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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
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FIRST OF MICHIGAN CAPITAL CORPORATION
(NAME OF ISSUER AND PERSON FILING STATEMENT)
COMMON STOCK, $.10 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
----------------
CUSIP NO. 320862105
(CUSIP NUMBER OF CLASS OF SECURITIES)
STEVE GASPER, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
FIRST OF MICHIGAN CAPITAL CORPORATION
100 RENAISSANCE CENTER
DETROIT, MICHIGAN 48243-1182
(313) 259-2600
WITH COPY TO:
JOHN F. MARVIN, ESQ.
LEONARD W. JURDEN, ESQ.
PAUL P. HOLEWINSKI, ESQ.
WATSON & MARSHALL L.C.
1010 GRAND AVENUE, 5TH FLOOR
KANSAS CITY, MISSOURI 64106-2271
(816) 842-3132
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
AUGUST 3, 1995
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE
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$7,109,375 $1,421.88
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*For purposes of calculating fee only.
Based upon $11 3/8 cash per share for 625,000 shares. The amount of the
filing fee, calculated in accordance with Regulation 240.0-11 of the Securities
Exchange Act of 1934, as amended, equals 1/50th of one percentum of the value
of Shares purchased.
[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or schedule and
the date of its filing.
Amount previously paid: Not applicable Filing party: Not applicable
Form or registration no.: Not applicable Date filed.: Not applicable
<PAGE>
INTRODUCTION
This Issuer Tender Offer Statement on Schedule 13E-4 ("Schedule 13E-4")
relates to the offer by First of Michigan Capital Corporation, a Delaware
corporation (the "Company"), to purchase 625,000 shares of its common stock,
par value $0.10 per share (the "Shares"), at a cash price of $11 3/8 per share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated August 3, 1995 (the
"Offer to Purchase") and in the related Letter of Transmittal (which together
constitute the "Offer"), and is intended to satisfy the reporting requirements
of Section 13(e) of the Securities Exchange Act of 1934, as amended. Copies of
the Offer to Purchase and the related Letter of Transmittal are filed as
Exhibits (a)(1) and (a)(2), respectively, hereto.
ITEM 1. SECURITY AND THE ISSUER.
(a) The name of the issuer is First of Michigan Capital Corporation, a Delaware
corporation, and its principal executive office is at 100 Renaissance
Center, 26th Floor, Detroit, Michigan 48243-1182.
(b) The class of securities to which this Schedule 13E-4 relates is the
Company's common stock, par value $0.10 per share. The information set
forth in the "Cover Page", "Introduction", "Special Factors--Background of
the Offer, --Vote of the Board of Directors; Position of Dissenting
Director, --Interests of Certain Persons in the Transaction, --Source and
Amount of Funds" and "The Tender Offer--Number of Shares; Proration, --
Certain Information About the Company" in the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in the "Cover Page", "Introduction", "Special
Factors--Certain Effects of the Offer on the Market for Shares;
Registration Under the Exchange Act" and "The Tender Offer--Price Range of
Common Stock; Dividends" in the Offer to Purchase is incorporated herein by
reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in "Special Factors--Source and Amount of Funds"
in the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a-j) The information set forth in the "Cover Page", "Introduction", "Special
Factors--Background of the Offer, --Vote of the Board of Directors;
Position of the Dissenting Director, --Purpose of the Offer;
Considerations of the Directors, --Plans for the Company, --Interests of
Certain Persons in the Transaction, --Certain Effects of the Offer on the
Market for the Shares; Registration Under the Exchange Act" and "The
Tender Offer--Price Range of Common Stock; Dividends" in the Offer to
Purchase is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "Special Factors--Interests of Certain Persons
in the Transaction" and Schedule II--Transactions in Shares During the 60
Days Prior to the Offer in the Offer to Purchase is incorporated herein by
reference.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
None.
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ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Cover Page", "Introduction", "Special
Factors--Background of the Offer, --Opinion of Financial Advisor; Fairness
of the Transaction" and "The Tender Offer--Fees and Expenses" in the Offer
to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a) The financial information set forth in "The Tender Offer--Certain
Information About the Company" and Appendix B -- First of Michigan Capital
Corporation Audited Financial Statements in the Offer to Purchase is
incorporated herein by reference.
(b) The pro forma data set forth in "The Tender Offer--Certain Information
About the Company" and Appendix B -- First of Michigan Capital Corporation
Audited Financial Statements in the Offer to Purchase is incorporated
herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) The information set forth in "Introduction" and "Special Factors--
Continuing Stockholders, --Plans for the Company" in the Offer to Purchase
is incorporated herein by reference.
(b) The information set forth in the "Cover Page", "Introduction" and "The
Tender Offer--Certain Conditions of the Offer, --Certain Legal Matters;
Delaware Law; Regulatory Approvals" in the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in "Special Factors--Certain Effects of the Offer
on the Market for the Shares; Registration Under the Exchange Act" in the
Offer to Purchase is incorporated herein by reference.
(d) The information set forth in "The Tender Offer--Certain Information about
the Company" in the Offer to Purchase is incorporated herein by reference.
(e) The information set forth in the Offer to Purchase and the related Letter
of Transmittal, copies of which are filed as Exhibits (a)(1) and (a)(2),
respectively, hereto, is incorporated herein by reference in their
entirety.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
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(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Press Release dated July 26, 1995.
(a)(7) Press Release dated August 3, 1995.
(a)(8) Letter to Stockholders.
(b) None.
(c) None.
(d) None.
(e) Not applicable.
(f) None.
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3
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
First of Michigan Capital
Corporation
/s/ Steve Gasper, Jr.
By: _________________________________
Name: Steve Gasper, Jr.
Title: President
Dated: August 3, 1995
4
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EXHIBIT INDEX
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EXHIBIT DESCRIPTION
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(a)(1) Offer to Purchase.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Press Release dated July 26, 1995.
(a)(7) Press Release dated August 3, 1995.
(a)(8) Letter to Stockholders.
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5
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FIRST OF MICHIGAN CAPITAL CORPORATION
100 RENAISSANCE CENTER, 26TH FLOOR
DETROIT, MICHIGAN 48243-1182
OFFER TO PURCHASE FOR CASH
UP TO
625,000 SHARES OF ITS COMMON STOCK
AT $11 3/8 PER SHARE NET
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON
AUGUST 31, 1995 UNLESS THE OFFER IS EXTENDED.
First of Michigan Capital Corporation, a Delaware corporation (the
"Company"), hereby offers to purchase from its stockholders up to 625,000
shares (the "Maximum Amount") of the Company's outstanding common stock, par
value $0.10 per share (the "Shares"), at $11 3/8 per share net to the Seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal, which together constitute
the "Offer". The Board of Directors of the Company has received an opinion from
Duff & Phelps Capital Markets Co. ("Duff & Phelps"), which acted as financial
advisor to the Board of Directors and the Special Committee (as defined
herein), to the effect that the Offer is fair to the Company's stockholders
from a financial point of view. The Company may accept for purchase a
sufficient number of Shares that will allow the Company to delist such Shares
from the Chicago Stock Exchange and to deregister such shares and suspend the
Company's reporting obligations under the Securities Exchange Act of 1934. The
Board of Directors is not making any recommendations concerning whether
stockholders should tender their shares. One director voted against the Offer.
----------------
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. SHARES MAY BE PURCHASED ON A PRO RATA BASIS IF MORE
SHARES THAN THE MAXIMUM AMOUNT ARE TENDERED.
----------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
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AUGUST 3, 1995
<PAGE>
IMPORTANT
Any stockholder desiring to tender all or any portion of his or her Shares
should either (i) complete and sign the Letter of Transmittal accompanying this
Offer to Purchase (or a facsimile copy thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver it and any other
required documents to First Chicago Trust Company of New York (the
"Depositary") and either mail or deliver the stock certificates for such Shares
to the Depositary along with the Letter of Transmittal or tender such Shares
pursuant to the procedures for book-entry transfer set forth in "The Tender
Offer--Procedure for Tendering Shares," or (ii) request his or her broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for him or her. Holders of Shares registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
such broker, dealer, commercial bank, trust company or other nominee if they
desire to tender such Shares. Any stockholder who desires to tender Shares and
whose certificates for Shares are not immediately available or who cannot
comply with the procedures for book-entry transfer on a timely basis may tender
Shares by following the procedures for guaranteed delivery set forth in "The
Tender Offer--Procedure for Tendering Shares".
Participants in the Company's Employee Stock Ownership Trust (the "ESOT") may
instruct the ESOT trustee to anonymously tender all Shares allocated to such
participant's ESOT account by properly completing the accompanying ESOT
Instruction Form and timely submitting such information to the Trustee.
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent.
----------------
The Shares are listed and traded on the Chicago Stock Exchange, Incorporated
(the "Chicago Exchange") and are registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The purchase of Shares pursuant to
the Offer may cause the Shares to become ineligible for continued listing on
the Chicago Exchange and allow the Company to terminate registration of the
Shares under the Exchange Act and to suspend its reporting obligations
thereunder. The published guidelines of the Chicago Exchange indicate that it
would consider delisting the Shares if, among other things, the number of
publicly held Shares (excluding officers, directors and other concentrated
holdings of Shares) falls below 100,000 or if the number of stockholders falls
below 500. Registration of the Shares under the Exchange Act may be terminated
upon application by the Company to the Securities and Exchange Commission if
there are fewer than 300 recordholders of the Shares. As of June 29, 1995,
there were 322 recordholders of 2,891,558 outstanding Shares of the Company.
If, as a result of the Offer, Shares are held of record by fewer than 300
persons, the Company will seek to delist its Shares on the Chicago Exchange and
terminate registration of the Shares under the Exchange Act. Such events may
have a material adverse effect on the liquidity and market value of any Shares
not purchased in the Offer. See "Special Factors--Certain Effects of the Offer
on the Market for the Shares; Registration Under the Exchange Act".
Stockholders should carefully consider the impact of the potential delisting
and deregistration of the Shares, as well as the Company's lack of obligation
to purchase Shares outside the Offer or otherwise provide for any liquidity in
the Shares equity repurchase transactions in making their determination whether
to tender their Shares.
In the event the purchase of the Company's Shares pursuant to the Offer does
not cause the Shares to become ineligible for listing on the Chicago Exchange
or allow the Company to terminate registration of the Shares under the Exchange
Act, the Company may implement a reverse stock split of its Shares or engage in
other transactions in order to eliminate holdings of fewer than 100 Shares and
reduce the number of record holders to 300. See "Special Factors--Plans for the
Company".
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A stockholder may tender all or any portion of his or her Shares in response
to the Offer. However, if the total number of Shares tendered by all
stockholders exceeds the Maximum Amount sought in the Offer, the Company will
not accept for purchase all of the Shares tendered. If all of the outstanding
Shares other than the Shares held by the Continuing Stockholders (as defined in
"Special Factors--Continuing Stockholders") are tendered, then approximately 58
percent of the Shares tendered will not be purchased. See "The Tender Offer--
Number of Shares; Proration". Shares will be purchases first from Odd Lot
Owners in priority to purchases from other stockholders. The purchases from the
remaining stockholders will be on a pro rata basis. See "The Tender Offer--
Number of Shares; Proration".
NO PERSON HAS BEEN AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER ON BEHALF OF THE COMPANY
OTHER THAN THOSE CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
TABLE OF CONTENTS
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PAGE
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INTRODUCTION.............................................................. 1
SPECIAL FACTORS........................................................... 3
Background of the Offer................................................. 3
Vote of the Board of Directors; Position of Dissenting Director......... 5
Continuing Stockholders................................................. 6
Purpose of the Offer; Considerations of the Directors................... 6
Opinion of Financial Advisor; Fairness of the Transaction............... 9
Prior Evaluations of the Company; Prior Transactions.................... 12
Plans For the Company................................................... 15
Certain Effects of the Offer on the Market for the Shares; Registration
Under the
Exchange Act........................................................... 16
Interests of Certain Persons in the Transaction......................... 18
Certain Tax Consequences to Stockholders................................ 19
Source and Amount of Funds.............................................. 21
THE TENDER OFFER.......................................................... 22
Number of Shares; Proration............................................. 22
Tenders by Owners of Fewer than 100 Shares.............................. 23
Tender of Employee Stock Ownership Trust Shares......................... 23
Procedure for Tendering Shares.......................................... 23
Withdrawal Rights....................................................... 25
Purchase of Shares and Payment of Purchase Price........................ 26
Certain Conditions of the Offer......................................... 27
Price Range of Shares; Dividends........................................ 28
Certain Information About the Company................................... 29
Certain Legal Matters; Delaware Law; Regulatory Approvals............... 36
Extension of the Offer; Termination; Amendments......................... 36
Fees and Expenses....................................................... 37
Miscellaneous........................................................... 38
Schedule IInformation Concerning Directors and Executive Officers of the
Company
Schedule IITransactions in Shares During the 60 Days Prior to the Offer
Appendix AOpinion of Duff & Phelps Capital Markets Co.
Appendix BFirst of Michigan Capital Corporation Co. Financial Statements
Appendix C July 26, 1995 Position Statement from Director Joseph Mengden
</TABLE>
iii
<PAGE>
TO THE HOLDERS OF SHARES OF COMMON STOCK OF
FIRST OF MICHIGAN CAPITAL CORPORATION
INTRODUCTION
The Company is offering to purchase from its stockholders up to 625,000
Shares of the Company's outstanding Shares at $11 3/8 per Share, net to the
seller in cash (the "Purchase Price"), upon the terms and subject to the
conditions set forth herein and in the related Letter of Transmittal
accompanying this Offer to Purchase (which together constitute the "Offer").
The Board of Directors of the Company (the "Board of Directors" or "Board") has
received an opinion from Duff & Phelps Capital Markets Co. ("Duff & Phelps"),
which acted as financial advisor to the Board and the Special Committee (as
defined in "Special Factors--Background of the Offer"), to the effect that the
Offer is fair to the Company's public stockholders from a financial point of
view. See "Special Factors--Opinion of Financial Advisor; Fairness of the
Transaction".
The Continuing Stockholders (as defined in "Special Factors--Continuing
Stockholders") have indicated that they do not intend to tender their shares in
response to the Offer. See "Special Factors--Continuing Stockholders". The
Continuing Stockholders collectively own 1,387,412 Shares. Therefore, of the
2,891,558 Shares outstanding as of June 29, 1995, a maximum of 1,504,146
Shares, including Shares allocated to the accounts of participants in the
Company's Employee Stock Ownership Trust (the "ESOT"), may be tendered in
response to the Offer. However, the Company will accept for purchase no more
than the Maximum Amount.
If before the Expiration Time (as defined in the "Tender Offer--Number of
Shares; Proration"), Shares are properly tendered and not withdrawn, the
Company will accept for purchase Shares properly tendered first from all Odd
Lot Owners (as defined in "Tender Offer--Tenders by Owners of Fewer than 100
Shares") and then from all other stockholders who properly tender Shares at the
Purchase Price. If stockholders tender more than 625,000 Shares, the Shares
purchased from stockholders other than Odd Lot Owners will be prorated. See
"The Tender Offer--Number of Shares; Proration and--Tenders by Owners of Fewer
than 100 Shares". All Shares purchased will be purchased at the Purchase Price,
and the Company will return all Shares not purchased under the Offer. Tendering
stockholders will not be obligated to pay brokerage commissions, solicitation
fees or, subject to Instruction 6 of the Letter of Transmittal, stock transfer
taxes on the Company's purchase of Shares. In addition, the Company will pay
all fees and expenses of the Depositary and Morrow & Co., Inc. (the
"Information Agent") in connection with the Offer.
Duff & Phelps rendered its opinion to the Board of Directors of the Company
that, as of July 31, 1995, the Purchase Price is fair to the stockholders from
a financial point of view. The full text of the written opinion of Duff &
Phelps, which sets forth the assumptions made, matters considered and
limitations of the review undertaken, is included as Appendix A to this Offer
to Purchase. Stockholders are urged to carefully read the opinion in its
entirety. See "Special Factors--Opinion of Financial Advisor; Fairness of the
Transaction" for a summary of the Duff & Phelps opinion.
The Shares are listed and traded on the Chicago Stock Exchange (the "Chicago
Exchange"). The closing per Share bid price as reported on the Chicago Exchange
on July 25, 1995, the last trading day before the Company announced that it
would commence the Offer, was $10 1/4. The closing per share bid price on the
Chicago Exchange on August 2, 1995, the last trading day before the Offer was
mailed to stockholders was $10. The Company urges its stockholders to obtain
current market quotations for the Shares.
The purchase of Shares pursuant to the Offer may cause the Shares to be
ineligible for continued listing on the Chicago Exchange and allow the Company
to terminate registration of the Shares under the Exchange
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Act and suspend its reporting obligations thereunder. The published guidelines
of the Chicago Exchange indicate that it would consider delisting the Shares
if, among other things, the number of publicly held Shares (excluding officers,
directors and other concentrated holdings of Shares) should fall below 100,000
or if the aggregate number of stockholders should fall below 500. Registration
of the Shares under the Exchange Act may be terminated upon application by the
Company to the Securities and Exchange Commission (the "Commission") if there
are fewer than 300 record holders of the Shares. As of June 29, 1995 (the most
recent date as of which such information is available), there were 322 record
holders of 2,891,558 Shares of the Company.
If, as a result of the Offer, Shares are held of record by fewer than 300
persons, the Company will immediately seek to delist its Shares on the Chicago
Exchange and terminate registration of the Shares under the Exchange Act. Such
events may have a material adverse effect on the liquidity and market value of
the Shares held by the remaining stockholders. See "The Tender Offer--Certain
Effects of the Offer on the Market for the Shares; Registration Under the
Exchange Act". In the event the Offer does not cause the Company's Shares to
become ineligible for listing on the Chicago Exchange or allow the Company to
terminate registration of the Shares under the Exchange Act, the Company may
implement a reverse stock split of its Shares or other transaction in order to
reduce the number of stockholders of record below 300. See "Special Factors--
Plans for the Company".
Management of the Company has plans to make changes in the Company's
operations. See "Special Factors--Plans for the Company".
The Company has filed with the Commission Schedules 13E-3 and 13E-4, together
with exhibits. Such Schedules, including exhibits and any amendments thereto,
furnish certain additional information with respect to the Offer. These
Schedules may be inspected at, and copies may be obtained from, the same places
and in the same manner as set forth in "The Tender Offer--Certain Information
About the Company".
THE OFFER IS NOT CONDITIONED ON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE "TENDER OFFER--
CERTAIN CONDITIONS OF OFFER". THE NUMBER OF SHARES PURCHASED MAY BE LESS THAN
THE NUMBER OF SHARES TENDERED. SEE "THE TENDER OFFER--NUMBER OF SHARES;
PRORATION".
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. IN
ADDITION, ONE DIRECTOR HAS VOTED AGAINST THE OFFER. SEE "SPECIAL FACTORS--VOTE
OF BOARD OF DIRECTORS; POSITION OF DISSENTING DIRECTOR AND--CONTINUING
STOCKHOLDERS." EACH STOCKHOLDER MUST MAKE HIS OR HER OWN DECISION WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. CERTAIN OF THE DIRECTORS
AND OFFICERS OF THE COMPANY INTEND TO TENDER SHARES PURSUANT TO THE OFFER. SEE
"SPECIAL FACTORS--INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION". IN
ADDITION, CERTAIN STOCKHOLDERS, SOME OF WHOM ARE ALSO DIRECTORS OF THE COMPANY,
HAVE INDICATED THAT THEY DO NOT INTEND TO TENDER THEIR SHARES. SEE "SPECIAL
FACTORS--CONTINUING STOCKHOLDERS".
2
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SPECIAL FACTORS
BACKGROUND OF THE OFFER
In the summer of 1992, the Board of Directors began a preliminary search to
find a purchaser for a minority block of the Company's Shares. This effort
stemmed from the plans of several stockholders to liquidate their investment
(representing approximately 35% of the Company's outstanding shares) in the
Company for reasons unrelated to the performance of the Company. Since the
Board believed that the breadth and depth of the market for the Company's
Shares on the Chicago Exchange (then the Midwest Stock Exchange) was not
sufficient for the size of the contemplated selling transactions, the Board
sought alternative sources to liquidate the shares. The Company engaged CS
First Boston Corporation ("First Boston"), an independent financial advisor, to
market the minority block of shares. In October 1992, First Boston contacted
Comerica, Incorporated, a Delaware corporation ("Comerica"), which expressed an
interest in not only purchasing the minority block of shares, but also in
merging the Company with Comerica's operations. On January 10, 1993, Comerica
and the Company entered into a merger agreement. However, Comerica terminated
the merger in March 1993 before it could be consummated. See "Special Factors--
Prior Evaluations of the Company; Prior Transactions".
On September 24, 1993, a special advisory committee of directors consisting
of Richard Gushee, Joseph Mengden, Richard Lewis and Geoffrey Baker was
established by the Board to pursue certain proposals made by companies that had
expressed an interest in acquiring the Company. The Company entered into
further, more detailed negotiations with two potential bidders. These
negotiations were unsuccessful and were subsequently terminated in the early
stages. See "Special Factors--Prior Evaluations of the Company; Prior
Transactions".
In mid-November 1993, the Board switched its focus away from strategic
combinations and began to look at internal ways to strengthen its operations.
On November 15, 1993, the Board decided to develop a strategic business plan to
modernize operations, improve efficiency, develop new products, plan for
management succession as members of management reached retirement age and
provide an alternative form of exit vehicle for Company stockholders seeking to
liquidate their Shares. The Board discussed alternative restructuring plans,
which included a presentation by management concerning a leveraged buy-out
involving the Company ESOT. The Board also appointed a special committee
consisting of Board members Joseph Mengden, John Martin, Richard Lewis and
Richard Gushee (the "Management Committee") to formulate for the Board's
consideration a comprehensive business plan and a plan for management
succession.
On November 22, 1993, the Board reviewed and discussed several model ESOT
leveraged buy-out transactions. A First Boston representative also summarized
several Share repurchase scenarios based on estimates that the Company had
excess capital of approximately $15 million. The Board determined that a one
million Share repurchase was not the best alternative, but that a 500,000 Share
repurchase plan might be considered. A going private transaction was also
discussed. The Board also authorized the Management Committee to engage a
recruiting firm to present candidates to be considered with respect to
management succession.
In April 1994, John G. Martin, who was a Director and the Company's Chief
Executive Officer, retired. At that time, the Company retained Steven Gasper,
Jr. as its President and Chief Executive Officer.
In the spring of 1995, the Board again began to explore methods of
strengthening the Company's operations, such as those considered in 1993,
including a transaction that would allow the Company to become privately held.
Gerard M. Lavin and Craig P. Baker (the "Outside Directors") were requested by
the Chairman of the Board, William H. Cuddy, to develop strategic plans for the
Company.
In May, 1995, the Outside Directors reported their preliminary findings and
proposed strategic plans for the Company. The Outside Directors proposed
consideration of taking the Company private and cashing out stockholders
through a reverse stock split and an offering to purchase other Shares on a
one-time limited basis. The Outside Directors also proposed consideration of a
restructuring of the current employee savings
3
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plans into a comprehensive employee retirement plan that would be more
effective in building retirement assets for Company employees. In order to fund
the transactions, the Outside Directors suggested disposing of certain Company
owned life insurance policies in order to collect the cash surrender value,
selling certain securities and real estate investments and eliminating dividend
payments. In addition, funds would be taken from the Company's cash and money
fund holdings. See "Special Factors--Source and Amounts of Funds".
On June 15, 1995, the Board determined that the current capitalization of the
Company exceeded what was reasonably necessary for the Company's continuing
operations. The Board unanimously appointed Gerard M. Lavin and Craig P. Baker
to serve on a special advisory committee (the "Special Committee") for the
purpose of considering and evaluating strategic options available to the
Company to reduce the Company's capitalization, including consideration of
whether the Company should conduct a self tender offer for its Shares. The
Board did not pursue and did not consider the suggestion of a reverse stock
split. The Board also voted to engage Duff & Phelps Capital Markets Co. ("Duff
& Phelps") as an independent financial advisor to assist the Special Committee
and the Board in establishing a Purchase Price for Company Shares. The Board
also retained outside legal counsel to provide legal advice to the Board and
the Special Committee.
One of the members of the Special Committee, Craig Baker, beneficially owns
266,072 Shares (or 9.2 percent of the outstanding Shares on June 29, 1995). The
other member, Gerard Lavin, is an officer of DST Systems, Inc. ("DST"). DST
beneficially owns 609,956 Shares (or 21.1 percent of the Shares outstanding on
June 29, 1995). In addition, Craig Baker's brother, father and uncle
beneficially own collectively 511,348 Shares (or 17.7 percent of the
outstanding Shares as of June 29, 1995). See "Special Factors--Continuing
Stockholders".
On June 20, 1995, the Board executed the contract to retain Duff & Phelps to
act as financial advisor to assist the Special Committee and the Board in
establishing a Purchase Price and to issue a formal written opinion with
respect to a range of prices in which a Company tender offer would be fair to
the stockholders from a financial point of view. See "Special Factors--Opinion
of Financial Advisor; Fairness of the Transaction".
On June 25, 1995, William H. Cuddy, Chairman of the Board of Directors,
received a letter from Board member Joseph Mengden voicing his concerns over
any self tender offer that was being contemplated by the Company (the "Mengden
Letter"). Mengden expressed his concerns that a Company tender offer resulting
in the Company becoming private would change the Company's mission statement
and decrease the Company's competitiveness in the securities brokerage
industry. Mengden also indicated that he would vote against any tender offer
which did not offer to purchase all the "public" Shares that were outstanding.
On June 28, 1995, the Board met to address several matters including the
Mengden Letter. The other members of the Board disagreed with Mr. Mengden's
statement that the proposed tender materially changed the Company's Mission
Statement and stated that they felt that Mr. Mengden had a fundamental
misunderstanding about the nature of the proposed transaction. They also
disagreed with Mr. Mengden's position that he did not have a financial interest
in the transaction in light of the fact that he owned more than 120,000 Shares.
See "Special Factors--Vote of the Board of Directors; Position of Dissenting
Director and --Interests of Certain Persons in the Transaction".
The other directors also concluded that the Company could not purchase all
outstanding shares without seriously jeopardizing First of Michigan's financial
stability. The other directors also noted that the proposed tender offer
benefitted all stockholders (i) by providing liquidity at a premium price for
those who chose to tender, and (ii) for those who chose not to tender, by
lowering costs by eliminating filings, thus allowing the Company to invest
additional resources in growth.
Mr. Mengden indicated that he had an interest in selling his Shares in order
to pursue other business ventures.
4
<PAGE>
The Board directed the Special Committee to proceed with an evaluation by
counsel and verify information provided to Duff & Phelps and decided to defer
any further discussion of a self tender offer until the next Board of Directors
meeting.
On July 18, 1995, Duff & Phelps discussed its preliminary views on valuation
with the Special Committee.
On July 20, 1995, the Special Committee recommended to the Board that the
Company make a cash tender offer for Shares with an aggregate value of
approximately $7 million with the intention of taking the Company private. The
Special Committee reported that they understood that Duff & Phelps had
determined that an offer price in the range of $11.00 to $11.50 per share would
be fair to Company stockholders from a financial point of view. The Special
Committee recommended that the Board adopt $11.25 as the purchase price for the
proposed offer.
