merge into F&M
and F&M will be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of F&M common
stock will 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 F&M common stock shall after such merger represent less than
50% of the outstanding shares and share equivalents of the merged
company, or
- an agreement to sell or otherwise transfer all or substantially all of
its or any of its material subsidiaries' assets to any person, other than
Citizens.
For purposes of the prior paragraph, the "acquiring corporation" is defined
as:
- the continuing or surviving corporation of a consolidation or merger with
F&M, if other than F&M;
- F&M in a merger in which F&M is the continuing or surviving person; and
- the transferee of all or any substantial part of F&M's assets or the
assets of any of F&M's material subsidiaries.
The substitute option will be exercisable for the number of shares of
common stock of the acquiring corporation or, at Citizens' election, the person
that controls the acquiring corporation, equal to the market/offer price
multiplied by the number of shares of F&M common stock for which the original
option was exercisable, divided by the "average price," as set forth in the
stock option agreement. The exercise price per share of the substitute option
will be the original option price multiplied by a fraction in which the
numerator is the number of shares of F&M common stock for which the original
option was 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 original option, to the extent possible.
Neither F&M nor Citizens 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 consent of the other party, except that Citizens may assign
the stock option agreement to one of its subsidiaries and Citizens may assign
its rights under the stock option agreement after the occurrence of a purchase
event other than the acquisition by any person other than Citizens of beneficial
ownership of 20% or more of the then outstanding F&M common stock. However,
until the Federal Reserve Board has approved an application by Citizens to
acquire the shares of F&M common stock subject to the option, Citizens may not
assign its rights under the option, other than to one of its subsidiaries,
except in:
- a widely dispersed public distribution;
- a private placement in which no one party acquires the right to purchase
in excess of 2% of the voting shares of F&M;
- an assignment to a single party for the purpose of conducting a widely
dispersed public distribution on Citizens' behalf; or
48
<PAGE> 55
- any other manner approved by the Federal Reserve Board.
The rights and obligations of Citizens and F&M under the stock option
agreement are subject to receipt of certain regulatory approvals and both
parties have agreed to use their reasonable efforts to obtain these approvals.
These include making application, if necessary, for listing of the shares of F&M
common stock issuable under the stock option agreement on any exchange or
quotation system and applying to the Federal Reserve Board and to state and
foreign banking authorities for approval to acquire the shares issuable under
the stock option agreement.
NASDAQ LISTING
Citizens has agreed to file a listing application with the Nasdaq National
Market covering the Citizens common stock that it will issue to complete the
merger. It is a condition to the merger that these shares of Citizens common
stock be authorized for listing on the Nasdaq National Market effective upon
official notice of issuance.
EXPENSES
Citizens and F&M will each pay its own expenses in connection with the
merger. However, Citizens and F&M will divide equally all fees and expenses,
other than accountants, attorneys and filing fees, incurred in connection with
the printing and filing of this joint proxy statement-prospectus.
DIVIDENDS
We will coordinate the payment of dividends on Citizens and F&M common
stock so that our stockholders 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.
RESTRICTIONS ON SALES BY AFFILIATES
The shares of Citizens common stock to be issued in connection with the
merger will be registered under the Securities Act and will be freely
transferable under the Securities Act, except for shares of Citizens common
stock issued to any person who is deemed to be an affiliate of either of us at
the time of either of our special stockholder meetings. Persons who may be
deemed to be affiliates include individuals or entities that control, are
controlled by, or are under common control of either of us and may include some
of our officers and directors, as well as our principal stockholders. We have
notified these people of their affiliate status. Affiliates may not sell their
shares of Citizens common stock acquired in connection with the merger except
pursuant to:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 under the Securities Act; or
- another applicable exemption under the Securities Act.
Citizens' registration statement on Form S-4, of which this joint proxy
statement-prospectus forms a part, does not cover the resale of shares of
Citizens common stock to be received by affiliates in the merger.
In addition to the transfer restrictions of Rule 145, SEC 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. SEC guidelines indicate that affiliates of
the acquiring or acquired company must 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.
49
<PAGE> 56
We have both agreed to use our best efforts to cause each person who is an
affiliate of either of us to deliver to the other party 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 to use its best efforts to publish not later than 90
days after the end of the first month after the merger is completed in which
there are at least 30 days of post-merger combined operations, combined sales
and net income figures.
NO APPRAISAL RIGHTS
Under Michigan law, holders of Citizens common stock will have no appraisal
rights in connection with the issuance of shares of Citizens common stock in
connection with the merger or the merger agreement and the related transactions.
Under Wisconsin law, holders of F&M common stock will have no appraisal
rights in connection with the approval of the merger agreement or the related
transactions.
OPERATIONS FOLLOWING THE MERGER
Citizens anticipates that it will incur one-time pre-tax charges of
approximately $25 million to $35 million for merger transaction costs and other
special charges in connection with the merger. Merger transaction costs,
expected to range between $6 million and $8 million, would consist primarily of
investment banking, legal and accounting fees. Other special charges would
include:
- severance payments associated with the consolidation or elimination of
various functions;
- facilities costs estimated to be incurred as a result of closing certain
branches;
- systems and operations costs, consisting primarily of equipment and
software write-offs; and
- other charges, including the write-down or write-off of various tangible
and intangible assets acquired.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the F&M Board of Directors, F&M
stockholders should be aware that certain officers and directors of F&M have
interests in the merger which are different from, or in addition to yours. The
F&M Board of Directors was aware of these potential conflicts and considered
them.
EMPLOYMENT AND OTHER AGREEMENTS
F&M entered into an employment agreement with John W. Johnson, pursuant to
which Mr. Johnson serves as President and Chief Executive Officer. The
employment agreement has a three year term, unless earlier terminated
voluntarily by Mr. Johnson or upon the occurrence of certain events by F&M.
Under the employment agreement, F&M pays Mr. Johnson a base salary, subject to
adjustment consistent with adjustments received by other employees of F&M and
the duties of Mr. Johnson. The employment agreement also provides that Mr.
Johnson is eligible to participate in F&M's option plan, bonuses and other
incentive plans of F&M established for F&M's President and CEO.
F&M also entered into an employment agreement with Daniel E. Voet, pursuant
to which Mr. Voet serves as Treasurer and Chief Financial Officer. The
employment agreement has a three year term, unless earlier terminated
voluntarily by Mr. Voet or upon the occurrence of certain events by F&M. Under
the employment agreement, F&M pays Mr. Voet a base salary, subject to adjustment
consistent with adjustments received by other employees of F&M and the duties of
Mr. Voet. The employment agreement also provides that Mr. Voet is eligible to
participate in F&M's option plan, bonuses and other incentive plans of F&M
established for F&M's Chief Financial Officer and Treasurer.
50
<PAGE> 57
Each of these employment agreements provides that if there is a change in
control of F&M and during the twelve month period following the transaction
either the officer's employment is terminated without cause; or the officer
resigns from his employment following a material change in his function, duties,
responsibilities or compensation, or if his position is eliminated and he is not
offered a position with substantially equivalent or greater functions, duties,
responsibilities or compensation, or if he is required to work at a location
outside the State of Wisconsin, then the officer is entitled to receive a
severance payment. The proposed merger will result in a change in control as
defined in these employment agreements. Therefore, if within twelve months after
the merger's effective date Mr. Johnson is terminated without cause or resigns
in connection with one of the events described above, he will be entitled to a
severance payment of $467,527. Similarly, if within twelve months after the
merger's effective date Mr. Voet is terminated without cause or resigns in
connection with one of the events described above, he will be entitled to a
severance payment of $191,596. In addition to the severance payment, each
officer would also be entitled to continue receiving, for two years following
termination, medical, life and disability insurance benefits, and vested
benefits otherwise payable to him in the F&M plan or agreement related to
retirement or deferred compensation benefits, if any.
Citizens has also agreed to honor F&M's other existing employment
agreements with non-executive officers, and F&M's standard severance benefit
arrangements.
F&M OPTIONS
In the merger, Citizens will assume all outstanding options granted under
F&M's stock option plans for employees and directors of F&M. Each stock option
outstanding and unexercised immediately prior to the effective date of the
merger will be converted automatically into an option to purchase shares of
Citizens common stock as described under "The Merger -- Treatment of Options."
The following table shows, for the executive officers and directors of F&M,
(1) the number of F&M shares of common stock subject to options held by these
persons, and (2) the number of shares of Citizens common stock subject to
options into which the F&M options will be converted.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
OPTION HOLDER OPTION SHARES CITIZENS SHARES
------------- ------------- ---------------
<S> <C> <C>
Otto L. Cox............................................. 3,993 5,203
Ronald E. Fenton........................................ 1,331 1,734
Paul J. Hernke.......................................... 3,993 5,203
Gail E. Janssen......................................... 4,631 6,034
John W. Johnson......................................... 7,784 10,142
Douglas A. Martin....................................... 6,478 8,441
Robert C. Safford....................................... 6,655 8,671
Glenn L. Schilling...................................... 5,324 6,937
Joseph E. Walsh......................................... 6,655 8,671
Thomas M. Beyer......................................... 250 326
Donna R. Habert......................................... 3,633 4,734
Janet M. Lakso.......................................... 4,178 5,444
Bart Salazar............................................ 4,843 6,310
Linda K. Seefeldt....................................... 4,843 6,310
Peter H. Smaby.......................................... 4,843 6,310
Darlene M. Vanden Boogart............................... 4,843 6,310
Daniel E. Voet.......................................... 5,593 7,288
</TABLE>
DIRECTORS' AND OFFICERS' INDEMNIFICATION
Citizens has agreed to indemnify, for a period of six years beginning on
the date the merger is effective, the present and former directors and officers
of F&M and its subsidiaries against any losses related to any claim arising out
of matters occurring at or prior to the date the merger is completed, on
51
<PAGE> 58
the same terms as they would have been entitled to under Wisconsin law and under
F&M's articles of incorporation and bylaws in effect on April 18, 1999, and
Citizens has also agreed to advance expenses as incurred to the extent permitted
under Wisconsin law and F&M's articles of incorporation and bylaws. Citizens has
also committed to maintaining in effect F&M's current pre-paid directors' and
officers' liability insurance policy until August 1, 2001, unless the companies
agree to substitute an alternative policy.
NEW DIRECTORS
Citizens has agreed to appoint Ronald E. Fenton, Gail E. Janssen and Robert
C. Safford, as designated by the F&M Board of Directors, to fill three newly
created positions on the Citizens Board of Directors. Citizens has also agreed
to add one individual designated by the F&M Board of Directors and acceptable to
Citizens as a rotating member of the Executive Committee of the Board of
Directors of Citizens. See "The Merger -- Directors and Officers."
52
<PAGE> 59
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet as of
June 30, 1999, and the pro forma condensed combined statements of income for the
six-month periods ended June 30, 1999 and 1998, and for each year in the three
year period ended December 31, 1998, 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 F&M and their subsidiaries
under the assumptions and adjustments set forth in the accompanying notes to the
unaudited pro forma condensed combined financial statements. The unaudited pro
forma condensed combined balance sheets assume the merger was consummated on
June 30, 1999. The unaudited pro forma condensed combined statements of income
give effect to the merger as if the merger occurred at the beginning of each
period covered by such statements of income. Pro forma per share amounts are
based on the conversion rate of 1.303 shares of Citizens common stock for each
share of F&M common stock.
The unaudited pro forma condensed combined financial statements do not
reflect one-time charges for merger transaction costs and other special charges
expected to be incurred by Citizens and F&M, 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 of the merger 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 F&M, including the
respective notes to those financial statements, 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, appearing elsewhere in this joint proxy
statement-prospectus. See "Where You Can Find More Information."