Representatives from Duff & Phelps joined the Board meeting and presented an
oral report describing its review of the Company and the approach used to
establish the Share price valuation. Duff & Phelps stated a range of $11.00 to
$11.75 as a band of prices it considered to be fair from a financial point of
view to Company stockholders in the proposed tender offer. Duff & Phelps
indicated that in preparing the opinion, they had not received any special
instructions from the Special Committee, there were no limitations placed on
their investigation and they had been given all the information they requested
in order to render the opinion. See "Special Factors--Opinions of Financial
Advisor; Fairness of the Transaction".
Because of the Duff & Phelps final price range, the Special Committee changed
its recommendation to the Board to include a Purchase Price range from $11.25
to $11.375. The Board determined that the Offer and the transactions
contemplated thereby were fair to and in the best interests of the stockholders
of the Company (both to those who tendered Shares and to those who did not),
and voted to approve the implementation of a cash tender offer to the holders
of Company common stock and to purchase up to 625,000 shares at a price of
$11.375 in order to (i) reduce the Company's capitalization by approximately $7
million, (ii) provide an opportunity for the Company's common stockholders to
receive immediate liquidity for their shares, (iii) eliminate Company common
stockholders of fewer than 100 shares and (iv) remove the Company common stock
from registration under the Exchange Act and from listing on the Chicago
Exchange. See "Special Factors--Purpose of the Offer; Considerations of the
Directors". Director Mengden was the sole director to dissent to the Board's
approval of the Offer. See "Special Factors--Vote of the Board of Directors;
Position of the Dissenting Director".
On July 26, 1995 the Offer was announced. On August 3, 1995 (the
"Commencement Date"), the Company mailed the Offer to stockholders.
VOTE OF THE BOARD OF DIRECTORS; POSITION OF DISSENTING DIRECTOR
The Offer was approved by all the members of the Board, including the non-
employee Board members, other than Mr. McDonnell, who was not present at the
meeting when the vote was taken, and Mr. Mengden, who voted against the
transaction. Mr. McDonnell has since indicated to the Company that he is in
favor of the Offer.
Mr. Mengden has indicated by letter dated July 26, 1995 (a copy of which is
attached as Appendix C hereto) that he voted against the Offer as not being in
his opinion in the best interest of the Company and the "public stockholders"
because the Offer is for only part of the Shares not held by the Continuing
Stockholders. Depending on the number of Shares tendered in excess of the
625,000 to be acquired pursuant to the Offer, he maintained that the tendering
stockholders could have up to approximately 57 percent of their shares not
accepted for purchase. See "The Tender Offer--Number of Shares; Proration". Mr.
Mengden said he believes that the Shares not purchased in the Offer, along with
the Shares not tendered, will suffer a material change in status if the Company
is able to effect its plans to deregister and delist the Shares, that the
5
<PAGE>
value of the remaining outstanding Shares may be severely depressed and that
liquidation and valuation of such Shares will be severely restricted. See
"Special Factors--Certain Effects of the Offer on the Market for the Shares;
Registration under the Exchange Act and --Purpose of the Offer; Considerations
of the Directors". In addition, Mr. Mengden expressed concern about the tax
effects of the Offer on the stockholders whose Shares are accepted for purchase
(See "Special Factors--Certain Tax Consequences to Stockholders"). Accordingly,
he stated that he believes that these negative factors outweigh the cost
savings to the Company for going private and, therefore, chose to vote against
the Offer. He also indicated that if the Offer was for all of the Shares not
held by the Continuing Stockholders, that he would reconsider his vote.
As of June 29, 1995, Mr. Mengden beneficially owned 123,836 Shares. He has
indicated he intends to tender all of his Shares. See "Special Factors--
Interests of Certain Persons in the Transaction".
CONTINUING STOCKHOLDERS
The following stockholders (the "Continuing Stockholders") have indicated
that they do not intend to tender their Shares in response to the Offer. See
also "Special Factors--Interests of Certain Persons in the Transaction".
As of June 29, 1995, the Continuing Stockholders beneficially owned the
following Shares.
<TABLE>
<CAPTION>
SHARES PERCENT OF PERCENT
BENEFICIALLY OUTSTANDING AFTER
CONTINUING STOCKHOLDER OWNED SHARES(1),(2) OFFER(3)
---------------------- ------------ ------------- --------
<S> <C> <C> <C>
Craig P. Baker...................... 266,072 (2) 9.2 11.7
Geoffrey B. Baker................... 76,332 (2) 2.6 3.4
Louis C. Baker...................... 250,196 (2) 8.7 11.0
DST Systems, Inc.................... 609,956 21.1 26.9
Paxton Mendelssohn, II.............. 228,416 7.9 10.1
Less duplicate shares............... (43,560)(2)
---------
Total........................... 1,387,412 48.0 61.2
=========
</TABLE>
- --------
(1) Amounts are based on Shares outstanding prior to the Offer and do not
reflect an adjustment for duplicate shares.
(2) Louis C. Baker is the co-trustee of two trusts that each hold 21,780
Shares. With respect to one of the trusts, Louis Baker is co-trustee with
Craig Baker and another person, and with respect to the other trust, Louis
Baker is co-trustee with Geoffrey Baker and another person. The holdings of
each of the trusts is attributed to each of the trustees of the trust for
purposes of the federal securities laws. Therefore, the amounts shown in
the table are being adjusted to eliminate the duplicate holdings. The
percentage calculations have not been adjusted to reflect an adjustment for
such duplicate holdings.
(3) The column sets forth the percentage ownership of the Continuing
Stockholders assuming that the Maximum Amount of Shares is purchased in the
Offer (in which case the total number of Shares outstanding would be
reduced to 2,266,558).
Based upon 2,891,558 Shares outstanding on June 29, 1995, 1,504,146 Shares
may be tendered in response to the Offer. The Company has no plans to purchase
more than the Maximum Amount. See "The Tender Offer--Number of Shares;
Proration". None of the Continuing Stockholders has requested or received any
opinion from any outside party as to the fairness of the consideration to be
paid pursuant to the Offer.
PURPOSE OF THE OFFER; CONSIDERATIONS OF THE DIRECTORS
The purpose of the Offer is to provide stockholders with the opportunity to
liquidate up to 625,000 Shares (which the Board believes may otherwise be
difficult for stockholders to achieve based on the historically thin trading
market for the Shares), as well as to attempt to reduce the costs and burdens
associated with maintaining accounts for holders of fewer than 100 shares of
the Company's common stock and with continuing a public market for the
Company's common stock.
6
<PAGE>
In addition, the Offer provides stockholders whose Shares are purchased
pursuant to the Offer the opportunity to sell those Shares for cash without the
usual transaction costs associated with open-market sales. Any Odd Lot Owners
(as defined in "Tender Offer--Tender By Owners of Fewer Than 100 Shares") whose
Shares are purchased pursuant to the Offer will avoid the payment of brokerage
commissions. The Offer also gives stockholders the opportunity to sell their
Shares at a price that is greater than market prices prevailing immediately
prior to the announcement of the Offer. In addition, to the extent the purchase
of Shares in the Offer results in a reduction in the number of stockholders of
record, the costs to the Company for services to stockholders will be reduced.
If a sufficient number of stockholders tender their Shares pursuant to the
Offer, the Shares are likely to be delisted from the Chicago Exchange. In
addition, if the Shares are delisted from the Chicago Exchange, the Company
intends to file with the Commission a notice of the termination of the
registration of its Shares under the Exchange Act. See "Special Factors--
Certain Effects of the Tender Offer on the Market for Shares; Registration
Under the Exchange Act". Accordingly, the Company will be relieved of the
burdens of being a public company, including the following:
(1) As a private company, the Company should realize a cost savings by
eliminating the cost of complying with the reporting and other requirements
applicable to public companies. These include the elimination of proxy
statements, annual reports, quarterly reports, current reports, transfer
agent services, and legal and accounting services required in connection
therewith and other compliance matters relating to the laws, rules and
regulations of the Commission. In addition, there should be savings from
(i) a reduced need for Company personnel in connection with the preparation
and review of the aforementioned reports, and (ii) reduced costs for
director and officer liability insurance. The Company's management
estimates that the annual pre-tax savings as a result of these changes
should be approximately $115,000.
(2) As a public company, the Company is required by applicable laws to
make public certain financial and operating information. This places the
Company at a disadvantage in situations where it is required to compete
with private companies or with divisions or units of public companies not
required to disclose such information in as much detail. Unlike the
Company, private companies are not required to disclose their operations
and finances to the public.
(3) As a private company, the Company may be in a better position to
compete since it may be able to more quickly take advantage of corporate
opportunities. For instance, certain matters requiring a stockholder vote
could be accomplished in a more expedited fashion as a private company than
as a public company, which is required to prepare and submit proxies or
information statements to all stockholders on matters requiring a vote of
the stockholders.
(4) As a public company, the Company is under more pressure to focus on
improving short-term performance to satisfy the expectations of
stockholders and financial analysts. In some instances, these short-term
goals may be inconsistent with the Board's overall goal of long-range
maximization of stockholders' value.
However, the potential delisting and deregistration of the Shares may have a
material adverse effect on the liquidity and market value of the remaining
Shares held by stockholders. See "Special Factors--Certain Effects of the Offer
on the Market for the Shares; Registration Under the Exchange Act".
The Board, in determining that the Offer was fair to stockholders who tender
and to those who do not, and in otherwise approving the Offer, based its
conclusions on the recommendations of the Special Committee and the opinions of
Duff & Phelps. The Special Committee considered a number of matters in reaching
its conclusions, including the following.
(1) The Board of Directors' belief that the current capitalization of the
Company exceeds that which is reasonably necessary for the Company's
continuing operations, and the fact that such excess
7
<PAGE>
capitalization means that the Company has available funds to pay for the
Shares tendered in the Offer rather than relying on an outside financing
commitment to complete the Offer.
(2) Duff & Phelps's oral opinion rendered on July 20, 1995, and its
written opinion dated July 31, 1995, that the Purchase Price is fair to
stockholders from a financial point of view, and Duff & Phelps' oral
opinion to the effect that stockholders would not be at a disadvantage
after the Offer because of the current lack of an effective market for
liquidating Shares, as demonstrated by the low volume recent trading
activity, and therefore, the Offer, at a price that represents the full
liquid value of the Shares, would be the best opportunity for those
stockholders who would like liquidity. See "Special Factors--Opinion of
Financial Advisor; Fairness of the Transaction".
(3) The historically thin trading market for the Shares that may restrict
the ability of any stockholder to rapidly liquidate any significant number
of Shares.
(4) The Special Committee's and the Board of Directors' belief that the
Purchase Price to be received by the stockholders in the Offer constitutes
superior value for stockholders when compared to the market value per Share
of comparable companies.
(5) The Special Committee's and the Board of Director's belief that the
alternative of continuing as a public company has cost and competitive
disadvantages and does not enhance stockholder value.
(6) The Board of Directors' belief that the costs and burdens of
maintaining accounts for an estimated 170 holders of fewer than 100 Shares
outweigh the advantages and benefits to be derived therefrom.
(7) The Board of Directors' belief that it would not be advisable to
solicit buyers, due to its prior experience with that approach, the
uncertainties, risks and delays necessarily involved in such an
undertaking, the potential disruption to the Company's business, operations
and work force, and the lack of any assurances that any potential buyer or
buyers would be willing to pay a higher price on terms acceptable to the
Company. See "Special Factors--Prior Evaluations of the Company; Prior
Transactions".
(8) Information with respect to the business, results of operations,
properties, financial condition and prospects of the Company.
(9) The judgment of the Special Committee as to the reasonableness of the
information provided by the Company and Duff & Phelps and the analyses
provided by Duff & Phelps concerning the value of the Company and its
financial condition.
(10) Their conclusions that as a result of the Offer, any trading market
for Shares will likely be further limited or disappear and that, as a
result, the realizable value of the Shares not purchased in the Offer may
well decrease.
(11) The fact that the Offer would not require stockholder approval.
(12) The indication that the Board was considering stopping payment of
dividends for the foreseeable future.
(13) The fact that the Continuing Stockholders had preliminarily
indicated that they were not going to tender their Shares.
The members of the Special Committee considered each of the factors listed
above during the course of their deliberations in light of their knowledge of
the Company and their business judgment, and concluded that each of the factors
supported the Committee's recommendation other than factor 10 and that factor
13 was neutral. The Special Committee did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the individual factors
considered in reaching its conclusion. Because of the appointment of the
Special Committee and the engagement of an independent financial advisor to
assist the Board of Directors and the Special Committee in establishing a
purchase price that was fair from a financial point of view, and because the
Special Committee did not limit Duff & Phelps' investigations or otherwise give
Duff & Phelps any instructions and that Duff & Phelps received all information
requested, neither the Board of Directors nor the Special Committee retained a
representative to act solely on behalf of stockholders for the purpose of
negotiating the terms of the Offer or preparing a report concerning the
fairness to such stockholders of the consideration to be received in the Offer.
The Offer is not contingent on the approval of a majority of the unaffiliated
stockholders.
8
<PAGE>
OPINION OF FINANCIAL ADVISOR; FAIRNESS OF THE TRANSACTION
As described in "Special Factors--Background of the Offer", the Board of
Directors engaged Duff & Phelps to act as its independent financial advisor,
and thereafter also to act as financial advisor to the Special Committee. Duff
& Phelps has acted as financial advisor to the Company and the Special
Committee in connection with the Offer to determine and recommend a range of
prices in which the Offer would be fair, from a financial point of view, to all
the Company's stockholders. See also "Special Factors--Background of the Offer"
concerning certain oral opinions expressed by Duff & Phelps.
On July 20, 1995, Duff & Phelps rendered its oral opinion, which opinion was
subsequently confirmed in writing on July 31, 1995, to the Company's Board to
the effect that, as of the date of such opinion, their recommended price range
for the Offer to the Company's stockholders for the Shares was fair, from a
financial point of view. The full text of the written opinion, which sets forth
the assumptions made, procedures followed, matters considered and scope of
review by Duff & Phelps in rendering its opinion, is attached as Appendix A to
this Offer and is incorporated herein by reference. Stockholders are urged to
read the Duff & Phelps opinion in its entirety.
In connection with its opinion, Duff & Phelps reviewed, among other things,
certain financial and other information of the Company that was publicly
available or furnished to Duff & Phelps by representatives of the Company
including certain internal financial analyses, financial forecasts, reports and
other information prepared by management representatives. Duff & Phelps
discussed with senior management of the Company the past and current
operations, financial condition and future outlook of the Company.
In preparing its opinion to the Board, Duff & Phelps performed a variety of
financial and comparative analysis including (i) a review of the publicly
traded stock price and volume of the Company and a comparison of financial
performance and market valuation ratios of the Company with those of publicly
traded companies Duff & Phelps deemed relevant for purposes of its opinion;
(ii) a discounted cash flow analysis of the projected free cash flow of the
Company; and (iii) a review of recent control transactions in the securities
brokerage industry. In addition, Duff & Phelps has conducted other studies,
analyses and investigations as it deemed appropriate for purposes of its
opinion.
The valuation standard which Duff & Phelps used to determine the price range
was marketable, minority interest. The shareholders of the Company are under no
compulsion to tender their Shares, and the Company's Board is currently not in
discussions to effect a change of control transaction, nor does it currently
plan to pursue such a transaction. Duff & Phelps valued the Company on a
marketable minority interest basis using valuation methodologies described
below.
Comparable Company Analysis. In the comparable company analysis, Duff &
Phelps selected a set of publicly traded companies based on comparability to
the Company. Although no single company chosen is exactly similar to the
Company, these companies share many of the same operating characteristics and
are affected by many of the same economic forces. The value of the Company is
derived from the rate at which these companies are capitalized in the market,
after adjusting for differences in operations and performance.
Using publicly available information, Duff & Phelps analyzed the historical
financial performance, stock prices and resulting valuation multiples for the
following securities brokerage firms: First Albany Corporation;
Interstate/Johnson Lane Corporation; Inter-Regional Financial Group, Inc.; Legg
Mason; McDonald & Co. Investments, Inc.; Morgan Keegan & Company, Inc.; Piper
Jaffray, Inc.; Raymond James Financial, Inc.; Rodman & Renshaw, Inc.; Scott &
Stringfellow Financial, Inc.; and Stifel Financial Corp. (the "Comparable
Companies").
Duff & Phelps compared the financial performance of the Company with the
financial performance of the Comparable Companies. Comparative statistics
revealed the following: (i) the five-year compounded annual growth in revenue
for the Company was 10.2% versus a median of 12.5% for the Comparable
Companies; (ii) after adjusting for non-recurring items, the five-year
compounded annual growth in earnings per share for the Company was 10.9% versus
a median of 33.9% for the Comparable Companies; (iii) after adjusting for non-
recurring items, the five-year average and latest twelve months' net income
margin for the Company was 6.1% and 1.8%, respectively, versus 5.8% and 4.2%,
respectively, for the Comparable
9
<PAGE>
Companies; and (iv) after adjusting for non-recurring items, the five-year
average and latest twelve months' return on equity for the Company was 12.6%
and 3.5%, respectively, versus 14.8% and 10.8%, respectively, for the
Comparable Companies. Five-year averages for the Company are based on fiscal
years ended September 30, 1990 to 1994, while the latest twelve months is for
the period ended March 31, 1995.
Duff & Phelps analyzed the market values for the Comparable Companies as
multiples of latest twelve months', three-year average and projected (from
Institutional Brokers Estimates System or I/B/E/S) earnings per share ("EPS")
available as of the date of the opinion. The median multiples of market value
of common equity to latest twelve month, three-year average and projected EPS
was 12.7x, 8.8x, and 9.7x, respectively. The market value of the Company as a
multiple of latest twelve month, three-year average and projected (by
management) EPS were 29.9x, 6.5x and 10.8x, respectively. Duff & Phelps also
analyzed the market values as multiples of the book values of the Comparable
Companies available as of the date of the opinion. The median multiple of
market value to book value was 1.3x. The multiple of market value to book value
for the Company was 0.9x. All multiples were based upon closing stock prices as
of July 11, 1995.
Duff & Phelps performed an analysis of the Company's stock price and trading
volume to determine whether the market price of the Company's common stock is a
reliable indicator of the true marketable, minority interest value of the
Common Stock. Duff & Phelps created an index comprised of the stock prices of
the Comparable Companies and tracked the performance of that index versus the
price performance of the Company Common Stock from June 1994 to the present.
The index increased in value by approximately 25% while the Company Common
Stock decreased in value by approximately 20%. Duff & Phelps also found that
there has been very little trading of the Common Stock over the past year.
Finally, there are no equity analysts who follow the Company and no meaningful
institutional ownership of the Common Stock. All but three of the Comparable
Companies, on the other hand, are followed by equity analysts and all have
institutional ownership of their common shares. Based on these factors, Duff &
Phelps concluded that the market price of the Common Stock of the Company could
not be considered a reliable indicator of value due to the lack of an active
market for the Common Stock.
Due to the lack of an active market, Duff & Phelps used comparable company
analysis (described above) to determine reasonable multiples to apply to the
Company's latest twelve month, three-year average and projected EPS and current
book value in order to derive the fully marketable value per share of the
Common Stock. Valuation multiples applied to latest twelve month, three-year
average and projected EPS were 32.8x, 7.1x and 11.9x, respectively. The
valuation multiple applied to book value was 1.0x. Using these multiples as a
basis of valuation, Duff & Phelps concluded that the marketable minority
interest value of the Common Stock was approximately $11.00 per share as of the
date of the opinion.
Discounted Cash Flow Analysis. Duff & Phelps performed a discounted cash flow
analysis of the projected "free cash flows" of the Company. Free cash flow is
defined as cash that is available to either reinvest in new businesses or to
distribute to investors in the form of dividends, stock buybacks or debt
service. The projected free cash flows are discounted to the present at a rate
which reflects the relative risk associated with these flows as well as the
rates of return which both equity and debt investors could expect to realize on
alternative investment opportunities.
The Company's future free cash flows were based on projected revenues, net
income, depreciation and amortization, working capital and capital expenditure
requirements for the six fiscal years ending September 30, 1995 to September
30, 2000. Duff & Phelps' projections were prepared from the perspective of a
hypothetical buyer of a controlling interest in the Company. Duff & Phelps
discounted the resulting free cash flows at a rate of 19.5%, which reflects,
among other things, industry risks, the relatively small market capitalization
of the Company, and current rates of return required by investors in equity
instruments in general. The Company's management provided Duff & Phelps with
management's own projections for the fiscal years ending September 30, 1995 to
September 30, 1998, which were generally more optimistic than Duff & Phelps'
projections. Duff & Phelps deemed management's projections to be operating
"goals" or "objectives." Duff & Phelps discounted the resulting free cash flows
at a rate of 21.0%, which reflects the
10
<PAGE>
increased risk of meeting relatively more ambitious projections. Due to the
perspectives from which the two sets of projections were prepared, the
discounted cash flow analysis resulted in a premium, or a reasonable estimate
of the price that a fully informed buyer would pay for all of the Shares of the
Company. These two sets of projections are not intended to represent the
expectations of a minority interest investor who has no access to non-public
information about the Company. The discounted cash flow analysis yielded a
control price of $14.20 per share.
Control Transaction Analysis. Duff & Phelps reviewed recent control
transactions involving securities brokerage firms as targets. Duff & Phelps
identified five completed transactions and two pending transactions. The
premiums that buyers paid over the trading price of the target firms before the
announcement date of the acquisition was generally between 20% to 30%.
Subtracting this range of premiums from their determination of a control value
of $14.20 per share (from the discounted cash flow analysis above) resulted in
a range of approximately $11.00 to $11.75 per share. Duff & Phelps also
indicated that the comparable company analysis also supports values in this
range as being reasonable marketable minority interest values. Therefore, Duff
& Phelps concluded that a price in the range of $11.00 to $11.75 per Share
would be fair to the stockholders of the Company, from a financial point of
view.
In rendering its opinion, Duff & Phelps relied, without independent
verification, on the accuracy and completeness of all financial and other
information publicly available or furnished to Duff & Phelps by or on behalf of
the Company. Duff & Phelps also assumed that the Company management prepared
financial forecasts and other information on bases that incorporated the best
currently available estimates and good faith judgment as to the future
financial performance of the Company. Duff & Phelps did not make an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor was Duff & Phelps furnished with any such evaluations or
appraisals. Duff & Phelps' indicated that its opinion is based on all economic,
market and business and financial conditions relevant to the Company existing
on the date of such opinion.
The Board of Directors and the Special Committee did not place any limitation
upon Duff & Phelps with respect to the procedures followed or factors
considered by Duff & Phelps in rendering its opinion nor did they give Duff &
Phelps any instructions outside of the scope of engagements, and Duff & Phelps
received all information requested in connection with its analysis.
The Board of Directors did not solicit general proposals from any other
investment banking firms believed to be experienced in comparable transactions.
Duff & Phelps was selected as the Company's financial advisor because Duff &
Phelps is a nationally recognized financial advisory firm with substantial
experience in transactions. As part of its financial advisory business, Duff &
Phelps is regularly engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, leveraged buyouts, restructurings,
employee benefit plans, private placements and valuations for estate, corporate
and other purposes. Duff & Phelps has not previously provided financial
advisory services to the Company and is not under contract or in specific
discussions to provide future financial advisory services to the Company. On
June 20, 1995, the Board of Directors engaged Duff & Phelps to act as its
financial advisor.
The Board believes that the Duff and Phelps' analysis must be considered as a
whole and that selecting portions of its analyses or the factors considered by
it, without considering the analysis taken as a whole and all such factors,
could create a misleading view of the processes underlying the Duff & Phelps'
opinion. The preparation of a fairness opinion is a complex process not
necessarily susceptible to partial analyses or summary description. In
preparing its analyses, Duff & Phelps made numerous assumptions with respect to
general business and economic conditions and other matters, many of which are
beyond the Company's control. Any estimates contained in such analyses are not
necessarily indicative of actual values, which may be significantly more or
less favorable than as set forth therein. Estimates of value of companies
generally and of the Shares in particular do not purport to be appraisals or
necessarily reflect the prices at which companies generally, or the Shares in
particular, may actually be sold. Because such estimates are
11
<PAGE>
inherently subject to uncertainty, neither the Company, the Board of Directors
nor the Special Committee assumes responsibility for their accuracy.
As compensation for Duff & Phelps' services as financial advisor to the
Company in connection with the Offer, the Company agreed to pay Duff & Phelps a
retainer fee of $50,000 at the commencement of its engagement and a fee of
$75,000 upon rendering its final opinion. No portion of the fee paid to Duff &
Phelps was contingent upon the conclusion reached in its final opinion. In
addition, the Company has agreed to reimburse Duff & Phelps for its reasonable
out-of-pocket expenses, including the fees and expenses of its legal counsel,
and to indemnify Duff & Phelps against certain liabilities, including
liabilities under the federal securities laws, relating to, arising out of or
in connection with its engagement. See "The Tender Offer--Fees and Expenses".
A copy of the discussion materials presented by Duff & Phelps to the Board of
Directors in connection with the delivery of its written opinion has been filed
as an exhibit to the Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") filed with the Commission with respect to the Offer and may be
inspected and copied, and obtained by mail from the Commission as set forth in
"The Tender Offer--Certain Information About the Company", and will be made
available for inspection and copying at the principal executive offices of the
Company at 100 Renaissance Center, 26th Floor, Detroit, Michigan 48243 during
regular business hours by any interested stockholder of the Company or his or
her representative who has been so designated in writing. In addition, the
Company will send a copy of such opinion to any interested stockholder or his
or her representative who has been so designated in writing upon written
request and at the expense of the requesting stockholder.
PRIOR EVALUATIONS OF THE COMPANY; PRIOR TRANSACTIONS
In early 1993, the Company entered into a merger agreement with Comerica
Incorporated, which was subsequently terminated. Following that, the Company
investigated selling all of its stock to other entities that expressed an
interest in acquiring the Company. Those transactions are discussed below. Each
of those transactions were for all of the Shares of the Company and therefore,
the valuations attached to the Company's stock in those transactions may
reflect a premium for the control of the Company. In addition, the Company had
other inquiries concerning, or members of the Board discussed with certain
groups of stockholders, the sale of the entire Company. None of these
discussions progressed beyond the initial stages.
Comerica I. In June 1992, the Board of Directors retained First Boston to
assist the Company in locating a potential buyer for a minority block of shares
of the Company held by the Company's largest stockholders. First Boston was
authorized by the Board to conduct a limited marketing effort to find potential
buyers. In October 1992, First Boston contacted Comerica concerning the sale of
the minority block of Company shares. Comerica expressed an interest in
acquiring all of the Company's outstanding common stock in a tax free exchange,
for approximately $45,000,000 in Comerica common stock as consideration for the
sale. Both sides had investment bankers advising them on the transaction.
To assist in its determination of a purchase price, Comerica conducted
extensive due diligence, which included an investigation of the Company's
financial condition, business operations, assets, liabilities, prospects and
affairs.
On January 10, 1993, Comerica and the Company entered into a merger agreement
(the "Merger Agreement"). Under the terms of the Merger Agreement, each issued
and outstanding share of Company common stock was to be canceled and converted
into .5558 of a share of Comerica common stock. The actual purchase price to be
paid by Comerica, however, was subject to a "collar" on Comerica's stock price,
of $33.00 and $28.665. In the event Comerica's share price moved above $33.00
or below $28.665 on the closing date of the transaction, the exchange ratio
would be adjusted by using a predetermined formula to maintain a certain range
of total value to be paid by Comerica for Company shares. First Boston gave its
written opinion dated January 9, 1993 that the Exchange Ratio of Company stock
for common stock was fair to Company's stockholders from a financial point of
view.
12
<PAGE>
On the last trading date before the Merger Agreement was signed, the value of
Comerica's stock was $30 3/4 per share and the value of the Company's stock was
$12 3/8* per share. If the transaction had been completed on those terms,
Company stockholders would have received Comerica stock with a market value of
$17.09* for each share of Company common stock exchanged. Any fractional shares
after the conversion were to be paid in cash to the holder.
Upon completion of the merger, the Company's benefit plan was to be retained
on a limited basis and outstanding stock options, exercisable or not, were to
be converted into options for Comerica stock according to the terms of the
Company stock plan under which they were issued. The number of shares of
Comerica common stock subject to each Company stock option was equal to the
number of full shares of Comerica common stock the option holder would have
been entitled to receive pursuant to the merger had such Company stockholder
exercised the option under the merger. Also, the Merger Agreement provided that
Comerica would indemnify present and former officers, directors, employees or
agents of the Company.
The Merger Agreement was terminated on March 31, 1993 by Comerica. Comerica
claimed that the departure of key employees from the Company's corporate
finance department and their subsequent employment by the Company's major
competitor amounted to a material adverse change in the Company's business in
violation of the Merger Agreement. The Company brought suit against Comerica
for breaching the Merger Agreement. This suit was withdrawn in August 1994.
Legg Mason. In the summer of 1993, the Company, through First Boston, entered
into preliminary discussions with Legg Mason, a regional broker-dealer firm.
Legg Mason visited the Company and conducted extensive due diligence including
a review of Company assets, liabilities, leases, pending litigation and
financial statements. The Company never received a formal written offer from
Legg Mason, but discussions between the parties indicated that a purchase price
of approximately $14* to $14.50* per outstanding share was contemplated. No
other terms of the combination of the two companies were discussed.
Representatives of Legg Mason expressed concern regarding the Company's
current structure and performance record. The Company's technology and sales
statistics were perceived by Legg Mason to be below industry standards and its
product base and efforts to market products appeared limited.
On September 2, 1993, representatives of Legg Mason met with the Company's
Board of Directors. Legg Mason indicated that it had assembled a letter
outlining the basis of an agreement, but that some collateral issues needed to
be addressed. Legg Mason stated it was concerned about certain tax shelters,
escheat issues and the funding of the retirement plans that covered the
principal officers. Legg Mason indicated concern about the Comerica litigation
and the substantial difference in sales forces payouts between the two
companies.
In October 1993, First Boston solicited written proposals from three
potential acquirors, including Legg Mason, for the purchase of all of the
outstanding shares of the Company. Legg Mason declined to submit a proposal and
indicated that it had no interest in competing in an auction for the Company.
Further negotiations with Legg Mason were terminated.
Comerica II. In August, 1993, Comerica and the Company reopened discussions
concerning a merger of the two companies. On August 11, 1993, John G. Martin,
President and Chief Executive Officer of the Company transmitted a confidential
letter to Comerica indicating the Company's willingness to seek a combination,
but that certain issues needed to be resolved before the transaction could be
reinstated. These issues were: (i) pricing of the transaction at $17.09 per
share; (ii) Comerica's reimbursement of expenses to the Company for the failed
merger attempt; (iii) entering into a "bomb proof" agreement to ensure that
neither party could withdraw or refuse to close for any reason other than the
party's failure to obtain Federal Reserve approval; and (iv) a cancellation
fee. Discussions concerning the merger of the companies ensued.
- --------
* Amounts have not been adjusted to reflect the 10 percent stock dividend
declared in December 1993 and distributed in January 1994.
13
<PAGE>
In October, 1993, First Boston requested Comerica to prepare a written
expression of interest. On October 8, 1993, Comerica delivered to First Boston
a written nonbinding proposal to purchase the outstanding stock of the Company.
Comerica's offer for an aggregate purchase price of $41.9 million included a
per share purchase price of $15.375* for all the outstanding shares and an
additional $1.5 million to purchase the outstanding options. Comerica also
proposed a combination cash/stock purchase at $15.375* per share cash purchase
price and a stock exchange ratio of .5125 Comerica shares for each share of the
Company. No collars were proposed. Comerica sought adjustments to the purchase
price at closing in the event the Company's net worth was less than $30 million
or if key personnel of the Company defected. Comerica did not indicate that it
would be willing to reimburse the Company's expenses stemming from the failed
merger.
Comerica was willing to limit the right of a party to terminate the merger
agreement prior to closing. For example, Comerica agreed that even if the
Company's net worth was below $30 million at closing or if key personnel left
the Company, it would close the transaction. However, Comerica insisted that
the closing be conditioned on obtaining approval of the transaction by the
Federal Reserve Board without any materially burdensome conditions and the
absence of a material breach of warranty and a material adverse change in the
business or prospects of the Company.
Comerica also indicated that it would be willing to negotiate a break up fee
of $2.00* per outstanding share of Company stock provided the Comerica Board of
Directors approved the proposed structure or had given initial approval to an
acceptable alternative structure.
On October 19, 1993, a First Boston representative communicated to Comerica
that the Board of Directors, after reviewing Comerica's October 8, 1993 letter
outlining its proposal for the purchase of the Company, felt that the offer was
generally disappointing and that other offers for the purchase of the Company
would need to be explored before an additional response could be provided to
Comerica. Comerica then withdrew its nonbinding offer.
Baird. In September, 1993, the Company opened up discussions with
representatives of Robert W. Baird and Company, Inc. ("Baird"), a privately
held broker dealer. On October 8, 1993, Baird presented the Company with a
nonbinding merger plan. Baird determined the total purchase price to be
$46,228,904 which was derived by multiplying the 2,628,790 outstanding shares
of the Company by the $17* per share purchase price and adding to that amount
the aggregate exercise price of $2,632,574 to purchase the outstanding options.
These evaluations assumed an aggregate net book value for the company of
$30,000,000 as of September 30, 1993.
Baird posed three alternative forms of consideration for the merger: (i) an
all cash payment to current Company stockholders at $17* per share; (ii) the
issuance of preferred stock of the new company with a liquidation value equal
to $17* per share with a quarterly put option for the preferred stockholders to
liquidate their investment; and (iii) exchange of Company common stock for new
company stock at an exchange ratio of .4365 shares of the new company for each
Company share owned. Common stock would also have periodic put options to allow
common stockholders to exit their investments based on an appraised valuation.
Each of the latter two transactions was intended to be a tax free exchange of
securities.
Similar to Legg Mason, representatives of Baird were concerned about the
Company's current structure and performance record. The Company's technology
and sales statistics were perceived by Baird to be below industry standards and
its product base and efforts to market products appeared limited. Baird
representatives also expressed concerns about the position and performance of
the Company relative to other similar firms. Baird also cited several material
collateral issues that would need to be addressed before a definitive agreement
could be reached. Baird wanted to consult with members of management and
investment officers of the Company to determine their willingness to combine
the two companies. Also, Baird sought verification of assumptions it made
concerning the Company's options, net book value, legal reserves and other
related matters, review of tax incentive programs, discussions and review of
litigation, on site visits and a discussion with outside auditors.
- --------
* Amounts have not been adjusted to reflect the 10 percent stock dividend
declared in December 1993 and distributed in January 1994.
14
<PAGE>
On October 12, 1993, the Board reviewed Baird's proposal and requested
supplemental information from Baird. On October 18, 1993, Baird provided a
supplemental memorandum addressing the Board's concerns and also indicated that
Baird was open to discussions concerning entering into a merger agreement that
would not be subject to termination. However, Baird expressed its concerns
about entering into such an agreement prior to the resolution of certain issues
it deemed potentially materially adverse.
On October 20 and 21, 1993, in response to a letter from Baird,
representatives of Baird and several Company Board members met to discuss the
proposed merger. At this face to face meeting, Baird reiterated its concerns
with respect to the Company's exposure pertaining to certain tax shelter
products and pending lawsuits against the Company. Baird also indicated that
while it was receptive to improving the price offered, additional time was
necessary before a definitive response to a price could be given. Baird
requested certain due diligence items which were provided by the Company.
On November 1, 1993, Baird informed the Board that it was not willing to take
any risks with respect to the Company's pending litigation and requested that
the Board consider selling the assets of the Company as opposed to the stock.
Since a sale structured in this way was costly and would be a taxable
transaction, the Board informed Baird that it was not interested in structuring
a transaction in this manner and terminated further talks with Baird.
Except for those matters discussed above, the Company has not within the past
three years received any offers from, nor has it had any negotiations with, any
person or entity regarding an acquisition of the Company or sale or transfer of
a substantial part of the assets of the Company's continuing operations.
PLANS FOR THE COMPANY
The Board plans to terminate the payment of dividends by the Company for the
foreseeable future.
As of June 29, 1995, the Company had 322 stockholders of record. If as a
result of the Offer, the number of stockholders of record is reduced below 300,
then the Company may no longer be eligible to continue its listing on the
Chicago Exchange and plans to apply to have the registration of the Shares
under the Exchange Act terminated. See "Special Factors--Certain Effects of the
Offer on the Market for the Shares; Registration Under the Exchange Act".
If the Offer does not eliminate Odd Lot Owners or does not reduce the number
of stockholders below 300, then the Company's Board of Directors will consider
a reverse stock split or other transactions to eliminate the holders of smaller
numbers of Shares. In the case of either the Offer or a reverse stock split,
stockholders who do not tender their shares will not be entitled to appraisal
rights under Delaware law or under the Company's certificate of incorporation.
Shares acquired by the Company pursuant to the Offer will be held in the
Company's treasury. The Board may also determine to cancel such Shares. In
either case, the Shares will be available for the Company to issue without
further stockholder action except as required by applicable law and, as long as
the Company's Common Stock is listed thereon, the rules of the Chicago
Exchange.
The Board currently does not have any plans to change the strategy of the
Company. The Board has, as discussed in the Company's most recent annual
report, approved a number of management proposals implementing plans to
strengthen the operations of the Company, and the Board, together with
management, continues to evaluate the Company's operations with the object of
finding opportunities to increase efficiency and to expand products and
services. The Board also recently took steps to further implement the plans,
including:
1. Implementation of New Employee Benefits Program. Although the plans
have not been completed, the goal of the new program is to focus on
providing retirement benefits through the Company's 401(k) plan. In order
to do that, the Board of Directors has determined to increase the Company's
matching contribution to the current 401(k) plan, from twenty-five percent
of the first three percent of an employee's contributions to fifty percent
of the first six percent of an employee's contributions and to stop funding
the Employee Stock Ownership Trust (the "ESOT") and the contributions to
the profit sharing plan, effective October 1, 1995. The Board of Directors
also resolved
15
<PAGE>
to terminate the stock purchase plan currently in effect. In the future,
the Board intends to consider other types of incentive programs. Management
currently estimates that these changes will result in an increase in
overall costs related to employee benefit plans of approximately $570,000
in 1995, which is comprised of an increase of $600,000 in contribution
matching expenses offset by approximately $30,000 in cost savings from the
termination of the ESOT and the profit sharing plan. See "Certain Effects
of the Offer on the Market for the Shares; Registration Under the Exchange
Act--Effect on the ESOT". The amounts do not reflect the effects of the
termination of the funding to the ESOT and the profit sharing plans.
Contributions to such plans were discretionary. Nonetheless, the Company
made total contributions to these two plans in fiscal years 1992, 1993 and
1994 of $356,000, $275,000 and $94,000, respectively.
2. Offer to Purchase Outstanding Options. The Company will offer to
purchase outstanding options. Any sales by the option holders will be
voluntary. Those options having an exercise price less than the Purchase
Price will be purchased for the difference between the Purchase Price and
the exercise price times the number of Shares subject to the option. The
options need not be exercisable. Those options having an exercise price
exceeding the Purchase Price will be purchased for $0.50 times the number
of Shares subject to the option. These options also need not be
exercisable. Management currently estimates that the buy out of the options
at the Purchase Price will cost approximately $329,000 assuming all of the
options are tendered. See also "Special Factors--Source and Amount of
Funds".
3. Liquidation of Certain Assets. Management also intends to attempt to
liquidate certain Company assets that are considered to be low yielding and
non-appreciating in order to raise cash to fund future growth. Certain of
those assets will be liquidated in order to fund the Offer. See "Special
Factors--Source and Amount of Funds". In addition, management is currently
considering liquidating certain stock and real estate investments of the
Company. The estimated net cash proceeds that could be received by the
Company is approximately $1 million. Such transactions are not expected to
adversely affect the capitalization of the Company.
The amounts indicated above are estimates prepared by management and have not
been independently verified. In addition, there can be no assurances that such
amounts will be realized.
Except as described in this Offer, the Company has no present plans or
proposals that would result in (i) the acquisition by any person of additional
securities of the Company, or the disposition of securities of the Company,
(ii) an extraordinary corporate transaction, such as a merger, reorganization,
liquidation or sale or transfer of a material amount of assets, involving the
Company or any of its subsidiaries, (iii) any change in the present Board of
Directors of the Company or management of the Company, (iv) any material change
in the present indebtedness or capitalization of the Company, (v) any other
material change in the Company's corporate structure or business or (vi) any
changes in the Company's certificate of incorporation, bylaws or instruments
corresponding thereto or any other actions which may impede the acquisition or
control of the Company by any person.
The Company may in the future purchase additional Shares in private
transactions, through tender offers or otherwise. However, the Company is under
no obligation to do so. Any possible future purchase of Shares by the Company
would depend on many factors, including, among others, the results of the
Offer, the price of the Shares, the Company's business and financial position
and general economic conditions. Any such purchases may be on the same terms or
on terms which are more or less favorable to stockholders than the terms of the
Offer. Rule 13e-4 under the Exchange Act generally prohibits the Company and
its affiliates from purchasing any Shares other than pursuant to the Offer for
at least ten business days after the Expiration Date.
CERTAIN EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; REGISTRATION UNDER
THE EXCHANGE ACT
As of June 29, 1995, there were 322 record holders of 2,891,558 Shares of the
Company. The purchase of Shares pursuant to the Offer may reduce the number of
Shares traded publicly as well as the number of stockholders of the Company.
The Offer may cause the Shares to become ineligible for continued listing on
16
<PAGE>
the Chicago Exchange and allow the Company to terminate the registration of the
Shares under the Exchange Act and suspend the Company's reporting obligations
thereunder. See also "Special Factors--Purpose of the Offer; Considerations of
the Directors". If the Offer results in the Company's Shares being held by
fewer than 300 stockholders, appropriate steps will be taken by the Company to
(i) delist the Company's Shares from the Chicago Exchange and (ii) terminate
registration of the Shares according to applicable provisions of the Exchange
Act. Such actions may have a material adverse effect on the liquidity and
market value of the Shares held by stockholders after the completion of the
Offer.
The Chicago Exchange's published guidelines indicate that it would consider
delisting Shares if, among other things, the number of publicly held Shares
(excluding officers, directors and other concentrated holdings of Shares)
should fall below 100,000 or if the aggregate number of stockholders should
fall below 500. Registration of the Shares under the Exchange Act may be
terminated upon application by the Company to the Commission if there are fewer
than 300 recordholders of the Shares. If, as a result of the Offer, Shares are
held of record by fewer than 300 persons, the Company will immediately seek
termination of registration of the Shares under the Exchange Act. Termination
of registration of the Shares under the Exchange Act would substantially reduce
the information required to be furnished by the Company to stockholders and
would make certain provisions of the Exchange Act, such as the requirement to
furnish proxy statements in connection with stockholders' meetings, no longer
applicable to the Company's securities. See also "Special Factors--Purpose of
the Offer; Considerations of the Directors".
The Shares are currently "margin securities" as the term is defined under the
rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those above regarding listing and market quotations, the Shares
might no longer be "margin securities" for purposes of the Federal Reserve
Board's margin regulations after consummation of the Offer, in which event such
Shares could no longer be used as collateral for margin loans made by brokers.
If the Shares become deregistered, they would no longer be eligible to trade on
the Chicago Exchange reporting and would not constitute "margin securities". In
addition, the Shares may no longer be acceptable collateral to financial
institutions.
By taking the steps to deregister and to delist the Shares, management
expects the Company to realize a cost savings. Estimates prepared by the
Company's management indicate that the annual pre-tax savings from such actions
would be approximately $115,000, in such areas as legal, accounting and other
expenses associated with being a public company.
No assurance can be given to any stockholder who continues to own Shares
after the Offer, either because the Shares were not tendered or because they
were tendered but were not purchased due to the Maximum Amount limitation of
the Offer, that (i) information about the Company previously available because
of the Company's reporting obligations under the Exchange Act will be available
to the shareholders, (ii) the shareholder will have any liquidity (by
opportunities to sell the Shares or pledge them as collateral for borrowing or
otherwise) with respect to his or her investment in the Shares or (iii) the
shareholder will receive any dividends or other distributions with respect to
the Shares in the foreseeable future.
Effect on the ESOT. If the Shares are deregistered, the Company has the
option to eliminate the right of ESOT participants to direct the voting of
Shares allocated to their accounts other than with respect the voting of Shares
regarding the approval or disapproval of certain corporate transactions, such
as any merger, recapitalization or liquidation. The Company has not yet
determined whether it will exercise this option.
If the Shares are delisted, the Company has the option to eliminate the right
of participants to receive distributions from the ESOT in the form of Shares.
The Company has not yet determined whether it will exercise this option. If the
Company does eliminate the right to receive distributions from the ESOT in the
form of Shares, distributions will be made solely in cash.
If the Shares are delisted, and if the Company does not eliminate the right
of participants to receive distributions from the ESOT in the form of Shares,
each participant who receives a distribution in the form of Shares will have
the right to require the Company to repurchase the distributed Shares under a
fair
17
<PAGE>
valuation formula, which may differ from the Purchase Price. The Company may
allow the ESOT trustee to assume the put obligation. This put right may be
exercised during a period of at least sixty days immediately following the
distribution and an additional period of at least sixty days during the
following plan year. The Company has the option to pay for the Shares in
installments.
The terms of the ESOT provide that if the Shares are delisted, and if the
Company does not eliminate the right of participants to receive distributions
from the ESOT in the form of Shares, each participant who receives a
distribution in the form of Shares and who does not put his stock to the
Company is subject to a right of first refusal on the part of the ESOT and the
Company to purchase the Shares in the event the participant desires to sell his
or her Shares to a purchaser other than the ESOT or the Company.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Based upon the Company's records and upon information provided to the Company
by its directors, officers and affiliates, neither the Company nor any of its
subsidiaries nor, to the best of the Company's knowledge, any of the directors
or officers of the Company or any of its subsidiaries, nor any associates of
any of the foregoing, has effected any transactions in the Shares during the 60
business days prior to the date hereof except as set forth in Schedule II and
except for transactions in Shares for the accounts of directors and officers of
the Company pursuant to the Company's stock purchase plan. See also "Special
Factors--Continuing Stockholders".
Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its affiliates, directors or
officers, or any of the officers or directors of its subsidiaries, is a party
to any contract, arrangement, understanding or relationship with any other
person relating, directly or indirectly, to the Offer with respect to any
securities of the Company (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer of the
voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies, consents or authorizations).
Share Ownership of Directors and Executive Officers. The following table sets
forth the number and percentage of Shares beneficially owned by directors and
executive officers of the Company as of June 29, 1995.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED(1) PERCENT(1)
------------ ----------
<S> <C> <C>
Directors
Craig P. Baker.................................. 266,072(2) 9.2
Thomas A. McDonnell............................. 0(3) *
Steve Gasper, Jr.(4)............................ 2,000(5) *
Geoffrey B. Baker............................... 76,332(6) 2.6
Joseph M. Mengden............................... 123,836 4.3
William H. Cuddy................................ 200(5) *
Gerard Lavin.................................... 0 *
Non-Director Named Executives and Group
Conrad W. Koski................................. 85,527 3.0
Lenore P. Denys................................. 787 *
Charles R. Roberts.............................. 146(5) *
John S. Albright................................ 210 *
Urban A. MacDonald.............................. 150 *
All Directors and Current Executive Officers as a
group
(12 persons)(1),(2),(3),(5),(6),(7).............. 555,260
</TABLE>
- --------
*Less than 0.1%
(1) Where applicable, shares reported as owned include shares subject to
options that are or will become exercisable within 60 days of the date of
this Offer to Purchase. For purposes of reporting the percentage
18
<PAGE>
owned as a group, all such optioned shares are treated as outstanding, but
for purposes of reporting the percentage owned by an individual only such of
those optioned shares as are held by the individual are treated as
outstanding.
(2) Includes 21,780 shares held by a trust in which voting and investment power
is shared by Craig P. Baker, his father, Louis C. Baker, and one other
person as co-trustees.
(3) Mr. McDonnell disclaims beneficial ownership of the 609,956 shares owned by
DST Systems, Inc. for which Mr. McDonnell is Vice Chairman of the Board,
President, Chief Executive Officer and Treasurer. See "Special Factors--
Continuing Stockholders".
(4) Also an Executive Officer of the Company. See Schedule I--Information
Concerning Directors and Executive Officers of the Company.
(5) Does not include 170,283 Shares (representing 5.89% of the outstanding
Shares on June 29, 1995) held by the Company's Employee Stock Ownership
Plan as of May 31, 1995, which are voted by a committee consisting of Steve
Gasper, Jr., the Company's Chief Executive Officer, William H. Cuddy, the
Chairman of the Board, Charles R. Roberts, an Executive Officer of the
Company, and Bruce M. Rockwell, an officer and employee of First of
Michigan Corporation, a wholly-owned subsidiary of the Company. See below,
concerning pass through to participants of right to tender Shares.
(6) Includes 21,780 shares held by a trust in which voting and investment power
is shared by Craig P. Baker, his father, Louis C. Baker and one other
person as co-trustees.
(7) Shares as to which there is shared voting or investment power by Directors
or Executive Officers are included only once.
Joseph M. Mengden, a director of the Company, has indicated that he intends
to tender all of his Shares. As of June 29, Mr. Mengden beneficially owned
123,836 Shares. See also "Special Factors--Vote of the Board of Directors;
Position of Dissenting Director and--Continuing Stockholders".
Shares Held by Company's Employee Stock Ownership Trust ("ESOT"). As of May
31, 1995, the ESOT held 170,283 Shares (5.74%), which are voted by a committee
consisting of Steven Gasper, Jr., the Company's Chief Executive Officer,
William H. Cuddy, Chairman of the Board, Charles R. Roberts, an executive
officer of the Company, and Bruce M. Rockwell, an officer and employee of First
of Michigan Corporation, a wholly-owned subsidiary of the Company. Under the
terms of the ESOT, the right to tender Shares allocated to participants'
accounts pursuant to the Offer is passed through to the ESOT participants. The
trustee of the ESOT will have to determine if it has an obligation to decide
whether to tender unallocated Shares held in the ESOT and any shares for which
the trustee of the ESOT does not receive instructions and, if the trustee has
such an obligation, whether or not to tender those Shares. See "The Tender
Offer--Tender of Employee Stock Ownership Trust Shares". The trustee has not
indicated to the Company the trustee's position on whether it has such an
obligation or, if it does, whether the trustee would tender any Shares under
the Offer.
CERTAIN TAX CONSEQUENCES TO STOCKHOLDERS
The following is a general summary under currently applicable law of certain
material federal income tax considerations generally applicable to the Offer.
The discussion does not address all aspects of federal income taxation. The
discussion set forth below is for general information only and the tax
treatment described herein may vary depending upon each stockholder's
particular circumstances and tax position. Certain stockholders (including
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers, foreign corporations, persons who are not citizens or residents
of the United States, stockholders who do not hold their Shares as capital
assets and stockholders who have acquired their Shares upon the exercise of
options or otherwise as compensation) may be subject to special rules not
discussed below. This discussion is based on current provisions of the Internal
Revenue Code (the "Code"), which is subject to change, possibly with
retroactive effect. No ruling from the Internal Revenue Service ("IRS") will be
applied for with respect to the federal income tax consequences discussed
herein and, accordingly, there can be no assurance that the IRS will agree with
the conclusions stated. The discussion does not consider the effect of any
applicable foreign, state, local or other tax laws. EACH STOCKHOLDER SHOULD
CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM
OR HER OF THE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY FOREIGN,
STATE, LOCAL OR OTHER TAX LAWS, ANY RECENT CHANGES IN APPLICABLE TAX LAWS AND
ANY PROPOSED LEGISLATION.
19
<PAGE>
In general, under Section 302 of the Code, sales of Shares by stockholders
pursuant to the Offer will be taxable transactions for federal income tax
purposes and may also be taxable transactions under applicable state, local,
foreign and other tax laws. The federal income tax consequences to a
stockholder may vary depending upon the stockholder's particular facts and
circumstances. In general, the repurchase of Shares from a stockholder by the
Company pursuant to the Offer is treated as a taxable sale of the Shares if the
repurchase (a) is "substantially disproportionate" with respect to the
stockholder, (b) is "not essentially equivalent to a dividend" with respect to
the stockholder or (c) results in a complete termination of the stockholder's
stock ownership of the Company. If any of the three tests is met, the
stockholder will recognize gain or loss equal to the difference between the
Purchase Price for the repurchased Shares and the basis for such Shares. Such
gain or loss will be a capital gain or loss (assuming the Share are held as a
capital asset) and any such capital gain or loss will be long term if, as of
the date of sale or exchange, the Shares were held for more than one year or
will be short term if, as of such date, the Shares were held for one year or
less. In general, individuals are currently taxed at a maximum graduated rate
of 28%, and corporations are taxed at graduated rates up to 35%, on net long
term capital gains.
If none of the three tests is met, the stockholder will be treated as having
received a dividend equal to the Purchase Price per Share times the number of
such stockholder's Shares that are repurchased. Dividends are included in
ordinary income, which is taxed at graduated rates of up to 39.6% for
individuals and up to 35% for corporations. Certain corporations may be
eligible to exclude a portion of any dividend from income.
In determining whether any of the tests are met a stockholder owns any shares
owned by his or her spouse, parents, children and grandchildren, certain
entities in which he or she has an ownership or beneficial interest and any
Shares which he or she has an option to acquire.
The repurchase of Shares will be "substantially disproportionate" with
respect to a stockholder if the percentage of the voting stock of the Company
owned by the stockholder immediately following the repurchase of Shares
pursuant to the Offer is less than 80% of the percentage of the voting stock of
the Company owned by such stockholder immediately before the repurchase of
Shares.
The repurchase of Shares may be "not essentially equivalent to a dividend"
with respect to a stockholder depending on the individual stockholder's facts
and circumstances. In any event, it must result in a "meaningful reduction" in
the stockholder's percentage interest in the Company.
Finally, the repurchase of Shares will result in the "complete termination"
of a stockholder's stock ownership of the Company if immediately following the
repurchase either (a) the stockholder does not actually or constructively own
any Shares or (b) the stockholder does not actually own any Shares, but
constructively owns Shares as to which he is eligible to waive and effectively
does waive (pursuant to I.R.S. rules) constructive ownership.