53
<PAGE> 60
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
CITIZENS F&M PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS COMBINED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks........................ $ 170,194 $ 69,645 $ -- $ 239,839
Money market investment........................ 9,933 23,548 33,481
Investment securities held to maturity......... -- 178,984 178,984
Investment securities available-for-sale....... 767,386 376,017 1,143,403
Loans.......................................... 3,654,412 1,862,809 5,517,221
Less: Allowance for loan losses................ (46,551) (24,518) (71,069)
---------- ---------- --------- ----------
Net loans................................. 3,607,861 1,838,291 -- 5,446,152
Premises and equipment......................... 81,216 53,469 134,685
Cost in excess of net assets acquired and
premium on core deposits, net................ 51,698 11,268 62,966
Other assets................................... 69,704 41,617 111,321
---------- ---------- --------- ----------
TOTAL ASSETS.............................. $4,757,992 $2,592,839 $ -- $7,350,831
========== ========== ========= ==========
LIABILITIES
Noninterest-bearing deposits................... $ 633,322 $ 275,665 $ -- $ 908,987
Interest-bearing deposits...................... 3,068,571 1,803,853 4,872,424
---------- ---------- --------- ----------
Total deposits............................ 3,701,893 2,079,518 -- 5,781,411
Short-term borrowings.......................... 449,489 141,210 590,699
Other liabilities.............................. 52,737 21,772 74,509
Long-term debt................................. 142,814 95,404 238,218
---------- ---------- --------- ----------
Total Liabilities......................... 4,346,933 2,337,904 -- 6,684,837
STOCKHOLDERS' EQUITY
Preferred stock................................ -- -- -- --
Common stock................................... 78,294 15,109 (15,109) 238,582
160,288
Capital surplus................................ -- 145,179 (145,179) --
Retained earnings.............................. 336,607 95,013 431,620
Accumulated other comprehensive income......... (3,842) (366) (4,208)
---------- ---------- --------- ----------
Total Stockholders' Equity................ 411,059 254,935 -- 665,994
---------- ---------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.................................. $4,757,992 $2,592,839 $ -- $7,350,831
========== ========== ========= ==========
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
54
<PAGE> 61
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS F&M PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................. $ 145,820 $ 77,584 $ 223,404
Interest and dividends on investment securities........ 18,199 15,927 34,126
Money market investments............................... 893 1,103 1,996
---------- ---------- ----------
Total interest income.......................... 164,912 94,614 259,526
---------- ---------- ----------
INTEREST EXPENSE
Deposits............................................... 59,043 38,019 97,062
Short-term borrowings.................................. 3,062 2,536 5,381
Long-term debt......................................... 3,567 2,526 6,310
---------- ---------- ----------
Total interest expense......................... 65,672 43,081 108,753
---------- ---------- ----------
NET INTEREST INCOME.................................... 99,240 51,533 150,773
Provision for loan losses.............................. 7,700 1,183 8,883
---------- ---------- ----------
Net interest income after provision for loan
losses............................................ 91,540 50,350 141,890
NONINTEREST INCOME..................................... 37,576 9,133 46,709
NONINTEREST EXPENSE.................................... 86,505 32,382 118,887
---------- ---------- ----------
Income before income taxes............................. 42,611 27,101 69,712
Income taxes........................................... 13,122 8,792 21,914
---------- ---------- ----------
NET INCOME............................................. $ 29,489 $ 18,309 $ 47,798
========== ========== ==========
PER COMMON SHARE DATA:
NET INCOME:
Basic............................................... $ 1.06 $ 1.14 $ 0.98
Diluted............................................. $ 1.05 $ 1.14 $ 0.97
AVERAGE COMMON SHARES:
Basic............................................... 27,692,685 16,091,315 48,659,668
Diluted............................................. 28,185,953 16,123,880 49,195,369
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
55
<PAGE> 62
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS F&M PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................. $ 151,140 $ 74,006 $ 225,146
Interest and dividends on investment securities........ 18,146 15,571 33,717
Money market investments............................... 1,391 1,180 2,571
---------- ---------- ----------
Total interest income.......................... 170,677 90,757 261,434
---------- ---------- ----------
INTEREST EXPENSE
Deposits............................................... 65,200 39,706 104,906
Short-term borrowings.................................. 3,057 2,158 5,215
Long-term debt......................................... 4,182 2,228 6,410
---------- ---------- ----------
Total interest expense......................... 72,439 44,092 116,531
---------- ---------- ----------
NET INTEREST INCOME.................................... 98,238 46,665 114,903
Provision for loan losses.............................. 7,020 1,456 8,476
---------- ---------- ----------
Net interest income after provision for loan
losses............................................ 91,218 45,209 136,427
NONINTEREST INCOME..................................... 26,958 7,793 34,751
NONINTEREST EXPENSE.................................... 78,891 29,944 108,835
---------- ---------- ----------
Income before income taxes............................. 39,285 23,058 62,343
Income taxes........................................... 12,080 7,015 19,095
---------- ---------- ----------
NET INCOME............................................. $ 27,205 $ 16,043 $ 43,248
========== ========== ==========
PER COMMON SHARE DATA:
NET INCOME:
Basic............................................... $ 0.97 $ 1.03 $ 0.89
Diluted............................................. $ 0.95 $ 1.03 $ 0.88
AVERAGE COMMON SHARES:
Basic............................................... 28,124,468 15,591,270 48,439,893
Diluted............................................. 28,772,876 15,632,871 49,142,507
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
56
<PAGE> 63
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS F&M PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................... $ 301,138 $ 149,032 $ 450,170
Interest and dividends on investment securities.......... 36,086 30,282 66,368
Money market investments................................. 2,656 3,113 5,769
---------- ---------- ----------
Total interest income.................................. 339,880 182,427 522,307
---------- ---------- ----------
INTEREST EXPENSE
Deposits................................................. 127,966 78,642 206,608
Short-term borrowings.................................... 6,004 3,802 9,806
Long-term debt........................................... 8,064 4,795 12,859
---------- ---------- ----------
Total interest expense................................. 142,034 87,239 229,273
---------- ---------- ----------
NET INTEREST INCOME...................................... 197,846 95,188 293,034
Provision for loan losses................................ 14,090 2,438 16,528
---------- ---------- ----------
Net interest income after provision for loan losses.... 183,756 92,750 276,506
NONINTEREST INCOME....................................... 56,252 16,824 73,076
NONINTEREST EXPENSE...................................... 158,291 61,726 220,017
---------- ---------- ----------
Income before income taxes............................... 81,717 47,848 129,565
Income taxes............................................. 24,932 14,351 39,283
---------- ---------- ----------
NET INCOME............................................... $ 56,785 $ 33,497 $ 90,282
========== ========== ==========
PER COMMON SHARE DATA:
NET INCOME:
Basic............................................... $ 2.02 $ 2.15 $ 1.86
Diluted............................................. $ 1.98 $ 2.15 $ 1.84
AVERAGE COMMON SHARES:
Basic............................................... 28,127,647 15,578,621 48,426,590
Diluted............................................. 28,742,615 15,611,584 49,084,509
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
57
<PAGE> 64
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS F&M PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans................................ $ 294,258 $ 132,070 $ 426,328
Interest and dividends on investment securities........... 40,532 28,753 69,285
Money market investments.................................. 1,073 2,022 3,095
---------- ---------- ----------
Total interest income................................... 335,863 161,845 498,708
---------- ---------- ----------
INTEREST EXPENSE
Deposits.................................................. 129,267 72,155 201,422
Short-term borrowings..................................... 8,689 4,534 13,223
Long-term debt............................................ 6,059 3,147 9,206
---------- ---------- ----------
Total interest expense.................................. 144,015 79,836 223,851
---------- ---------- ----------
NET INTEREST INCOME....................................... 191,848 83,009 274,857
Provision for loan losses................................. 15,332 5,179 20,511
---------- ---------- ----------
Net interest income after provision for loan losses..... 176,516 77,830 254,346
NONINTEREST INCOME........................................ 46,694 12,780 59,474
NONINTEREST EXPENSE....................................... 177,161 56,571 233,732
---------- ---------- ----------
Income before income taxes................................ 46,049 34,039 80,088
Income taxes.............................................. 14,541 10,656 25,197
---------- ---------- ----------
NET INCOME................................................ $ 31,508 $ 23,383 $ 54,891
========== ========== ==========
PER COMMON SHARE DATA:
NET INCOME:
Basic................................................ $ 1.13 $ 1.59 $ 1.17
Diluted.............................................. $ 1.11 $ 1.58 $ 1.15
AVERAGE COMMON SHARES:
Basic................................................ 27,878,990 14,707,409 47,042,744
Diluted.............................................. 28,419,676 14,760,237 47,652,265
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
58
<PAGE> 65
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CITIZENS F&M PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans............................... $ 265,139 $ 108,778 $ 373,917
Interest and dividends on investment securities.......... 43,431 27,641 71,072
Money market investments................................. 3,766 1,942 5,708
---------- ---------- ----------
Total interest income.................................. 312,336 138,361 450,697
---------- ---------- ----------
INTEREST EXPENSE
Deposits................................................. 119,185 62,389 181,574
Short-term borrowings.................................... 7,959 2,966 10,925
Long-term debt........................................... 6,547 1,338 7,885
---------- ---------- ----------
Total interest expense................................. 133,691 66,693 200,384
---------- ---------- ----------
NET INTEREST INCOME...................................... 178,645 71,668 250,313
Provision for loan losses................................ 12,126 3,599 15,725
---------- ---------- ----------
Net interest income after provision for loan losses.... 166,519 68,069 234,588
NONINTEREST INCOME....................................... 48,004 10,199 58,203
NONINTEREST EXPENSE...................................... 155,056 46,404 201,460
---------- ---------- ----------
Income before income taxes............................... 59,467 31,864 91,331
Income taxes............................................. 17,042 9,685 26,727
---------- ---------- ----------
NET INCOME............................................... $ 42,425 $ 22,179 $ 64,604
========== ========== ==========
PER COMMON SHARE DATA:
NET INCOME:
Basic............................................... $ 1.52 $ 1.61 $ 1.41
Diluted............................................. $ 1.50 $ 1.61 $ 1.40
AVERAGE COMMON SHARES:
Basic............................................... 27,844,341 13,766,973 45,782,707
Diluted............................................. 28,258,591 13,799,981 46,239,966
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
59
<PAGE> 66
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 Pro Forma Adjustments -- Pro forma adjustments to common shares and
capital surplus at June 30, 1999 reflect the combination of Citizens and F&M,
accounted for as a pooling of interests, through the exchange of 20,982,384
Citizens common shares for all 16,103,134 outstanding shares of F&M common stock
at an exchange ratio of 1.303 Citizens common shares for each share of F&M
common stock. Under generally accepted accounting principles, the assets and
liabilities of F&M will be combined with those of Citizens at book values. In
addition, the statements of income of F&M will be combined with the statements
of income of Citizens on a retroactive basis to January 1, 1996.
Note 2 Special Charge -- The unaudited pro forma condensed combined
financial statements do not reflect one-time charges of approximately $25
million to $35 million for merger transaction costs and other special charges.
Merger transaction costs, expected to range between $6 million and $8 million,
consist primarily of investment banking, legal and accounting fees. Other
special charges include severance payments associated primarily with the
consolidation or elimination of various functions and branches; facilities costs
estimated to be incurred as a result of closing certain branches; systems and
operations costs, consisting primarily of equipment and software write-offs; and
other charges, including write-down or write-off of various tangible and
intangible assets acquired. 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 F&M.
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REGULATION AND SUPERVISION
The following discussion describes certain of the material elements of the
regulatory framework applicable to bank holding companies and their subsidiaries
and provides certain specific information relevant to us. This regulatory
framework is intended primarily for the protection of depositors and the federal
deposit insurance funds and not for the protection of security holders. To the
extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to those provisions. A
change in the statutes, regulations or regulatory policies applicable to us or
our respective subsidiaries may have a material effect on our respective
businesses. The framework described in this section will also generally be
applicable to Citizens following the merger.
GENERAL
As a bank holding company, each of us is subject to regulation under the
Bank Holding Company Act and to inspection, examination and supervision by the
Board of Governors of the Federal Reserve System. Under the Bank Holding Company
Act, bank holding companies generally may not acquire the ownership or control
of more than 5% of the voting shares or substantially all the assets of any
company, including a bank, without the Federal Reserve Board's prior approval.
In addition, bank holding companies generally may engage, directly or
indirectly, only in banking and such other activities as are determined by the
Federal Reserve Board to be closely related to banking.
Various governmental requirements, including Sections 23A and 23B of the
Federal Reserve Act limit borrowings by each of us and our nonbank subsidiaries
from our affiliate banks, and also limit various other transactions between each
of us and our nonbank subsidiaries, on the one hand, and our affiliate banks, on
the other hand. For example, Section 23A of the Federal Reserve Act limits to no
more than 10% of its total capital the aggregate outstanding amount of any
bank's loans and other "covered transactions" with any particular nonbank
affiliate, and limits to no more than 20% of its total capital the aggregate
outstanding amount of any bank's covered transactions with all of its nonbank
affiliates. Section 23A of the Federal Reserve Act also generally requires that
a bank's loans to its nonbank affiliates be secured, and Section 23B of the
Federal Reserve Act generally requires that a bank's transactions with its
nonbank affiliates be on arm's length terms.
Each of our state-chartered banking subsidiaries are subject to regulation
primarily by their respective state banking departments and by the Federal
Reserve Board. Citizens' Illinois banking subsidiary is chartered under federal
law; its primary regulator is the Comptroller of the Currency. We and our
respective subsidiaries also are affected by the fiscal and monetary policies of
the federal government and the Federal Reserve Board, and by various other
governmental requirements and regulations.
LIABILITY FOR BANK SUBSIDIARIES
Under current Federal Reserve Board policy, a bank holding company is
expected to act as a source of financial and managerial strength to each of its
subsidiary banks and to maintain resources adequate to support each of its
subsidiary banks. This support may be required at times when the bank holding
company may not have the resources to provide it. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a subsidiary bank would be
assumed by the bankruptcy trustee and entitled to priority of payment.
Any depository institution insured by the FDIC can be held liable for any
loss incurred, or reasonably expected to be incurred, by the FDIC in connection
with (1) the default of a commonly controlled FDIC-insured depository
institution or (2) any assistance provided by the FDIC to a commonly controlled
FDIC-insured depository institution in danger of default. "Default" is defined
generally as the appointment of a conservator or receiver and "in danger of
default" is defined generally as the existence of certain conditions indicating
that a default is likely to occur in the absence of regulatory assistance. All
of our banks are FDIC-insured depositary institutions. Also, if a default
occurred with respect to a bank, any capital loans to the bank from its parent
holding company would be subordinate in right of payment to payment of the
bank's depositors and certain of its other obligations.
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CAPITAL REQUIREMENTS
Each of us is subject to risk-based capital requirements and guidelines
imposed by the Federal Reserve Board that are substantially similar to the
capital requirements and guidelines imposed by the FDIC and the respective state
banking departments on the depository institutions within their respective
jurisdictions. For this purpose, a depository institution's or holding company's
assets and certain specified off-balance sheet commitments are assigned to four
risk categories, each weighted differently based on the level of credit risk
that is ascribed to such assets or commitments. In addition, risk weighted
assets are adjusted for low-level recourse and market risk equivalent assets. A
depository institution's or holding company's capital, in turn, is divided into
three tiers:
- Tier 1 or "core" capital, which includes common equity, non-cumulative
perpetual preferred stock and a limited amount of cumulative perpetual
preferred stock and related surplus (excluding auction rate issues) and a
limited amount of cumulative perpetual preferred stock and minority
interests in equity accounts of consolidated subsidiaries, less goodwill,
certain identifiable intangible assets and certain other assets;
- Tier 2 or "supplementary" capital, which includes, among other items,
perpetual preferred stock not meeting the Tier 1 definition, mandatory
convertible securities, subordinated debt and allowances for loan and
lease losses, subject to certain limitations, less certain required
deductions; and
- Tier 3 or "market risk" capital, which includes qualifying unsecured
subordinated debt.
Each of us, like other bank holding companies, is required to maintain Tier
1 and "total capital" (the sum of Tier 1, Tier 2 and Tier 3 capital) equal to at
least 4% and 8% of its total risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit), respectively. At
June 30, 1999, each of us met both requirements, with Tier 1 and total capital
equal to 9.67% and 10.91% (in the case of Citizens) and 11.94% and 13.14% (in
the case of F&M) of its total risk-weighted assets, respectively.
The Federal Reserve Board and the FDIC have adopted rules to incorporate
market and interest rate risk components into their risk-based capital
standards. Amendments to the risk-based capital requirements, incorporating
market risk, became effective January 1, 1998. Under the new market risk
requirements, capital will be allocated to support the amount of market risk
related to a financial institution's ongoing trading activities.
The Federal Reserve Board also requires bank holding companies to maintain
a minimum "leverage ratio" (Tier 1 capital to adjusted total assets) of 3% if
the holding company has the highest regulatory rating and meets certain other
requirements, or of 3% plus an additional cushion of at least 100 to 200 basis
points if the holding company does not meet these requirements. At June 30,
1999, Citizen's leverage ratio was 8.10% and F&M's leverage ratio was 9.53%.
The Federal Reserve Board may set capital requirements higher than the
minimums noted above for holding companies whose circumstances warrant it. For
example, holding companies experiencing or anticipating significant growth may
be expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will consider a
"tangible Tier 1 capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of our respective depository institutions were in compliance with all
applicable capital requirements. Failure to meet capital requirements could
subject a bank to a variety of enforcement remedies, including the termination
of deposit insurance by the FDIC, and to certain restrictions on its business,
which are described under "-- Federal Deposit Insurance Corporation Improvement
Act."
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT
The FDICIA, among other things, identifies five capital categories for
insured depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
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<PAGE> 69
undercapitalized) and requires federal bank regulatory agencies to implement
systems for "prompt corrective action" for insured depository institutions that
do not meet minimum capital requirements, based on these categories. The FDICIA
imposes progressively more restrictive constraints on operations, management and
capital distributions, depending on the category in which an institution is
classified. Unless a bank is "well-capitalized," it is subject to restrictions
on its ability to offer brokered deposits and on certain other aspects of its
operations. An "undercapitalized" bank must develop a capital restoration plan
and its parent holding company must guarantee the bank's compliance with the
plan up to the lesser of 5% of the bank's assets at the time it became
undercapitalized and the amount needed to comply with the plan.
As of June 30, 1999, each of our respective bank subsidiaries was "well
capitalized," based on the "prompt corrective action" ratios and guidelines
described above. It should be noted, however, that a bank's capital category is
determined solely for the purpose of applying the FDIC's "prompt corrective
action" regulations and that the capital category may not constitute an accurate
representation of a bank's overall financial condition or prospects.
DIVIDEND RESTRICTIONS
Each of us is a corporation separate and distinct from our respective
banks. Various federal and state statutory provisions limit the amount of
dividends our respective banks can pay to us without regulatory approval. The
Federal Reserve Board has issued a policy statement on the payment of cash
dividends by bank holding companies. In the policy statement, the Federal
Reserve Board expressed its view that a bank holding company should not pay cash
dividends exceeding its net income or which could only be funded in ways that
weakened the bank holding company's financial health, such as by borrowing.
Additionally, the Federal Reserve Board possesses enforcement powers over bank
holding companies and their non-bank subsidiaries to prevent or remedy actions
that represent unsafe or unsound practices or violations of applicable statutes
and regulations. Among these powers is the ability, in appropriate cases, to
proscribe the payment of dividends by banks and bank holding companies. The
"prompt corrective action" provisions of the FDICIA impose further restrictions
on the payment of dividends by insured banks which fail to meet specified
capital levels. The Federal Reserve Board has issued a policy statement
providing that bank holding companies and insured banks should generally only
pay dividends out of current operating earnings.
The Federal Deposit Insurance Act generally prohibits a depository
institution from making any capital distribution (including a payment of a
dividend) or paying any management fees to its holding company if the depository
institution would thereafter be undercapitalized. The FDIC may prevent an
insured bank from paying dividends if the bank is in default of payment of an
assessment due to the FDIC. In addition, payment of dividends by an insured bank
may be prevented by the applicable federal regulatory authority if the payment
is determined, by reason of the financial condition of the bank, to be an unsafe
and unsound banking practice.
DEPOSIT INSURANCE ASSESSMENTS
The deposits of each of our respective banks are insured up to regulatory
limits by the FDIC and, accordingly, are subject to deposit insurance
assessments to maintain the bank Insurance Fund administered by the FDIC. The
FDIC has adopted regulations establishing a permanent risk-related deposit
insurance assessment system. Under this system, the FDIC places each insured
bank in one of nine risk categories based on (1) the bank's capitalization and
(2) supervisory evaluations provided to the FDIC by the institution's primary
federal regulator. Each insured bank's insurance assessment rate is then
determined by the risk category in which it is classified by the FDIC.
Effective January 1, 1999, the annual insurance premiums on bank deposits
insured by the Bank Insurance Fund and the Savings Association Insurance Fund
vary between $0.00 per $100 of deposits for banks classified in the highest
capital and supervisory evaluation categories to $0.27 per $100 of deposits for
banks classified in the lowest capital and supervisory evaluation categories.