On May 3, 1995, legislation was introduced in the House of Representatives,
and later in the Senate, that would amend Section 302 of the Code with respect
to repurchases from shareholders that are corporations. Under this legislation,
any repurchase of Shares from shareholders that are corporations that is not
pro rata as to all shareholders would be treated as a taxable sale; however, no
loss would be allowed on the sale to the extent provided in regulations. This
legislation is proposed to be effective for repurchases after May 3, 1995.
There can be no assurances that this legislation will be enacted without
change.
On April 5, 1995, the House of Representatives approved and sent to the
Senate H.R. 1215, the Contract with America Tax Relief Act of 1995 (the "Act").
The Act provides, among other things, for a 50% capital gains deduction for net
long-term capital gains of individuals, effective for gains recognized after
December 31, 1994. In addition, the Act provides for a maximum 25% tax rate on
net long-term capital gains of corporations, effective for gains recognized
after December 31, 1994. On June 22, 1995, House and Senate leaders agreed to
defer consideration of the Act until Fall. If the Act were enacted into law
without change, there could be a substantial reduction in the tax rate
applicable to net long-term capital gains recognized by
20
<PAGE>
stockholders pursuant to the Offer. There can be no assurances, however, that
the Act will be enacted, or if enacted, that the Act's capital gains provisions
or their effective date will not be changed.
The foregoing is intended to be only a general discussion of the federal
income tax consequences of the Offer and does not address every federal income
tax concern which may be applicable to a particular stockholder, including
without limitation considerations arising from the classification of income on
a stockholder's return as passive, investment or active. Each stockholder is
urged to consult such stockholder's own tax advisor to determine the particular
tax consequences to such stockholder of the disposition of Shares pursuant to
the Offer. See "The Tender Offer--Procedure for Tendering Shares" for details
regarding federal withholding taxes.
SOURCE AND AMOUNT OF FUNDS
Assuming the Company purchases the Maximum Amount at the Purchase Price per
Share, the Company expects the maximum aggregate cost of the Offer, including
all fees and expenses applicable to the Offer, to be approximately $7,383,375.
(This amount does not include payments to be made in connection with the buy
out of outstanding options. See "Special Factors--Plans for the Company".) The
Company anticipates that it will fund the purchase of Shares pursuant to the
Offer, and the payment of related fees and expenses, from proceeds to be
received from the surrender of certain whole life insurance policies (insuring
the lives of certain Company officers and naming the Company as the
beneficiary) and the sale of certain securities and other investments. The
policies have been surrendered to the insurers and payment is anticipated by
September 15, 1995. On June 30, 1995, the Company had cash and cash
equivalents, cash surrender value of life insurance, securities and other
investments available for sale of approximately $10,700,000. See also "Special
Factors--Plans for the Company" concerning use of a portion of the proceeds
from the sale to fund the buyout of outstanding options. The tax liability
arising from the surrender of the life insurance policies is approximately
$375,000, while the tax liabilities on the sale of certain securities and other
assets cannot presently be determined. These assets are owned by the Company's
subsidiaries, and it is anticipated that the subsidiaries will dividend the
cash to the Company when available.
21
<PAGE>
THE TENDER OFFER
NUMBER OF SHARES; PRORATION
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment and thereby purchase up to 625,000 (the "Maximum Amount") of
the outstanding Shares properly tendered at or before the Expiration Time (as
defined below) that have not been withdrawn (in accordance with "Tender Offer--
Withdrawal Rights") at $11 3/8 per Share net to the seller in cash. "Expiration
Time" means 5:00 p.m. Eastern time, on Thursday, August 31, 1995, unless and
until the Company in its sole discretion shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Time" shall
refer to the latest time and date at which the Offer, as so extended by the
Company, shall expire. See "Tender Offer--Extension of the Offer; Termination;
Amendments" for a description of the Company's right to extend the time during
which the Offer is open and to delay, terminate or amend the Offer. See also
"Tender Offer--Certain Conditions of the Offer".
The Company will accept Shares for payment in the following order of
priority:
(1) All Shares properly tendered at the Purchase Price at or before the
Expiration Time and not withdrawn by any Odd Lot Owner (as defined in
"Tender Offer--Tenders by Owners of Fewer than 100 Shares") who tenders all
Shares beneficially owned by such Odd Lot Owner (partial tenders will not
qualify for this preference) and who completes the box captioned "Odd Lots"
on the Letter of Transmittal and Notice of Guaranteed Delivery; and
(2) After purchase of all of the foregoing Shares, all Shares up to the
Maximum Amount properly tendered at the Purchase Price at or before the
Expiration Time and not withdrawn. If stockholders tender more than the
Maximum Amount of Shares, Shares will be accepted for payment on a pro rata
basis. The proration period expires at the Expiration Time.
The following table illustrates the potential effects of proration, assuming
all Shares outstanding other than the Shares held by the Continuing
Stockholders are tendered. See "Special Factors--Continuing Stockholders". The
table does not reflect the potential effect of the priority purchases of the
odd lots because information is not available to determine how many Shares are
held by Odd Lot Owners of the Shares held by nominees (some of which may also
be registered holders of the Shares). As of June 29, 1995, the Company's
records indicated that there were 174 registered holders of less than 100
Shares holding a total of 2,581 Shares. Some of these holders may beneficially
own additional shares and therefore, not qualify as Odd Lot Owners.
<TABLE>
<CAPTION>
NO.
PRIOR TO THE OFFER SHARES PERCENTAGE(1)
------------------ --------- -------------
<S> <C> <C>
Total Shares outstanding............................ 2,891,558 100.0
Share held by Continuing Stockholders............... 1,387,412 48.0
---------
Shares available for tender......................... 1,504,146 52.0
Maximum Amount to be purchased...................... 625,000 21.6
---------
Minimum remaining Shares other than Continuing
Stockholders(2).................................... 879,146 30.4
</TABLE>
----------------
<TABLE>
<CAPTION>
REMAINING
SHARES SHARES SHARES NOT PERCENT NOT NON-CONTINUING
TENDERED (3) PURCHASED (4) PURCHASED PURCHASED (5) STOCKHOLDER SHARES PERCENTAGE(6)
------------ ------------- ---------- ------------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
500,000 500,000 0 0 1,004,146 42.0
625,000 625,000 0 0 879,146 38.8
750,000 625,000 125,000 16.6 879,146 38.8
1,000,000 625,000 375,000 37.5 879,146 38.8
1,250,000 625,000 625,000 50.0 879,146 38.8
1,504,146 625,000 879,146 58.4 879,146 38.8
</TABLE>
- --------
(1) Percentage of the Shares outstanding prior to the Offer.
(2) Assuming the Maximum Amount is purchased pursuant to the Offer. The number
of Shares remaining outstanding, other than those held by the Continuing
Stockholders, will be greater than 189,146 if less than the entire Maximum
Amount is purchased.
(3) Includes odd lots.
(4) Amount does not reflect the affects of the priority purchases of odd lots.
(5) Determined by dividing the total shares not purchased by the total shares
tendered. Because of the potential priority purchases of the odd lots, the
percentage may be higher.
(6) Percentage of the total number of Shares outstanding after the Offer based
on the number of Shares purchased.
22
<PAGE>
TENDERS BY OWNERS OF FEWER THAN 100 SHARES
The Company, upon the terms and subject to the conditions of the Offer, will
accept for payment, without proration, all Shares properly tendered at the
Purchase Price at or before the Expiration Time and not withdrawn by or on
behalf of stockholders who beneficially owned as of the close of business on
July 26, 1995 and continue to beneficially own as of the Expiration Time, an
aggregate of fewer than 100 Shares ("Odd Lot Owners"). See "Tender Offer--
Number of Shares; Proration." To avoid proration, an Odd Lot Owner must
properly tender all Shares that such Odd Lot Owner beneficially owns. Partial
tenders will not qualify for this preference, and this preference is not
available to beneficial owners of 100 or more Shares, even if such owners have
separate stock certificates for fewer than 100 Shares. Any Odd Lot Owner
wishing to tender all Shares beneficially owned by him pursuant to this Offer
must also complete the box captioned "Odd Lots" on the Letter of Transmittal or
Notice of Guaranteed Delivery. See "Tender Offer--Procedure for Tendering
Shares". See also "Special Factors--Plans for the Company" concerning other
potential transactions by the Company to eliminate smaller blocks of stock
following the Offer.
TENDER OF EMPLOYEE STOCK OWNERSHIP TRUST SHARES
Under the terms of the ESOT, participants are allowed to direct the ESOT
trustee to tender any portion or all of such participant's Shares allocated to
his or her account under the ESOT. The number of Shares allocated to a
participant's account may differ from the number of Shares in which such
participant has a vested interest. In order to have such Shares tendered, an
ESOT participant must properly complete and timely submit an ESOT Tender Offer
Instruction Form to the ESOT trustee in accordance with the instructions set
forth on the Instruction Form.
Under the provisions of the ESOT, the ESOT Trustee is prohibited from
disclosing which participants directed that their Shares be tendered.
Therefore, any participant may anonymously tender the Shares allocated to their
account.
PROCEDURE FOR TENDERING SHARES
Proper Tender of Shares. For Shares to be properly tendered pursuant to the
Offer, the certificates representing such Shares (or confirmation of receipt of
such Shares pursuant to the procedures for book-entry transfer set forth
below), together with a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) with any required signature guarantees,
and any other documents required by the Letter of Transmittal, must be received
at or before the Expiration Time by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase. If a stockholder's
certificates are not available (or the procedures for book-entry transfer
cannot be completed on a timely basis) or time will not permit all required
documents to reach the Depositary at or before the Expiration Time, the
tendering stockholder must comply with the guaranteed delivery procedure set
forth below.
It is a violation of Section 10(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 10b-4 promulgated thereunder, for a
person to tender shares for such persons' own account unless the person so
tendering owns such shares or owns other securities convertible into or
exchangeable for such shares or owns an option, warrant or right to purchase
such shares and intends to acquire shares for tender by conversion, exchange or
exercise of such option, warrant or right.
Medallion Signature Guarantees and Method of Delivery. No Medallion signature
guarantee is required on the Letter of Transmittal if the Letter of Transmittal
is signed by the registered owner of the Shares (which term, for purposes of
this Section, includes any participant in The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities") whose name appears on a
security position listing as the owner of the Shares) tendered therewith, and
payment and delivery are to be made directly to such registered owner at his
address shown on the Company's records, or if Shares tendered for the account
of a member firm of a registered national
23
<PAGE>
securities exchange, a member of the National Association of Securities
Dealers, Inc. or each of which is a recognized member of the Medallion
Signature Guarantee Program or other similar program (each such entity being
hereinafter referred to as an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 1 of the Letter of Transmittal. If a certificate
representing Shares is registered in the name of a person other than the signer
of a Letter of Transmittal, or if payment is to be made or Shares not purchased
or tendered are to be issued to a person other than the registered owner, then
the certificate must be endorsed or accompanied by an appropriate stock power,
in either case signed exactly as the name of the registered owner appears on
the certificate, with the signature on the certificate or stock power
guaranteed by an Eligible Institution. In all cases, payment for Shares
tendered and accepted for payment pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Shares (or a timely
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities), a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) and any other
documents required by the Letter of Transmittal. THE METHOD OF DELIVERY OF ALL
DOCUMENTS, INCLUDING STOCK CERTIFICATES, THE LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING
STOCKHOLDER. IF DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT THE DOCUMENTS ARE
PROPERLY INSURED AND DELIVERED REGISTERED MAIL WITH RETURN RECEIPT REQUESTED.
Federal Income Tax Withholding. To prevent backup federal income tax
withholding equal to 31% of the gross payments made pursuant to the Offer, each
stockholder who does not otherwise establish an exemption from such withholding
must notify the Depositary of such stockholder's correct taxpayer
identification number (or certify that such taxpayer is awaiting a taxpayer
identification number) and provide certain other information by completing the
Substitute Form W-9 included in the Letter of Transmittal. Foreign stockholders
who are individuals must submit Form W-8 in order to avoid backup withholding.
The Depositary will withhold 30% of the gross payments payable to a foreign
stockholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. For this purpose, a foreign
stockholder is a stockholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political
subdivision thereof or (iii) any estate or trust the income of which is subject
to United States federal income taxation regardless of the source of such
income. The Depositary will determine a stockholder's status as a foreign
stockholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to any outstanding certificates or statements
concerning eligibility for a reduced rate of, or exemption from, withholding
(e.g., Form 1001 or Form 4224) unless facts and circumstances indicate that
such reliance is not warranted. A foreign stockholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such stockholder may be
eligible should consider doing so in order to avoid overwithholding.
For a discussion of certain other federal income tax consequences to
tendering stockholders, see "Special Factors--Certain Tax Consequences to
Stockholders".
Book-Entry Delivery. The Depositary will establish an account with respect to
the shares at each of the Book-Entry Transfer Facilities for purposes of the
Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in a Book-Entry Transfer Facility's
system may make book-entry delivery of the shares by causing such facility to
transfer such shares into the Depositary's account in accordance with such
facility's procedure for such transfer. Even though delivery of shares may be
effected through book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities, a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof), with any required Medallion
signature guarantees and other required documents must, in any case, be
transmitted to and received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase at or before the Expiration Time,
or the guaranteed delivery procedure set forth below must be followed. Delivery
of the Letter of Transmittal and any other required documents to one of the
Book-Entry Transfer Facilities does not constitute delivery to the Depositary.
24
<PAGE>
Guaranteed Delivery. If a stockholder desires to tender shares pursuant to
the Offer and such stockholder's certificates are not immediately available (or
the procedures for book-entry transfer cannot be completed on a timely basis)
or time will not permit all required documents to reach the Depositary at or
before the Expiration Time, such shares may nevertheless be tendered provided
that all of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission), at or before the Expiration Time, a properly completed and
duly executed Notice of Guaranteed Delivery substantially in the form the
Company has provided with this Offer to Purchase; and
(c) the certificates for all tendered Shares in proper form for transfer
(or confirmation of book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities),
together with a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof) and any other documents required by the Letter of
Transmittal, are received by the Depositary within five business days after
the date the Depositary receives such Notice of Guaranteed Delivery.
Determinations of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted, the price to be paid for the Shares and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by the Company, in its sole discretion,
which determination shall be final and binding on all parties. The Company
reserves the absolute right to reject any or all tenders it determines not to
be in proper form or the acceptance for payment may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Offer and any defect or irregularity in the
tender of any particular Shares. No tender of Shares will be deemed to be
properly made until all defects or irregularities have been cured or waived.
Neither the Company, Information Agent, Depositary or any other person is
obligated to give notice of any defects or irregularities in tenders, and none
of the above will incur any liability for failure to give such notice.
Other Requirements. It is a violation of Rule 14e-4 promulgated under the
Exchange Act for a person, directly or indirectly, to tender shares for his or
her own account unless, at the time of the tender, the person so tendering: (i)
has a net long position equal to or greater than the amount of shares tendered
in (A) shares or (B) other securities immediately convertible into, exercisable
or exchangeable for the amount of shares tendered and upon acceptance of his or
her tender, will acquire such shares for tender by a conversion, exercise or
exchange of such other securities; and (ii) will cause such shares to be
delivered in accordance with the terms of the Offer. Rule 14e-4 provides a
similar restriction applicable to the tender or guarantee of a tender on behalf
of another person. The tender of Shares pursuant to any one of the procedures
described above will constitute the tendering stockholder's acceptance of the
terms and conditions of the Offer as well as the tendering stockholder's
representation and warranty that (i) such stockholder has a net long position
in the Shares being tendered within the meaning of the Rule 14e-4 promulgated
under the Exchange Act and (ii) the tender of such Shares complies with Rule
14e-4.
WITHDRAWAL RIGHTS
Shares that are tendered pursuant to the Offer will not be returned unless
the Shares are withdrawn at or before the Expiration Time or if the Shares have
not yet been accepted for payment by the Company at any time after Thursday,
September 28, 1995.
For a withdrawal to be effective, the Depositary must timely receive (at its
address set forth on the back cover of this Offer to Purchase) a written,
telegraphic or facsimile transmission notice of withdrawal. Such notice of
withdrawal must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
owner, if different from that of the person
25
<PAGE>
who tendered such Shares. If the certificates have been delivered or otherwise
identified to the Depositary, then, prior to the release of such certificates,
the tendering stockholder must also submit the serial numbers shown on the
particular certificates evidencing the Shares and the signature on the notice
of withdrawal must be guaranteed by an Eligible Institution (except in the case
of Shares tendered by an Eligible Institution). If Shares have been tendered
pursuant to the procedure for book-entry transfer set forth in "Tender Offer--
Procedure for Tendering Shares," the notice of withdrawal must specify the name
and the number of the account at the applicable Book-Entry Transfer Facility to
be credited with the withdrawn Shares and otherwise comply with the procedures
of such facility.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company, in its sole
discretion, which determination shall be final and binding on all parties.
Neither the Company, Depositary, Information Agent or any other person is or
will be obligated to give any notice of any defects or irregularities in any
notice of withdrawal, and none will incur any liability for failure to give any
such notice. Any Shares properly withdrawn will thereafter be deemed not
tendered for purposes of the Offer. Withdrawn Shares may, however, be
retendered at or before the Expiration Time by following the procedures
described in "Tender Offer--Procedure for Tendering Shares".
PURCHASE OF SHARES AND PAYMENT OF PURCHASE PRICE
Upon the terms and subject to the conditions of the Offer, the Company will
promptly after the Expiration Time, accept for payment and pay the Purchase
Price for those Shares properly tendered and not withdrawn. For purposes of the
Offer, the Company will be deemed to have accepted for payment (and therefore
purchased), Shares which are validly tendered at the Purchase Price and not
withdrawn when the Company gives oral or written notice to the Depositary of
its acceptance of such Shares for payment pursuant to the Offer.
The Company will pay for Shares properly tendered pursuant to the Offer by
depositing the aggregate Purchase Price with the Depositary. The Depositary
will act as agent for the tendering stockholders and distribute the monies to
the tendering stockholders. In all cases, payment for Shares pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for Shares (or of a timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at one of the Book-Entry Transfer Facilities), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required for a valid tender of Shares. See
"Tender Offer--Procedure for Tendering Shares".
Certificates for all Shares not purchased will be returned (or, in the case
of Shares tendered by book-entry transfer, such Shares will be credited to the
account maintained with one of the Book-Entry Transfer Facilities by the
participant therein who so delivered such Shares) as promptly as practicable
following the Expiration Time without expense to the tendering stockholder.
Under no circumstances will the Company pay interest on the Purchase Price.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however, if
payment of the Purchase Price is to be made to, or (in the circumstances
permitted by the Offer) if unpurchased Shares are to be registered in the name
of, any person other than the registered owner, or if tendered certificates are
registered in the name of any person other than the person signing the Letter
of Transmittal, the amount of all stock transfer taxes, if any (whether imposed
on the registered owner or such other person), payable on account of the
transfer to such person will be deducted from the Purchase Price unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted. See Instruction 7 of the Letter of Transmittal.
As provided in Rules 13e-4(f)(4) and (8)(ii) under the Exchange Act, the
Company will pay, for each Share accepted pursuant to the Offer, the same
amount per Share for all Shares accepted for payment.
26
<PAGE>
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment, purchase or pay for any Shares tendered, and
may terminate or amend the Offer if at any time after the Commencement Date,
and at or before the payment for the Shares purchased, if any of the following
events shall have occurred (as determined by the Company in good faith) and the
Company determines, in its reasonable judgment, not to proceed with the Offer
or with such acceptance purchase or payment.
(a) There shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency or authority or tribunal or any other person, domestic or foreign,
or before any court or governmental, regulatory or administrative authority
or agency or tribunal, domestic or foreign, or any judgment, order or
injunction entered, enforced or deemed applicable by any such court,
authority, agency or tribunal, which:
(1) challenges the making of the Offer, the acquisition of Shares
pursuant to the Offer or otherwise related in any manner to the Offer;
or
(2) could materially affect the business, condition (financial or
other), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of the Company and
its subsidiaries, taken as a whole, or materially impair the Offer's
contemplated benefits to the Company.
(b) There shall have been any action threatened or taken, or approval
withheld, or any statute, rule or regulation proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable to the Offer
or the Company or any of its subsidiaries, by any government or
governmental regulatory or administrative authority or agency or tribunal,
domestic or foreign, which would or might directly or indirectly:
(1) make the acceptance for payment of, or payment for, some or all
of the Shares illegal or otherwise restrict or prohibit consummation of
the Offer;
(2) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment or pay for some or all of the
Shares;
(3) materially impair the contemplated benefits of the Offer to the
Company; or
(4) materially affect the business, condition (financial or other),
income, operations or prospects of the Company and its subsidiaries,
taken as a whole, or otherwise materially impair in any way the
contemplated future conduct of the business of the Company and its
subsidiaries, taken as a whole.
(c) There shall have occurred:
(1) the declaration of any banking moratorium or suspension of
payments with respect to banks in the United States;
(2) any general and protracted suspension of trading in, or
limitation on prices for, securities on any United States national
securities exchange or in the over-the-counter market;
(3) the commencement of a war, armed hostilities or any other
national or international crisis directly or indirectly involving the
United States;
(4) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or in any event
which might affect, the extension of credit by banks or other lending
institutions in the United States;
(5) any significant decrease in the market price of the Shares or any
change in the general political, market, economic or financial
conditions in the United States or abroad that could have a material
adverse effect on the Company's business, operations or prospects or
the trading in the Shares; or
(6) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening
thereof.
27
<PAGE>
(d) Any change shall occur or be threatened in the business, condition
(financial or other), income, operations or prospects of the Company and
its subsidiaries, taken as a whole, which are or may be material to the
Company.
(e) A tender or exchange offer (other than the Offer) for any or all of
the Shares, or any merger, business combination or other similar
transaction with or involving the Company or any subsidiary, shall have
been proposed, announced or made by any person.
(f) (1) any entity, "group" (as that term is used in Section 13(d)(3) of
the Exchange Act) or person (other than entities, groups or persons, if
any, who have filed with the Securities and Exchange Commission (the
"Commission") a Schedule 13G or a Schedule 13D with respect to any of the
Shares) shall have acquired or proposed to acquire beneficial ownership of
more than 5% of the outstanding Shares;
(2) such entity, group or person that has publicly disclosed any such
beneficial ownership of more than 5% of the Shares prior to such date shall
have acquired, or proposed to acquire, beneficial ownership of additional
Shares constituting more than 2% of the outstanding Shares or shall have
been granted any option or right to acquire beneficial ownership of more
than 2% of the outstanding Shares; or
(3) any entity, person or group shall have filed a Notification and
Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
reflecting an intent to acquire the Company or any of its Shares.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition (including any action or inaction by the Company) or may be waived by
the Company in whole or in part. The Company's failure at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted from
time to time and at any time. Any determination by the Company concerning the
events described in this "Tender Offer--Certain Conditions of the Offer" and
any related judgment by the Company regarding the inadvisability of proceeding
with the acceptance for payment, purchase or payment for any Shares tendered
shall be final and shall be binding on all parties.
PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded on the Chicago Stock Exchange (the "Chicago Exchange").
The following table sets forth the quarterly (on a calendar year basis) high
and low stock prices per Share on the Chicago Exchange, the trading volume of
Shares traded through the Chicago Exchange during such quarter and the
dividends paid per Share such quarter:
<TABLE>
<CAPTION>
PURCHASES DIVIDENDS
BY THE PAID
HIGH LOW VOLUME(2) COMPANY(3) PER SHARE
------ ----- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1993(1)
1st Quarter................. 15.23 11.14 77,100 0 .07
2nd Quarter................. 12.95 11.14 52,100 1,319 --
3rd Quarter................. 12.27 10.80 39,100 1,383 .29
4th Quarter................. 12.61 11.93 74,000 17,358 --
1994
1st Quarter................. 13.50 12.38 40,500 5,930 .05
2nd Quarter................. 13.50 13.00 35,300 14,432 .05
3rd Quarter................. 14.38 12.88 47,300 31,431 .06
4th Quarter................. 14.25 13.00 83,200 68,321 .06
1995
1st Quarter................. 12.75 10.25 49,900 38,034 .06
2nd Quarter................. 11.00 9.25 21,300 2,308 .06
3rd Quarter(4).............. 10 3/8 10.00 8,800 1,323 --
</TABLE>
28
<PAGE>
- --------
(1) Amounts in 1993 are adjusted to reflect the 10% stock dividend declared in
December 1993 and distributed in January 1994.
(2) Volume of shares traded through the Chicago Exchange during the quarter.
Does not include shares that may have been traded in private transactions
and are therefore not reflected in the volume numbers in the above chart.
The Company is aware of only one private transaction in April 1994 in which
Craig Baker acquired 100,000 shares from John Martin, then chief executive
officer and Director of the Company.
(3) Represents total purchases of treasury stock by the Company, purchases by
the ESOT and as purchases under the Employee Stock Purchase Plan during the
relevant period. The transactions during the fourth quarter of 1994 include
24,750 Shares purchased from the Company's specialist and 19,000 Shares
purchased from a former officer and director of the Company. The
transactions during the first quarter of 1995 include 20,154 Shares
purchased from a former officer and director of the Company.
(4) Through August 1, 1995.
The closing per Share bid price as reported on the Chicago Exchange on July
25, 1995, the last trading day before the Company announced that it would
commence the Offer, was $10 1/4. The closing per Share sales price as reported
on the Chicago Exchange on August 2, 1995, the last day of trading before the
Company mailed the Offer to stockholders, was $10. The Company urges
stockholders to obtain current quotations of the market price of the Shares.
The Board of Directors, as part of its rebuilding plans, has voted to suspend
indefinitely the payment of dividends on the Shares. See "Special Factors--
Plans for the Company".
CERTAIN INFORMATION ABOUT THE COMPANY
Certain Litigation. The Company is not aware of any material pending
litigation relating to the Offer. However, the Company's principal subsidiary,
First of Michigan Corporation, is the subject of claims made in certain civil
actions arising out of its business as a broker-dealer and as an investment
banker. The Company provides for costs related to contingencies when a loss is
probable and the amount is reasonably determinable. While these actions in the
aggregate seek substantial amounts, management believes that their disposition
will not have a material adverse effect on the financial position of the
Company. However, depending on the amount and timing of a potential unfavorable
resolution to a contingency, it is possible that the Company's future results
of operations or cash flows could be materially adversely affected for the
relevant reporting period.
Summary Historical Financial Information. The following table sets forth
certain summary historical financial information of the Company as of and for
the fiscal years ended September 30, 1994 and September 24, 1993. The
historical financial information has been summarized or calculated from the
Company's unaudited and audited financial statements attached as Appendix B
hereto. The following summary historical financial information should be read
in conjunction with, and is qualified in its entirety by reference to, such
unaudited and audited consolidated financial statements and their related
notes. The Company's audited financial statements attached hereto as Exhibit B
appear as presented in the 1994 Form 10-K filed with the Commission on December
27, 1994.
29
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
AND PRO FORMA INFORMATION
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------------- ---------------------------------------
9/24/93 9/30/94 9/30/94 6/24/94 6/30/95 6/30/95
(HISTORICAL) (HISTORICAL) (PRO FORMA) (HISTORICAL) (HISTORICAL) (PRO FORMA)
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement:
Total revenue......... $63,030,000 $ 61,197,000 $61,118,000 $ 46,753,000 $ 44,341,000 $ 44,281,000
Net income............ 3,400,000 1,043,000 142,000 1,300,000 99,000 --
Balance sheet (end of
period):
Total assets.......... 86,506,000 103,768,000 96,268,000 100,128,000 114,895,000 107,395,000
Total indebtedness.... 55,754,000 72,641,000 73,273,000 68,423,000 85,124,000 85,124,000
Shareholder's equity.. 30,752,000 31,127,000 23,126,000 31,705,000 29,771,000 21,670,000
Per share data:
Net income............ $ 1.16 $ .35 $ .06 $ .44 $ .03 $ .00
Book value (end of
period).............. $ 11.70 $ 10.80 $ 10.25 $ 10.97 $ 10.59 $ 9.91
Average shares
outstanding (c)...... 2,936,217 2,952,969 2,265,513 2,953,490 2,867,971 2,220,429
Ratio of earnings to
fixed charges.......... 4.37 1.58 1.04 2.10 (a) (b)
RATIO OF EARNINGS TO FIXED CHARGES
Earnings:
Consolidated pretax
income (loss) from
continuing
operations........... $ 5,220,000 $ 1,468,000 $ 671,000 $ 1,874,000 $ (116,000) $ (266,000)
Fixed charges......... 1,549,000 2,519,000 2,519,000 1,703,000 2,695,000 2,695,000
----------- ------------ ----------- ------------ ------------ ------------
Total............... $ 6,769,000 $ 3,987,000 $ 3,190,000 $ 3,577,000 $ 2,579,000 $ 2,429,000
=========== ============ =========== ============ ============ ============
Fixed Charges:
Interest charges...... $ 826,000 $ 1,719,000 $ 1,719,000 $ 1,110,000 $ 2,181,000 $ 2,181,000
Portion of rentals
deemed to be
interest............. 723,000 800,000 800,000 593,000 514,000 514,000
----------- ------------ ----------- ------------ ------------ ------------
Total............... $ 1,549,000 $ 2,519,000 $ 2,519,000 $ 1,703,000 $ 2,695,000 $ 2,695,000
=========== ============ =========== ============ ============ ============
Ratio of earnings to
fixed charges.......... 4.37 1.58 1.26 2.10 (a) (b)
</TABLE>
- --------
(a) Earnings are inadequate to cover fixed charges by $116,000.
(b) Earnings are inadequate to cover fixed charges by $266,000.
(c) Equivalent to average number of common and common equivalent shares
outstanding.
30
<PAGE>
Pro Forma Financial Information. The following pro forma financial
information sets forth historical information which has been adjusted to
reflect, among other things, the assumed purchase of 625,000 Shares pursuant to
the Offer at a purchase price of $11 3/8 per Share. The pro forma statement of
income information assumes as described in the footnotes thereto, the
transactions described above taking place at the beginning of the periods
presented. Pro forma condensed balance sheet information also assumes that the
transactions described above have taken place on the dates presented. The pro
forma information is based on certain assumptions and estimates and therefore
does not purport to be indicative of the results that actually would have been
attained had the above transactions occurred at the dates indicated or the
results that may be obtained in the future.
The pro forma financial information should be read in conjunction with the
accompanying notes which are an integral part of the pro forma financial
information and with the audited and unaudited financial statements and related
notes set forth in Appendix B attached hereto.
(Remainder of page intentionally left blank.)
31
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
PRO FORMA STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AUDITED ADJUSTMENTS 9/30/94
ASSETS 9/30/94 (UNAUDITED) (UNAUDITED)
------ ------------ ----------- -----------
<S> <C> <C> <C>
Cash and cash equivalents........... $ 2,612,487 $(7,369,000)(2)
6,000,000 (1) $ 1,243,487
Receivable from brokers and dealers. 2,673,582 2,673,582
Receivable from customers........... 72,536,305 73,536,305
Notes receivable from employees..... 2,278,673 2,278,673
Other accounts receivable........... 1,756,211 1,756,211
Securities owned.................... 4,656,986 4,656,986
Memberships in exchanges, at cost
(market value--$918,000 in 1994)... 430,503 430,503
Equipment and leasehold
improvements, at depreciated cost.. 2,597,239 2,597,239
Other investments................... 1,134,887 1,134,887
Net cash surrender value of life
insurance.......................... 6,874,924 (6,000,000)(1) 874,924
Deferred income taxes............... 2,541,000 2,541,000
Other assets........................ 2,675,156 2,675,156
------------ ----------- -----------
Total assets.................... $103,767,953 $(7,369,000) $96,398,953
============ =========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
<S> <C> <C> <C>
Liabilities:
Notes payable to banks............ $ 26,250,000 $26,250,000
Payable to brokers and dealers.... 16,368,327 16,368,327
Payable to customers.............. 12,685,476 12,685,476
Securities sold, not yet
purchased........................ 318,255 318,255
Employee compensation payable..... 12,335,278 12,335,278
Dividend payable.................. 172,913 172,913
Income taxes payable.............. 126,178 $ 104,000 230,178
Other accounts payable and accrued
liabilities...................... 2,884,546 528,000 (3) 3,412,546
Capital lease obligation.......... 1,500,000 1,500,000
------------ ----------- -----------
Total liabilities............... 72,640,973 632,000 73,272,973
Stockholder's equity:
Serial preferred stock, $.10 par
value, 5,000,000 shares
authorized and unissued
Common stock, $.10 par value,
10,000,000 shares authorized,
2,891,558 issued in 1994......... 289,156 289,156
Capital in excess of par value.... 3,767,157 3,767,157
Retained earnings................. 27,202,524 (901,000) 26,301,524
------------ ----------- -----------
Total stockholder's equity...... 31,258,837 (901,000) 30,357,837
Less treasury stock, at cost (9,674
shares)............................ (131,857) (7,100,000)(2) (7,231,857)
------------ ----------- -----------
31,126,980 (8,001,000) 23,125,980
------------ ----------- -----------
Total liabilities and
stockholder's equity........... $103,767,953 $(7,369,000) $96,398,953
============ =========== ===========
</TABLE>
- --------
(1) Elimination of the cash surrender value of certain life insurance policies.
(2) To record purchase of 625,000 shares of stock.
(3) Represents accrued expenses to be incurred related to the completion of the
tender offer.
32
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
PRO FORMA STATEMENT OF FINANCIAL CONDITION
JUNE 30, 1995
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
6/30/95 ADJUSTMENTS 6/30/95
ASSETS (UNAUDITED) (UNAUDITED) (UNAUDITED)
------ ------------ ----------- ------------
<S> <C> <C> <C>
Cash and cash equivalents.......... $ 2,650,747 $(7,369,000)(2)
6,000,000 (1) $ 1,281,747
Receivable from brokers and
dealers........................... 7,171,289 7,171,289
Receivable from customers.......... 71,912,879 71,912,879
Notes receivable from employees.... 2,086,930 2,086,930
Other accounts receivable.......... 1,401,469 1,401,469
Securities owned................... 12,861,158 12,861,158
Memberships in exchanges, at cost
(market value--
$950,500 at June 30, 1995)........ 430,503 430,503
Equipment and leasehold
improvements, at depreciated cost. 2,769,735 2,769,735
Other investments.................. 716,359 716,359
Net cash surrender value of life
insurance......................... 7,404,598 (6,000,000)(1) 1,404,598
Deferred income taxes.............. 2,841,000 2,841,000
Other assets....................... 2,648,719 2,648,719
------------ ----------- ------------
Total assets................... $114,895,386 $(7,369,000) $107,526,386
============ =========== ============
<CAPTION>
LIABILITIES AND STOCKHOLDER'S
EQUITY
-----------------------------
<S> <C> <C> <C>
Liabilities:
Notes payable to banks........... $ 34,250,000 $ 34,250,000
Payable to brokers and dealers... 19,317,827 19,317,827
Payable to customers............. 13,600,351 13,600,351
Securities sold, not yet
purchased....................... 424,213 424,213
Employee compensation payable.... 12,038,221 12,038,221
Dividend payable................. 168,655 168,655
Other accounts payable and
accrued liabilities............. 4,050,604 $ 731,000 (3) 4,781,604
Capital lease obligation......... 1,275,000 1,275,000
------------ ----------- ------------
Total liabilities.............. 85,124,871 731,000 85,855,871
Stockholder's equity:
Serial preferred stock, $.10 par
value, 5,000,000 shares
authorized and unissued
Common stock, $.10 par value,
10,000,000 shares authorized,
2,891,558 issued................ 289,156 289,156
Capital in excess of par value... 3,689,801 3,689,801
Retained earnings................ 26,793,663 (99,000)(5)
(901,000)(4) 25,793,663
------------ ----------- ------------
Total stockholder's equity..... 30,772,620 (1,000,000) 29,772,620
Less treasury stock, at cost--
80,641 shares at June 30, 1995.... (1,002,105) (7,100,000)(2) (8,102,105)
------------ ----------- ------------
29,770,515 (8,100,000) 21,670,515
------------ ----------- ------------
Total liabilities and
stockholder's equity.......... $114,895,386 $(7,369,000) $107,526,386
============ =========== ============
</TABLE>
- --------
(1) Elimination of the cash surrender value of certain life insurance policies.
(2) To record purchase of 625,000 shares of stock and associated costs.
(3) Represents accrued expenses to be incurred related to the completion of the
tender offer.
(4) Represents expenses related to tender offer transaction as of September 30,
1994.
(5) Represents expenses/income reductions incurred related to tender offer
transaction for the nine month period ended June 30, 1995.
33
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
9/30/94 ADJUSTMENTS 9/30/94
AUDITED UNAUDITED UNAUDITED
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Commissions.......................... $37,505,448 $ 37,505,448
Principal transactions............... 3,750,159 3,750,159
Investment banking................... 8,866,447 8,866,447
Interest............................. 4,525,541 $ (79,000)(1) 4,446,541
Insurance commissions................ 3,338,579 3,338,579
Other................................ 3,210,344 3,210,344
----------- --------- ------------
Total revenues..................... 61,196,518 (79,000) 61,117,518
Expenses:
Employee compensation and benefits... 30,071,506 329,000 (3)
120,000 (2) 30,520,506
Floor brokerage, exchange, clearance
and other fees...................... 5,938,459 5,938,459
Communications....................... 983,186 983,186
Interest............................. 1,719,427 1,719,427
Occupancy and equipment rental....... 3,589,656 3,589,656
Taxes, other than income taxes....... 2,522,564 2,522,564
Office supplies and expenses......... 2,829,787 2,829,787
Merger termination expenses.......... 3,385,590 3,385,590
Other operating expenses............. 8,688,450 269,000 (4) 8,957,450
----------- --------- ------------
Total expenses..................... 59,728,625 718,000 60,446,625
Income before income taxes............. 1,467,893 (797,000) 670,893
Provision (credit) for income taxes.... 425,000 (271,000)(7)
375,000 (6) 529,000
----------- --------- ------------
Net income......................... $ 1,042,893 $(901,000) $ 141,893
=========== ========= ============
Net income per share................... $.35 $(.29) $.06
=========== ========= ============
Average number of common and common
equivalent shares outstanding for
income per share...................... 2,952,969 2,265,513(5)
</TABLE>
- --------
(1)Represents reduction in interest income for net cash used in transaction.
(2) Elimination of income related to the increase in cash surrender value of
certain life insurance policies.
(3)Represents estimate of the cost associated with the repurchase of
outstanding stock options.
(4)Represents estimated expenses related to the completion of stock repurchase
transaction.
(5)Represents the cancellation of outstanding stock options and repurchase of
625,000 shares.
(6) Includes an income tax provision to be incurred related to the surrender of
the life insurance policies which had previously been treated as tax exempt
income.
(7)Represents tax effect of additional expenses.
34
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
PRO FORMA INCOME STATEMENT
FOR THE NINE MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
NINE MONTHS
ENDING PRO FORMA PRO FORMA
6/30/95 ADJUSTMENTS 6/30/95
UNAUDITED UNAUDITED UNAUDITED
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Commissions......................... $24,220,737 $ 24,220,737
Principal transactions.............. 3,450,608 3,450,608
Investment banking.................. 6,647,277 6,647,277
Interest............................ 4,624,763 $(60,000)(1) 4,564,763
Insurance commissions............... 1,957,693 1,957,693
Other............................... 3,439,930 3,439,930
----------- -------- ------------
Total revenues.................... 44,341,008 (60,000) 44,281,008
Expenses:
Employee compensation and benefits.. 23,519,264 90,000 (2) 23,609,264
Floor brokerage, exchange, clearance
and other fees..................... 3,608,336 3,608,336
Communications...................... 874,539 874,539
Interest............................ 2,180,895 2,180,895
Occupancy and equipment rental...... 3,425,824 3,425,824
Taxes, other than income taxes...... 2,093,563 2,093,563
Office supplies and expenses........ 2,643,655 2,643,655
Other operating expenses............ 6,111,355 6,111,355
----------- -------- ------------
Total expenses.................... 44,457,431 90,000 44,547,431
Income (loss) before income taxes..... (116,423) (150,000) (266,423)
Provision (credit) for income taxes... (215,000) 51,000 (266,000)
----------- -------- ------------
Net income (loss)..................... $ 98,577 $(99,000) $ (423)
=========== ======== ============
Net income (loss) per share........... $.03 $(.03) $.00
=========== ======== ============
Average number of common and common
equivalent shares outstanding for
income (loss) per share.............. 2,867,971 2,220,429(3)
</TABLE>
- --------
(1) Represents reduction in interest income for net cash used in transaction.
(2) Elimination of income related to the increase in cash surrender value
certain life insurance policies.
(3) Represents the cancellation of outstanding stock options and repurchase of
625,000 shares.
35
<PAGE>
Additional Information. The Company is subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Commission. The
Company is required to disclose in such proxy statements certain information,
as of particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company. The Company has also filed with the Commission the Rule 13e-3
Transaction Statement on Schedule 13E-3 and the Issuer Tender Offer Statement
on Schedule 13E-4, which includes certain additional information relating to
the Offer.
Such material can be inspected and copied at the public reference facilities
of the Commission, Room 1024, 450 Fifth Street, N.W. Washington, D.C. 20549,
and at its regional offices at Room 1029, Jacob K. Javits Federal Building, 26
Federal Plaza, New York, New York 10278; and the Kluczynski Federal Building,
230 South Dearborn Street, Chicago, Illinois 60604. Copies may also be obtained
by mail from the Commission's Public Reference Branch, 450 Fifty Street, N.W.
Washington, D.C. 20549. However, the Company's Schedule 13E-3 and Schedule 13E-
4 will not be available at the Commission's regional offices for approximately
three to six weeks after having been filed with the Commission's office located
in Washington, D.C.
CERTAIN LEGAL MATTERS; DELAWARE LAW; REGULATORY APPROVALS
Certain Legal Matters. For a discussion of certain legal matters, see "The
Tender Offer--Certain Information About the Company".
Delaware Law. Section 160(a)(1) of the Delaware General Corporation Law
("Delaware Law") specifically restricts a corporation's authority to purchase
or redeem its own shares of capital stock for cash or other property when (i)
the capital of the corporation is impaired or (ii) when such purchase would
cause any impairment of the capital of the corporation. The purchase of 625,000
shares from Company stockholders at $11 3/8 per Share will require $7,109,375
(plus applicable transfer taxes and expenses). The Company believes that it
will have sufficient surplus to meet the requirements under Section 160(a)(1)
of the Delaware Law.
Regulatory Approval. The transaction requires approval by the New York Stock
Exchange (the "NYSE"), which must approve in writing reductions of member
firms' capital. The Company has notified the NYSE of the intent to distribute
capital, but no written approval of the distribution has been received. The
Company does not anticipate any problems in receiving such approval prior to
the acceptance for payment of the shares tendered. See "Special Factors--Source
and Amount of Funds".
EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS
The Company reserves the right to extend the time period of the Offer. During
any such extension, all Shares previously tendered and not purchased or
withdrawn will remain subject to the Offer, except to the extent that such
Shares may be withdrawn as set forth in "The Tender Offer--Withdrawal Rights".
The Company also expressly reserves the right, in its sole discretion, to
terminate the Offer and not accept for payment or pay for any Shares not
theretofore accepted for payment or, subject to the applicable law, to postpone
payment for Shares upon the occurrence of any of the conditions specified in
"The Tender Offer--Certain Conditions of the Offer" by giving oral or written
notice of such termination to the Depositary in making a public announcement
thereof. The Company's reservation of the right to delay payment for Shares
that it has accepted for payment is limited by Rules 13e-4(f)(2) and 13e-
4(f)(5) promulgated under the Exchange Act. Rule 13e-4(f)(2) requires that the
Company permit Shares tendered pursuant to the Offer to be withdrawn (i) at any
time during the period the Offer remains open, and (ii) if not yet accepted for
payment, after the expiration of 40 business days from commencement of the
offer. Rule 13e-4(f)(5) requires that the Company pay the consideration offered
or return the Shares tendered promptly after termination or withdrawal of the
Offer.
Subject to compliance with applicable law, the Company further reserves the
right to amend the Offer in any respect or to waive the limitation on the
maximum number of Shares to be purchased pursuant to the
36
<PAGE>
Offer. Amendments to the Offer may be made at any time and may from time to
time be effected by public announcement thereof, such announcement, in the case
of an extension, to be issued no later than 12:00 a.m. Eastern time, on the
next business day after the previously scheduled Expiration Time. Any public
announcement made pursuant to the Offer will be disseminated promptly to
stockholders in a manner reasonably designed to inform stockholders of such
change. Without limiting the manner in which the Company may choose to make a
public announcement, except as required by applicable law, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by making a release to the Dow Jones News
Service.
If the Company materially changes the terms of this Offer or the information
concerning the Offer, or if it waives a material condition to the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(c)(2) promulgated under the Exchange Act. These rules require that the
minimum period during which the Offer must remain open following material
changes in the terms of the Offer or information concerning the Offer (other
than a change in price or a change in percentage of securities sought) will
depend on the facts and circumstances, including the relative materiality of
such terms or information. If (i) the Company increases or decreases the price
to be paid for Shares, or the Company increases the number of Shares being
sought and any such increase in the number of Shares being sought exceeds 2% of
the outstanding Shares, or the Company decreases the number of Shares being
sought and (ii) the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including,
the date that notice of such increase or decrease is first published, sent or
given, the Offer will be extended until at least the expiration of such period
of ten business days.
FEES AND EXPENSES
Duff & Phelps is entitled to receive a total aggregate fee of $125,000 for
its financial advisory services, of which $50,000 is a retainer payment to be
remitted by Company upon execution of the engagement letter between Duff &
Phelps and the Company with the remainder payable upon the delivery of Duff &
Phelps fairness opinion and supporting analysis. The Company has also agreed
that it will reimburse Duff & Phelps for its reasonable, out-of-pocket expenses
(including travel, lodging, telephone, document reproduction, telecopying and
reasonable computer database charges) and to indemnify Duff & Phelps and their
affiliates against certain expenses and liabilities in connection with its
service as financial advisor rendering the fairness opinion to the Company. The
Company has agreed that if Duff & Phelps is required to perform services
unrelated to the delivery of the fairness opinion (including testimony and
administrative or judicial proceedings), then it will compensate Duff & Phelps
on a per diem basis at the then prevailing Duff & Phelps' standard hourly rate
plus reimbursement for reasonable out-of-pocket expenses associated therewith,
and that if the Offer is abandoned for any reason unrelated to the conclusions
reached by the opinion letter, Duff & Phelps shall be entitled to receive the
greater of the retainer payment or its professional hours incurred at its
standard hourly rates then in effect, but in no event more than $125,000.
The Company has retained Morrow & Co., Inc. as Information Agent and First
Chicago Trust Company of New York as Depositary in connection with the Offer.
The Information Agent may contact holders of Shares by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers and other
nominee security holders to forward material relating to the Offer to
beneficial owners. The Depositary and the Information Agent will receive
reasonable and customary compensation for their services in connection with the
Offer. The Company will also reimburse the Depositary and the Information Agent
for reasonable out-of pocket expenses, including reasonable attorneys' fees,
and has agreed to indemnify the Depositary and the Information Agent against
certain liabilities in connection with the Offer, including certain liabilities
under the federal securities laws.
37
<PAGE>
It is estimated that the expenses incurred by the Company in connection with
the Offer will be approximately as set forth below:
<TABLE>
<S> <C>
Filing Fee....................................................... $ 1,500
Financial Advisor Fees........................................... 125,000
Information Agent Fees........................................... 5,000
Depositary Fees.................................................. 7,500
Legal Fees....................................................... 75,000
Printing and Mailing Costs....................................... 30,000
Accounting Fees.................................................. 20,000
Miscellaneous.................................................... 5,000
--------
Total........................................................ $269,000
========
</TABLE>
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person (other than as described above)
for soliciting the tender of any Shares pursuant to the Offer. However, the
Company will, on request, reimburse such persons for customary handling and
mailing expenses incurred in forwarding materials in respect of the Offer to
the beneficial owners for which they act as nominees or in a fiduciary
capacity. No such broker, dealer, commercial bank or trust company has been
authorized to act as the Company's agent for purposes of the Offer. The Company
will pay (or cause to be paid) any stock transfer taxes on its purchase of
Shares pursuant to the Offer, except as otherwise provided in Instruction 6 of
the Letter of Transmittal. Other than as described above, no solicitation or
similar fees will be paid to brokers, dealers or others by the Company in
connection with the Offer.
MISCELLANEOUS
The Offer is not being made to, nor will the Company accept tenders from,
holders of Shares in any jurisdiction in which the Offer or its acceptance
would not be in compliance with the laws of such jurisdiction. The Company is
not aware of any jurisdiction where the making of the Offer or the tender of
Shares would not be in compliance with applicable law. If the Company becomes
aware of any jurisdiction where the making of the Offer or the tender of Shares
is not in compliance with said applicable law, the Company will make a good
faith effort to comply with such law. If after such good faith effort the
Company cannot comply with such law, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares residing in
such jurisdiction. In any jurisdiction in which the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer the
Offer will be deemed to be made on the Company's behalf by one or more
registered brokers or dealers licenses under the laws of such jurisdiction. The
Offer is not being made to, nor will the Company accept tenders from or on
behalf of, holders of Shares in any jurisdiction is which the Offer or the
acceptance thereof would not be in compliance with the securities or blue sky
or other laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
First of Michigan Capital
Corporation
38
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS
AND EXECUTIVE OFFICERS OF THE COMPANY
The following is a list of Directors and Executive Officers of First of
Michigan Capital Corporation (the "Company"):
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
Steve Gasper, Jr. Director, and Chief Executive Officer
Conrad W. Koski Executive Vice President and
Treasurer
Lenore P. Denys Senior Vice President and
Corporate Secretary
Charles R. Roberts Senior Vice President
John S. Albright Senior Vice President
Urban A. MacDonald Senior Vice President
William H. Cuddy Chairman of the Board of Directors
Thomas A. McDonnell Director
Craig P. Baker Director
Geoffrey B. Baker Director
Joseph M. Mengden Director
Gerard M. Lavin Director
</TABLE>
Set forth below is certain information concerning the directors and executive
officers of the Company 1994, 1995.
Mr. Gasper became President and Chief Executive Officer of the Company in
April, 1994. He was elected to the Board of Directors in 1994. From September
1989 to December 1993, he served as Executive Vice President of Fidelity
Brokerage Services, Inc. ("Fidelity Brokerage"). Before joining Fidelity
Brokerage, Mr. Gasper was a Senior Vice President and Director of Corporate
Marketing for Thompson McKinnon Securities, Inc. Mr. Gasper is a director of
the Chicago Stock Exchange.
Mr. Conrad W. Koski joined the Company in 1973. He has served as Executive
Vice President and Treasurer since 1983.
Ms. Lenore P. Denys joined the Company in January 1981. She served as Vice
President from February 1985 until February 1989. She was elected Senior Vice
President and Corporate Secretary in February 1989.
Mr. Charles R. Roberts joined the Company as Director of Sales and Branches
in July 1994. From September 1993 until leaving to join the Company, he held a
comparable position with Roney & Co. ("Roney"). Mr. Roberts was a regional
director from December 1992 to September 1993 for the brokerage firm Stifel,
Nicolaus & Company, Inc. He also served in various capacities with Payne
Webber, Inc., including Investment Executive, Regional Insurance Coordinator,
and Branch Manager, beginning in August 1979.
Mr. John S. Albright joined the Company as the Director of Fixed Income
Securities in August of 1994. Before that, Mr. Albright served as President of
Reflections La Canada, Inc. from December 1989 to May 1994. He also was a
senior managing director of World Data Delivery Systems, Inc. from November
1991 to March 1993, and Co-Director of Fixed Income Securities for Bateman
Eichler, Hill Richards (now Kemper Securities, Inc.), from August 1986 to
December 1988. Mr. Albright also served as a group Vice President with Michigan
based MBM Group, Inc. (Manley, Bennett, McDonald & Co.) prior to that firm's
acquisition by Thompson McKinnon Securities, Inc.
I-1
<PAGE>
Mr. Urban A. MacDonald became associated with the Company as Director of
Corporate Finance in October 1994, after spending 12 years with Roney. Before
leaving Roney, Mr. MacDonald was its Director of Mergers and Acquisitions for
two years. Before that, he was Roney's Director of Investment Banking. After
leaving Roney in February 1994, Mr. MacDonald established his own company, the
Chesapeake Group, Inc., a merger and acquisition intermediary firm.
Mr. William H. Cuddy became Chairman of the Board of Directors of the Company
on April 25, 1995. He has been a Director of the Company since March 15, 1994.
Mr. Cuddy has been a partner in the Connecticut and Boston law firm of Day,
Berry and Howard since 1968.
Mr. Thomas A. McDonnell has been a Director of the Company since May 3, 1994.
Mr. McDonnell is President and Chief Executive Officer and Treasurer of DST
Systems, Inc. (mutual fund recordkeeping and related services) and is an
Executive Vice President of Kansas City Southern Industries, Inc. He joined DST
Systems in 1969 and has served as its President since 1973. He is also
president of Berger Associates, Inc. (mutual fund management company). He is
also a Director of Kansas City Southern Industries, Inc., Informix Software,
Inc., the Continuum Company, Puritan-Bennett Corporation, and BHA Group, Inc.
Mr. Craig P. Baker has been a Director of the Company since January 27, 1994.
He is a private investor.
Mr. Geoffrey B. Baker has been a Director of the Company since April 25,
1985. He is a private investor. He has also been a director of Difco
Laboratories a manufacturer of micro biological products since 1988.
Mr. Joseph M. Mengden has been a Director of the Company since June 27, 1968.
He served as Chairman of the Board from April 1994 to April 1995. He has also
served as Chairman and Chief Executive Officer of Saginaw Bay Broadcasting
Corporation since March 1992. Mr. Mengden is also the President of Mengden &
Associates, Ltd., which has been a consultant to the Company since February
1992. He has also served as Senior Consultant to the Company from September 29,
1989 to March 31, 1992. Prior to that, he served as Executive Vice President of
the Company.
Mr. Gerard M. Lavin has been a Director of the Company since April 7, 1995.