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DEPOSITOR PREFERENCE STATUTE
Federal legislation has been enacted providing that deposits and certain
claims for administrative expenses and employee compensation against an insured
depository institution would be afforded a priority over other general unsecured
claims against the institution, including federal funds and letters of credit,
in the "liquidation or other resolution" of the institution by any receiver.
BROKERED DEPOSITS
Under FDIC regulations, no FDIC-insured depository institution can accept
brokered deposits unless it is well capitalized, or is adequately capitalized
and receives a waiver from the FDIC. In addition, these regulations prohibit any
depository institution that is not well capitalized from paying an interest rate
on deposits in excess of 75 basis points over certain prevailing market rates
or, unless it provides certain notice to affected depositors, offering "pass
through" deposit insurance on certain employee benefit plan accounts.
INTERSTATE BANKING AND BRANCHING
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, subject to certain concentration limits and other requirements:
- bank holding companies such as us are permitted to acquire banks and
bank holding companies located in any state;
- any bank that is a subsidiary of a bank holding company is permitted
to receive deposits, renew time deposits, close loans, service loans
and receive loan payments as an agent for any other bank subsidiary
of that holding company; and
- banks are permitted to acquire branch offices outside their home
states by merging with out-of-state banks, purchasing branches in
other states, and establishing de novo branches in other states;
provided that, in the case of any purchase or opening of individual
branches, the host state has adopted legislation "opting in" to
those provisions of the Riegle-Neal Act; and provided that, in the
case of a merger with a bank located in another state, the host
state has not adopted legislation "opting out" of that provision of
the Riegle-Neal Act.
After the merger, Citizens may use the Riegle-Neal Act to acquire banks in
additional states.
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DESCRIPTION OF CITIZENS CAPITAL STOCK
GENERAL
Under the Citizens articles of incorporation, Citizens' authorized capital
stock consists of 100,000,000 shares of Citizens common stock and 5,000,000
shares of Citizens preferred stock, of which 200,000 shares have been designated
as Series A preferred stock. At August 31, 1999 no shares of Citizens preferred
stock, including the Series A preferred stock, were currently issued or
outstanding, 26,735,270 shares of Citizens common stock were outstanding
(excluding treasury shares) and 2,166,708 shares of Citizens common stock were
issuable upon the exercise or conversion of options, warrants or convertible
securities issuable by Citizens.
The Citizens articles of incorporation contain specific provisions with
respect to the election of directors, which include the provision that the
Citizens Board of Directors 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 Stockholders' 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
dividends that are declared by the Citizens Board of Directors 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, if this
happens, 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
of Directors 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 stockholders 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 F&M common stock upon the consummation of the merger
will be, fully paid and non-assessable.
Restrictions on Ownership. The Bank Holding Company Act requires any "bank
holding company" (as defined in the Bank Holding Company Act) to obtain the
approval of the Federal Reserve Board prior to acquiring 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. Any holder of
25% or more of the Citizens common stock, or a holder of 5% or more if that
holder otherwise exercises a "controlling influence" over Citizens, is subject
to regulation as a bank holding company under the Bank Holding Company Act.
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CITIZENS PREFERRED STOCK
The Citizens Board of Directors is empowered by the Citizens articles of
incorporation, without further action by the Citizens stockholders, 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
upon filing became a part of Citizens' articles of incorporation. 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 rights are not
currently exercisable. See "-- 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 of
Directors. The ability of the Citizens Board of Directors to issue Citizens
preferred stock without stockholder approval might have the effect of making
more difficult any change in control of Citizens.
CITIZENS RIGHTS AGREEMENT
On July 20, 1990, the Citizens Board of Directors declared a dividend
distribution of one right for each outstanding share of Citizens common stock
payable to stockholders of record on August 10, 1990. Each right entitles its
holder to purchase from Citizens 1/100th of a share of Citizens Series A
preferred stock at a price of $75 per 1/100th of a share, subject to adjustment
to prevent dilution. As a 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. Each share of Citizens common stock issued in the merger
will have attached to it one of the rights. The description and terms of the
rights are set forth in a Rights Agreement between Citizens and Citizens Bank,
as rights agent. The rights do not have any voting rights nor are they entitled
to dividends and they will expire on July 20, 2000.
The rights attach to all Citizens common stock certificates representing
outstanding shares. No separate rights certificates have been distributed. The
rights are not transferable apart from the Citizens common stock until after a
distribution date which will occur upon the earlier of:
- the tenth business day after a public announcement that a person or group
has acquired, or obtained the right to acquire, beneficial ownership of
15% or more of the outstanding shares of Citizens common stock (that
person or group to be referred to as an "acquiring person"); or
- 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, that person would be an acquiring person.
The rights are not exercisable until after the distribution date and after the
Citizens Board of Director's right to redeem the rights expires.
In the event that,
- 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 an acquiring person which results in the acquiring
person 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 the tender offer is fair
and has received a written agreement from the acquiring person to pay all
fees, costs and expenses incurred by Citizens in connection with the
rendering and receipt of this opinion, or
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- 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 Citizens common
stock by more than 1%, or
- 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 Citizens common stock having a market
value of two times the then-current rights' purchase price.
In the event that, following a distribution date,
- Citizens is consolidated with or merged into another person, or
- another person is merged into or consolidated with Citizens in a
transaction in which Citizens common stock is changed into or exchanged
for stock or other securities of any other person or cash or any other
property, or
- 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 the transaction would have a market value of two times the then-
current rights' purchase price. Mergers and consolidations with 90% stockholders
who became 90% stockholders 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 stockholders in
such tender offer.
At any time after any person becomes an acquiring person but prior to the
time that that acquiring person has acquired 50% or more of the outstanding
Citizens common stock, the Citizens Board of Directors may cause stockholders 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 Citizens 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 of Directors has determined to make
this exchange, the rights may no longer be exercised.
At any time prior to the close of business on the earlier of (1) the tenth
business day following public announcement that a person or group has become an
acquiring person or (2) the date the rights expire, the Citizens Board of
Directors may redeem the rights in whole, but not in part, at a redemption price
of $.005 per right. Immediately upon the Citizens Board of Directors' 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 of Directors approves the reinstatement.
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 of Directors. 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 stockholders as
determined by a majority of the independent directors on the Citizens Board of
Directors, or willing to negotiate with the Citizens Board of Directors. The
rights should not interfere with any merger or other business combination
approved by the Citizens Board of Directors since the Citizens Board of
Directors may, at its option, at any time until ten days following the public
announcement that a person or group has become an acquiring person, redeem all
but not less than all of the then outstanding rights at the $.005 redemption
price.
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COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
Upon completion of the merger, F&M stockholders whose shares of F&M common
stock are converted into shares of Citizens common stock will become
stockholders of Citizens. The rights of Citizens stockholders are governed by
Citizens' articles of incorporation, bylaws and rights agreement, and Michigan
law. Currently, the rights of F&M stockholders are governed by F&M's articles of
incorporation and bylaws, and Wisconsin law.
The following tables summarize the principal differences between the rights
of Citizens stockholders and F&M stockholders. Copies of Citizens' articles of
incorporation, bylaws and rights agreement and F&M's articles of incorporation
and bylaws will be sent to you upon request. See "Where You Can Find More
Information" on page 82.
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
NUMBER AND CLASSIFICATION OF
DIRECTORS.................. Citizens articles of F&M's bylaws provide that the
incorporation provide that number of directors will be
the number of directors will 9. F&M's Board of Directors
be no less than 10 and no is also divided into three
more than 25. Citizens classes elected for staggered
currently has 18 directors, three-year terms.
this number will increase to
21 after the merger. The
directors are divided into
three classes and each is
elected to a three year term.
Director elections are
staggered so that only one of
the three classes of
directors is elected in any
year.
NOMINATIONS OF DIRECTOR
CANDIDATES................. A stockholder intending to An F&M stockholder intending
nominate a candidate for to nominate a candidate for
election as a Citizens election as an F&M director
director at any meeting must at an annual meeting must
deliver information about the deliver information about
nominee to Citizens (1) at that nominee to F&M at least
least 90 days prior to the 90 days, but not more than
date of an annual meeting at 150 days, before the
which directors are to be scheduled meeting date. For a
elected if the annual meeting special meeting, notice must
is held after the last be given within 10 days after
Thursday in January, and (2) F&M announces the meeting,
within 7 business days after but may only be made if the
the date of notice to nomination is within the
stockholders of a special purposes described in the
stockholder meeting at which notice to stockholders of the
directors are to be elected. meeting.
QUALIFICATIONS FOR
DIRECTORS.................. When an officer of Citizens F&M has no similar provisions
or any of its subsidiaries in its articles of
who also serves as a director incorporation or bylaws.
of Citizens ceases to be an However, directors are
officer of Citizens or one of required to retire from F&M's
its subsidiaries, he or she Board of Directors upon
shall, at the same time, reaching 70 years of age.
cease to serve as a director.
</TABLE>
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<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
REMOVAL OF DIRECTORS......... Citizens' bylaws provide that F&M's bylaws provide that a
a director may be removed director may be removed by
only upon a showing of cause, the vote of the stockholders
by the vote of the holding a majority of the
stockholders holding at least outstanding shares entitled
two-thirds of the outstanding to vote for the election of
shares entitled to vote at the director given at a
any special meeting called meeting of the stockholders
for that purpose. called for that purpose.
Since F&M's bylaws do not
state otherwise, under
Wisconsin law, a director may
be removed with or without
cause.
FILLING VACANCIES ON THE
BOARD OF DIRECTORS......... Vacancies on the Citizens Vacancies on the F&M Board of
Board of Directors may be Directors may be filled by
filled by a majority of the the Board of Directors, by a
remaining directors. majority of all remaining
directors, if less than a
quorum. If the vacancy was
created by the removal of a
director by a vote of the
stockholders, the
stockholders have the right
to fill the vacancy at the
same meeting.
SPECIAL STOCKHOLDER
MEETINGS................... Citizens' bylaws provide that F&M's bylaws provide that a
a special meeting of Citizens special meeting of F&M
stockholders may be called by stockholders may be called by
the Chairman of the Board of the President or the Board of
Directors or by the President Directors or by the person
and shall be called by the designated in the written
President or Secretary upon request of the holders of not
the written request of a less than 10% of all the
majority of the directors of shares of F&M entitled to
Citizens, or at the written vote at the meeting.
request of stockholders Wisconsin law provides that
owning at least two-thirds of the only matters to be
the Citizens capital stock considered at a special
entitled to vote at the meeting are those included in
special meeting. The request the notice of meeting.
must state the purpose or
purposes of the proposed
meeting, and the business
transacted at any special
meeting of stockholders shall
be limited to the purposes
stated in Citizens' notice of
meeting delivered to
stockholders.
</TABLE>
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<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
CERTAIN BUSINESS
COMBINATIONS............... Citizens' articles of Under Wisconsin law, a plan
incorporation provide that of merger or share exchange
the affirmative vote of the involving F&M generally must
holders of not less than be approved by a each voting
two-thirds of the Citizens group of stockholders
shares entitled to vote and entitled to vote separately
the holders of not less than on the plan by a majority of
a majority of the outstanding all the votes entitled to be
shares entitled to vote cast on the plan by that
excluding all such shares voting group. However,
beneficially owned by a certain transactions subject
related person, as defined to Wisconsin anti-takeover
below, is required to approve laws require a greater vote.
certain business In addition, certain mergers
combinations, such as mergers in which F&M is the surviving
or sales of substantially all corporation and which do not
assets, involving a related affect the articles of
person. This vote is not incorporation or the rights
required if the business of existing stockholders do
combination is approved by a not require stockholder
75% vote of the continuing approval. See "Anti-Takeover
directors of Citizens before Laws," below.
or after the related person
acquired that status, or if
certain conditions relating
to the price to be paid and
certain procedural
requirements are met.
A related person for purposes
of this provision is a person
owning beneficially 10% or
more of the outstanding
shares of any class or series
of Citizens capital stock.
These provisions of the
Citizens articles of
incorporation are not
applicable if Citizens is
subject to the provisions of
the Michigan Business
Corporation Act containing
supermajority voting
requirements for certain
transactions with persons who
own more than 10% of the
outstanding voting capital
stock. Citizens is not now
subject to those provisions,
but the Board of Directors
could elect to subject
Citizens to them in the
future.
</TABLE>
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<PAGE> 77
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
AMENDMENT OF ARTICLES OF
INCORPORATION AND BYLAWS... Citizens' articles of F&M's articles of
incorporation provide that incorporation or bylaws may
any amendment, change or be amended by stockholders by
repeal of the provisions of the affirmative vote of a
Citizens' articles of majority of the votes cast by
incorporation relating to: each group of stockholders
- the size and classification entitled to vote on the
of the Citizens Board, amendment as a group.
- certain amendments of the Generally, F&M's bylaws may
Citizens bylaws proposed by also be amended by the F&M
any stockholder of Citizens Board of Directors by the
relating to the calling of affirmative vote of a
special meetings of majority of the number of
stockholders, nomination of directors present at a
director candidates, and meeting at which a quorum is
removal of directors, in attendance. Some
- business combinations, and relatively ministerial
- actions of stockholders by amendments to articles of
written consent, incorporation do not require
must be approved by a vote of a stockholder vote under
at least two-thirds of the Wisconsin law.
then outstanding shares of
capital stock entitled to
vote. With respect to
amending provisions relating
to business combinations,
they also require a majority
of the shares of capital
stock entitled to vote of
which a related person is not
a beneficial owner. There are
exceptions for transactions
meeting prior approval
requirements.
Michigan law generally
provides that proposed
amendments to a corporation's
articles of incorporation
must be approved by a
majority of the outstanding
shares entitled to vote on
the amendment.
</TABLE>
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<PAGE> 78
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
INDEMNIFICATION OF DIRECTORS
AND OFFICERS............... Michigan law generally Wisconsin law also provides
provides that a corporation for mandatory indemnification
may, and in certain of a director or officer
circumstances must, indemnify against certain liabilities
directors and officers and expenses. The details
against many liabilities concerning exceptions and
related to their corporate procedures differ from
office. There are exceptions Michigan law in ways which
in specified cases which are not material when
generally involve either considered in the abstract
personal misconduct or but which might affect
conflicting interests. The particular cases.
statute also provides
procedures for approval of Wisconsin law also contains
this indemnification. provisions which, subject to
certain conditions, permit
Michigan law also permits a reimbursement of expenses as
corporation to advance incurred, provide for court-
expenses to directors, ordered indemnification and
officers and others upon a permit additional rights to
determination of eligibility indemnification. Unlike
and specifies related Michigan law, Wisconsin law
requirements. Michigan law specifically states that it
provides that a corporation is the public policy of
may provide additional rights Wisconsin to require or
to those seeking permit indemnification in
indemnification or connection with a proceeding
advancement of expenses. involving securities
regulation to the extent
otherwise required or
permitted under Wisconsin
law.
LIMITED LIABILITY OF
DIRECTORS.................. Citizens' articles of Under Wisconsin law, the F&M
incorporation provide that a directors are liable to the
director will not be corporation for a breach of
personally liable to Citizens fiduciary duty only if the
or its stockholders for breach constitutes certain
monetary damages for breach types of willful misconduct
of the director's fiduciary and violations of criminal
duty, other than the law. Except in the case of
liability of a director for this type of breach, a
certain types of willful Wisconsin corporation must
misconduct and violations of indemnify directors against
criminal law. damages and costs incurred in
connection with any
proceeding where the director
was a party because of being
a director.
</TABLE>
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<PAGE> 79
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
VOTE REQUIRED FOR CERTAIN
REORGANIZATIONS............ Under Michigan law, a Under Wisconsin law, a
stockholder vote is required stockholder vote is required
for most mergers, share for most mergers, share
exchanges, sales of exchanges, sales of
substantially all assets, and substantially all assets, and
for the voluntary dissolution for the voluntary dissolution
of a corporation. of a corporation.
Except as indicated below or Wisconsin law does not
unless required by the require the vote of the
articles, Michigan law does stockholders of the surviving
not require the vote of the corporation in a merger if
stockholders of the surviving the merger does not change
corporation in a merger if the corporation's articles of
the merger does not change incorporation in a way that
the articles of incorporation requires stockholder approval
of the surviving corporation or change the number of
and if each stockholder of shares or rights of shares
the surviving corporation held by stockholders, and the
owning shares before the merger does not result in an
merger will hold the same increase by more than 20% of
number and type of shares the shares or related share
after. rights outstanding.