Mr. Lavin currently serves as President of Berger Associates, Inc. He is also a
Senior Executive and member of the management committee of DST Systems, Inc.
I-2
<PAGE>
Appendix A
[LETTERHEAD OF DUFF & PHELPS CAPITAL MARKETS CO.]
July 31, 1995
Board of Directors
First of Michigan Capital Corporation
Suite 2600
100 Renaissance Center
Detroit, MI 48243
To the Board of Directors:
Duff & Phelps Capital Markets Co. ("Duff & Phelps") has been retained as an
independent financial advisor to the Board of Directors of First of Michigan
Capital Corporation ("First of Michigan" or the "Company") with respect to a
proposed tender offer (the "Tender Offer") in which the Company will offer to
acquire certain shares of its common stock for $11.375 per share. Specifically,
Duff & Phelps was retained to determine the range of prices of common stock in
which the Tender Offer would be fair to the shareholders of First of Michigan,
from a financial point of view. The proposed price of $11.375 per share is
within the range determined by Duff & Phelps.
Background and Scope of Analysis
- --------------------------------
As background for our analysis, we held discussions with senior management of
the Company regarding the past and current operations, financial condition and
future outlook of First of Michigan. We held these discussions at the Company's
corporate headquarters in Detroit, Michigan. In addition, we based our analysis
on a review of the following:
1. Annual reports to shareholders and annual reports on Forms 10-K of First of
Michigan for the fiscal years ended September 30, 1989 to September 30, 1994
and the quarterly report on Form 10-Q for the six months ended March 31,
1995.
2. Internal operating information prepared by senior management, including
financial projections.
3. Certain reports prepared by outside consultants and delivered to the Board
of Directors of First of Michigan.
In addition, we reviewed the current, publicly traded stock price and trading
volume of First of Michigan, as well as its past stock price trends and trading
volume. We have relied upon industry information and other data obtained from
regularly published sources. In addition, we have conducted other studies,
analyses and investigations as we have deemed appropriate. We did not
independently verify the information obtained from management at the Company or
that obtained from industry and investment sources.
<PAGE>
Board of Directors
First of Michigan Capital Corporation
July 31, 1995
Page 2
The valuation standard which we have applied to the Tender Offer is marketable,
minority interest. The shareholders of First of Michigan are under no compulsion
to tender their shares, and the Board of Directors of the Company is currently
not in discussions to effect a change of control transaction, nor does it
currently plan to pursue such a transaction.
In rendering its opinion, Duff & Phelps has relied, without independent
verification, on the accuracy and completeness of all financial and other
information publicly available or furnished to Duff & Phelps by or on behalf of
First of Michigan. Duff & Phelps has also assumed that First of Michigan
management prepared financial forecasts and other information on bases that
incorporated the best currently available estimates and good faith judgment as
to the future financial performance of First of Michigan. Duff & Phelps did not
make an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of First of Michigan, nor was Duff & Phelps furnished
with any such evaluations or appraisals. Duff & Phelp's opinion is based on all
economic, market and business and financial conditions relevant to First of
Michigan existing on the date of such opinion. First of Michigan did not place
any limitation upon Duff & Phelps with respect to the procedures followed or
factors considered by Duff & Phelps in rendering its opinion.
Conclusion
- ----------
After considering all factors we regard as relevant and assuming the accuracy
and completeness of the information provided to us, it is our opinion as of July
31, 1995 that the Tender Offer price of $11.375 per share is fair to the
shareholders of First of Michigan, from a financial point of view.
Respectfully submitted,
[Duff & Phelps Sig]
Duff & Phelps Capital Markets Co.
LSB/CLJ
<PAGE>
APPENDIX B
FINANCIAL STATEMENTS FOR THE NINE-MONTH PERIOD ENDED JUNE 30, 1995
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheets...................................... B-1
Condensed Consolidated Statements of Income................................ B-2
Statement of Consolidated Cash Flows....................................... B-3
Notes to Condensed Consolidated Financial Statements....................... B-4
FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED SEPTEMBER 30, 1994
Consolidated Statements of Income.......................................... B-6
Consolidated Balance Sheets................................................ B-7
Consolidated Statements of Cash Flows...................................... B-8
Consolidated Statements of Stockholders' Equity............................ B-9
Notes to Consolidated Financial Statements................................. B-10
Report of Independent Auditors............................................. B-16
</TABLE>
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER
1995 30, 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents.......................... $ 2,650,747 $ 2,612,487
Receivable from brokers and dealers................ 7,171,289 2,673,582
Receivable from customers.......................... 71,912,879 73,536,305
Notes receivable from employees.................... 2,086,930 2,278,673
Other accounts receivable.......................... 1,401,469 1,756,211
Securities owned................................... 12,861,158 4,656,986
Memberships in exchanges, at cost (market value--
$949,000 at March 31, 1995 and $918,000 at
September 30, 1994)............................... 430,503 430,503
Equipment and leasehold improvements, at
depreciated cost.................................. 2,769,735 2,597,239
Other investments.................................. 716,359 1,134,887
Net cash surrender value of life insurance......... 7,404,598 6,874,924
Deferred income taxes.............................. 2,841,000 2,541,000
Other assets....................................... 2,648,719 2,675,156
------------ ------------
$114,895,386 $103,767,953
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable to banks........................... $ 34,250,000 $ 26,250,000
Payable to brokers and dealers................... 19,317,827 16,368,327
Payable to customers............................. 13,600,351 12,685,476
Securities sold, not yet purchased............... 424,213 318,255
Employee compensation payable.................... 12,038,221 12,335,278
Dividend payable................................. 168,655 126,178
Income taxes payable............................. 0 172,913
Other accounts payable and accrued liabilities... 4,050,604 2,884,546
Capital lease obligation......................... 1,275,000 1,500,000
------------ ------------
85,124,871 72,640,973
Contingencies--See note
Stockholders' equity:
Common stock, $.10 par value 10,000,000 shares
authorized, 2,891,558 issued.................... 289,156 289,156
Capital in excess of par value..................... 3,689,801 3,767,157
Retained earnings.................................. 26,793,663 27,202,524
------------ ------------
30,772,620 31,258,837
------------ ------------
Less treasury stock, at cost--80,641 shares at
March 31, 1995 and 9,674 at September 30, 1994.... (1,002,105) (131,857)
------------ ------------
29,770,515 31,126,980
------------ ------------
$114,895,386 $103,767,953
============ ============
</TABLE>
- --------
Note: The balance sheet at September 30, 1994 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed consolidated financial statements.
B-1
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ ------------------------
JUNE 30, JUNE 24, JUNE 30, JUNE 24,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Commissions................ $ 9,038,531 $ 8,441,971 $24,220,737 $28,896,869
Principal transactions..... 1,189,237 726,738 3,450,608 2,800,795
Investment banking......... 1,929,145 2,928,122 6,647,277 7,069,909
Interest................... 1,598,303 1,249,877 4,624,763 3,114,537
Insurance commissions...... 627,993 805,271 1,957,693 2,513,131
Other...................... 1,265,146 773.051 3,439,930 2,357,481
----------- ----------- ----------- -----------
Total revenues........... 15,648,355 14,925,020 44,341,008 46,752,722
----------- ----------- ----------- -----------
Expenses
Employee compensation and
benefits.................. 8,614,283 7,099,889 23,519,264 22,746,529
Floor brokerage, exchange,
clearance and other fees.. 1,214,997 1,265,566 3,608,336 4,612,905
Communications............. 300,189 246,907 874,539 712,143
Interest................... 796,977 519,317 2,180,895 1,110,200
Occupancy and equipment
rental.................... 1,268,890 904,898 3,425,824 2,671,961
Taxes, other than income
taxes..................... 728,310 693,997 2,093,563 1,977,906
Office supplies and
expenses.................. 950,033 682,030 2,643,655 2,023,151
Merger termination
expenses.................. -- 1,450,180 -- 3,390,082
Other operating expenses... 2,244,052 1,925,218 6,111,355 5,633,762
----------- ----------- ----------- -----------
Total expenses........... 16,117,731 14,788,002 44,457,431 44,878,639
----------- ----------- ----------- -----------
Income (loss) before income
taxes....................... (469,376) 137,018 (116,423) 1,874,083
Provision (credit) for income
taxes....................... (240,000) 10,000 (215,000) 575,000
----------- ----------- ----------- -----------
Net income (loss).......... $ (229,376) $ 127,018 $ 98,577 $ 1,299,083
----------- ----------- ----------- -----------
Net income (loss) per
share..................... $(.08) $.04 $.03 $.44
Average number of common and
common equivalent shares
outstanding for income
(loss) per share............ 2,824,321 2,953,601 2,867,971 2,953,490
Cash dividends per share..... $.06 $.05 $.18 $.10
</TABLE>
See accompanying notes.
B-2
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------
JUNE 30, JUNE 24,
1995 1994
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.......................................... $ 98,577 $ 1,299,083
Noncash items included in Net Income:
Depreciation and amortization..................... 313,173 268,031
Deferred income taxes............................. (300,000) (315,000)
Gain on sale of fixed assets...................... (3,523) (139)
Gain on sale of investment account securities..... (261,013) (14,580)
----------- ------------
(152,786) 1,237,395
----------- ------------
(Increase) decrease in operating receivables:
Customers......................................... 1,623,426 (14,001,408)
Brokers and dealers............................... (4,497,707) 388,460
Employees......................................... 191,743 1,075,769
Other............................................. 354,742 (236,920)
Increase (decrease) in operating payables:
Customers......................................... 914,875 (7,482,491)
Brokers and dealers............................... 2,949,500 5,683,893
Employee compensation............................. (297,057) (1,311,101)
Income taxes...................................... (172,913) 69,269
Other............................................. 1,166,058 339,336
Increase in:
Securities inventory.............................. (8,204,172) 1,635,715
Other assets...................................... (503,237) (1,417,484)
Decrease in:
Securities sold, not yet purchased................ 105,958 (452,858)
----------- ------------
(6,368,784) (15,709,819
----------- ------------
CASH PROVIDED (USED) FOR OPERATING ACTIVITIES....... (6,521,570) (14,472,424)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings...... 8,000,000 16,520,000
Payments on capital lease obligation.............. (225,000) --
Employee stock transactions....................... 301,768 301,980
Repurchases of common stock....................... (1,249,372) (359,600)
Dividends paid.................................... (464,961) (985,787)
----------- ------------
CASH PROVIDED (USED) FOR FINANCING ACTIVITIES....... 6,362,435 15,476,593
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment account
securities....................................... 704,125 138,839
Net payments for equipment and leasehold
improvements..................................... (482,146) (225,044)
Purchases, advances and other activity in other
investments--net................................. (24,584) (11,510)
----------- ------------
CASH PROVIDED BY INVESTING ACTIVITIES............... 197,395 (97,715)
----------- ------------
INCREASE IN CASH AND CASH EQUIVALENTS............... 38,260 906,454
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR...... 2,612,487 2,276,928
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR............ $ 2,650,747 $ 3,183,382
=========== ============
Income tax payments................................. $ 174,923 $ 820,731
Interest payments................................... $ 2,035,360 $ 1,087,015
</TABLE>
See notes to condensed consolidated financial statements.
B-3
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
The consolidated financial statements include the accounts and operations of
First of Michigan Capital Corporation and its subsidiary companies (the
Company) including First of Michigan Corporation, a registered securities
broker-dealer and a member organization of the New York Stock Exchange, Inc.,
after elimination of all significant intercompany accounts and transactions.
Securities owned and securities sold, not yet purchased, are valued at market
and unrealized gains and losses are reflected in revenues.
Investment account securities are carried at the lower of cost or market.
Certain other investments are accounted for on the equity method. The Company's
equity in such operations was not material in amount during the periods ended
March 31, 1995 and March 25, 1994.
Net income per share is computed on the basis of the weighted average number
of common shares outstanding, assuming dilutive stock options were exercised at
the beginning of the quarter or at the date of issuance, if later, with
applicable proceeds used to acquire additional treasury shares at the average
market price.
INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------------------------
JUNE 30, 1995 JUNE 24, 1994
------------------------ ------------------------
FEDERAL STATE & LOCAL FEDERAL STATE & LOCAL
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Current................. $ 75,000 $(10,000) $ 865,000 $25,000
Deferred................ (280,000) -- (315,000) --
--------- -------- --------- -------
Total................... $(205,000) $(10,000) $ 550,000 $25,000
========= ======== ========= =======
</TABLE>
Deferred income taxes principally arise from deferred compensation expense.
CONTINGENCIES
In the normal course of business, First of Michigan Corporation enters into
underwriting commitments. Transactions relating to such underwriting
commitments which were open at March 31, 1995 and subsequently settled, had no
material effect on the financial statements as of that date.
First of Michigan Corporation is the subject of claims made in several civil
actions arising out of its business as a broker-dealer and as an investment
banker. While these actions in the aggregate seek substantial amounts,
management believes that their disposition will not have a material adverse
effect on the financial position of the Company.
B-4
<PAGE>
TERMINATION OF MERGER AND RELATED EXPENSES
Merger termination expense for the three months and nine months ended June
24, 1994, includes both legal costs as well as the amortization of certain
employee retention agreements. With the settlement of the lawsuit with
Comerica, Incorporated, in August 1994, the amortization of the retention
agreements, amounting to $338,383 and $992,836 for the three months and nine
months ended June 30, 1995, respectively, has been included in employee
compensation and benefits.
CAPITAL REQUIREMENTS
First of Michigan Corporation is subject to the uniform net capital rule
(Rule 15c3-1) of the Securities and Exchange Commission and the capital rules
of the New York Stock Exchange, Inc., of which it is a member, and elects to
compute its net capital requirements in accordance with the alternative method.
Under this method, the Corporation is required to maintain minimum net
capital, as defined, equal to 2 percent of aggregate debit balances arising
from customer transactions, as defined. The net capital rules also provide that
equity capital may not be withdrawn or cash dividends paid if the resulting net
capital would be less than 5 percent of aggregate debits. At June 30, 1995
First of Michigan Corporation's net capital of $17,111,172 was 23 percent of
aggregate debit balances, and was $15,644,986 in excess of the 2 percent
minimum net capital required and $13,445,708 in excess of the 5 percent
dividend restriction.
----------------
The preceding information is unaudited and accordingly, does not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation of the results of the period have been included. The
results for the interim period are not necessarily indicative of the results to
be expected for the full year. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended September 30, 1994.
B-5
<PAGE>
First of Michigan Capital Corporation
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Years Ended September 30, 24, 25 1994 1993 1992
<S> <C> <C> <C>
REVENUES
Commissions............................................ $37,505,448 $36,932,603 $33,570,252
Principal transactions................................. 3,750,159 4,321,540 4,219,157
Investment banking..................................... 8,866,447 12,061,078 12,932,275
Interest............................................... 4,525,541 3,088,422 2,906,412
Insurance commissions.................................. 3,338,579 3,090,235 2,411,316
Other.................................................. 3,210,344 3,535,704 3,839,591
-----------------------------------------
61,196,518 63,029,582 59,879,003
EXPENSES
Employee compensation and benefits..................... 30,071,506 32,667,548 31,745,904
Floor brokerage, exchange, clearance and other fees.... 5,938,459 5,799,617 5,656,533
Communications......................................... 983,186 929,459 964,149
Interest............................................... 1,719,427 826,097 450,390
Occupancy and equipment rental......................... 3,589,656 3,314,354 3,405,996
Taxes, other than income taxes......................... 2,522,564 2,575,605 2,423,886
Office supplies and expenses........................... 2,829,787 2,528,537 2,533,104
Merger related expenses................................ 3,385,590 3,545,983 --
Other operating expenses............................... 8,688,450 5,621,915 5,444,089
-----------------------------------------
59,728,625 57,809,115 52,624,051
-----------------------------------------
Income before income taxes............................. 1,467,893 5,220,467 7,254,952
Provision for income taxes............................. 425,000 1,820,000 2,550,000
-----------------------------------------
NET INCOME............................................. $ 1,042,893 $ 3,400,467 $ 4,704,952
=========================================
Net income per share................................... $.35 $1.16 $1.64
=========================================
Cash dividends per share............................... $.16 $.36 $1.05
=========================================
Average number of common and common equivalent
shares outstanding for income per share............... 2,952,969 2,936,217 2,864,901
</TABLE>
See notes to consolidated financial statements.
B-6
<PAGE>
First of Michigan Capital Corporation
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
For the Years Ended September 30,24 1994 1993
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................................... $ 2,612,487 $ 2,276,928
Receivable from brokers and dealers................................................. 2,673,582 2,867,342
Receivable from customers........................................................... 73,536,305 56,826,370
Notes receivable from employees..................................................... 2,278,673 3,638,818
Other accounts receivable........................................................... 1,756,211 1,768,732
Securities owned.................................................................... 4,656,986 5,853,783
Memberships in exchanges, at cost
(market value--$918,000 in 1994 and $856,000 in 1993)............................. 430,503 430,503
Equipment and leasehold improvements, at depreciated cost........................... 2,597,239 896,955
Investment account securities....................................................... -- 673,439
Other investments................................................................... 1,134,887 1,123,377
Net cash surrender value of life insurance.......................................... 6,874,924 5,857,993
Deferred income taxes............................................................... 2,541,000 2,260,000
Other assets........................................................................ 2,675,156 2,032,088
-----------------------------------
$103,767,953 $ 86,506,328
===================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable to banks.............................................................. $ 26,250,000 $ 12,000,000
Payable to brokers and dealers...................................................... 16,368,327 9,808,834
Payable to customers................................................................ 12,685,476 16,890,969
Securities sold, not yet purchased.................................................. 318,255 549,919
Employee compensation payable....................................................... 12,335,278 13,425,449
Dividend payable.................................................................... 172,913 841,213
Income taxes payable................................................................ 126,178 147,140
Other accounts payable and accrued liabilities...................................... 2,884,546 2,090,380
Capital lease obligation............................................................ 1,500,000 --
-----------------------------------
72,640,973 55,753,904
Commitments and contingencies -- See notes E & F.
Stockholders' equity
Serial preferred stock, $.10 par value, 5,000,000 shares authorized and unissued
Common stock, $ .10 par value, 10,000,000 shares authorized 2,891,558
issued in 1994 and 2,628,790 in 1993.............................................. 289,156 262,879
Capital in excess of par value...................................................... 3,767,157 3,867,885
Retained earnings................................................................... 27,202,524 26,621,660
-----------------------------------
31,258,837 30,752,424
Less treasury stock, at cost (9,674 shares)......................................... (131,857) --
-----------------------------------
Total Stockholders' Equity.......................................................... 31,126,980 30,752,424
-----------------------------------
$103,767,953 $ 86,506,328
===================================
</TABLE>
See notes to consolidated financial statements.
B-7
<PAGE>
First of Michigan Capital Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Years Ended September 30, 24, 25 1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 1,042,893 $ 3,400,467 $ 4,704,952
Noncash items icluded in net income:
Depreciation and amortization.................. 314,638 330,793 351,017
Deferred income taxes.......................... (281,000) 341,000 (588,000)
(Gain) loss of sale of fixed assets............ (499) (27,454) 2,222
Other.......................................... (38,880) (57,135) (238,237)
-----------------------------------------------
1,037,152 3,987,671 4,231,954
(Increase) decrease in operating receivables:
Brokers and dealers............................ 193,760 131,666 (1,227,177)
Customers...................................... (16,709,935) (16,419,334) (10,407,651)
Employees...................................... 1,360,145 (3,162,715) 365,637
Other.......................................... 12,521 (843,662) (325,353)
(Increase) decrease in operating payables:
Brokers and dealers............................ 6,559,493 4,690,507 3,148,062
Customers...................................... (4,205,493) 2,980,341 477,117
Employee compensation.......................... (1,090,171) 408,995 4,243,575
Income taxes................................... (20,962) (394,603) 499,015
Other.......................................... 794,166 (87,712) (22,935)
(Increase) decrease in:
Securities inventory........................... 1,196,797 2,080,180 (2,379,128)
Other assets................................... (1,659,999) 80,106 (3,778,797)
(Increase) decrease in:
Securities sold, not yet purchased............. (231,664) 316,872 (18,760)
-----------------------------------------------
(13,801,342) (10,219,359) (9,426,395)
-----------------------------------------------
Cash used for operating activities............... (12,764,190) (6,231,688) (5,194,441)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term borrowings.............. 14,250,000 9,500,000 2,500,000
Proceeds from employee stock transactions...... 419,167 534,076 132,305
Payments for repurchases of common stock....... (625,475) (1,312) (54,822)
Dividends paid................................. (1,130,329) (2,799,991) (1,289,169)
-----------------------------------------------
Cash provided by financing activities.......... 12,913,363 7,232,773 1,288,314
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of investment account
securities................................... 712,319 429,090 1,563,656
Purchase of investment account securities...... -- (61,000) (1,656,594)
Net payments for equipment and leasehold
improvements................................. (514,423) (257,775) (449,226)
Purchases, advances and other activity in
other investments-net........................ (11,510) (503,870) 108,016
-----------------------------------------------
Cash provided by (used for) investing activities. 186,386 (393,555) (434,148)
-----------------------------------------------
Increase (decrease) in cash and cash equivalents. 335,559 607,530 (4,340,275)
-----------------------------------------------
Cash and cash equivalents at beginning of year... 2,276,928 1,669,398 6,009,673
-----------------------------------------------
Cash and cash equivalents at end of year......... $ 2,612,487 $ 2,276,928 $ 1,669,398
===============================================
</TABLE>
See notes to consolidated financial statements.
B-8
<PAGE>
First of Michigan Capital Corporation
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Issued Treasury Stock
------------------- Capital -------------- Total
Number Aggregate in Excess Retained Number of Stockholders'
of Shares Par Value of Par Value Earnings Shares Cost Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at September 27, 1991......... 2,582,888 $258,289 $3,316,317 $22,544,878 (6,500) $ (54,089) $26,065,395
Net income........................... -- -- -- 4,704,952 -- -- 4,704,952
Cash dividends declared.............. -- -- -- (2,977,121) -- -- (2,977,121)
Purchase of treasury shares.......... -- -- -- -- (4,750) (54,822) (54,822)
Shares issued under stock option
plans.............................. 2,100 210 23,184 -- 11,250 108,911 132,305
------------------------------------------------------------------------------------------
Balances at September 25, 1992......... 2,584,988 258,499 3,339,501 24,272,709 -- -- 27,870,709
Net income........................... -- -- -- 3,400,467 -- -- 3,400,467
Cash dividends declared.............. -- -- -- (1,051,516) -- -- (1,051,516)
Purchase of treasury shares.......... -- -- -- -- (100) (1,312) (1,312)
Shares issued under stock option
plans.............................. 43,802 4,380 528,384 -- 100 1,312 534,076
------------------------------------------------------------------------------------------
Balances at September 24, 1993......... 2,628,790 262,879 3,867,885 26,621,660 -- -- 30,752,424
Net income........................... -- -- -- 1,042,893 -- -- 1,042,893
Cash dividends declared.............. -- -- -- (462,029) -- -- (462,029)
Purchase of treasury shares.......... -- -- -- -- (46,579) (625,475) (625,475)
Shares issued under stock option
plans.............................. -- -- (74,451) -- 36,905 493,618 419,167
Stock dividend....................... 262,768 26,277 (26,277) -- -- -- --
------------------------------------------------------------------------------------------
Balances at September 30, 1994......... 2,891,558 $289,156 $3,767,157 $27,202,524 (9,674) $(131,857) $31,126,980
==========================================================================================
</TABLE>
See notes to consolidated financial statements.
Consolidated Statements of Stockholders' Equity
B-9
<PAGE>
First of Michigan Capital Corporation
Notes to Consolidated Financial Statements
Summary of Principal Accounting Policies Note A
The consolidated financial statements include the accounts and operations of
First of Michigan Capital Corporation and its subsidiary companies (the Company)
including First of Michigan Corporation, (the Corporation), a registered
securities broker-dealer and a member organization of the New York Stock
Exchange, Inc., after elimination of all significant intercompany accounts and
transactions.
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Accounts of officers and employees are included in receivable from and
payable to customers, as they are subject to the normal terms and regulations as
to payment and, in the aggregate, are not significant.
Securities owned and securities sold, not yet purchased, consist of the
Company's trading accounts carried at market value. Unrealized gains and losses
are reflected in operations. Sales of securities, not yet purchased, represent
an obligation of the Company to deliver specified equity securities at a
predetermined date and price. The Company will be obligated to acquire the
required securities at prevailing market prices in the future to satisfy this
obligation.
Securities transactions and related revenues and expenses are recorded on a
settlement date basis which does not differ materially from a trade date basis.
The risk of loss on unsettled transactions is the same as settled transactions
and relates to the customer's or broker's inability to meet the terms of their
contracts. Credit risk is reduced by the industry policy of obtaining and
maintaining adequate collateral until the commitment is completed.
Depreciation of equipment is provided using the straight-line basis over
the estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the term of the lease or the useful life of
the improvement, whichever is less.
Investment account securities are carried at the lower of cost or market.
Certain other investments are accounted for on the equity method. The Company's
equity in such operations is not material.
Net income per share is computed on the basis of the weighted average
number of common and common equivalent shares outstanding, assuming dilutive
stock options were exercised at the beginning of each quarter or at the date of
issuance, if later, with applicable proceeds used to acquire additional treasury
shares at the average market price.
On December 17, 1993, a 10% stock dividend was declared payable to
shareholders of record on December 31, 1993. All per share and stock option
information has been adjusted to reflect this dividend.
The Company is a party to financial instruments with off-balance-sheet risk
in its normal course of business. The Company is required, in the event of the
non-delivery of customers' securities owed the Company by other broker-dealers,
or by its customers, to purchase identical securities in the open market. Such
purchases might result in losses not reflected in the accompanying financial
statements. The market values of securities owed the Company approximates the
amounts payable.
B-10
<PAGE>
Brokers, Dealers and Customers Note B
The components of the receivable from and payable to brokers and dealers are as
shown.
Receivables from brokers generally are collected within thirty days and are
collateralized by securities in physical possession, on deposit, or receivable
from customers or other brokers. The Company does business with brokers that for
the most part are members of the major securities exchanges.
The Company monitors the credit standing of each broker-dealer and customer
that it conducts business with. In addition, the Company monitors the market
value of collateral held and the market value of securities receivable from
others. It is the Company's policy to request and obtain additional collateral
when exposure to loss exists. The value of securities owned by customers and
held as collateral for these receivables is not included in the balance sheet.
Payable to customers includes free credit balances of $8,344,946 at September
30, 1994 and $7,594,108 at September 24, 1993. Interest paid on stock loan
transactions approximated $455,000, $127,000 and $40,000 for the years ended
September 30, 1994, September 24, 1993 and September 25, 1992, respectively.
<TABLE>
<CAPTION>
Years Ending September 30, 24 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Receivable from brokers and dealers:
Securities failed-to-deliver........... $ 348,399 $ 62,505
Deposits on securities borrowed........ 2,302,500 2,762,400
Other.................................. 22,683 42,437
----------------------------
$ 2,673,582 $2,867,342
============================
Payable to brokers and dealers:
Securities failed-to-receive........... $ 239,569 $ 304,416
Deposits received for securities loaned 15,358,150 8,282,582
Clearing organizations................. 770,608 1,165,708
Other.................................. -- 56,128
----------------------------
$16,368,327 $9,808,834
============================
</TABLE>
Securities Owned Note C
Securities owned are as shown.
<TABLE>
<CAPTION>
Years Ending September 30, 24 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C>
Municipal bonds.......................... $ 2,020,058 $3,870,251
Corporate stocks......................... 2,002,429 1,619,837
Corporate obligations.................... 634,499 363,695
----------------------------
$ 4,656,986 $5,853,783
============================
</TABLE>
Bank Credit Arrangements Note D
First of Michigan Corporation has available lines of credit on a secured
basis with five banks aggregating $112,000,000. The Corporation had borrowed
$26,250,000 against these lines of credit at September 30, 1994. There were
$12,000,000 in borrowings outstanding against these lines of credit at September
24, 1993. Interest is at the banks' broker call loan interest rate. The lines of
credit may be withdrawn at the sole discretion of the banks.
Under separate agreements, First of Michigan Capital Corporation has
available short-term lines of credit on an unsecured basis, aggregating
$8,000,000 with two banks. Interest is at the banks' broker call loan interest
rate. First of Michigan Capital Corporation had no borrowings against these
lines of credit at September 30, 1994 or at September 24, 1993.
Interest paid for the years ended September 30, 1994, September 24, 1993 and
September 25, 1992, exclusive of amounts for stock loaned referred to in Note B,
was $1,201,000, $684,000 and $349,000, respectively.
B-11
<PAGE>
COMMITMENTS AND CONTINGENCIES NOTE E
- --------------------------------------------------------------------------------
As of September 30, 1994, First of Michigan Corporation has provided a
clearing corporation with securities pledged as collateral in the amount of
approximately $1,900,000 which satisfied margin deposit requirements of $843,454
at that date.
At September 30, 1994, the aggregate minimum rental commitments under
noncancellable leases and contracts for office space and equipment, expiring
1995 through 1999, are as shown.
Certain of the office leases contain renewal options ranging from one to
five years. The office leases generally provide for rent escalations resulting
from increased assessments for real estate taxes and other charges. Annual
rental expense for office space and equipment was $2,400,000 in 1994, $2,170,000
in 1993 and $2,190,000 in 1992.
In the normal course of business, First of Michigan Corporation enters into
underwriting commitments. Transactions relating to such underwriting commitments
which were open at September 30, 1994 and subsequently settled, had no material
effect on the financial statements as of that date.
In September 1994, the Company entered into a $1,500,000 capital lease for
equipment which is included in equipment and leasehold improvements.
First of Michigan Corporation is the subject of claims made in several
civil actions arising out of its business as a broker-dealer and as an
investment banker. While these actions in the aggregate seek substantial
amounts, management believes that their disposition will not have a material
adverse effect on the financial position of the Company.
RENTAL COMMITMENTS: Capital Leases Operating Leases
- --------------------------------------------------------------------------------
1995............................................. $ 336,000 $1,847,000
1996............................................. 336,000 1,661,100
1997............................................. 336,000 1,308,000
1998............................................. 336,000 369,000
1999............................................. 336,000 208,000
----------------------------
Total minimum lease payments................. 1,680,000 $5,393,000
==========
Amounts representing interest................ 180,000
----------
Present value of net minimum lease payments.. $1,500,000
==========
TERMINATION OF MERGER AND RELATED EXPENSES NOTE F
- --------------------------------------------------------------------------------
On January 10, 1993, the Company and Comerica Incorporated (Comerica)
entered into an Agreement and Plan of Merger (Merger Agreement). The Company was
notified on March 31, 1993 by Comerica that it was terminating the Merger
Agreement.
As a result of the termination of the Merger Agreement, First of Michigan
Corporation entered into additional retention agreements with certain investment
executives, covering a three year period. The amortization of these agreements
resulted in merger-related expenses of approximately $1,383,000 in 1994 and
$699,000 in 1993. At September 30, 1994, approximately $2,056,000 of the notes
receivable from employees represents the unamortized portion of these
agreements, which will be amortized ratably over the next eighteen months.
In August 1994, a settlement was reached between Comerica and the Company
ending a prior lawsuit for breach of contract regarding the termination of the
Merger Agreement.
B-12
<PAGE>
STOCK OPTIONS NOTE G
- --------------------------------------------------------------------------------
The Company has a Stock Option Plan for its employees under which the
Company may grant options for up to 550,000 shares of common stock at a price
not less than 85% of the market value of the common stock on the date of grant.
All options granted through September 30, 1994 have prices equal to at least 95%
of the market value at date of grant. Options become exercisable after 3 years
but not later than 5 years from date of grant except options for 27,500 shares
at $7.16 per share granted December 12, 1990 and 13,750 shares at $9.55 per
share granted December 27, 1991, which become exercisable after 5 years but not
later than 7 years from date of grant and 90,000 shares and 30,000 shares at
$13.38 and $16.72, respectively, granted March 29, 1994, which become
exercisable at a rate of 20% after each year until the end of year 5 when all
options are vested and expire March 29, 2001 and April 8, 1999, respectively.
Additional option information is shown.
Options outstanding at September 30, 1994, of which 31,657 were
exercisable, carried exercise prices ranging from $8.41 to $10.11 per share
(weighted average of $9.08 per share) and 299,437 shares were available for
future grants.
The Company has a separate Stock Option Plan for its non-employee Directors
under which the Company may grant options for up to 55,000 shares of common
stock at a price not less than the market value of the common stock on the date
of grant. Options become exercisable after 5 years but no later than 7 years
from date of grant. Additional option information is shown.
Options outstanding at September 30, 1994, of which none were exercisable,
carried exercise prices ranging from $7.16 to $9.55 per share (weighted average
of $8.05 per share) and 48,400 shares were available for future grants.
EMPLOYEE STOCK OPTION PLAN 1994 1993 1992
- -------------------------------------------------------------------------------
Outstanding at beginning of fiscal year..... 265,012 252,300 226,173
Granted (a)................................ 210,204 79,959 80,693
Exercised (b).............................. (38,598) (48,292) (14,685)
Cancelled or expired....................... (52,578) (18,955) (39,881)
-------------------------------
Outstanding at end of fiscal year (c)...... 384,040 265,012 252,300
===============================
DIRECTORS STOCK OPTION PLAN 1994 1993 1992
- -------------------------------------------------------------------------------
Outstanding at beginning of fiscal year..... 8,800 8,800 5,500
Granted (d)................................ -- -- 3,300
Exercised.................................. -- -- --
Cancelled or expired....................... (2,200) -- --
-------------------------------
Outstanding at end of fiscal year.......... 6,600 8,800 5,500
===============================
(a) Grant prices per share were $12.61, $13.38 and $16.72 in 1994, $10.00
in 1993 and $9.55, $9.77, $10.00 and $10.45 in 1992.
(b) Weighted average price per share of $10.04 in 1994, $10.55 in 1993 and
$8.56 in 1992.
(c) Includes 103,078 in 1994, 176,437 shares in 1993 and 235,800 shares in
1992 granted under a previous Stock Option Plan.
(d) Grant price per share was $9.55 in 1992.
CAPITAL REQUIREMENTS NOTE H
- --------------------------------------------------------------------------------
The Corporation is subject to the Securities and Exchange Commission's
Uniform Net Capital Rule (rule 15c3-1), which requires the maintenance of
minimum net capital. The Corporation has elected to use the alternative method,
permitted by the rule, which requires that the Corporation maintain minimum net
capital, as defined, equal to the greater of $263,000 or 2 percent of aggregate
debit balances arising from customer transactions, as defined. The net capital
rule of the New York Stock Exchange, Inc., also provides that equity capital may
not be withdrawn or cash dividends paid if resulting net capital would be less
than 5 percent of aggregate debits.
At September 30, 1994, the Corporation had net capital of $18,628,324 which
was 25 percent of aggregate debit balances and $17,154,841 in excess of required
net capital.
B-13
<PAGE>
INCOME TAXES NOTE I
- --------------------------------------------------------------------------------
The provision of income taxes consists of the following:
YEARS ENDED SEPTEMBER 30, 24, 25 1994 1993 1992
- --------------------------------------------------------------------------------
Federal:
Current................................ $681,000 $1,419,000 $3,088,000
Deferred (credit)...................... (281,000) 341,000 (588,000)
-------------------------------------
400,000 1,760,000 2,500,000
State and local........................ 25,000 60,000 50,000
-------------------------------------
$425,000 $1,820,000 $2,550,000
=====================================
A reconciliation of the total income tax provision and the amount computed by
applying the statutory federal income tax rate of 34% to earnings before income
taxes is as follows:
1994 1993 1992
- --------------------------------------------------------------------------------
Computed amounts......................... $499,000 $1,775,000 $2,467,000
Municipal interest income................ (72,000) (90,000) (107,000)
Other.................................... (27,000) 75,000 140,000
-------------------------------------
Federal Income Tax Provision............. $400,000 $1,760,000 $2,500,000
=====================================
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of September 30, 1994 and
September 24, 1993 are as follows:
1994 1993
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Prepaid expenses................................... $170,000 $ --
Lease payment accrual.............................. 53,000 64,000
Amortization of organizational costs............... -- 34,000
Depreciation....................................... 26,000 39,000
Other - net........................................ 45,000 23,000
-----------------------
Total deferred tax liabilities....................... 294,000 160,000
Deferred tax assets:
Deferred compensation.............................. 1,754,000 1,567,000
Retirement benefits................................ 777,000 664,000
Other - net........................................ 304,000 189,000
-------------------------
Total deferred tax assets............................ 2,835,000 2,420,000
-------------------------
Net deferred tax assets.............................. $2,541,000 $2,260,000
=========================
Federal, state and local income taxes paid during the year approximated
$861,000 in 1994, $1,874,000 in 1993 and $2,639,000 in 1992.
B-14
<PAGE>
QUARTERLY INFORMATION (UNAUDITED) NOTE J
- --------------------------------------------------------------------------------
The table shown below sets forth the unaudited results of operations of the
Company by quarter for 1994 and 1993. The information was prepared in conformity
with generally accepted accounting principles. As such, it reflects all
adjustments which were, in the opinion of management, necessary for a fair
presentation of the results of operations for the periods presented. The nature
of the Company's business is such that the results of any interim period are not
necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------
December 31, March 25, June 24, September 30,
1993 1994 1994 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues............................... $16,474,646 $15,353,056 $14,925,020 $14,443,796
Expenses............................... 14,871,413 15,219,224 14,788,002 14,849,986 (a)
-------------------------------------------------------------
Income before income taxes............. 1,603,233 133,832 137,018 (406,190)
Provision (credit) for income taxes.... 545,000 20,000 10,000 (150,000)
-------------------------------------------------------------
Net income (loss)...................... $ 1,058,233 $ 113,832 $ 127,018 $ (256,190)
=============================================================
Net income (loss) per share............ $.36 $.04 $.04 $(.09)
=============================================================
Dividends per share.................... $.05 $.05 $.06
=============================================
Stock price range:
High.................................. $12.61 $13.50 $13.50 $14.38
Low................................... $11.93 $12.38 $13.00 $12.88
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------
December 31, March 26, June 25, September 24,
1992 1993 1993 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues............................... $14,977,611 $15,532,355 $15,529,460 $16,970,156
Expenses............................... 12,891,606 14,502,557 16,130,132 14,284,820 (b)
-------------------------------------------------------------
Income before income taxes............. 2,106,005 1,029,798 (600,672) 2,685,336
Provision for income taxes............. 745,000 330,000 (245,000) 990,000
-------------------------------------------------------------
Net income............................. $ 1,361,005 $ 699,798 $ (355,672) $ 1,695,336
=============================================================
Net income per share*.................. $.47 $.22 ($.11) $.58
=============================================================
Dividends per share*................... $.07 $.29
=========== =============
Stock price range:
High*................................. $12.625 $16.75 $14.25 $13.50
Low*.................................. $10.875 $12.25 $12.25 $11.875
</TABLE>
(a) Expenses include an accrual of $600,000 for legal costs.
(b) Expenses include a reduction in compensation for bonuses and benefit plans
of approximately $493,000.
* Amounts adjusted to reflect the 10% stock dividend declared in December 1993.
B-15
<PAGE>
First of Michigan Capital Corporation
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
First of Michigan Capital Corporation
We have audited the accompanying consolidated balance sheets of First of
Michigan Capital Corporation and subsidiaries as of September 30, 1994 and
September 24, 1993, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three fiscal years in the
period ended September 30, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of First of Michigan
Capital Corporation and subsidiaries at September 30, 1994 and September 24,
1993, and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended September 30, 1994, in
conformity with generally accepted accounting principles.
/s/ Ernest & Young LLP
Detroit, Michigan
November 10, 1994
B-16
<PAGE>
Appendix C
I voted "No" on the proposed Self-Tender Offer as not being in the best
interests of the Company and its "Public Stockholders", because it offers only
to purchase part, not all, of the "public's" shares. Depending on the number of
shares tendered versus the 625,000 share maximum offer to purchase, the
tendering shareholders could have up to 57% of their original holdings remain
unpurchased, because of the proration of tenders if total tenders exceed 625,000
shares. These Remaining Shares, along with all shares not tendered (and still
outstanding) will suffer a material change of status when the company's proposed
"Going Private" plan is effected, as follows:
1.) Shares will be delisted - no further trading on the Chicago Stock
Exchange;
2.) Registration of the Shares under the Exchange Act of the SEC will be
terminated, thereby permitting the elimination of proxy statements,
annual reports and quarterly reports;
3.) Shares will no longer be "margin securities", under the Federal Reserve
Board's margin requirements and will not be eligible as collateral for
margin loans from brokers. Shares would also lose much of their
collateral value for secured loans from other lending institutions;
4.) The dividend will be eliminated, leaving the remaining shareholders
with no income from their investment in their Remaining Shares;
5.) The Shares accepted for purchase will create a "capital event", a
taxable gain or loss, with the possibility of the IRS claiming that it
is ordinary taxable income;
6.) As non-marketable securities, the market value of the Remaining Shares
may be severely depressed. Estate planning will become extremely
complex and the estate of a Decedent Shareholder may be tied up for an
indeterminable period of time.
The above negative factors far outweigh the neglible cost savings to the
Company for "going private" in this manner. If the offer were amended to
purchase all of the Shares tendered (without proration), I would reconsider my
earlier vote.
Over the past 10 years, the Company's Board of Directors held discussions
regarding delisting from the Chicago Stock Exchange in favor of over-the-counter
trading, and rejected "going private" because of the perceived benefits of
being a public company for its Corporate Finance, Public Finance and brokerage
clients and prospects.
July 26, 1995 /s/ Joseph M. Mengden
---------------------
Joseph M. Mengden
<PAGE>
The Letter of Transmittal, certificates for the Shares and any other required
documents should be sent by each stockholder or his or her broker, dealer,
commercial bank, trust company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
Facsimile Transmission:
(201) 222-4720
(201) 222-4721
(For Eligible Institutions Only)
By Hand/Overnight Confirm by Telephone By Mail:
Courier: (212) 222-4707 First Chicago Trust
First Chicago Trust Company
Company of New York
of New York Tenders and Exchanges
Tenders and Exchanges P.O. Box 2559--FMC
14 Wall Street--Suite Suite 4660
4680--FMC Jersey City, New Jersey
8th Floor 07303-2559
New York, New York 10005
Any questions or requests for assistance or additional copies of the Offer to
Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent at its telephone number and location
listed below. You may also contact your broker, dealer, commercial bank or
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 THIRD AVENUE
20TH FLOOR
NEW YORK, NEW YORK 10022
(212) 754-8000
CALL TOLL FREE (800) 662-5200
<PAGE>
Letter of Transmittal
To Tender Shares of Common Stock of
First of Michigan Capital Corporation
100 Renaissance Center
Detroit, Michigan 48243-1182
Pursuant to its Offer to Purchase dated August 3, 1995
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE UNLESS THE OFFER IS EXTENDED.
To: First Chicago Trust Company of New York
By Mail: By Hand or Overnight
First Chicago Trust Courier:
Company of New York First Chicago Trust
Tenders & Exchanges Company of New York
P.O. Box 2559-FMC--Suite Tenders & Exchanges
4660 14 Wall Street--Suite
Jersey City, NJ 07303- 4680--FMC
2559 8th Floor
New York, NY 10005
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
SHARES
TENDERED
(ATTACH
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) ADDITIONAL
(PLEASE FILL IN EXACTLY AS NAME(S) APPEAR ON LIST IF
CERTIFICATE(S)) NECESSARY)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
NUMBER OF
SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
TOTAL SHARES
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by any certificates delivered to First Chicago Trust Company
of New York (the "Depositary") are being tendered. See Instruction 4.
This letter of Transmittal can be used only if (a) certificates for Shares
(as defined below) are to be delivered with it or (b) Shares are being
delivered concurrently by book-entry transfer to the account maintained by the
Depositary at The Depository Trust Company, the Midwest Securities Trust
Company or the Philadelphia Depository Trust Company (collectively, the "Book-
Entry Transfer Facilities") as set forth in "The Tender Offer--Procedures for
Tendering Shares" of the Offer to Purchase (as defined below).
Stockholders who cannot deliver the certificates for their Shares to the
Depositary on or prior to the Expiration Time (as defined in the Offer to
Purchase) or who cannot complete the procedure for book-entry transfer on a
timely basis or who cannot deliver a Letter of Transmittal and all other
required documents to the Depositary on or prior to the Expiration Time, in any
such case, must tender their Shares pursuant to the guaranteed delivery
procedure set forth in "The Tender Offer--Procedures for Tendering Shares" of
the Offer to Purchase. See Instruction 2.
<PAGE>
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
Check Box of Book-Entry Transfer Facility:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Account No. ______________________________________________________________
Transaction Code No. _____________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Stockholder(s) ______________________________________
Date of Execution of Notice of Guaranteed Delivery _______________________
Name of Institution which Guaranteed Delivery ____________________________
If delivery is by book-entry transfer:
Name of Tendering Institution ____________________________________________
Check Box of Book-Entry Transfer Facility:
[_]The Depository Trust Company
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Account No. ______________________________________________________________
Transaction Code No. _____________________________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to First of Michigan Capital Corporation, a
Delaware corporation (the "Company"), shares of Company common stock, par value
$.10 per share (the "Shares"), pursuant to the Company's offer to purchase
625,000 Shares at a price of $11 3/8 per Share (the "Purchase Price"), net to
the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated August 1995 (the "Offer to Purchase"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which together
constitute the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Company all right, title and interest in and to all the Shares
that are being tendered hereby, or orders the registration of such Shares
delivered by book-entry transfer, that are purchased pursuant to the Offer and
hereby irrevocably constitutes and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares, with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to:
<PAGE>
(a) deliver certificates for such Shares, or transfer ownership of such
Shares on the account books maintained by any of the Book-Entry Transfer
Facilities, together, in any such case, with all accompanying evidences of
transfer and authenticity, to or upon the order of the Company, upon
receipt by the Depositary, as the undersigned's agent, of the Purchase
Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer on
the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that:
(a) the undersigned "owns" the Shares tendered hereby within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, and has full power and authority to validly tender, sell, assign
and transfer the Shares tendered hereby;
(b) the tender of Shares by the undersigned complies with Rule 14e-4;
(c) when and to the extent the Company accepts the Shares for purchase,
the Company will acquire good, marketable and unencumbered title to the
Shares, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(d) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable to
complete the assignment, transfer and purchase of the Shares tendered
hereby (and any and all dividends, distributions, rights or other
securities); and
(e) the undersigned has read and agrees to all the terms of the Offer.
The undersigned recognizes that, under certain circumstances set forth in the
Offer to Purchase, the Company may terminate or amend the Offer or may not be
required to accept for payment any of the Shares tendered herewith.
The undersigned understands that tenders of Shares pursuant to any one of the
procedures described in "The Tender Offer--Procedure for Tendering Shares" of
the Offer to Purchase and in the Instructions hereto will constitute an
agreement between the undersigned and the Company upon the terms and subject to
the conditions of the Offer.
The undersigned shall promptly remit and transfer to the Depositary for the
account of the Company any and all other Shares or other securities issued to
the undersigned on or after August 3, 1995 in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and pending such
remittance or appropriate assurance thereof, the Company shall be entitled to
all rights and privileges as owner of any such Shares or other securities and
may withhold the entire consideration or deduct from the consideration the
amount or value thereof, as determined by the Company in its sole discretion.
All authority herein conferred, or agreed to be conferred, shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer to Purchase, this
tender is irrevocable.
Unless otherwise indicated under "Special Payment Instructions," please issue
the check for the Purchase Price and/or return or issue the certificate(s)
evidencing any Shares not tendered or not accepted for payment in the name(s)
of the registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the Purchase Price and/or the certificate(s)
evidencing any Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address of the registered
holder(s) appearing under "Description of Shares Tendered." In the event that
both the "Special Delivery Instructions" and "Special Payment Instructions" are
not completed, please issue the check for the Purchase Price and/or issue or
return the certificate(s) evidencing any Shares not tendered or accepted for
payment in the name(s) of, and deliver
<PAGE>
said check and/or certificate(s) to the person or persons so indicated. In the
case of book-entry delivery of Shares, please credit the account maintained at
the Book-Entry Transfer Facility indicated above with any Shares not accepted
for payment. The undersigned recognizes that the Company has no obligation
pursuant to the "Special Payment Instructions" to transfer any Shares from the
name(s) of the registered holder(s) thereof if the Company does not accept for
payment any of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1,4,5,6,7,8, 9 AND (SEE INSTRUCTIONS 4 AND 7)
10) To be completed ONLY IF the check
To be completed ONLY IF the check for the aggregate Purchase Price of
for the aggregate Purchase Price of Shares purchased and/or certifi-
Shares purchased and/or certifi- cates for Shares not tendered or
cates for Shares not tendered or not purchased are to be mailed to
not purchased are to be issued in someone other than that shown below
the name of someone other than the the undersigned's signature(s).
undersigned.
Issue [_] check, and/or
Issue [_] check, and/or [_] certificates to:
[_] certificates to:
Name: ______________________________
Name: ______________________________ (Please Print)
-------------------------------
(Please Print) Address ____________________________
------------------------------------
Address ____________________________ (Zip Code)
------------------------------------ ------------------------------------
(Zip Code)
------------------------------------
(Taxpayer Identification No.)
ODD LOTS
(SEE INSTRUCTION 8)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially, as of the close of business on July 26, 1995, an
aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[_]Was the beneficial owner on the close of business on July 26, 1995 and
will continue to be the beneficial owner as of the Expiration Time, of
an aggregate of fewer than 100 Shares, all of which are being tendered;
or
[_]A broker, dealer, commercial bank, trust company or other nominee
which:
a) Is tendering, for the beneficial owners thereof, Shares with
respect to which it is a record owner, and
b) Believes, based upon representations made to it by such beneficial
owners that each such person was the beneficial owner on the close
of business on July 26, 1995 and each such person will continue to
be the beneficial owner as of the Expiration Time, of an aggregate
of fewer than 100 Shares and is tendering all such Shares.
<PAGE>
SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
X ___________________________________________________________________________
X ___________________________________________________________________________
(Signature(s) of Owner(s)
Name(s) _____________________________________________________________________
(Please Print)
Capacity (full title) _______________________________________________________
Address _____________________________________________________________________
-----------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number ______________________________________________
Taxpayer Identification Number ______________________________________________
Dated _______________________________________________________________________
Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please set forth full
title and see Instruction 5.)
MEDALLION SIGNATURE GUARANTEE
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature ________________________________________________________
Name ________________________________________________________________________
(Please Print)
Title _______________________________________________________________________
Name of Firm ________________________________________________________________
Address _____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ______________________________________________
Dated _______________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES
(a) This Letter of Transmittal is signed by the registered owner of the
Shares (which term, for purposes of this document, shall include any
participant in a Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of Shares) tendered with this Letter of
Transmittal. Payment and delivery are to be made directly to such owner unless
such owner has completed either the box entitled "Special Payment Instructions"
or "Special Delivery Instructions" above; or
(b) Shares are tendered for the account of a member firm of a registered
national securities exchange, a member of a National Association of Securities
Dealers, Inc., each of which is a recognized member of the Medallion Signature
Guarantee Program or other similar program (each being referred to as an
"Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures on
this Letter of Transmittal. See Instruction 5.
2. DELIVERY OF THE LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES
This Letter of Transmittal is to be used only if (a) certificates for Shares
are to be forwarded herewith or (b) delivery of Shares is to be made by book-
entry transfer pursuant to the procedures set forth in "The Tender Offer--
Procedure for Tendering Shares" of the Offer to Purchase. Certificates of all
physically delivered Shares, or a confirmation of a book-entry transfer of all
Shares delivered electronically into the Depositary's account at one of the
Book-Entry Transfer Facilities, together in each case with a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) with any
required Medallion signature guarantees and any other documents required by
this Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal on or prior
to the Expiration Time as defined in "Tender Offer--Number of Shares;
Proration" of the Offer to Purchase. Delivery of documents to one of the Book-
Entry Transfer Facilities does not constitute delivery to the Depositary.
Stockholders who cannot deliver the certificates for their Shares to the
Depositary on or prior to the Expiration Time or who cannot complete the
procedure for book-entry transfer on a timely basis or who cannot deliver a
Letter of Transmittal and all other required documents to the Depositary on or
prior to the Expiration Time must tender their Shares pursuant to the
guaranteed delivery procedures set forth in "The Tender Offer--Procedures for
Tendering Shares" of the Offer to Purchase. Pursuant to such procedures: (a)
such tender must be made by or through an Eligible Institution, (b) the
Depositary receives (by hand, mail, telegram or facsimile transmission), on or
prior to the Expiration Time, a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form the Company has provided with the
Offer to Purchase (indicating the price at which the Shares are being
tendered); (c) the certificates for all tendered Shares in proper form for
transfer (or confirmation of Book-Entry Transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities), together
with a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal, are
received by the Depositary within five business days after the date the
Depositary receives such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal
(or facsimile thereof), each tendering stockholder waives any right to receive
any notice of the acceptance of such stockholder's tender.
<PAGE>
3. INADEQUATE SPACE
If the space provided in the box captioned "Description of Shares Tendered"
is inadequate, the certificate numbers and/or the number of Shares should be
listed on a separate signed schedule and attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND UNPURCHASED SHARES
(The following is not applicable to stockholders who deliver Shares by book-
entry transfer.) If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box entitled "Number of Shares Tendered." If
such Shares are purchased, a new certificate for the remainder of the Shares
represented by the old certificate(s) will be sent to and in the name of the
registered holder(s) (unless otherwise provided by such holder(s) having
completed either of the boxes entitled "Special Payment Instructions" or
"Special Delivery Instructions" on this Letter of Transmittal) as promptly as
practicable following the expiration or termination of the Offer. All Shares
represented by the certificate(s) listed and delivered to the Depositary will
be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered herewith, the signature(s) must correspond with the name(s)
as written on the face of the certificates without any change whatsoever.
(b) If any of the Shares tendered herewith are registered in the names of two
or more joint owners, each such owner must sign this Letter of Transmittal.