Stockholders of a corporation
proposing to issue its
shares, or other securities
convertible into its shares,
in a merger, share exchange
or other acquisition of
shares or assets of another
entity have the right to vote
on the acquisition if the
number of shares to be
issued, plus those issuable
upon conversion of any other
securities to be issued, will
exceed 100% of the number of
shares outstanding
immediately prior to the
acquisition plus the number
of shares, if any, issuable
upon conversion of any
outstanding securities.
</TABLE>
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<PAGE> 80
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
STOCKHOLDER ACTION BY
CONSENT.................... Michigan law permits Wisconsin law permits
stockholders to take action stockholders to take action
without a meeting by without a meeting by
unanimous written consent. unanimous written consent.
Citizens' articles of Wisconsin law also allows a
incorporation provide that corporation, if it so elects
any action by stockholders in its articles of
that may be taken at a incorporation, to take such
meeting of stockholders may action by less than unanimous
be taken without a meeting, written consent of the
without prior notice, and stockholders. F&M's articles
without a vote if a consent of incorporation do not
in writing setting forth the include a provision
action so taken is signed by permitting less than
the holders of not less than unanimous consent.
two-thirds of the outstanding
capital stock entitled to
vote.
STATUTORY STOCKHOLDER
LIABILITY.................. There is no provision under Wisconsin law imposes
Michigan law comparable with personal liability on
Wisconsin law. However, stockholders of Wisconsin
Wisconsin courts have applied corporations for debts owed
this provision to to employees for services
non-Wisconsin corporations performed, but not exceeding
which are qualified to do six months service in any one
business in Wisconsin. case. As judicially
Citizens may therefore become interpreted, Wisconsin law
subject to those provisions limits the liability to the
if it is required to qualify consideration paid to a
to do business in Wisconsin. corporation for shares.
</TABLE>
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<PAGE> 81
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
DISSENTERS' RIGHTS........... Under Michigan law, unless Under most circumstances,
otherwise provided in a including this merger, F&M
Michigan corporation's stockholders are not entitled
articles of incorporation, to dissenter's rights because
bylaws, or a resolution of F&M common stock is traded on
its board of directors, the Nasdaq Stock Market.
dissenters' rights are not Assuming continued Nasdaq
available to holders of listing, F&M stockholders
shares listed on a national would not be entitled to
securities exchange. As a dissenter's rights with
result, assuming the respect to future
continued listing of the transactions. However, in
Citizens common stock on the spite of F&M's Nasdaq
Nasdaq National Market, listing, F&M stockholders may
Citizens stockholders will dissent from a proposed
not be entitled to merger or share exchange and
dissenters' rights with receive the fair value of
respect to any future merger, their shares only where the
plan of share exchange or transaction involves a
sale of all or substantially significant stockholder a
all of the assets of Citizens person or group who directly
which might occur following or indirectly owns 10% or
the merger. more of the F&M voting stock,
or is an affiliate of F&M and
directly or indirectly owned
10% or more of the voting
stock within the last two
years.
DIRECTOR AND OFFICER
DISCRETION................. There is no provision under The WBCL provides that, in
Michigan law comparable with discharging his or her duties
Wisconsin law. to the corporation and in
determining what he or she
believes to be in the best
interests of the corporation,
a director or officer may, in
addition to considering the
effects of any action on
stockholders, consider:
- the effects of the action
on employees, suppliers and
customers of the
corporation;
- the effects of the action
on the communities in which
the corporation operates;
and
- any other factors that the
director or officer
considers pertinent.
</TABLE>
75
<PAGE> 82
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
ANTI-TAKEOVER STATUTES --
BUSINESS COMBINATIONS...... Michigan law provides that Sections 180.1140 to 180.1144
business combinations between of the Wisconsin Business
covered Michigan business Corporation Law regulate a
corporations, or their broad range of business
subsidiaries and an combinations between a
interested stockholder or its resident domestic corporation
affiliate can be consummated and an interested
only if approved by at least stockholder. A business
90% of the votes of each combination is defined to
class of the corporation's include any of the following
stock entitled to vote and by transactions:
at least two-thirds of the - merger or share exchange;
votes of each such class of - sale, lease, exchange,
stock other than voting mortgage, pledge, transfer,
shares beneficially owned by or other disposition of
the interested stockholder or assets equal to 5% or more
its affiliate or associate, of the market value of the
unless five years have stock or assets of the
elapsed after the person company or 10% of its
involved became an interested earning power or income;
stockholder and unless - issuance of stock or rights
certain fair price and other to purchase stock with a
conditions are satisfied. market value equal to 5% or
more of the outstanding
Business combinations stock; and
include, generally: - adoption of a plan of
- any merger, consolidation, liquidation or dissolution.
or share exchange of the
corporation or any A resident domestic
subsidiary which alters the corporation is defined to
contract rights of the mean a Wisconsin corporation
shares or which changes or that has a class of voting
converts, in whole or in stock that is registered or
part, the outstanding traded on a national
shares of the corporation; securities exchange or that
- any sale, lease, transfer, is registered under Section
or other disposition, not in 12(g) of the Exchange Act and
the ordinary course of that, as of the relevant
business, of assets having date, satisfies any of the
an aggregate book value of following:
10% or more of the - its principal offices are
corporation's net worth; located in Wisconsin;
- the issuance or transfer of - it has significant business
equity securities having an operations located in
aggregate market value of Wisconsin;
5% or more of the total - more than 10% of the
market value of the holders of record of its
corporation's outstanding shares are residents of
shares; Wisconsin, or
- the adoption of any plan or - more than 10% of its shares
proposal for liquidation or are held of record by
dissolution in which an residents of Wisconsin.
interested stockholder or
any affiliate thereof will F&M is a resident corporation
receive anything but cash; for purposes of the Wisconsin
and anti- takeover laws.
</TABLE>
76
<PAGE> 83
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
- any reclassification of An interested stockholder is
securities, defined to mean a person who
recapitalization, or beneficially owns, directly
merger, consolidation or or indirectly, 10% of the
share exchange which has voting power of the
the effect of increasing by outstanding voting stock of a
5% or more the total number corporation or who is an
of outstanding shares of affiliate or associate of the
any class of equity corporation and beneficially
securities of the owned 10% of the voting power
corporation or any of the then outstanding
subsidiary owned by any voting stock within the last
interested stockholder or three years.
its affiliate.
Under this law, F&M cannot
An interested stockholder engage in a business
is defined as the direct or combination with an
indirect beneficial owner interested stockholder for a
of 10% or more of the period of three years
voting power of the following the date the person
outstanding voting shares becomes an interested
of the corporation, or an stockholder, unless the Board
affiliate of the of Directors approved the
corporation which was the business combination or the
direct or indirect acquisition of the stock that
beneficial owner of 10% or resulted in the person
more of the voting power of becoming an interested
the outstanding voting stockholder before such
shares of the corporation acquisition. F&M may engage
within the preceding two in a business combination
years. with an interested
stockholder after the
The Board of Directors may three-year period with
exempt business respect to that stockholder
combinations with a expires only if one or more
particular interested of the following conditions
stockholder by resolution is satisfied:
adopted prior to the time - the Board of Directors
the interested stockholder approved the acquisition of
attained that status. the stock prior to the
stockholder's acquisition
date;
- the business combination is
approved by a majority of
the outstanding voting
stock not beneficially
owned by the interested
stockholder; or
- the consideration to be
received by stockholders
meets certain fair price
requirements of the statute
with respect to form and
amount.
</TABLE>
77
<PAGE> 84
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
ANTI-TAKEOVER STATUTES --
CONTROL SHARE
ACQUISITIONS............... The Citizens articles of Under Section 180.1150 of the
incorporation and bylaws Wisconsin Business
expressly provide that Corporation Law, the voting
Citizens is subject to power of shares of a resident
Chapter 7B of the Michigan domestic corporation, held by
Business Corporation Act any person or group of
regarding "Control Share persons acting together in
Acquisitions." Thus, shares excess of 20% of the voting
of capital stock of Citizens power in the election of
constituting control shares directors is limited (in
have the same voting rights voting on any matter) to 10%
as were accorded the shares of the full voting power of
before the "control share those shares. This
acquisition" only to the restriction does not apply to
extent granted by resolution shares acquired directly from
approved by the stockholders the resident domestic
of Citizens in accordance corporation, in certain
with Chapter 7B. Generally, specified transactions, or in
Chapter 7B provides that a a transaction in which the
person or an entity that corporation's stockholders
acquires control shares in a have approved restoration of
control share acquisition may the full voting power of the
vote the control shares on otherwise restricted shares.
any matter only if a majority Because of the 10% threshold
of all shares entitled to contained in Wisconsin's
vote on the matter and of all business statute discussed
non-interested shares above, this control share
entitled to vote on the threshold of 20% may not be
matter approve such voting implicated unless the Board
rights. Interested shares are of Directors first approves a
defined generally as those transaction that permits the
shares beneficially owned by stockholder to exceed the 10%
officers of the corporation, ownership level. While a
employee directors of the corporation may opt out of
corporation and the person or this statute, F&M has not
entity making the control opted out of it.
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 stockholders.
</TABLE>
78
<PAGE> 85
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
ANTI-TAKEOVER STATUTES --
ANTI-GREENMAIL............. Michigan also has a so-called Section 180.1134 of the
"anti-greenmail" provision Wisconsin Business
which, absent stockholder Corporation Law provides
approval, restricts the that, in addition to the vote
ability of certain publicly otherwise required by law or
held corporations to the articles of incorporation
repurchase voting shares at of a resident domestic
above market value from corporation, the approval of
certain large stockholders, the holders of a majority of
unless an identical or better the shares entitled to vote
offer to purchase is made to is required before a
all owners of such shares. corporation can take certain
Under Michigan law, these action while a takeover offer
provisions apply to purchases is being made or after a
from a person or a group who takeover offer has been
owns more than 3% of the publicly announced and before
shares of a corporation which it is concluded. This statute
has shares listed on a requires stockholder approval
national securities exchange for the corporation to do
and who has beneficially either of the following:
owned such shares for less - acquire more than 5% of its
than two years. outstanding voting shares
at a price above the market
price from any individual
or organization that owns
more than 3% of the
outstanding voting shares
and has held such shares
for less than two years,
unless a similar offer is
made to acquire all voting
shares and all securities
which may be converted into
voting shares; or
- sell or option assets of
the corporation which amount
to 10% or more of the
market value of the
corporation, unless the
corporation has at least
three independent directors
(directors who are not
officers or employees) and
a majority of the
independent directors vote
not to have this provision
apply to the corporation.
</TABLE>
79
<PAGE> 86
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
ANTI-TAKEOVER
STATUTES -- FAIR PRICE
PROVISIONS................. Citizens is not currently The Wisconsin Business
subject to the Michigan "Fair Corporation Law also
Price" statute, Chapter 7A of provides, in Sections
the Michigan Business 180.1130 to 180.1133, that
Corporation Act. However, the certain mergers, share
Board of Directors may elect exchanges or sales, leases,
by resolution to subject exchanges or other
Citizens to the provisions of dispositions of assets in a
Chapter 7A. transaction involving a
significant stockholder and a
Chapter 7A applies to certain resident domestic corporation
business combinations, such such as F&M require a
as mergers, sales of assets, supermajority vote of
issuances of equity stockholders in addition to
securities and a liquidation, any approval otherwise
recapitalization or required, unless stockholders
reorganization, involving an receive a fair price for
interested stockholder, their shares that satisfies a
generally, the holder of 10% statutory formula. A
or more of a class of a significant stockholder for
corporation's voting stock. this purpose is defined as a
The approval of holders of person or group who
90% of each class of the beneficially owns, directly
corporation's outstanding or indirectly, 10% or more of
voting stock and the approval the voting stock of the
of the holders of two-thirds corporation, or is an
of the outstanding stock of affiliate of the corporation
each such class other than and beneficially owned,
shares beneficially owned by directly or indirectly, 10%
the interested stockholder is or more of the voting stock
required to approve a of the corporation within the
business combination last two years. Any such
involving an interested business combination must be
stockholder. The approved by 80% of the voting
supermajority voting power of the corporation's
requirements do not apply to stock and at least two-thirds
a business combination that of the voting power of the
meets certain price, form of corporation's stock not
consideration and procedural beneficially held by the
requirements designed to make significant stockholder who
the transaction fair to all is party to the relevant
stockholders or to a transaction or any of its
transaction that the Board of affiliates or associates, in
Directors has approved with each case voting together as
respect to a particular a single group, unless the
interested stockholder prior following fair price
to the interested stockholder standards have been met:
becoming an interested - the aggregate value of the
stockholder. per share consideration is
equal to the higher of (1)
the highest price paid for
any common shares of the
corporation by the
significant stockholder in
the transaction in which it
became a significant
stockholder; (2) the market
value of the corporation's
shares on the date of
</TABLE>
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<PAGE> 87
<TABLE>
<CAPTION>
CITIZENS STOCKHOLDERS F&M STOCKHOLDERS
--------------------- ----------------
<S> <C> <C>
commencement of any tender
offer by the significant
stockholder, the date on
which the person became a
significant stockholder or
the date of the first
public announcement of the
proposed business
combination, whichever is
higher, or (3) the highest
preferential liquidation or
dissolution distribution to
which holders of the shares
would be entitled; and
- either cash, or the form of
consideration used by the
significant stockholder to
acquire the largest number
of shares, is offered.
</TABLE>
EXPERTS
The consolidated financial statements of Citizens Banking Corporation as of
December 31, 1998 and 1997 and for each of the years in the three year period
then ended, included in Citizens Banking Corporation's Annual Report on Form
10-K for the year ended December 31, 1998 and incorporated by reference in this
joint proxy statement-prospectus, which are referred to and made part of this
joint proxy statement-prospectus and the registration statement, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated by reference in this joint proxy
statement-prospectus and the registration statement. All of these consolidated
financial statements are incorporated by reference in this joint proxy
statement-prospectus in reliance upon such reports given on their authority as
experts in accounting and auditing.
The consolidated financial statements of F&M Bancorporation, Inc.
incorporated in this joint proxy statement-prospectus by reference from F&M's
Annual Report on Form 10-K for the years ended December 31, 1998 and 1997, and
for each of the years in the three-year periods then ended, have been audited by
Wipfli Ullrich Bertelson LLP, independent public accountants, as stated in their
report, which is also incorporated in this joint proxy statement-prospectus by
reference, and have been incorporated in reliance upon the report of such firm
upon their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Citizens common stock to be issued to the holders of
F&M common stock in connection with the merger, and certain other legal matters
in connection with the merger, will be passed upon by Dykema Gossett PLLC,
counsel to Citizens.
Certain federal income tax matters in connection with the merger will be
passed upon by Dykema Gossett PLLC, counsel to Citizens, and Quarles & Brady
LLP, counsel to F&M.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation to the
Citizens 2000 Annual Meeting of stockholders must submit the proposal to
Citizens Banking Corporation, 328 South Saginaw
81
<PAGE> 88
Street, Flint, Michigan 48502, Attention: Thomas W. Gallagher, Secretary, not
later than November 15, 1999, for inclusion, if appropriate, in Citizens' proxy
statement and the form of proxy relating to the 2000 annual meeting of
stockholders.
F&M will hold a 2000 annual meeting of stockholders only if the merger is
not completed. F&M stockholders were notified of the deadline for submission of
stockholder proposals to be considered at the meeting in the proxy materials for
the 1999 annual meeting of stockholders.
WHERE YOU CAN FIND MORE INFORMATION
Both Citizens and F&M are subject to the informational requirements of the
Securities Exchange Act and, in accordance with the Exchange Act, file reports,
proxy statements and other information with the SEC. You may read and copy
reports, proxy statements and other information concerning either Citizens or
F&M at the following SEC locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
Judiciary Plaza Seven World Trade Center Citicorp Center
450 Fifth Street, N.W. Suite 1300 500 West Madison Street
Room 1024 New York, New York 10048 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. You may obtain information of the operations of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC 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 SEC. Citizens common stock and
F&M common stock are both listed on the Nasdaq National Market. You may inspect
reports, proxy materials and other information concerning Citizens and F&M at
the offices of the National Association of Securities Dealers, Inc., Market
Listing Section, 1735 K Street, N.W., Washington, D.C. 20006.
Citizens has filed a registration statement on Form S-4 to register with
the SEC the shares of Citizens common stock to be issued in connection with the
merger. This joint proxy statement-prospectus is a part of that registration
statement and constitutes a prospectus of Citizens in addition to being a proxy
statement of Citizens for the Citizens special meeting and a proxy statement for
F&M for the F&M special meeting. Citizens has supplied all the information
contained in this joint proxy statement-prospectus relating to Citizens and F&M
has supplied all information relating to F&M. As allowed by SEC rules, this
joint proxy statement-prospectus does not contain all the information you can
find in the registration statement or the exhibits to the registration
statement.
The SEC allows Citizens and F&M to incorporate by reference information in
this joint proxy statement-prospectus. This means that some of the important
business and financial information relating to Citizens and F&M that you may
want to consider before deciding how to vote is not included in this joint proxy
statement-prospectus, but rather is "incorporated by reference" to documents
that have been previously filed by Citizens and F&M with the SEC. The
information incorporated by reference is deemed to be a part of this joint proxy
statement-prospectus, except for any information superseded by information
contained directly in this joint proxy statement-prospectus.
The following documents filed by Citizens with the SEC are incorporated by
reference in this joint proxy statement-prospectus:
(1) Citizens' Annual Report on Form 10-K for the year ended December 31,
1998.
(2) Citizens' Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
(3) Citizens' Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.
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<PAGE> 89
(4) Citizens' Proxy Statement for the Annual Meeting of Stockholders of
Citizens held April 20, 1999.
(5) Citizens' Current Report on Form 8-K dated April 18, 1999.
(6) Citizens' Current Report on Form 8-K/A dated April 18, 1999.
(7) Citizens' Current Report on Form 8-K dated August 31, 1999.
(8) The description of Citizens common stock contained in Citizens'
Registration Statement on Form 8-A filed on June 30, 1982.
(9) Citizens Registration Statement on Form 8-A dated July 20, 1990
relating to Preferred Stock Purchase Rights.
The following documents filed by F&M with the SEC are incorporated by
reference in this joint proxy statement-prospectus:
(1) F&M's Annual Report on Form 10-K for the year ended December 31, 1998.
(2) F&M's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999.
(3) F&M's Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.
(4) F&M's Current Report on Form 8-K dated April 18, 1999.
Citizens and F&M may be required by Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act to file additional documents with the SEC after the date of
this joint proxy statement-prospectus. Any such documents filed before the date
of the Citizens special meeting and the F&M special meeting will be incorporated
by reference in this joint proxy statement-prospectus from the date they are
filed.
Any statement contained in a document incorporated by reference into this
joint proxy statement-prospectus will be modified or superseded to the extent
that a statement contained in this joint proxy statement-prospectus, or in any
other subsequently filed document, modifies or supersedes such previous
statement. Any statement so modified or superseded will not be a part of this
joint proxy statement-prospectus except as modified or superseded.
If you are a stockholder, you can obtain any of the documents incorporated
by reference from Citizens, F&M or the SEC. These documents are available from
Citizens or F&M without charge, excluding all exhibits. You may obtain documents
incorporated by reference in this joint proxy statement-prospectus by requesting
them orally or in writing from:
<TABLE>
<CAPTION>
CITIZENS F&M
-------- ---
<S> <C>
Thomas W. Gallagher, Secretary Janet M. Lakso, Secretary
Citizens Banking Corporation F&M Bancorporation, Inc.
328 S. Saginaw Street One Bank Avenue
Flint, Michigan 48502 Kaukauna, Wisconsin 54130
Telephone: (810) 766-7500 Telephone: (920) 766-1717
</TABLE>
In order to ensure timely delivery of these documents, your request must be
received no later than October 15, 1999, which is five (5) business days prior
to the date of the Citizens special meeting and the F&M special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT-PROSPECTUS TO VOTE ON THE MERGER OR THE
ISSUANCE OF SHARES OF CITIZENS COMMON STOCK IN CONNECTION WITH THE MERGER. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS. THIS JOINT
PROXY STATEMENT-PROSPECTUS IS DATED SEPTEMBER 8, 1999. YOU SHOULD NOT ASSUME
THAT THE INFORMATION CONTAINED IN THE JOINT PROXY STATEMENT-PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS
JOINT PROXY STATEMENT-PROSPECTUS TO STOCKHOLDERS NOR THE ISSUANCE OF CITIZENS
COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
83
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ANNEX A
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AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 18TH DAY OF APRIL, 1999
AS AMENDED AND RESTATED
AS OF JULY 30, 1999
BY AND AMONG
CITIZENS BANKING CORPORATION
CITIZENS ACQUISITION, INC.
AND
F & M BANCORPORATION, INC.
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I. THE MERGER........................................................ A-5
SECTION 1.1. Structure of the Merger..................................... A-5
SECTION 1.2. Effect on Capital Stock..................................... A-5
SECTION 1.3. Exchange of Certificates.................................... A-6
SECTION 1.4. Alternative Structure....................................... A-7
SECTION 1.5. Options..................................................... A-8
SECTION 1.6. Tax and Accounting Consequences............................. A-8
ARTICLE II. CONDUCT PENDING THE MERGER....................................... A-8
Conduct of the Company's Business Prior to the Effective
SECTION 2.1. Time........................................................ A-8
SECTION 2.2. Forbearance by the Company.................................. A-9
SECTION 2.3. Cooperation................................................. A-11
SECTION 2.4. Conduct of Parent's Business Prior to the Effective Time.... A-11
SECTION 2.5. Cooperation of Parent....................................... A-11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... A-11
SECTION 3.1. Recitals True............................................... A-11
SECTION 3.2. Capital Stock............................................... A-11
SECTION 3.3. Due Organization............................................ A-12
SECTION 3.4. Authority................................................... A-12
SECTION 3.5. Subsidiaries; Significant Investments....................... A-12
SECTION 3.6. Shareholder Approvals....................................... A-12
SECTION 3.7. No Violations............................................... A-12
SECTION 3.8. Consents and Approvals...................................... A-13
SECTION 3.9. Company Reports............................................. A-13
Absence of Undisclosed Liabilities and Certain Changes or
SECTION 3.10. Events...................................................... A-14
SECTION 3.11. Taxes....................................................... A-14
SECTION 3.12. Absence of Claims........................................... A-14
SECTION 3.13. Absence of Regulatory Actions............................... A-14
SECTION 3.14. Agreements.................................................. A-14
SECTION 3.15. Labor Matters............................................... A-15
SECTION 3.16. Employee Benefit Plans...................................... A-15
SECTION 3.17. Properties.................................................. A-16
SECTION 3.18. Knowledge as to Conditions.................................. A-17
SECTION 3.19. Compliance with Laws........................................ A-17
SECTION 3.20. Fees........................................................ A-17
SECTION 3.21. Environmental Matters....................................... A-17
SECTION 3.22. Allowance................................................... A-19
SECTION 3.23. Antitakeover Provisions Inapplicable........................ A-19
SECTION 3.24. Material Interests of Certain Persons....................... A-19
SECTION 3.25. Insurance................................................... A-19
SECTION 3.26. Investment Securities....................................... A-20
SECTION 3.27. Pooling of Interests........................................ A-20
SECTION 3.28. Derivatives................................................. A-20
SECTION 3.29. Registration Obligations.................................... A-20
SECTION 3.30. Books and Records........................................... A-20
SECTION 3.31. Corporate Documents......................................... A-20
SECTION 3.32. Company Action.............................................. A-20
SECTION 3.33. Indemnification............................................. A-20
SECTION 3.34. Fair Lending; Community Reinvestment Act.................... A-20
SECTION 3.35. Other Activities of the Company and its Subsidiaries........ A-20
</TABLE>
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SECTION 3.36. Year 2000................................................... A-21
SECTION 3.37. No Omission of Material Fact................................ A-21
SECTION 3.38. Conduct of Business......................................... A-21
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-22
SECTION 4.8. Consents and Approvals...................................... A-23
SECTION 4.9. Parent Reports.............................................. A-23
Absence of Undisclosed Liabilities and Certain Changes or
SECTION 4.10. Events...................................................... A-24
SECTION 4.11. Taxes....................................................... A-24
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-26
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-28
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-29
SECTION 4.33. Other Activities of Parent and its Subsidiaries............. A-29
SECTION 4.34. Year 2000................................................... A-29
SECTION 4.35. No Omission of Material Fact................................ A-29
SECTION 4.36. Conduct of Business......................................... A-30
ARTICLE V. ADDITIONAL AGREEMENTS............................................. A-30
SECTION 5.1. Acquisition Proposals....................................... A-30
SECTION 5.2. Certain Policies of the Company............................. A-30
SECTION 5.3. Access and Information...................................... A-30
SECTION 5.4. Certain Filings, Consents and Arrangements.................. A-31
SECTION 5.5. Antitakeover Statutes....................................... A-31
SECTION 5.6. Directors' and Officers' Indemnification.................... A-31
SECTION 5.7. Additional Agreements....................................... A-32
SECTION 5.8. Publicity................................................... A-32
SECTION 5.9. Regulatory Matters.......................................... A-32
SECTION 5.10. Shareholders' Meeting....................................... A-33
</TABLE>
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SECTION 5.11. Affiliates; Publication of Combined Financial Results....... A-33
SECTION 5.12. Authorization, Reservation and Listing...................... A-33
SECTION 5.13. Notification of Certain Matters............................. A-33
SECTION 5.14. Board of Directors and Executive Committee of Parent........ A-34
SECTION 5.15. Benefit Plans............................................... A-34
SECTION 5.16. Employment Arrangements..................................... A-34
ARTICLE VI. CONDITIONS TO CONSUMMATION....................................... A-35
SECTION 6.1. Conditions to All Parties' Obligations...................... A-35
SECTION 6.2. Conditions to the Obligations of Parent and Merger Sub...... A-35
SECTION 6.3. Conditions to the Obligation of the Company................. A-36
ARTICLE VII. TERMINATION..................................................... A-36
SECTION 7.1. Termination................................................. A-36
SECTION 7.2. Effect of Termination....................................... A-37
ARTICLE VIII. EFFECTIVE DATE AND EFFECTIVE TIME.............................. A-37
SECTION 8.1. Effective Date and Effective Time........................... A-37
ARTICLE IX. OTHER MATTERS.................................................... A-37
SECTION 9.1. Certain Definitions; Interpretation......................... A-37
SECTION 9.2. Survival.................................................... A-38
SECTION 9.3. Waiver...................................................... A-38
SECTION 9.4. Counterparts................................................ A-38
SECTION 9.5. Governing Law............................................... A-38
SECTION 9.6. WAIVER OF JURY TRIAL........................................ A-38
SECTION 9.7. Expenses.................................................... A-38
SECTION 9.8. Notices..................................................... A-38
SECTION 9.9. Entire Agreement; Etc....................................... A-39
SECTION 9.10. Assignment.................................................. A-39
</TABLE>
ANNEX 1
Stock Option Agreement
ANNEX 2
Affiliate Letter
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AGREEMENT AND PLAN OF MERGER, dated as of the 18th day of April, 1999, as
amended and restated as of July 30, 1999 (this "Plan"), by and among Citizens
Banking Corporation ("Parent"), Citizens Acquisition, Inc., a wholly-owned
subsidiary of Parent ("Merger Sub"), and F & M Bancorporation, Inc. (the
"Company").
RECITALS:
A. Amendment and Restatement. Parent and the Company are parties to that
certain Agreement and Plan of Merger dated as of the 18th day of April 1999 (the
"Original Plan") pursuant to which the Company would merge with and into Parent.
Parent and the Company desire to amend and restate the Original Plan in
accordance with Sections 1.4 and 9.3 of the Original Plan to provide for the
merger of Merger Sub with and into the Company with the Company as the surviving
corporation.
B. 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
100,000,000 authorized shares of common stock, without par value, of which no
more than 27,617,275 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").
C. Merger Sub. Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Wisconsin, with its
principal executive offices located in Flint, Michigan. As of the date hereof,
Merger Sub has 9,000 authorized shares of common stock, par value $0.01 per
share, 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.
D. The Company. The Company is a corporation duly incorporated, validly
existing and in active status under the laws of the State of Wisconsin, with its
principal executive offices located in Kaukauna, Wisconsin. As of the date
hereof, the Company has 50,000,000 authorized shares of common stock, par value
$1.00 per share ("Company Common Stock"), of which no more than 15,567,381
shares 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.
E. 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 Reports (as defined in Section 3.9) or in the Company
Disclosure Letter (as defined in Article III).
F. Parent Options, Etc. Neither 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).
G. Stock Option Agreement. As a condition and inducement to Parent'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.
H. 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
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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.
I. 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.
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. The 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 Wisconsin Business Corporation Law (the "WBCL"). The separate
corporate existence of the Company shall thereupon cease. The Surviving
Corporation shall continue to be governed by the WBCL 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 Subchapter XI of Chapter 180 of the WBCL.
(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 Merger Sub 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 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 Section 1.2(c), into the right to receive 1.303 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"). Each share of Parent Common Stock issued and outstanding at the
Effective Time shall remain issued and outstanding. 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) 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 Company, shall
be canceled and retired and shall cease to exist, and no exchange or payment
shall be made with respect thereto.
(c) 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.
(d) 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
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surrender of Certificates for exchange shall be paid, upon such surrender, cash
(without interest) determined by multiplying (i) the per share closing price on
The Nasdaq Stock Market of Parent Common Stock on the date of the Effective Time
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 (as
defined below) shall promptly pay such amounts to such holders in accordance
with this Article I.
(e) Capital Stock of Merger Sub. Each share of common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of the validly issued, fully paid and nonassessable
(except as provided in Wis. Stats. Section 180.0622(2)(b), as judicially
interpreted) common stock of the Surviving Corporation, such shares shall
thereafter constitute all of the issued and outstanding shares of capital stock
of the Surviving Corporation.
SECTION 1.3. Exchange of Certificates.
(a) Exchange Agent. Parent shall supply, or shall cause to be supplied, to
or for the account of Harris Trust and Savings Bank, 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(e) (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(e), 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. 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
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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 stockholder 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 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 the
shares of Parent Common Stock and any cash in lieu of fractional shares
deliverable in exchange therefor pursuant to this Agreement.
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
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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 or to facilitate the consolidation of the Company's subsidiaries,
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, the tax effect or economic
benefits of the Merger to the holders of Company Common Stock or the "pooling of
interests" accounting treatment of the transaction.
SECTION 1.5. Options. (a) At the Effective Time, each option granted by the
Company to purchase shares of Company Common Stock under (i) the Company's 1993
Incentive Stock Option Plan, (ii) the Company's 1993 Stock Option Plan for
Non-Employee Directors and (iii) any other stock option plan or arrangement of
the Company (collectively, the "Company Option Plans") which is outstanding and
unexercised immediately prior thereto shall cease to represent a right to
acquire shares of Company Common Stock and shall be converted automatically into
an option to purchase shares of Parent Common Stock in an amount and at an
exercise price determined as provided below, and otherwise subject to the terms
of the Company Option Plans pursuant to which such options have been issued and
the agreements evidencing grants thereunder:
(i) The number of shares of Parent Common Stock to be subject to the
new option shall be equal to the product of the number of shares of Company
Common Stock subject to the original option and the Exchange Ratio;
provided that any fractional shares of Parent Common Stock resulting from
such multiplication shall be rounded to the nearest whole share; and
(ii) The exercise price per share of Parent Common Stock under the new
option shall be equal to the exercise price per share of Company Common
Stock under the original option divided by the Exchange Ratio, provided
that such exercise price shall be rounded down to the nearest whole cent.
(b) The adjustment provided herein with respect to any options which are
"incentive stock options" (as defined in Section 422 of the Code) shall be and
is intended to be effected in a manner which is consistent with Section 424(a)
of the Code. The duration and other terms of the new option shall be the same as
the original option except that all references to the Company shall be deemed to
be references to Parent.
(c) Parent agrees to file with Securities and Exchange Commission (the
"SEC") as soon as reasonably practicable after the Effective Time a registration
statement on Form S-8 or other appropriate form under the Securities Act of 1933
(together with the rules and regulations thereunder, the "Securities Act") to
register Parent Common Stock issuable upon exercise of options under the Company
Option Plans and use its reasonable efforts to cause such registration statement
to remain effective until the exercise or expiration of such options.
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) use its best efforts to consummate the
Agreement of Merger and Reorganization, dated as of July 21, 1998, by and
between the Company, CBE, Inc., and F & M Merger Corporation, as amended on
November 30, 1998 (the "CBE Merger Agreement"),
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(iv) take no action which would adversely affect or delay the ability of the
Company, Parent 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 (v) take no action that is reasonably likely to have a
Material Adverse Effect (as defined in Section 9.1 hereof) on the Company.