(c) If any of the Shares tendered herewith are registered in different names
on different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
(d) If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered herewith, no endorsements of certificates or separate stock
powers are required unless payment is to be made, and/or the certificates for
Shares not tendered or not purchased are to be issued, in the name(s) of any
person(s) other than the registered holder(s). However, if this Letter of
Transmittal is signed by a person other than the registered holder(s) of the
Shares tendered herewith, the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the certificates for such Shares.
Signature(s) on any such certificates or stock powers must be Medallion
signature guaranteed by an Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing and submit proper evidence
satisfactory to the Company of the authority of such person to so act must be
submitted.
6. STOCK TRANSFER TAXES
Except as set forth in this Instruction 6, the Company will pay any stock
transfer taxes with respect to the transfer and sale of Shares to it or its
order pursuant to the Offer. However, if payment of the Purchase Price is to be
made to, or if certificates for Shares not tendered or accepted for purchase
are to be registered in the name of, any person other than the registered
holder, or if tendered certificates are registered in the name of any person
other than the person(s) signing this Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered holder or such person),
if any, payable on account of the transfer to such person will be deducted from
the Purchase Price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS
If certificates for Shares not tendered or not purchased and/or checks are to
be issued in the name of a person other than the signor of the Letter of
Transmittal or if such certificates and/or checks are to be sent to someone
other than the signor of the Letter of Transmittal or to the signor at a
different address, the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal should be
completed. See Instruction 1.
8. ODD LOTS
As described in the Section "Tender Offer--Tenders by Owners of Fewer than
100 Shares" of the Offer to Purchase, if the Company is to purchase less than
all Shares tendered before the Expiration Time, the Shares purchased first will
consist of all Shares tendered by any stockholder who owns beneficially as of
the close of business on July 26, 1995 and who continues to own as of the
Expiration Time, an aggregate of fewer than 100 Shares and who tenders all of
his Shares at the Purchase Price (as defined in the Offer to Purchase). This
preference will not be available unless the box captioned "Odd Lots" is
completed.
9. FEDERAL INCOME TAX WITHHOLDING
Except as provided below under "Important Tax Information," each tendering
stockholder is required to provide the Depositary with a correct TIN on the
provided Substitute Form W-9. Failure to provide the information on the form
may subject the tendering stockholder to a $50 penalty. Also, a 31% federal
backup withholding tax may be imposed on the payments made to the stockholder
or other payee with respect to Shares purchased pursuant to the Offer.
10. WITHHOLDING ON FOREIGN STOCKHOLDERS
The Depositary will withhold federal income taxes equal to 30% of the gross
proceeds paid to a foreign stockholder unless the Depositary determines that a
reduced rate of withholding or an exemption from withholding is applicable. For
this purpose, a foreign stockholder is a stockholder that is not (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof or (iii) any estate or trust the income of which
is subject to United States federal income taxation regardless of the source of
such income. The Depositary will determine a stockholder's status as a foreign
stockholder and eligibility for a reduced rate of, or an exemption from,
withholding by reference to any outstanding certificates or statements
concerning eligibility for a reduced rate of, or an exemption from, withholding
(e.g., Form 1001 or Form 4224) unless facts and circumstances indicate that
such reliance is not warranted. A foreign stockholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of withholding for which such stockholder may be eligible should consider
doing so in order to avoid overwithholding. A foreign stockholder may be
eligible to obtain from the U.S. Internal Revenue Service a refund of tax
withheld if the payment to such stockholder qualifies for capital gain or loss
treatment.
11. IRREGULARITIES
All questions as to the number of Shares to be purchased, the form of
documents and the validity, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by the
Company, in its sole discretion, and its determination will be final and
binding on all parties. The Company reserves the absolute right to reject any
or all tenders which it determines not to be in proper form or the acceptance
of or payment for which may, in the opinion of the Company's counsel, be
unlawful. The Company also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in the tender of Shares
by any particular stockholder, whether or not similar defects or irregularities
are waived in the case of other stockholders. The Company's interpretation of
the terms and conditions of the Offer (including this Letter of Transmittal and
the instructions hereto) will be final and binding. No tender of Shares will be
deemed to be validly made until all defects and irregularities have been cured
or waived. Unless waived, any defects or irregularities in connection with
tenders must be cured within such reasonable time as the Company will
determine. None of the Company, its affiliates, the Depositary, the Information
Agent or any other person will be obligated to give notice of any defects or
irregularities in tenders, and none of them will incur any liability for
failure to give any such notice.
<PAGE>
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Questions and requests for assistance may be directed to the Information
Agent at its respective address and telephone number set forth below.
Additional copies of the Offer to Purchase, the Letter of Transmittal and the
Notice of Guaranteed Delivery may be obtained from the Information Agent.
13. LOST, DESTROYED OR STOLEN CERTIFICATES
If any certificate(s) representing Shares has or have been lost, destroyed or
stolen, the stockholder should promptly notify the Information Agent. The
stockholder will then be instructed as to the steps that must be taken in order
to replace the certificate(s). This Letter of Transmittal and related documents
cannot be processed until the procedures for replacing lost or destroyed
certificates have been followed.
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Ave., 20th Floor
New York, NY 10022
(212) 754-8000
Call Toll Free 1-800-662-5200
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF
(TOGETHER WITH CERTIFICATES FOR SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER
OF SHARES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION TIME.
IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's current taxpayer identification number ("TIN") on Substitute Form
W-9 below. If the Depositary is not provided with the correct TIN, the Internal
Revenue Service may subject the stockholder or other payee to a $50 penalty. In
addition, payments that are made to such stockholder or other payee with
respect to Shares purchased pursuant to the Offer may be subject to 31% backup
withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements and should indicate their status by writing "exempt" across the
face of the Substitute Form W-9. In order for a foreign individual to qualify
as an exempt recipient, the stockholder must submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
more instructions.
If Stockholder fails to provide TIN and no exemption applies, the Depositary
is required to withhold 31% of any such payments made to the stockholder or
other payee. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 2 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below Part 2 in order to avoid backup
withholding. Notwithstanding that the box in Part 2 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31% of all payments made prior to the time a properly
certified TIN is provided to the Depositary.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or for the last transferee appearing on the transfers attached to, or
endorsed on, the certificates evidencing the Shares. If the Shares are
registered in more than one name or are not registered in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
SUBSTITUTE PART 1--PLEASE PROVIDE -----------------------
FORM W-9 YOUR TIN IN THE BOX AT Social Security Number
RIGHT AND CERTIFY BY OR
SIGNING AND DATING BELOW
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER (TIN) -----------------------
- --------------------------------------------------------------------------------
Employer
Identification Number
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
------------------------------------------------------
- --------------------------------------------------------------------------------
PART 2--Awaiting TIN [_]
Name ________________________________________________________________________
(Please Print)
Address _____________________________________________________________________
(Including Zip Code)
Signature ______________________________________________________________Date
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 2 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER
IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that, notwithstanding that I have checked the box on Part 2 (and
have completed this Certificate of Awaiting Taxpayer Identification Number),
all reportable payments made to me prior to the time I provide the
Depositary with a properly certified taxpayer identification number will be
subject to a 31% backup withholding tax.
Signature ______________________________________________________________Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN A
BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL
DETAILS.
<PAGE>
The Information Agent for the Offer is:
MORROW & CO., INC.
909 Third Avenue, 20th Floor
New York, NY 10022
(212) 754-8000
Toll Free 1-800-662-5200
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
SHARES OF COMMON STOCK
OF
FIRST OF MICHIGAN CAPITAL CORPORATION
100 RENAISSANCE CENTER
DETROIT, MICHIGAN 48243-1182
This form or a facsimile hereof must be used to accept the Offer (as defined
below) if:
(a) certificates for shares of Common Stock, par value $.10 per share
(the "Shares"), of First of Michigan Capital Corporation, a Delaware
corporation (the "Company"), cannot be delivered to First Chicago Trust
Company of New York (the "Depositary") prior to the Expiration Time as
defined in the Section "The Tender Offer--Number of Shares; Proration" of
the Company's Offer to Purchase dated August 3, 1995 (the "Offer to
Purchase"); or
(b) the procedure for book-entry transfer set forth in "The Tender
Offer--Procedure for Tendering Shares" of the Offer to Purchase cannot be
completed on a timely basis; or
(c) the Letter of Transmittal (or a facsimile thereof) and all other
required documents cannot be delivered to the Depositary prior to the
Expiration Time.
This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See "The Tender Offer--
Procedure for Tendering Shares" of the Offer to Purchase.
TO: FIRST CHICAGO TRUST COMPANY OF NEW YORK
Facsimile Transmission:
(for Eligible Institutions Only)
(201) 222-4720
or
(201) 222-4721
To Confirm Receipt of
Notice of Guaranteed Delivery:
(201) 222-4707
By Mail: By Hand or Overnight Courier:
First Chicago Trust Company of New York First Chicago Trust Company of New York
Tenders & Exchanges P.O. Box 2559-FMC, Tenders & Exchanges 14 Wall Street-
Suite 4660 Jersey City, NJ 07303-2559 Suite 4680-FMC
8th Floor New York, NY 10005
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR A
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN AS LISTED ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
(as defined in "The Tender Offer--Procedure for Tendering Shares" of the
Company's Offer to Purchase) under the Instructions thereto, such signature
guarantee must appear in the applicable space provided in the signature box on
the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares specified below pursuant to the guaranteed
delivery procedures set forth in "The Tender Offer--Procedures for Tendering
Shares" of the Offer to Purchase.
ODD LOTS
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially on the close of business on July 26, 1995 and who
will continue to own beneficially as of the Expiration Time, an aggregate of
fewer than 100 Shares.
The undersigned either (check one):
[_]was the beneficial owner on the close of business on July 26, 1995 and
will continue to be the beneficial owner as of the Expiration Time, of
an aggregate of fewer than 100 Shares, all of which are being tendered;
or
[_]is a broker, dealer, commercial bank, trust company or other nominee
which:
(a) is tendering, for beneficial owners, Shares with respect to which
it is the record owner; and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the
close of business on July 26, 1995 and each such person would
continue to be the beneficial owner as of the Expiration Time, of
an aggregate of fewer than 100 Shares and is tendering all of such
Shares.
No. of Shares tendered: ____________________ Name(s) of Record
Holder(s):
Certificate Nos. (if available): ___________ ---------------------------
-------------------------------------------- ---------------------------
(Please Print)
If Shares will be delivered by book-entry Address(es): _______________
transfer: ---------------------------
Name of Tendering Institution: ---------------------------
-------------------------------------------- ---------------------------
(Zip Code)
Account No. ________________________________
Area Code and Tel. No. ____
at: ---------------------------
[_]The Depository Trust Company Signature(s): _____________
---------------------------
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company
Date: ______________________________________
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an "Eligible Institution," (as that term is defined in "The
Tender Offer--Procedure for Tendering Shares" of the Company's Offer to
Purchase) guarantees:
(a) that the above named person(s) "own(s)" the Shares tendered hereby
within the meaning of Rule 14e-4 under the Securities and Exchange Act of
1934, as amended,
(b) that such tender of Shares complies with Rule 14e-4, and
(c) to deliver to the Depositary either the stock certificates
representing the Shares tendered hereby, in proper form for transfer, or
confirmation of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, Midwest Securities
Trust Company or Philadelphia Depository Trust Company, in any such case
together with a properly completed and duly executed Letter(s) of
Transmittal (or facsimile(s) thereof), and any other required documents,
all within five business days after the date of execution of this notice.
- ------------------------------------------ ---------------------------------
(Name of Firm) (Authorized Signature)
- ------------------------------------------ ---------------------------------
(Address) (Name/Title)
- ------------------------------------------
(Zip Code)
Date: ____________________________________ ---------------------------------
(Area Code and Tele. No.)
DO NOT SEND STOCK CERTIFICATES WITH THIS FORM, YOUR STOCK CERTIFICATES MUST BE
SENT WITH THE LETTER OF TRANSMITTAL.
3
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
OFFER TO PURCHASE FOR CASH
UP TO
625,000 OUTSTANDING SHARES OF ITS COMMON STOCK
AT
$11 3/8 NET PER SHARE
To: Brokers, Dealers, Commercial August 3, 1995
Banks, Trust Companies and
Other Nominees:
First of Michigan Capital Corporation, a Delaware corporation (the
"Company"), has made an Offer to Purchase 625,000 outstanding shares of its
common stock, par value $.10 per share (the "Shares"), at a price of $11 3/8
per Share net to the seller in cash, upon the terms and subject to the
conditions set forth in the Company's Offer to Purchase, dated August 3, 1995
(the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer").
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated August 3, 1995;
2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer Number
on Substitute Form W-9 providing information relating to backup federal
income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents cannot be delivered to the
Depositary on or prior to the Expiration Time (as defined in The Tender
Offer--Number of Shares; Proration" in the Offer to Purchase);
4. A form of letter that may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to
the Offer; and
5. Return envelope addressed to First Chicago Trust Company of New York,
the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M. EASTERN TIME ON
AUGUST 31, 1995, UNLESS THE OFFER IS EXTENDED.
Certificates for Shares (or evidence of a book-entry delivery into the
Depositary's account maintained at The Depository Trust Company, Midwest
Securities Trust Company or the Philadelphia Depository Trust Company) and a
duly executed and properly completed Letter of Transmittal or facsimile
thereof, together with any other required documents, must be delivered to the
Depositary as set forth in "The Tender Offer--Procedures for Tendering Shares"
in the accompanying Offer to Purchase.
If holders of Shares wish to tender, but it is impractical for them to
forward their certificates for such Shares or other required documentation on
or prior to the Expiration Time of the Offer or to comply with the book-entry
transfer procedures on a timely basis, a tender may be effected by following
the guaranteed delivery procedures specified in "The Tender Offer--Procedure
for Tendering Shares" in the accompanying Offer to Purchase.
The Company will not pay any fees or commissions to any broker or dealer or
other person for soliciting tenders of Shares pursuant to the Offer. However,
the Company will, upon request, reimburse brokers,
<PAGE>
dealers, commercial banks and trust companies for reasonable and necessary
costs and expenses incurred in forwarding materials to their customers. The
Company will pay all stock transfer taxes applicable to its purchase of Shares
pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal.
Questions and requests for assistance with respect to the Offer may be
directed to the Information Agent at its respective address and telephone
number set forth in the back cover of the Offer to Purchase. Additional copies
of the Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may be obtained from the Information Agent.
Very truly yours,
First of Michigan Capital
Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL MAKE YOU OR ANY
PERSON THE AGENT OF THE COMPANY, THE INFORMATION AGENT OR THE DEPOSITARY, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED HEREWITH AND STATEMENTS CONTAINED THEREIN.
<PAGE>
FIRST OF MICHIGAN CAPITAL CORPORATION
OFFER TO PURCHASE FOR CASH
UP TO
625,000 OUTSTANDING SHARES OF ITS COMMON STOCK
AT
$11 3/8 NET PER SHARE
August 3, 1995
To Our Client:
Enclosed for your consideration are the Offer to Purchase dated August 3,
1995, and the related Letter of Transmittal (which together constitute the
"Offer"), in connection with the Offer by First of Michigan Capital
Corporation, a Delaware corporation (the "Company"), to purchase for cash up to
625,000 shares of its Common Stock, par value $0.10 per share (the "Shares"),
at a price of $11 3/8 per Share net to the seller in cash, upon the terms and
subject to the conditions of the Offer.
We are the holder of record of Shares held for your account. A tender of such
Shares can be made only by us as the holder of record and pursuant to your
instructions. The Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Shares held by us for your
account.
We request instructions as to whether you wish to tender any or all of the
Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the Letter of Transmittal.
Your attention is directed to the following:
1. The Company is offering to purchase up to 625,000 Shares at a price of
$11 3/8 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer. In
the event more than 625,000 Shares are tendered by stockholders, Shares
will be purchased pro rata by the Company. The Company, upon the terms
and subject to the conditions of the Offer, will accept for purchase,
without proration, all Shares properly tendered by stockholders owning
less than 100 Shares.
2. The Offer and withdrawal rights will expire at 5:00 p.m. Eastern time on
August 31, 1995, unless extended by the Company.
3. The Offer is not conditioned on any minimum number of Shares being
tendered. The Offer is also subject to certain other conditions.
4. Any stock transfer taxes applicable to the sale of Shares to the Company
pursuant to the Offer will be paid by the Company, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
5. Payment by the Company for those Shares tendered pursuant to the Offer
will be made only after timely receipt by the Depositary of: (i)
certificates for such Shares, (or timely confirmation of the book-entry
transfer of such Shares, into the Depositary's account maintained at The
Depository Trust Company, Midwest Securities Trust Company or
Philadelphia Depository Trust Company, pursuant to the procedures set
forth in "The Tender Offer--Procedures for Tendering Shares" of the
Offer to Purchase; (ii) the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required
signature guarantees; and (iii) any other documents required by the
Letter of Transmittal. Accordingly, payment may not be made to all
tendering stockholders at the same time depending upon when certificates
for, or confirmations of book-entry transfer of, such Shares into the
Depositary's account at a Book-Entry Transfer Facility are actually
received by the Depositary.
If you wish to tender any or all of your Shares, please so instruct us by
completing, executing and returning the attached instruction form. An envelope
to return your instructions to us is enclosed. If you authorize tender of your
Shares, all such Shares will be tendered unless otherwise specified on the
attached instruction form. Your instructions should be forwarded to us in ample
time to permit us to submit a tender on your behalf prior to the expiration of
the Offer.
THE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON
BEHALF OF, HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE MAKING OF THE
OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION. IN THOSE JURISDICTIONS THE LAWS OF WHICH REQUIRE THAT THE OFFER
BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE MADE BY FIRST OF
MICHIGAN CORPORATION OR BY ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED
UNDER THE LAWS OF SUCH JURISDICTION.
<PAGE>
INSTRUCTIONS WITH RESPECT TO OFFER TO PURCHASE FOR CASH
UP TO
625,000 OUTSTANDING SHARES OF COMMON STOCK
OF
FIRST OF MICHIGAN CAPITAL CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated August 3, 1995, and the related Letter of Transmittal in
connection with the Offer by First of Michigan Capital Corporation (the
"Company") to purchase up to 625,000 outstanding shares of its common stock,
par value $0.10 per share (the "Shares"), at a price of $11 3/8 per Share net
to the undersigned in cash.
This will instruct you to tender the number of Shares indicated below held by
you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
[_]By checking this box, all Shares held for the account of the
undersigned, including fractional Shares, will be tendered.
[_]If fewer than all Shares are to be tendered, please check the box and
indicate below the aggregate number of Shares to be tendered.
_____________ Shares*
- --------
* Unless otherwise indicated, it will be assumed that all Shares held for the
account of the undersigned are to be tendered.
SIGN HERE
- ------------------------------------- -------------------------------------
Signature(s) -------------------------------------
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
- -------------------------------------
Please print name(s) and address(es)
here
Dated _______________________________
<PAGE>
PRESS RELEASE
-------------
Corporation Contact: Media Relations Contact:
William H. Cuddy, Chairman of the Board Frederick Marx
Steve Gasper, Jr., President and CEO Marx, Layne & Co.
First of Michigan Capital Corporation (810) 855-6777
(313) 259-2600
FIRST OF MICHIGAN CAPITAL CORPORATION
ANNOUNCES COMMENCEMENT OF SELF TENDER OFFER
FOR 625,000 SHARES OF ITS COMMON STOCK AT $ll 3/8 PER SHARE
AND
REPORTS THIRD QUARTER RESULTS
Detroit, Michigan. July 26, 1995. First of Michigan Capital Corporation (Chicago
Stock Exchange / FMG) announced today that it intends to commence within the
next few days a cash tender offer to purchase up to 625,000 shares of the
Company's common stock at $11 3/8 per share. The terms and conditions of the
tender offer will be set forth in an Offer to Purchase and the related Letter of
Transmittal to be distributed to all the Company's stockholders within the next
few days.
The Company's tender offer will not be conditioned on any minimum number of
shares being tendered. The Company will buy shares first from those stockholders
holding fewer than 100 shares.
The purpose of the tender offer is to use the Company's excess capitalization to
provide an opportunity for the Company's common stockholders to receive
immediate liquidity for their shares up to the 625,000 shares offered to be
purchased and to reduce the operating capital expenses by eliminating Company
common stockholdings of fewer than 100 shares and removing the Company's common
stock from registration under the Securities Exchange Act of 1934 and from
listing on the Chicago Stock Exchange.
The Board has also voted to discontinue the payment of dividends for the
foreseeable future. Management plans to use this savings, along with the other
savings realized as a result of the announced tender offer, to fund future
growth of the Company.
First of Michigan Capital Corporation also announced today that the Company
incurred a loss for the quarter ended June 30, 1995 of $229,376 or $.08 per
share compared to net income of $127,018 or $.04 per share for the quarter ended
June 24, 1994. Consolidated revenues were $15,648,355 versus $14,925,020 for the
previous quarter.
Consolidated net income for the nine months ended June 30, 1995 was $98,577 or
$.03 per share on revenues of $44,341,008. For the nine month period ended June
24, 1994, net income was $1,299,083 or $.44 per share on revenue of $46,752,722.
<PAGE>
Steve Gasper, Jr., President and Chief Executive Officer, reported that the
increase in revenues for the three month period was due to increases in
commission and interest revenues, which were partially offset by a decline in
revenues from the underwriting of new stocks and bonds. He said the revenue
decline for the nine month period was primarily attributable to the decline in
revenues from commissions and mutual fund transactions.
Gasper also reported that the decline in net income for both the three month and
nine month periods is attributable mainly to higher operating expenses as a
result of required additional expenditures in revenue building areas within the
firm which have put pressure on short-term earnings. Gasper also said that First
of Michigan Capital Corporation remains committed to its mission of being
client driven, service focused and Investment Executive oriented, in order to
create significant value for its clients, employees and shareholders.
First of Michigan Capital Corporation's principal subsidiary is First of
Michigan Corporation, a member of the New York Stock Exchange and Michigan's
largest full service securities firm. Founded more than 60 years ago, First of
Michigan Corporation specializes in a wide range of financial services that
include investment products such as stocks, bonds, unit trusts and mutual funds;
and investment services such as retirement plans, money management,
underwriting, trading and investment banking. First of Michigan offers these
services through its 546 employees located in 32 offices throughout Michigan, as
well as an office at 100 Wall Street, New York.
FIRST OF MICHIGAN CAPITAL CORPORATION
-------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
June 30, June 24, June 30, June 24,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $15,648,355 $14,925,020 $44,341,008 $46,752,722
Net Income (Loss) $ (229,376) $ 127,018 $ 98,577 $ 1,299,083
Net Income (Loss)
Per Share $ (.08) $ .04 $ .03 $ .44
Average Shares
Outstanding 2,824,321 2,953,601 2,867,971 2,953,490
</TABLE>
<PAGE>
PRESS RELEASE
-------------
Corporation Contact: Media Relations Contact:
William H. Cuddy, Chairman of the Board Frederick Marx
Steve Gasper, Jr., President and CEO Marx, Layne & Co.
First of Michigan Capital Corporation (810) 855-6777
(313) 259-2600
FIRST OF MICHIGAN CAPITAL CORPORATION
ANNOUNCES COMMENCEMENT OF SELF TENDER OFFER
FOR 625,000 SHARES OF ITS COMMON STOCK AT $ll 3/8 PER SHARE
Detroit, Michigan. August 3, 1995. First of Michigan Capital Corporation.
(Chicago Stock Exchange/FMG) announced today the commencement of a cash tender
offer by the company to purchase up to 625,000 shares of the Company's common
stock at $11 3/8 per share. The terms and conditions of the tender offer, as set
forth in the Offer to Purchase dated August 3, 1995 and the related letter of
transmittal, will be distributed to all Company stockholders. The Company's
tender offer is set to expire on Thursday, August 31, 1995, unless the offer is
extended by the Company.
The Company's tender offer is not conditioned on any minimum number of
shares being tendered. Certain stockholders have agreed not to tender any of the
1,386,312 shares of the Company that they own. The Company will buy shares first
from those stockholders holding fewer than 100 shares. If more than 625,000
shares are tendered, the shares in excess of the shares tendered by stockholders
with fewer than 100 shares will be purchased on a pro rata basis.
The purpose of the tender offer is to use the Company's excess
capitalization to provide an opportunity for the Company's common stockholders
to receive immediate liquidity for their shares up to the 625,000 shares offered
to be purchased and to reduce the operating capital expenses by eliminating
Company common stockholdings of fewer than 100 shares and removing the Company's
common stock from registration under the Securities Exchange Act of 1934 and
from listing on the Chicago Stock Exchange.
The Board of Directors of the Company has received an opinion from Duff &
Phelps Capital Market Co. to the effect that, as of July 20, 1995, the offering
price of $11 3/8 is fair to the Company's stockholders from a financial point of
view. Neither the Company nor its Board of Directors is making any
recommendation to any stockholder as to whether to tender or refrain from
tendering shares in the offer and has not authorized any person to make any such
recommendation. On August 2, 1995, the closing price of the Company's common
stock on the Chicago Exchange was bid $8 1/2 and Offer $10.00.
<PAGE>
Questions and requests for assistance in connection with the Company's tender
offer may be directed to Morrow & Co., Inc., the information agent at (212)
754-8000 or call toll free 1-800-662-5200.
First of Michigan Capital Corporation's principal subsidiary is First of
Michigan Corporation, a member of the New York Stock Exchange and Michigan's
largest full service securities firm. Founded more than 60 years ago, First of
Michigan Corporation specializes in a wide range of financial services that
include investment products such as stocks, bonds, unit trusts and mutual funds;
and investment services such as retirement plans, money management,
underwriting, trading and investment banking. First of Michigan offers these
services through its 546 employees located in 32 offices throughout Michigan, as
well as an office at 100 Wall Street, New York, New York.
<PAGE>
August 3, 1995
RE: TENDER OFFER
To Our Shareholders:
First of Michigan Capital Corporation (the "Company") is offering to
purchase up to 625,000 shares of its common stock for $11 3/8, net to the
seller in cash. The Company's tender offer is not conditioned on any minimum
number of shares being tendered. The Company will buy shares first from those
stockholders holding fewer than 100 shares ("odd lots"). After the purchase of
odd lot shares properly tendered, the Company will purchase the remaining
properly tendered shares up to 625,000 shares. If more than 625,000 shares are
tendered (including odd lot shares), the shares in excess of the odd lot
shares will be purchased on a pro rata basis.
The Board of Directors of the Company has received an opinion from Duff &
Phelps Capital Markets Co. that, as of July 31, 1995, the offering price of
$11 3/8 is fair to the Company's stockholders from a financial point of view.
Neither the Company nor its Board of Directors makes any recommendation to
any stockholder as to whether to tender or refrain from tendering your shares.
You must make your own decision whether to tender shares and, if so, how many
shares you will tender. The Offer, proration period and withdrawal rights
expire at 5:00 p.m. Eastern time on Thursday, August 31, 1995, unless the
Offer is extended in the Company's sole discretion.
This offer is explained in detail in the enclosed Offer to Purchase and
Letter of Transmittal dated August 3, 1995. If you want to tender your shares,
the instructions on how to tender shares are also explained in detail in the
enclosed materials. We encourage you to read these materials carefully before
making any decision with respect to the tender offer.
Very truly yours,
William H. Cuddy
Chairman of the Board
Steve Gasper, Jr.
President and Chief Executive
Officer