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) (i) adjust, split, combine or reclassify any capital stock;
(ii) 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, except for
regular quarterly cash dividends both (i) at a rate per share of Company
Common Stock not in excess of $0.25 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,
except for reductions in income resulting directly from adjustments
specifically made at Parent's request, 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;
(iii) grant any stock appreciation rights or grant, sell or issue to
any individual, corporation or other person any right or option to acquire
any shares of its capital stock or securities evidencing a right to convert
into or acquire, any shares of its capital stock; or
(iv) issue any additional shares of capital stock except (A) pursuant
to the exercise of Company options outstanding as of the date hereof and on
the terms in effect on the date hereof, or (B) shares issuable pursuant to
the CBE 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 this Plan which
have been previously provided to Parent;
(d) make any capital expenditures, other than capital expenditures for data
processing conversions pursuant to contracts or agreements in force as of the
date of this Plan which have been previously provided to Parent and capital
expenditures made in the ordinary course of business consistent with past
practice in amounts not exceeding $50,000, individually or $500,000 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 3.15), 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 5% in any 12-month period, or any amendment
required by applicable law
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(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 $100,000 or $400,000 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, other than with respect to the CBE Merger
Agreement, 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;
(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 $100,000 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, 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 $5,000,000 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, 1998, 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;
(o) amend or otherwise modify the CBE Merger Agreement; or
(p) 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
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Plan incorrect or prevent the Company from performing or cause the Company not
to perform its covenants hereunder.
SECTION 2.3. Cooperation. The Company shall, and the Company shall cause
each of its subsidiaries to, cooperate with Parent 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 subsidiaries 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 of it 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 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, (iii) take no action
that is reasonably likely to have a Material Adverse Effect on Parent, and (iv)
enter into any agreement that would result in a change in control of Parent
without the prior written consent of the Company, provided however that such
consent shall not be required if Parent's Board of Directors determines, upon
receipt of a written opinion of its outside counsel, that such requirement would
result in a breach of its fiduciary duties to the shareholders of Parent. For
purposes of this Section 2.4, change in control shall mean the occurrence of any
of the following events: (A) the acquisition of ownership by a person, firm or
corporation, or a group acting in concert, of fifty-one percent, or more, of the
outstanding Parent Common Stock, (B) a sale of all or substantially all of the
assets of the Parent to any person, firm or corporation, or (C) a merger or
similar transaction between Parent and another entity if shareholders of Parent
do 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 . 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, 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):
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, except as provided in Wis. Stats. Section
180.0622(2)(b), as judicially interpreted, in the case of Wisconsin --
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organized corporations and banks, and Wis. Stats. Section 220.07 in the case of
Wisconsin state banks, 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 or active status 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 or similar rights 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 Hovde Financial, Inc. 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 has provided 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 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
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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, except for such breaches, violations, defaults, rights
of termination or acceleration or liens or encumbrances referred to in clause
(c) that would not individually or in the aggregate have a Material Adverse
Effect on the Company.
SECTION 3.8. 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 (the "State Approvals"), (c) the filing with
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, (d) the filing of the Certificate of
Merger with the Wisconsin Department of Financial Institutions pursuant to the
WBCL, (e) 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 (f) 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 (each a "Governmental Entity") 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, 1998, nor any other document
filed by the Company subsequent to December 31, 1998 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
stockholders' equity and consolidated statements 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.
(b) 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,
1995 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, 1995, 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 3.10. Absence of Undisclosed Liabilities and Certain Changes or
Events. Since December 31, 1998, 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, 1998,
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. 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, which, in any case, is reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
the Company or to hinder or delay consummation of the transactions contemplated
hereby.
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 Reports filed prior to the date of this Plan. Except as disclosed in the
Company Reports filed prior to the date of this Plan, neither the Company nor
any of its subsidiaries is a party to an oral or written (i) consulting
agreement (other than data processing, software programming and licensing
contracts entered into in the ordinary course of business) not terminable on 30
days, or less notice involving the payment of more than $100,000 per annum, in
the case of any such agreement with an individual, or $200,000 per annum, in the
case of any other such agreement, (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 $100,000, (iii) agreement with respect to any executive officer of the
Company or
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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 $100,000 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, or (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).
(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, bonus, commission and perquisite arrangements,
written or unwritten, 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.
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 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
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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 280G 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 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
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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. To the knowledge of the Company, all
of 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, 1995, 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 Hovde Financial, Inc., 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. To the knowledge of the Company:
(a) Except as will not, individually or in the aggregate, have a
Material Adverse Effect on the Company, 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 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);
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(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 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. ss. 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 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
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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 audited balance sheet as of December 31, 1998, was, and the
allowance for possible loan losses shown on the balance sheets in 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,
involving amounts in excess of $100,000, 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, Sections 180.1140-1144,
180.1130-1133, and 180.1150.
SECTION 3.24. Material Interests of Certain Persons. Except as disclosed in
the Company's Proxy Statement for its 1999 Annual Meeting of Stockholders or to
the extent such information is not required to be disclosed therein, 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.
SECTION 3.25. Insurance. The Company and its subsidiaries are presently
insured, and since December 31, 1995, 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,
1995, 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 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.
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SECTION 3.26. Investment Securities. Except for pledges to the Federal Home
Loan Bank in the ordinary course of business consistent with past practice and
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-K for the year ended December 31, 1998, and
none of the material investments made by it or any of its subsidiaries since
December 31, 1998, 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. Each of the Company's acquisitions
during the two years preceding the date of this Plan which were accounted for as
"pooling of interests" qualify as "pooling of interests" for accounting
purposes. 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.
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. The Company has
delivered to Parent copies of the charter of each subsidiary of the Company
which in each instance is accurate and complete in all material respects.
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. 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 "satisfactory" or "outstanding" in its most recent CRA
examination.
SECTION 3.35. Other Activities of the Company and its Subsidiaries.
(a) Neither of the Company nor any of its subsidiaries that is not a
bank, a bank operating subsidiary or a bank service corporation, directly
or indirectly, engages in any activity prohibited by the Federal Reserve
Board. Without limiting the generality of the foregoing, any equity
investment of the Company and each subsidiary that is not a bank, a bank
operating subsidiary or a bank service corporation, is not prohibited by
the Federal Reserve Board.
(b) To the Company's knowledge, each of its subsidiaries which is a
bank that performs trust or other fiduciary activities (a "Company Bank
Subsidiary") and each subsidiary which is a trust
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company (a "Company Trust Subsidiary") currently performs all personal
trust, corporate trust and other fiduciary activities ("Trust Activities")
with requisite authority under applicable law of Governmental Entities and
in accordance in all material respects with the agreed-upon terms of the
agreements and instruments governing such Trust Activities, sound fiduciary
principles and applicable law and regulation (specifically including, but
not limited to, Section 9 of Title 12 of the Code of Federal Regulations);
there is no investigation or inquiry by any Governmental Entity pending, or
to the knowledge of the Company, threatened, against or affecting the
Company, or any Significant Subsidiary thereof relating to the compliance
by the Company or any such Significant Subsidiary (as such term is defined
in Rule 1-02(w) of Regulation S-X of the SEC) with sound fiduciary
principles and applicable regulations; and except where any such failure
would not have a Material Adverse Effect on the Company, each employee of a
Company Bank Subsidiary or a Company Trust Subsidiary, as applicable, had
the authority to act in the capacity in which he or she acted with respect
to Trust Activities, in each case, in which such employee held himself or
herself out as a representative of a Company Bank Subsidiary or a Company
Trust Subsidiary, as applicable; and each Company Bank Subsidiary and each
Company Trust Subsidiary has established policies and procedures for the
purpose of complying with applicable laws of Governmental Entities relating
to Trust Activities, has followed such policies and procedures in all
material respects and has performed appropriate internal audit reviews of,
and has engaged independent accountants to perform audits of, Trust
Activities, which audits in the case of any Company Bank Subsidiary since
January 1, 1996, and in the case of any Company Trust Subsidiary since
January 1, 1998 have disclosed no material violations of applicable laws of
Governmental Entities or such policies and procedures.
SECTION 3.36. Year 2000. None of the Company or any of the Company's
subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR 98-3(SUP), dated March 4,
1998). The Company has disclosed to Parent a complete and accurate copy of the
Company's plan, including an estimate of the anticipated associated costs, for
addressing the issues ("Year 2000 Issues") set forth in the statement of the
Federal Financial Institutions Examination Council, dated May 5, 1997, entitled
"Year 2000 Project Management Awareness," and December 1997, entitled "Safety
and Soundness Guidelines Concerning the Year 2000 Business Risk," as such issues
affect the Company and its subsidiaries. Between the date of this Agreement and
the Effective Time, the Company shall use commercially practicable efforts to
implement such plan.
SECTION 3.37. 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 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 3.38. Conduct of Business. Since December 31, 1998, 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 December 31, 1998. The Company has not purchased
or caused to be purchased any Company Common Stock since April 1, 1997.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants 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 and all Parent Shares to be issued in the
Merger will be duly authorized and validly issued, are fully paid and
nonassessable and are not subject to any preemptive rights. Each share of Parent
Common Stock to be issued in the Merger will have attached thereto one right to
purchase one-half of 1/100th of a share of Series A Preferred Stock of Parent at
a price of $75 per 1/100th of a share.
SECTION 4.3. Due Organization. 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, the 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. In addition, Parent has received the
written opinion of Keefe, Bruyette & Woods, Inc. to the effect that the Merger
is fair to the shareholders of Parent from a financial point of view and has
provided a true and complete copy of such opinion to the Company. 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 vote required for approval of the Plan
and consummation of the Merger and the other transactions contemplated hereby.
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
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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, except
for such breaches, violations, defaults, rights of termination or acceleration
or liens or encumbrances referred to in clause (iii) that would not individually
or in the aggregate have a Material Adverse Effect on Parent.
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) any 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 Wisconsin Department of Financial
Institutions pursuant to the WBCL, (e) 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 (f) 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 Governmental Entities 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, 1998, nor any other document filed
by Parent subsequent to December 31, 1998 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 stockholders' equity and consolidated statements 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, 1995
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, 1995,
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, 1998, 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, 1998,
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 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 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. Parent's Disclosure Letter contains a
complete and correct list of the names of each director and officer of Parent
and each of its subsidiaries. Parent's Disclosure
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Letter also contains a complete list of all 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 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"). (i) All of Parent's 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.
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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 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. To the knowledge of
Parent, all of 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, 1995, 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 performed for
Parent by Keefe, Bruyette & Woods, Inc., 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. To the knowledge of Parent:
(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;
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(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;
(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. ss. 9601 or any
similar Environmental Law.
(b) The following definitions apply for purposes of this Section 4.21:
"Loan Property," "Participation Facility," "Environmental Law," and "Hazardous
Material" each have the meaning set forth in Section 3.21(b).
SECTION 4.22. Allowance. The allowance for possible loan losses shown on
Parent's audited balance sheet as of December 31, 1998 was, and the allowance
for possible loan losses shown on the balance sheets in the 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. Parent has disclosed to the Company in writing prior to
the execution hereof and has set forth in the Parent Disclosure Letter all
loans, leases, advances, credit enhancements, other extensions of credit,
commitments and interest-bearing assets of Parent 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-
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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 Interests of Certain Persons. Except as disclosed in
Parent's Proxy Statement for its 1999 Annual Meeting of Stockholders or to the
extent such information is not required to be disclosed therein, 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.
SECTION 4.24. Insurance. Parent and its subsidiaries are presently insured,
and since December 31, 1995, 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, 1995,
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. The Parent Disclosure Letter
lists all insurance policies maintained by or for the benefit of Parent, 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 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-K
for the year ended December 31, 1998, and none of the material investments made
by it or any of its subsidiaries since December 31, 1998, 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. Each of Parent's acquisitions during
the two years preceding the date of this Plan which were accounted for as
"pooling of interests" qualify as "pooling of interests" for accounting
purposes. 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.
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.
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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 "satisfactory" or "outstanding" in its most recent CRA examination.
SECTION 4.33. Other Activities of Parent and its Subsidiaries.
(a) Neither of Parent nor any of its subsidiaries that is not a bank,
a bank operating subsidiary or a bank service corporation, directly or
indirectly, engages in any activity prohibited by the Federal Reserve
Board. Without limiting the generality of the foregoing, any equity
investment of Parent and each subsidiary that is not a bank, a bank
operating subsidiary or a bank service corporation, is not prohibited by
the Federal Reserve Board.
(b) To Parent's knowledge, each of its subsidiaries which is a bank (a
"Parent Bank Subsidiary") currently performs all personal trust, corporate
trust and other fiduciary activities "Trust Activities") with requisite
authority under applicable law of Governmental Entities and in accordance
in all material respects with the agreed-upon terms of the agreements and
instruments governing such Trust Activities, sound fiduciary principles and
applicable law and regulation (specifically including, but not limited to,
Section 9 of Title 12 of the Code of Federal Regulations); there is no
investigation or inquiry by any Governmental Entity pending, or to the
knowledge of Parent, threatened, against or affecting Parent, or any
Significant Subsidiary thereof relating to the compliance by Parent or any
such Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X of the SEC) with sound fiduciary principles and applicable
regulations; and except where any such failure would not have a Material
Adverse Effect on Parent, each employee of a Parent Bank Subsidiary had the
authority to act in the capacity in which he or she acted with respect to
Trust Activities, in each case, in which such employee held himself or
herself out as a representative of a Parent Bank Subsidiary; and each
Parent Bank Subsidiary has established policies and procedures for the
purpose of complying with applicable laws of Governmental Entities relating
to Trust Activities, has followed such policies and procedures in all
material respects and has performed appropriate internal audit reviews of,
and has engaged independent accountants to perform audits of, Trust
Activities, which audits since January 1, 1996 have disclosed no material
violations of applicable laws of Governmental Entities or such policies and
procedures.
SECTION 4.34. Year 2000. None of Parent or any of Parent's subsidiaries has
received, or reasonably expects to receive, a "Year 2000 Deficiency Notification
Letter" (as such term is employed in the Federal Reserve's Supervision and
Regulation Letter No. SR 98-3 (SUP), dated March 4, 1998). Parent has disclosed
to the Company a complete and accurate copy of Parent's plan, including an
estimate of the anticipated associated costs, for addressing the issues ("Year
2000 Issues") set forth in the statement of the Federal Financial Institutions
Examination Council, dated May 5, 1997, entitled "Year 2000 Project Management
Awareness," and December 1997, entitled "Safety and Soundness Guidelines
Concerning the Year 2000 Business Risk," as such issues affect Parent and its
Subsidiaries. Between the date of this Agreement and the Effective Time, Parent
shall use commercially practicable efforts to implement such plan.
SECTION 4.35. 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 the 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 4.36. Conduct of Business. Since December 31, 1998, 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 December 31, 1998. Parent has not purchased any Parent Common Stock since
April 1, 1997.
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, unless, at
any time prior to the adoption of this Agreement by the holders of Company
Common Stock, the Company's Board of Directors determines, upon receipt of a
written opinion of its outside legal counsel, that it is required to take the
following action in order to fulfill their fiduciary duties to the Company's
shareholders under the WBCL, 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 all
shareholder 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. Neither the Company's representations,
warranties and covenants contained in this Plan shall be deemed to be untrue or
breached in any respect for any purpose nor shall the Exchange Ratio be modified
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 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
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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 from other sources not known by such party to
be bound by a confidentiality agreement, (iii) is 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. The provisions of the Confidentiality Agreements
dated April 5, 1999 and December 23, 1998 shall survive to the extent such terms
are not inconsistent with this Section 5.3.
SECTION 5.4. Certain Filings, Consents and Arrangements. Parent 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, 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 WBCL 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 WBCL 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
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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.
(c) Parent shall maintain in effect the current pre-paid directors' and
officers' liability insurance policy of the Company until August 1, 2001, unless
Parent and the Company agree to substitute an alternative policy or policies
therefor.
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 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
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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, in the case of Parent, and approving this Plan, in the
case of the Company. The Board of Directors of the Company and Parent shall
recommend that this Plan be approved by each of the shareholders of the Company
and Parent, 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
either the Michigan Business Corporation Act (the "MBCA") or the WBCL, as
applicable. Notwithstanding the preceding sentence, neither the Company nor
Parent shall 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 or approving the issuance of Parent Shares pursuant to this Plan, as
applicable.
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
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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 and Parent 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) Subject to any notice previously provided under Section 5.13(a) above,
from and after the due date hereof to the Effective Time and at and as of the
Effective Time, the Company and Parent 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 or the Parent
Disclosure Letter, as applicable ("Disclosure Letter Updates") to the other
party 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 on or before the 25th
day of each calendar month commencing the first full calendar month after the
date of this Agreement. Within twenty (20) days after receipt of any Disclosure
Letter Update (or if cure is promptly commenced, but is not effected within
thirty (30) days after receipt of any Disclosure Letter Update (the "Cure
Period")), Parent or the Company, as the case may be, 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 any or all of the
Disclosure Letter Updates previously provided, indicates that a Material Adverse
Effect with respect to the Company or Parent, as applicable, has occurred or is
reasonably likely to occur which either has not or cannot be cured within the
Cure Period, or which does not result primarily from changes in the general
level of interest rates.
SECTION 5.14. Board of Directors and Executive Committee of Parent. Parent
will take such action as may be necessary so that the number of directors of
Parent shall be increased by three subsequent to the Effective Time. Three
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 Parent with respect to the service of directors shall be
added to the Board of Directors of Parent 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. Parent also will take
such action as may be necessary so that one 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 as a rotating member of the Executive
Committee of the Board of Directors of Parent subsequent to the Effective Time.
SECTION 5.15. Benefit Plans. For purposes of crediting periods of service
for eligibility and vesting, but not for benefit accrual purposes, under 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. 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"), employees of the Company
who become participants in the Parent Retirement Plan after the Effective Time
shall be given credit for service with the Company prior to the Effective Time.
SECTION 5.16. Employment Arrangements. Parent agrees to cause to be
honored, in accordance with their existing terms, all employment agreements and
severance plans of the Company in effect as of the date hereof.
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ARTICLE VI. CONDITIONS TO CONSUMMATION
SECTION 6.1. Conditions to All Parties' Obligations. The respective
obligations of Parent 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, 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 appropriate State Regulators, and (ii) 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 contained in this Plan; and
Parent shall have received a certificate signed by the
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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 McCarty, Curry, Wydeven, Peeters & Haak, LLP, 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.
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 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 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, dated the Effective
Date, from Dykema Gossett PLLC, counsel to Parent in form and substance
satisfactory to the Company.
(c) The Company shall have received a written opinion from either McCarty,
Curry, Wydeven, Peeters & Haak, LLP or Quarles & Brady LLP 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.
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 December 31, 1999, 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,
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 December 31, 1999 without fault on the
part of the Company; or
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(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 or the Company pursuant to Section 5.13(b).
(g) by Parent, at its sole discretion, at any time (i) within 45 days of
the date of this Agreement, if Parent is not satisfied with its due diligence
review of the quality of the Company's loan portfolio, or (ii) if any
representation or warranty of the Company contained in Section 3.21 is untrue,
without respect to the knowledge of the Company.
SECTION 7.2. Effect of Termination. 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, or the
Company or any of their officers or directors, except (i) for fraud or willful
and material breach of this Plan and (ii) 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.
"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.
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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 MBCA and the WBCL.
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,
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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.
If to the Company, to:
F & M Bancorporation, Inc.
One Bank Avenue
Kaukauna, Wisconsin 54130
Facsimile: (920) 766-5628
Attention: Gail E. Janssen
With copies to:
McCarty, Curry, Wydeven, Peeters & Haak, LLP
120 E. 4th Street
Kaukauna, Wisconsin 54130
Facsimile: (920) 766-4756
Attention: Randall A. Haak, Esq.
and
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Facsimile: (414) 271-3552
Attention: Kenneth V. Hallett, 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, Esq.
With copies to:
Dykema Gossett PLLC
1577 North Woodward Avenue
Suite 300
Bloomfield Hills, Michigan 48304-2820
Facsimile: (248) 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 1.5,
5.6 and 5.15 (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 of their subsidiaries
provided that no such assignment shall relieve the assigning party of its
obligations hereunder.
[THIS SPACE INTENTIONALLY LEFT BLANK]
A-39
<PAGE> 130
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: Chairman, President and
Chief Executive Officer
CITIZENS ACQUISITION, INC.
By: /s/ THOMAS W. GALLAGHER
------------------------------------
Name: Thomas W. Gallagher
Title: Secretary
F & M BANCORPORATION, INC.
By: /s/ GAIL E. JANSSEN
------------------------------------
Name: Gail E. Janssen
Title: Chairman of the Board
A-40
<PAGE> 131
ANNEX B
September 8, 1999
The Board of Directors
Citizens Banking Corporation
328 South Saginaw Street
Flint, Michigan 48502-2401
Members of the Board:
You have requested our opinion as investment bankers as to the fairness,
from a financial point of view, to the shareholders of Citizens Banking
Corporation ("Citizens") of the exchange ratio in the proposed merger (the
"Merger") of Citizens with F&M Bancorporation ("F&M"), pursuant to the Agreement
and Plan of Merger dated as of April 18, 1999 between Citizens and F&M ( the
"Agreement"). Under the terms of the Merger, each outstanding share of common
stock of F&M will, subject to certain exceptions as set forth in the Agreement,
be exchanged for 1.303 shares of common stock of Citizens (the "Exchange
Ratio"). It is our understanding that the Merger will be accounted for as a
pooling-of-interests under generally accepted accounting principles.
Keefe, Bruyette & Woods, Inc. as part of its investment banking business is
continually engaged in the valuation of banking businesses and their securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. As
specialists in the securities of banking companies we have experience in, and
knowledge of, the valuation of banking enterprises. In the ordinary course of
our business as a broker-dealer, we may, from time to time, purchase securities
from, and sell securities to, Citizens and as a market maker in securities we
may from time to time have a long or short position in, and buy or sell, debt or
equity securities of Citizens for our own account and for the accounts of our
customers. To the extent we have any such position as of the date of this
opinion it has been disclosed to Citizens. We have acted as a financial advisor
to the Board of Directors of Citizens in rendering this fairness opinion and
will receive a fee from Citizens for our services.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Annual Reports to Stockholders of Citizens for the three years
ended December 31, 1998 and the three years ended December 31, 1998 for F&M;
certain interim reports to stockholders and Quarterly Reports on Form 10Q of F&M
and Citizens, and certain internal financial analyses and forecasts for Citizens
and F&M prepared by management. We also have held discussions with members of
the senior management of Citizens regarding the past and current business
operations, regulatory relationships, financial condition and future prospects
of Citizens as well as the results of their due diligence examination of F&M. In
addition, we have compared certain financial and stock market information for
Citizens and F&M with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the banking industry and performed such other
studies and analyses as we considered appropriate.
In conducting our review and arriving at our opinion, we have relied upon
and assumed the accuracy and completeness of all of the financial and other
information provided to us or publicly available and we have not assumed any
responsibility for independently verifying any of such information. We have
relied upon the management of Citizens as to the reasonableness and
achievability of the financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to us, and we have assumed that such
forecasts and projections reflect the best currently available estimates and
judgments of Citizens and that such forecasts and projections will be realized
in the amounts and in the time periods currently estimated by such management.
We have also assumed that the aggregate allowances for loan losses for Citizens
and F&M are adequate to cover such losses. In rendering our opinion, we have not
made or obtained any evaluations or appraisals of the property of Citizens or
F&M, nor have we examined any individual credit files.
B-1
<PAGE> 132
We have considered such financial and other factors as we have deemed
appropriate under the circumstances, including among others the following: (i)
the historical and current financial position and results of operations of
Citizens and F&M; (ii) the assets and liabilities of Citizens and F&M; and (iii)
the nature and terms of certain other merger transactions involving banks and
bank holding companies. We have also taken into account our assessment of
general economic, market and financial conditions and our experience in other
transactions, as well as our experience in securities valuation and our
knowledge of the banking industry generally. Our opinion is necessarily based
upon conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the exchange Ratio in the Merger is fair, from a financial point of
view, to the common stockholders of Citizens.
Very truly yours,
/s/ KEEFE, BRUYETTE & WOODS, INC.
--------------------------------------
KEEFE, BRUYETTE & WOODS, INC.
B-2
<PAGE> 133
ANNEX C
April 16, 1999
Board of Directors
F&M Bancorporation, Inc.
One Bank Avenue
Kaukauna, WI 54130
Members of the Board:
F&M Bancorporation, Inc. ("F&M"), a Wisconsin corporation, and Citizens
Banking Corporation ("Citizens"), a Michigan corporation, have entered into an
Agreement and Plan of Merger (the "Plan") dated April 16, 1999, pursuant to
which F&M will be merged with and into Citizens (the "Merger"). As is set forth
in Section 1.2(a) of the Plan, at the effective time of the Merger each of the
outstanding shares of F&M common stock ("F&M Common Stock") will be converted
into and have the right to receive 1.303 shares (the "Exchange Ratio") of
Citizens common stock (the "Citizens Common Stock"). In connection therewith,
you have requested our opinion as to the fairness, from a financial point of
view, of the Exchange Ratio to the shareholders of F&M.
Hovde Financial, Inc. ("Hovde") specializes in providing investment banking
and financial advisory services to commercial bank and thrift institutions. Our
principals are experienced in the independent valuation of securities in
connection with negotiated underwritings, subscription and community offerings,
private placements, merger and acquisition transactions and recapitalizations.
We are familiar with F&M, having acted as its financial advisor in connection
with, and having participated in the negotiations leading to, the Plan.
We were retained by F&M to act as its exclusive financial advisor with
respect to a review of F&M's strategic alternatives and the possible sale,
merger, consolidation, or other business combination, in one or a series of
transactions, involving all or a substantial amount of the business, securities
or assets of F&M. We will receive compensation from F&M in connection with our
services, a significant portion of which is contingent upon the consummation of
the Merger. At your direction, we solicited the interest of third parties
regarding a possible business combination with F&M. The Plan is the result of
this solicitation.
During the course of our engagement, we reviewed and analyzed material
bearing upon the financial and operating conditions of F&M and Citizens and
material prepared in connection with the proposed transaction, including the
following: the Plan; certain historical publicly available information
concerning F&M and Citizens; the terms of recent merger and acquisition
transactions involving banks and bank holding companies that we considered
relevant; historical market prices and trading volumes for Citizens Common
Stock; and financial and other information provided to us by the managements of
F&M and Citizens.
In addition, we have conducted meetings with members of the senior
management of F&M and Citizens for the purpose of reviewing the future prospects
of F&M and Citizens. We also evaluated the pro forma ownership of Citizens
Common Stock by F&M's shareholders relative to the pro forma contribution of
F&M's assets, liabilities, equity and earnings to the pro forma company, and
conducted such other studies, analyses and examinations as we deemed
appropriate. We also took into account our assessment of general economic,
market and financial conditions and our experience in other transactions, as
well as our knowledge of the banking industry and our general experience in
securities valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by F&M
and Citizens and in the discussions with F&M and Citizens management. We did not
independently verify and have relied on and assumed that the aggregate
allowances for loan losses set forth in the balance sheets of each of F&M and
Citizens at December 31, 1998, and at March 31, 1999, respectively, were
adequate to cover such losses and complied fully with applicable law, regulatory
policy
C-1
<PAGE> 134
and sound banking practices as of the date of such financial statements. We were
not retained to and did not conduct a physical inspection of any of the
properties or facilities of F&M or Citizens, nor did we make any independent
evaluation or appraisal of the assets, liabilities or prospects of F&M or
Citizens, nor were we furnished with any such evaluation or appraisal, and we
were not retained to and did not review any individual credit files.
We have assumed that the Merger is, and will be, in compliance with all
laws and regulations that are applicable to F&M and Citizens. In rendering this
opinion, we have been advised by F&M and Citizens and we have assumed that there
are no factors that would impede any necessary regulatory or governmental
approval for the Merger and we have further assumed that in the course of
obtaining the necessary regulatory and governmental approvals, no restriction
will be imposed on Citizens or the surviving corporation that would have a
material adverse effect on Citizens or the contemplated benefits of the Merger.
We have also assumed that there would not occur any change in the applicable law
or regulation that would cause a material adverse change in the prospects or
operations of Citizens or the surviving corporation after the Merger.
Our opinion is based solely upon the information available to us and the
economic, market and other circumstances as they exist as of the date hereof.
Events occurring and information that becomes available after the date hereof
could materially affect the assumptions and analyses used in preparing this
opinion. We have not undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring or information that becomes available after
the date hereof.
We are not expressing any opinion herein as to the prices at which shares
of Citizens Common Stock issued in the Merger may trade if and when they are
issued or at any future time, nor does our opinion constitute a recommendation
to any holder of F&M Common Stock as to how such holder should vote with respect
to the Plan at any meeting of holders of F&M Common Stock.
This letter is solely for the information of the Board of Directors of F&M
and is not to be used, circulated, quoted or otherwise referred to for any other
purpose, nor is it to be filed with, included in or referred to in whole or in
part in any registration statement, proxy statement or any other document,
except in each case in accordance with our prior written consent which shall not
be unreasonably withheld; provided, however, that we hereby consent to the
inclusion and reference to this letter in any registration statement, proxy
statement, information statement or tender offer document to be delivered to the
holders of F&M Common Stock in connection with the Merger if and only if this
letter is quoted in full or attached as an exhibit to such document and this
letter has not been withdrawn prior to the date of such document.
Subject to the foregoing and based on our experience as investment bankers,
our activities and assumptions as described above, and other factors we have
deemed relevant, we are of the opinion as of the date hereof that the Exchange
Ratio is fair, from a financial point of view, to the shareholders of F&M.
Sincerely,
/s/ HOVDE FINANCIAL, INC.
--------------------------------------
HOVDE FINANCIAL, INC.
C-2
<PAGE> 135
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 Michigan law.
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
Michigan law 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 stockholders 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 Michigan law.
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 $20,000,000, 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,
2001.
II-1
<PAGE> 136
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a list of Exhibits to this Registration
Statement:
<TABLE>
<C> <S>
2 Agreement and Plan of Merger, dated as of April 18, 1999, as
Amended and Restated as of July 30, 1999, by and among
Citizens Banking Corporation, Citizens Acquisition, Inc. and
F&M Bancorporation, Inc., (included in Part I of this
Registration Statement as Exhibit A to the Joint Proxy
Statement-Prospectus). The Amended and Restated 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 Amended and Restated Agreement and Plan of
Merger is included as Exhibit 99.3 to this Registration
Statement and Annex 2 to the Amended and Restated 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 the
Registrant and Citizens Bank, as Rights Agent (incorporated
by reference to Exhibit 1 of the Registrant's 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 Quarles & Brady LLP as to federal income tax
matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Wipfli Ullrich Bertelson LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Keefe, Bruyette & Woods, Inc.
23.5 Consent of Hovde Financial, Inc.
23.6 Consent of Dykema Gossett PLLC (included in Exhibits 5 and
8.1 hereof).
23.7 Consent of Quarles & Brady LLP (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 F&M.
99.3 Stock Option Agreement, dated as of April 18, 1999, by and
between Citizens Banking Corporation and F&M Bancorporation,
Inc. (incorporated by reference to Exhibit 2.2 to Citizens'
Current Report on Form 8-K dated April 18, 1999).
</TABLE>
(b) Financial Statement Schedules.
Not Applicable
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-2
<PAGE> 137
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned hereby undertakes, that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
and F&M'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.
(c) The undersigned hereby undertakes, 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.
(d) The undersigned hereby undertakes, that every prospectus (i) that is
filed pursuant to paragraph (2) immediately preceding, 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, 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.
(e) The undersigned hereby undertakes, 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 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.
(f) The undersigned hereby undertakes, to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 138
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-4
<PAGE> 139
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 September 1, 1999.
CITIZENS BANKING CORPORATION
By: /s/ ROBERT J. VITITO
------------------------------------
Robert J. Vitito
Chairman, 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 September 1, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ROBERT J. VITITO Chairman, President, Chief Executive Officer
- -------------------------------------------- and Director (Principal Executive Officer)
Robert J. Vitito
/s/ JOHN W. ENNEST Vice Chairman, Chief Financial Officer,
- -------------------------------------------- Treasurer and Director (Principal Financial
John W. Ennest Officer)
/s/ DANIEL E. BEKEMEIER Senior Vice President and Controller of
- -------------------------------------------- Citizens
Daniel E. Bekemeier
/s/ DANIEL E. BEKEMEIER 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
/s/ JOSEPH P. DAY Director
- --------------------------------------------
Joseph P. Day
/s/ LAWRENCE O. ERICKSON Director
- --------------------------------------------
Lawrence O. Erickson
/s/ VICTOR E. GEORGE Director
- --------------------------------------------
Victor E. George
</TABLE>
II-5
<PAGE> 140
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ WILLIAM J. HANK Director
- --------------------------------------------
William J. Hank
/s/ STEPHEN J. LAZAROFF Director
- --------------------------------------------
Stephen J. Lazaroff
/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/ ADA C. WASHINGTON Director
- --------------------------------------------
Ada C. Washington
/s/ CHARLES R. WEEKS Director
- --------------------------------------------
Charles R. Weeks
/s/ JAMES L. WOLOHAN Director
- --------------------------------------------
James L. Wolohan
</TABLE>
II-6
<PAGE> 141
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
- ------- --------------------
<C> <S>
2 Agreement and Plan of Merger, dated as of April 18, 1999, as
Amended and Restated as of July 30, 1999, by and among
Citizens Banking Corporation, Citizens Acquisition, Inc. and
F&M Bancorporation, Inc., (included in Part I of this
Registration Statement as Exhibit A to the Joint Proxy
Statement-Prospectus). The Amended and Restated 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 Amended and Restated Agreement and Plan of
Merger is included as Exhibit 99.3 to this Registration
Statement and Annex 2 to the Amended and Restated 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 the
Registrant and Citizens Bank, as Rights Agent (incorporated
by reference to Exhibit 1 of the Registrant's 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 Quarles & Brady LLP as to federal income tax
matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Wipfli Ullrich Bertelson LLP.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of Keefe, Bruyette & Woods, Inc.
23.5 Consent of Hovde Financial, Inc.
23.6 Consent of Dykema Gossett PLLC (included in Exhibits 5 and
8.1 hereof).
23.7 Consent of Quarles & Brady LLP (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 F&M.
99.3 Stock Option Agreement, dated as of April 18, 1999, by and
between Citizens Banking Corporation and F&M Bancorporation,
Inc. (incorporated by reference to Exhibit 2.2 to Citizens'
Current Report on Form 8-K dated April 18, 1999).
</TABLE>
<PAGE> 1
EXHIBIT 5
[Letterhead of Dykema Gossett PLLC]
September 3, 1999
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 Citizens of up to 21,133,306 shares of
Common Stock of Citizens (the "Common Stock") to the shareholders of F&M
Bancorporation, Inc., a Wisconsin corporation ("F&M"), in connection with the
merger (the "Merger") of Citizens' wholly-owned subsidiary, Citizens
Acquisition, Inc., a Wisconsin corporation ("Merger Sub"), with and into F&M,
all as set forth in the Agreement and Plan of Merger, dated as of April 18,
1999, as Amended and Restated as of July 30, 1999, by and among Citizens, Merger
Sub and F&M (the "Merger Agreement"). As a result of the Merger, the outstanding
shares of common stock, par value $1.00 per share, of F&M 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 opinions 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 F&M in accordance with the Merger Agreement, will be legally
issued, fully paid and non-assessable.
<PAGE> 2
Citizens Banking Corporation
September 3, 1999
Page 2
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement. We further consent to the reference to our firm under
the heading "Legal Matters" in the Joint Proxy Statement-Prospectus included in
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,
/S/ DYKEMA GOSSETT PLLC
<PAGE> 1
EXHIBIT 8.1
[Letterhead of Dykema Gossett PLLC]
September 3, 1999
Citizens Banking Corporation
328 S. Saginaw Street
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 Wisconsin (the "Merger") of Citizens Acquisition Inc., a
Wisconsin corporation and a wholly-owned subsidiary of Citizens ("Acquisition"),
with and into F&M Bancorporation, Inc., a Wisconsin corporation ("F&M"),
pursuant to an Agreement and Plan of Merger dated as of April 18, 1999, as
Amended and Restated as of July 30, 1999 (as so amended and restated, the
"Merger Agreement"), by and among Citizens, Acquisition and F&M. The delivery of
an opinion on or before 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 Merger
Agreement.
In rendering our opinion, we have relied upon 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 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, without independent review
or investigation, made by executives of Citizens and F&M, including those set
forth in representation letters provided to us by Citizens and F&M in connection
with the issuance of this opinion letter. We have assumed that such statements
and representations are true, correct, complete and will not be breached and
will continue to be so through the date of the Merger and that no actions will
be taken that are inconsistent with such statements and representations. We have
assumed that any representation or statement made "to the best of knowledge" or
similarly qualified is correct without qualification. As to all matters in which
a person or entity making a representation has represented that such person or
entity is not a party to, or 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. Our opinion is conditioned
on, among other things, the initial and continuing accuracy of such facts,
information, covenants, statements, representations and assumptions. Any
inaccuracy or breach of any of these could adversely affect our opinion.
<PAGE> 2
Citizens Banking Corporation
September 3, 1999
Page 2
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 and the
authenticity of the originals of such documents. We have also assumed that the
Merger will be consummated in accordance with the Merger Agreement.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the Internal Revenue Service (the "Service") and such other
authorities as we have considered relevant. 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
materially adversely affect our conclusions. We undertake no responsibility to
update this opinion for changes in the law or relevant facts subsequent to the
date of this letter.
We express no opinions other than those expressly set forth herein.
These opinions have no binding effect on the Service, and no assurance can be
given that contrary positions may not be taken by the Service or a court
considering the issues. Although we believe that our opinions will be sustained
if challenged, there can be no assurances to this effect. No opinion is
expressed as to the tax consequences under any foreign, state, or local tax law
of the Merger or any transactions related thereto.
Description of the Merger
The following is a summary of the material terms of the Merger, the
details of which are more fully described in the Merger Agreement.
The Merger Agreement provides that, subject to the satisfaction or
waiver of the conditions set forth therein, Acquisition will merge with and into
F&M pursuant to the Wisconsin Business Corporation Law ("WBCL"). Upon
consummation of the Merger, each outstanding share of F&M Common Stock, will be
converted into the right to receive 1.303 shares of Citizens Common Stock.
No fractional shares of Citizens Common Stock will be issued. Each
holder who would otherwise be entitled to a fractional share of Citizens Common
Stock will receive a cash payment equal to the product of the fractional
interest and the per share closing price on the date of the Effective Time.
<PAGE> 3
Citizens Banking Corporation
September 3, 1999
Page 3
Opinion
Based solely upon the foregoing, we are of the opinion that under
current law:
(i) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code, and Citizens, Acquisition, and F&M will
each be a party to the reorganization within the meaning of Section
368(b) of the Code; and
(ii) no gain or loss will be recognized by Citizens or Acquisition
as a result of the Merger.
This opinion is solely for the benefit of Citizens and is not to be
used, circulated, quoted or otherwise referred to for any purpose without our
express written permission.
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement of Citizens on Form S-4 and to the reference to our firm
under the caption "The Merger-Material Federal Income Tax Consequences" in the
Joint Proxy Statement-Prospectus. In giving our 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.
Sincerely,
/s/ DYKEMA GOSSETT PLLC
<PAGE> 1
EXHIBIT 8.2
[Quarles & Brady LLP letterhead]
September 3, 1999
F&M Bancorporation, Inc.
One Bank Avenue
Kaukauna, WI 54120
Re: Acquisition of F&M Bancorporation, Inc. by Citizens Banking
Corporation-- Merger of Citizens Acquisition, Inc. into F&M
Bancorporation, Inc.
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to section 6.2(c) of
the Agreement and Plan of Merger (the "Agreement") dated as of April 18, 1999,
as amended and restated as of July 30, 1999, by and among Citizens Banking
Corporation, a Michigan corporation ("Citizens"), Citizens Acquisition, Inc., a
Wisconsin corporation ("Acquisition"), and F&M Bancorporation, Inc., a Wisconsin
corporation ("F&M").
It is anticipated that, pursuant to the Agreement, Acquisition will
merge with and into F&M pursuant to the applicable laws of the State of
Wisconsin (the "Merger"), and pursuant to the Agreement and as a result thereof
the identity and separate existence of Acquisition will cease, and F&M will
become a corporation wholly-owned subsidiary of Citizens.
Except as otherwise provided, capitalized items referred to herein have
the same meaning as set forth in the Agreement. All Section references unless
otherwise indicated are to the Internal Revenue Code of 1986, as amended (the
"Code").
We have acted as legal counsel to F&M in connection with the Merger. As
such, and for the purposes of rendering this opinion, we have examined and are
relying upon, without independent investigation or review thereof, the truth and
accuracy, at all times, of the statements, covenants, representations and
warranties contained in the following documents:
1. The Agreement;
2. Representations made to us by Citizens and F&M in letters dated
August 31, 1999; and August 26, 1999
3. Such other instruments and documents related to the formation,
organization, and operation of Citizens, Acquisition and F&M, the
consummation of the Merger, and the transactions contemplated
thereby as we deemed necessary or appropriate.
<PAGE> 2
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon without independent investigation or
review) that:
1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents and
there has been, or will be by the Effective Time of the Merger,
due execution and delivery of all documents where execution and
delivery are prerequisites to effectiveness thereof;
2. At the Effective Time of the Merger, the fair market value of the
Citizens voting common stock and other consideration received by
each F&M shareholder will be approximately equal to the aggregate
fair market value of the F&M common stock surrendered in the
Merger;
3. The Merger will be effected in accordance with the terms of the
Agreement, and all of the statements, covenants, representations
and warranties therein or referred to above will be true as of the
Effective Time of the Merger; and
4. The Agreement and the Merger are the product of arm's-length
negotiations.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations, and qualifications set forth herein, we
are of the opinion that:
1. The Merger will constitute a "reorganization" within the meaning
of Section 368 of the Code. Citizens, Acquisition and F&M will
each be a "party to the reorganization" within the meaning of
Section 368 of the Code;
2. No gain or loss will be recognized by Citizens, Acquisition or F&M
as a result of the Merger;
3. The shareholders of F&M will not recognize gain or loss on their
exchange of F&M shares for Citizens shares, except to the extent
of cash received in lieu of a fractional share of Citizens common
stock; and
4. The discussion in the Registration Statement on Form S-4 filed by
Citizens with reference to the Merger under the heading "The
Merger - Material Federal Income Tax Consequences" is accurate.
In addition to the assumptions set forth above, this opinion is subject
to the exemptions, limitations and qualifications set forth below:
1. This opinion represents and is based upon our best judgment
regarding the application of federal income tax laws arising under
the Code, existing judicial decisions, administrative regulations
and published rulings and procedures. Our opinion is not binding
upon the Internal Revenue Service or the courts and there is no
assurance that the Internal Revenue Service could not successfully
assert a contrary opinion.
<PAGE> 3
Furthermore, no assurance can be given that future legislation,
judicial or administrative changes, either on a prospective or
retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein.
2. This opinion does not address any other federal, state, local or
foreign tax consequences that may result from the Merger or any
other related transactions.
3. No opinion is expressed as to any transaction other than the
Merger as described in this opinion.
4. This opinion is intended solely for the benefit of F&M and its
shareholders; it may not be relied upon for any other purpose or
by any other person or entity and it may not be made available to
any other person or entity without our prior written consent.
We consent to the filing of this opinion as an exhibit to the
Registration Statement of Citizens on Form S-4 and to the reference to our firm
under the caption "The Merger - Material Federal Income Tax Consequences" in the
Joint Proxy Statement-Prospectus constituting a part thereof. In giving our
consent, we do not admit that we are "experts" within the meaning of Section 11
of the Securities Act of 1933, or that we are within the category of persons
whose consent is required by Section 7 of the Securities Act or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ QUARLES & BRADY LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
included in the Joint Proxy Statement-Prospectus that is made part of the
Registration Statement on Form S-4 of Citizens Banking Corporation for the
registration of 21,133,306 shares of its common stock and to the incorporation
by reference therein of our report dated January 14, 1999, with respect to the
consolidated financial statements of Citizens Banking Corporation included in
its Annual Report (Form 10-K) for the year ended December 31, 1998, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Detroit, Michigan
September 3, 1999
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to incorporation by reference from the F&M Bancorporation,
Inc. report on Form 10-K for the year ended December 31, 1998 in this
Registration Statement on Form S-4 of Citizens Banking Corporation of our report
dated February 4, 1999, relating to the consolidated balance sheets of F&M
Bancorporation, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1998 and the references to our firm under the heading "Experts" in the joint
proxy statement-prospectus.
/s/ Wipfli Ullrich Bertelson LLP
WIPFLI ULLRICH BERTELSON LLP
Appleton, Wisconsin
September 3, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the Citizens Banking Corporation Registration Statement on Form
S-4 pertaining to the registration of 21,133,306 shares of its common stock, of
our report dated February 4, 1997, with respect to the consolidated statements
of income, changes in shareholders' equity and cash flows for the year ended
December 31, 1996 of CB Financial Corporation and subsidiaries included in
Citizens Banking Corporation's annual report (Form 10-K) for the year ended
December 31, 1998. Our report dated February 4, 1997 included in Citizens
Banking Corporation's Form 10-K for the year ended December 31, 1998, is no
longer appropriate since restated financial statements have been presented
giving effect to a business combination accounted for as a pooling-of-interests.
/s/ Arthur Andersen
Detroit, Michigan
September 3, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
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 part of the Registration Statement on
Form S-4 relating to the proposed merger of Citizens Acquisition, Inc., a
wholly-owned subsidiary of Citizens Banking Corporation, with and into F&M
Bancorporation, Inc. and to the references to our firm and such opinion therein.
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 hereby 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.
KEEFE, BRUYETTE & WOODS, INC.
by: /s/ Keefe, Bruyette & Woods, Inc.
---------------------------------
Dated: September 3, 1999
<PAGE> 1
EXHIBIT 23.5
CONSENT OF HOVDE FINANCIAL, INC.
The undersigned, acting as an independent financial advisor to the
Board of Directors of F&M Bancorporation, Inc., hereby consents to the reference
to our firm in the Form S-4 Registration Statement, and joint proxy
statement-prospectus included therein, relating to the acquisition of F&M
Bancorporation, Inc. by Citizens Banking Corporation, and to the inclusion of
our fairness opinion as an annex to the joint proxy statement-prospectus. In
giving this consent, we do not admit that we are an "expert" whose consent is
required under the Securities Act of 1933.
Dated: September 3, 1999
HOVDE FINANCIAL, INC.
By: /s/ Hovde Financial, Inc.
-----------------------------------------------
<PAGE> 1
EXHIBIT 99.1
FORM OF PROXY FOR CITIZENS
CITIZENS BANKING CORPORATION
The undersigned hereby appoints Victor E. George and William C. Shedd,
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 Stockholders of Citizens Banking Corporation to be held at 328 South Saginaw
Street, Flint, Michigan 48502, at 9:00 a.m. local time, on October 22, 1999 and
at any adjournments thereof.
The Board of Directors recommends votes FOR:
1. Approval of the issuance of shares of Citizens common stock, pursuant
to the Agreement and Plan of Merger, dated as of April 18, 1999, as Amended and
Restated as of July 30, 1999 by and among Citizens Banking Corporation, Citizens
Acquisition, Inc. and F&M Bancorporation, Inc.
|_| 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 issuance of shares 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 , 1999
-------------------------
------------------------------------
------------------------------------
------------------------------------
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
FORM OF PROXY FOR F&M
F&M BANCORPORATION, INC.
SPECIAL MEETING OF SHAREHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gail E. Janssen, John W. Johnson and Daniel E.
Voet, and each of them, proxies, with full power of substitution, to represent
and to vote as designated herein all shares of stock the undersigned is entitled
to vote at the special meeting of shareholders of F&M Bancorporation, Inc. to be
held at the Paper Valley Hotel and Conference Center, 333 West College Avenue,
Appleton, Wisconsin, on Friday, October 22, 1999, at 8:00 a.m., central time,
and at any adjournment thereof, hereby revoking any and all proxies heretofore
given:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
F&M BANCORPORATION, INC. 1999 SPECIAL MEETING
(1) CITIZENS MERGER - Approval of the merger agreement by and among F&M
Bancorporation, Inc., Citizens Banking Corporation, and Citizens
Acquisition, Inc., in which F&M will become a wholly-owned subsidiary
of Citizens, and each share of F&M common stock will be converted into
1.303 shares of Citizens common stock:
|_| FOR |_| AGAINST |_| ABSTAIN
(2) OTHER MATTERS: In their discretion, on such other matters as may
properly come before the meeting or any adjournment thereof;
all as set out in the notice of meeting and joint proxy statement-prospectus
relating to the special meeting, receipt of which is hereby acknowledged.
Check appropriate box
indicate changes below:
Address change? |_| Date ______________, 1999
Name change? |_| No. of Shares
---------------------------------------------------
Signature(s) in box
PLEASE SIGN PERSONALLY AS NAME APPEARS AT LEFT.
When signing as attorney, executor, administrator,
personal representative, trustee or guardian, given
full title as such. If signer is a corporation,
sign full corporate name by duly authorized
officer. If stock is held in the name of two or
more persons, all should sign.